Adnoc Logistics & Services is planning to acquire more vessels based on what chief executive Abdulkareem Al Masabi describes as a “smart growth” strategy, in line with its parent group’s investment projects to expand hydrocarbon production capacity.
To meet rising demand within the United Arab Emirates and from overseas clients, parent Abu Dhabi National Oil Co (Adnoc) is pouring money into expansion projects that can raise its output of crude, oil products, chemicals and sulphur in the coming decade.
Among the state-run energy conglomerate’s targets, crude production will increase to four million barrels per day (bpd) at the end of 2020 from 3.5 million bpd this year. It hopes to lift the total further to five million bpd by 2030.
Adnoc hopes its petrochemical capacity will grow to 11.4 million tonnes per annum by 2026, from 4.5 mtpa in 2016. The company is targeting a rise in gasoline capacity to 10.2 mtpa by 2022.
Adnoc Logistics, part of the Adnoc group, controls a fleet of 122 owned and chartered vessels, including nine LNG carriers, 42 oil tankers, 48 bulkers, four boxships, and offshore and port-support ships. However, its current portfolio may not be sufficient to meet future group needs.
In an exclusive interview with TradeWinds, Al Masabi says his company will need to expand and renew its fleet. “We are already in the planning stage…[we need to] make sure we are meeting the requirement of our biggest client, which is the Adnoc group,” Al Masabi says.
Al Masabi points out that Adnoc Logistics will expand in the LNG, LPG, crude and product tanker sectors as well as dry bulk, but stresses there are no specific targets in terms of fleet size. “It will depend on customers’ requirements,” he says.
The company will acquire the tonnage via newbuilding or secondhand deals while also considering time charters and bareboat leases, according to Al Masabi.
Smart, effective, efficient
“We are expanding, but we want to do a very smart, effective and efficient expansion,” he says. “Financials … will decide what we go for.”
The expansion plan will start with the crude tanker sector, says Al Masabi, as Adnoc will have more export capacity in the coming years.
The UAE’s nationwide crude production is expected to increase to 3.53 million bpd in 2023 from 3.23 million bpd in 2018, based on the International Energy Agency’s latest medium-term forecast.
Moreover, Adnoc has announced a $3.1bn investment project at its Ruwais refinery that will free up more light, sweet Murban crude for exports by the end of 2022.
“We will expand very soon for the crude tanker sector. We have some new capacity coming,” said Al Masabi, adding that approximately three units will join its fleet, although their exact capacity is not yet confirmed.
As to the criteria for Adnoc Logistics' tonnage, Al Masabi says the vessels will need to meet the group’s age limit at 20 years as well as requirements from external parties. This is because 30% of Adnoc Logistics’ business is outside of the group and the buyers of Adnoc’s cargoes on a delivered basis sometimes will have specific discharge needs, he adds.
Al Masabi has foreseen potentially more diverse shipping needs from its parent, which has been expanding its oil trading platform that handles own production as well as third-party cargoes.
“[Adnoc is] creating a big trading platform, adding logistics services including shipping to it,” Al Masabi said. “We are trying to be attached to the platform.”
Full integration
Adnoc Logistics was born in 2016 out of the merger among three Adnoc group firms, namely Abu Dhabi National Tanker Co, Petroleum Services Co and Abu Dhabi Petroleum Ports Operating Co. The company is designed to integrate its parent’s shipping, offshore and port services to improve operating efficiency.
With the full integration completed earlier this year, Adnoc Logistics has become more capable of dealing with the cyclical shipping industry, according to Al Masabi.
“You need to be efficient, agile … understand your customers’ needs,” Al Masabi says. “We are achieving those goals."
There was speculation that Adnoc Logistics may sell a minority stake via an initial public offering, although TradeWinds understands that is not on the cards for now.
In the first listing of an Adnoc group firm, fuel retail arm Adnoc Distribution raised AED 3.1bn ($844m) by selling 10% of its shares on the Abu Dhabi Securities Exchange in late 2017.
