S04 ORME 7 2016 Analysis 01_Layout 1 26/10/2016 10:51 Page 18
Consolidation and restructuring
afoot at ADNOC Abu Dhabi rings the changes as offshore ADNOC oil units and other subsidiaries are set for consolidation. HESE ARE CHANGING times for Abu Dhabi’s energy sector. One of the Middle East’s largest oil producers, with total output of around 3.2mn bpd, it remains a stalwart of world hydrocarbon production. At the same time, it has become a frontrunner in the dash for renewable energy, named a few years ago as the world headquarters for the newly-formed International Renewable Energy Agency. Although business continues as usual for state-owned Abu Dhabi National Oil Company (ADNOC), it is by no means immune to the broader changes sweeping the energy sector. Indeed, the lengthy renewal of concession agreements with international partners in recent years has perhaps allowed officials to sit back and take stock of how the industry might look a few years from now, especially in an era of prolonged low oil prices. One of the most notable changes, announced recently, is the consolidation of the emirate’s two largest offshore operators, as part of a drive to streamline business and boost cost efficiencies.
Abu Dhabi’s offshore production is forecast to reach 1.6mn bpd by 2017 or 2018. (Photo: Kanok Sulaiman/Shutterstock)
be well positioned to take advantage of strategic opportunities for future growth,” the ADNOC statement added.
Offshore consolidation Much of Abu Dhabi’s oil production comes from offshore fields, and from two key players, the Zakum Development Company (ZADCO) and the Abu Dhabi Marine Operating Company (ADMA-OPCO). Together, these two firms make up the bulk of Abu Dhabi’s offshore crude oil production, which is forecast to reach 1.6 mn bpd by 2017 or 2018. In an October statement, ADNOC said that the consolidation is "aimed at capitalising on synergies to drive operational efficiency and maximise value.” It forms a central pillar of a bigger restructuring effort within the OPEC member’s main energy firm, again with the dawn of cheap oil. "The new company resulting from this integration will be more agile, better able to respond to changing market demands, and
Issue 7 2016
One of the most notable changes is the consolidation of the emirate’s two largest offshore operators.” Most immediately, this means hiking capacity significantly within the next couple of years. Current production from the combined ADMA-OPCO and ZADCO offshore oil fields is around 1.2 mn bpd. It means working towards a production increase of around 400,000 bpd within two years, by which time the group hopes to
have completed the consolidation process. Abu Dhabi is looking to lift its overall production to at least 3.5mn bpd by 2017-18. ZADCO, which operates the huge Upper Zakum field, is especially active, and in the midst of a project to raise output there to some 750,000 bpd. It also operates the Umm Al Dalkh and Satah fields.
Logical step Of course, Abu Dhabi and the UAE are not the only places to face the challenges posed by an industry shaken up by the collapse of crude prices. The sharp drop in oil prices since 2014 has forced companies the world over to become more stringent with their spending plans amid tough competition and squeezed profit margins. Typically, lower production costs mean the Gulf states have weathered the storm somewhat better than producers in higher cost areas, such as the North Sea, though all have been affected.