Thu, Jul 18 2024 18 July, 2024

ADNOC makes U.S., Mozambique moves to bolster global LNG presence

ADNOC has announced investments in LNG projects in the U.S. and Mozambique while simultaneously advancing its domestic LNG plans.

Logo of ADNOC on a pillar, January 2020. Photo: Adobe Stock/ MarcoCuraba)

The Abu Dhabi National Oil Co. (ADNOC) has taken several steps in recent weeks to grow its role as a global LNG player. Over the course of three days in late May, the United Arab Emirates’ (UAE) state-owned oil and gas company announced two separate LNG investments in the U.S. and Mozambique.

Under the first of the deals, ADNOC secured an 11.7% equity stake in the first phase of NextDecade’s Rio Grande LNG on the U.S. Gulf Coast, also entering into a 20-year off-take agreement for 1.9 million tonnes/year (mtpa) from Rio Grande LNG Train 4.

Under the second of the deals, the Middle Eastern company agreed to acquire a 10% equity stake in the Area 4 concession in Mozambique’s Rovuma Basin from Galp. Area 4 contains the operational Coral South floating LNG (FLNG) facility, as well as the planned Coral North FLNG and onshore Rovuma LNG facilities.

The investments are ADNOC’s first in the U.S. and Mozambique respectively. They were followed by the company’s announcement in mid-June that it had taken a final investment decision (FID) on the Ruwais LNG project in Abu Dhabi.

Strategic shift

The moves are indicative of a broader strategic shift as ADNOC adapts to global trends.

“ADNOC aims to achieve two primary goals with its overseas investments,” Facts Global Energy’s (FGE) director of LNG supply analytics, Siamak Adibi, told Gas Outlook. “The first and most important is to establish a larger global footprint in the gas/LNG market,” he said.

“Secondly, ADNOC is selling some of its domestic assets/services and is reinvesting the revenue/cash into other projects to expand its business,” Adibi continued. “This strategy is designed to mitigate business risk and optimise revenue generation.”

Decarbonisation is also among the drivers behind ADNOC’s efforts to enhance its integrated gas business. The company is targeting net zero greenhouse gas (GHG) emissions from its operations by 2045, while simultaneously planning to grow its LNG business over the coming years.

“ADNOC believes that pursuing more gas and LNG opportunities will help to lower its carbon emissions and strengthen its position in the global market, and it plans to expand its LNG capacity by 150% to 15 mtpa by 2028, from 6 mtpa currently,” an Enverus senior global manager, Bruce Walker, told Gas Outlook. “Other growth pillars for the company include petrochemicals and renewables.”

Many oil and gas producers say that a greater focus on gas will help them reduce emissions. On top of this, the projects ADNOC is pursuing internationally and domestically are designed with further decarbonisation in mind.

“The Rio Grande LNG project features a unique aspect of LNG supply by utilising a carbon capture and storage (CCS) facility with the capacity to store more than 5 mtpa of CO2,” said Adibi. “This is expected to reduce the Scope 1 emissions from the project by up to 95%. ADNOC is also developing an electric drive at their LNG project in Ruwais, powered by renewable and nuclear energy. Similarly, the Rovuma project in Mozambique will also feature a modular, electric-drive design aimed at significantly reducing the carbon intensity of its operations, if it is equipped by renewable power generation capacity or possibly a CCS project.”

Adibi went on to note that these projects would not only support ADNOC’s net zero ambitions but would also help the company ensure its long-term supply optionality for markets with more mature emission trading systems (ETS). This comes as Europe in particular is pursuing decarbonisation goals that make it more likely to tighten emissions requirements for gas supplies in the future. Both FGE and Enverus view Europe as the potential market for low-carbon LNG, at least to begin with.

“We believe that low-carbon LNG will initially target the European market, which due to its aggressive decarbonisation goals is most likely to pay a premium,” said Walker.

This was echoed by Adibi.

“If Europe adopts lifecycle emission accounting for LNG, some legacy suppliers with high-carbon emission intensity may face difficulties in their supply optimisation across basins, while low-carbon LNG projects could benefit from a potential price premium in the EU market,” Adibi said.

Next steps

ADNOC will now be working with the Mozambique Area 4 partners – which also include Eni, ExxonMobil and China National Petroleum Corp. (CNPC) – to bring the projects there to FID. This could be easier for the offshore Coral North FLNG project than for the onshore Rovuma LNG. The security issues that have delayed TotalEnergies’ nearby Mozambique LNG project appear to have eased, but risks remain.

An Enverus regional manager, Jimmy Boulter, told Gas Outlook that he was “definitely optimistic” about an FID being reached on Coral North.

“As there are no major security risks with FLNG, and Eni have a reputation for quickly and efficiently completing oil and gas developments, we’ll likely see an FID late this year,” Boulter said. “The ExxonMobil-led Rovuma LNG project, which initially had a 2020 FID target, continues to be a bit more up in the air because it involves onshore LNG facilities and is thus reliant on the security situation improving enough to restart (as is TotalEnergies’ Mozambique LNG project on Area 1; the two projects would actually share some facilities at the same onshore site),” he continued.

“Last thing ExxonMobil said was FID in late 2025, but this could be pushed back if the militants encroach farther north in Cabo Delgado again,” he added.

NOCs move in

For developers working to advance new LNG projects, it increasingly makes sense to bring state-owned national oil companies (NOCs) such as ADNOC into their partnerships.

“With continued concerns about peak demand and the politics of the energy transition still front and centre, funding for oil and gas projects got generally harder over the past few years, giving state-owned companies a bit of an advantage,” an Enverus director, Patrick Rutty, told Gas Outlook.

“Combined with global energy security issues, this caused NOCs in southeast Asia, China, Korea, and Japan to move to secure supply (mostly gas but also oil) for their own domestic markets. At the same time, Middle Eastern NOCs are seeking to expand their positions in the global gas supply chain,” he added.

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