Abu Dhabi’s Supreme Petroleum Council (SPC) launched a new pricing mechanism for Abu Dhabi National Oil Company’s (ADNOC) flagship onshore crude oil, Murban, and announced a significant increase in oil and gas reserves and new discoveries in the emirate of Abu Dhabi, at its meeting held at ADNOC’s headquarters.
The SPC meeting was presided over by His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the United Arab Emirates (UAE) Armed Forces, and Vice-Chairman of the SPC.
During the meeting, H.H. Sheikh Mohamed conveyed the encouragement and support of the UAE President, H.H. Sheikh Khalifa bin Zayed Al Nahyan, as ADNOC continues to harness energy resources to create long-term and sustainable value for the nation. He commended ADNOC on its strong performance as it delivers its 2030 strategy and highlighted that ADNOC has been able to achieve its operational and financial targets, despite the volatile energy markets, due to its drive to continuously optimize its performance and maximize value from its assets and resources.
H.H. Sheikh Mohamed commended ADNOC on its relentless efforts to drive the exploration of Abu Dhabi’s huge hydrocarbon resources which resulted in the historic achievement of significantly increasing its oil and gas reserves, and elevated the UAE from the seventh to the sixth position in both global oil and gas reserves rankings. He noted this achievement reinforces the important role the UAE plays and will continue to play in ensuring the security of energy supplies to global customers.
He also commented on the strategic and historic decision to list ADNOC‘s Murban crude oil on an internationally recognized exchange, noting it will provide the markets with greater confidence and solidify Abu Dhabi’s position as a global energy hub and an essential energy provider to the world, particularly the fast-growing markets in Asia.
H.H. Sheikh Mohamed highlighted ADNOC’s ongoing transformation into a more performance-led and commercially-driven organization and emphasized the central role ADNOC plays in enabling the UAE’s economic ambitions. He expressed the SPC’s recognition of ADNOC’s efforts to drive foreign investment into the UAE through its approach to strategic partnerships and investments.
H.H. Sheikh Mohamed and the SPC also reinforced the importance of a performance-led culture driven by a highly-skilled and qualified workforce. H.H. Sheikh Mohamed commended ADNOC on the progress it is making in attracting and developing the talent that will cater for its future growth.
He noted ADNOC has recruited over 3,200 Emirati nationals with advanced qualifications since 2016 and is set to employ an additional 1,258 by the end of 2019, including over 600 ADNOC scholars. He also acknowledged ADNOC’s plans to recruit more than 3,000 additional Emirati nationals over the next few years.
H.H. Sheikh Mohamed highlighted ADNOC’s drive to stimulate socio-economic development in the UAE through its In-Country Value (ICV) program, which created an additional 1,000 private-sector jobs for Emirati talent in 2018 and is expected to grow over the coming years.
The SPC also commended ADNOC for its industry leadership in applying artificial intelligence (AI) and embedding digitization across its full value chain to increase efficiencies, empower its people and unlock greater value from its resources.
His Excellency Dr. Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, said: “The support of the UAE’s leadership is enabling ADNOC to accelerate the pace of its ongoing transformation into a more commercially-driven and customer-focused integrated energy company with global reach. Following the leadership’s wise directives, ADNOC is adopting more creative strategies and more flexible business models, while shaping value-add partnership opportunities to remain resilient and meet operational and financial targets in today’s unpredictable energy markets, as we deliver our 2030 strategy.”
The SPC is the highest governing body of the oil and gas industry in Abu Dhabi. The Council formulates, approves, and oversees the implementation of Abu Dhabi's petroleum policy and follows up its implementation across all areas of the petroleum industry to ensure that the set goals are achieved.
Other SPC members that attended the meeting are H.H. Sheikh Hazza bin Zayed Al Nahyan; H.H. Sheikh Mansour bin Zayed Al Nahyan; H.H. Sheikh Hamed bin Zayed Al Nahyan; H.H. Sheikh Dhiyab bin Mohamed bin Zayed Al Nahyan; H.E. Suhail Mohammed Al Mazrouei; H.E. Dr. Sultan Ahmed Al Jaber; H.E. Hamad Mubarak Al Shamsi; H.E. Dr. Ahmed Mubarak Al Mazrouei; H.E. Khaldoun Khalifa Al Mubarak; H.E. Jassim Mohammed Buatabh Al Zaabi; H.E. Eng. Awaidha Murshed Al Marar; H.E. Abdullah Nasser Al Suwaidi; and H.E. Suhail Faris Ghanem Al Mazrui.
In support of ADNOC’s drive to strengthen its marketing, supply, and trading capabilities to deliver greater value while responding to customer needs, the SPC launched a new forward pricing mechanism for ADNOC’s Murban Crude, enhancing the attractiveness of Murban and reinforcing the UAE’s position as a reliable energy provider to the world.
The SPC also approved ADNOC’s new trading strategy, following the incorporation of ADNOC Global Trading in July, a joint venture with Eni and OMV that will focus on creating additional value from the sales and trading of products from ADNOC Refining.
On the SPC’s decision to list ADNOC’s Murban crude on an exchange, H.E. Dr. Al Jaber said: “The forward-looking decision and market-orientated foresight of His Highness Sheikh Mohamed bin Zayed and the SPC, to list Murban on an internationally recognised exchange and improve the terms of sale of ADNOC’s Murban Crude, is another significant step in our transformation. The initiative will enable our customers and other market participants to better price, manage and trade their purchases of Murban. This historic and strategic move cements the UAE, Abu Dhabi and ADNOC’s role in the international oil and gas sector.
“Murban is recognized the world over for its intrinsic chemical qualities, consistent and stable production volumes, large number of international buyers, and numerous long-term concession and production partners. These landmark changes, the SPC has approved, will make Murban an even more attractive crude to the global market.”
ADNOC will engage with its customers and other stakeholders over the coming months regarding the implementation of its new Murban Crude forward pricing mechanism, which will see it move from a retroactive official selling price (OSP) to market-driven, transparent, forward pricing. The company expects to implement its new Murban Crude forward pricing mechanism between the second and third quarters of 2020.
The new Murban Crude forward pricing mechanism will use a market-driven futures contract as its price marker, enabling customers and the market to better price, trade, and manage their crude requirements. The futures contract will be traded on an independent and regulated exchange and is expected to demonstrate a highly liquid forward price curve, given the market appetite for Middle East crude.
Today’s SPC approval also included the lifting of destination restrictions on ADNOC sales of Murban Crude.
At the meeting, the SPC also announced increases in hydrocarbon reserves of 7 billion STB of oil and 58 TSCF of conventional gas, moving the UAE from seventh to the sixth position in both global oil and gas reserves ranking with a total of 105 billion STB of recoverable oil and 273 trillion SCF of conventional gas. These significant additions to the UAE’s hydrocarbon reserves mark an historic milestone for the country since the last major update of its reserves base three decades ago and underpin its position as a stable and long-term energy provider to the world.
In addition, the SPC announced the discovery of unconventional recoverable gas resources totaling 160 TSCF; a first for the region, ushering in a new era of large scale unconventional hydrocarbon resources development.
The increase in reserves and new discoveries follows ADNOC’s extensive drilling of dozens of new exploration and appraisal wells across Abu Dhabi’s conventional and unconventional oil and gas fields over the past few years. In addition, the start of production in new fields, for example, SARB, Umm Lulu, Haliba, and Bu Haseer, has enabled ADNOC to verify and further upgrade the originally expected reserves’ volumes.
Equally, the ongoing maturation of ADNOC’s field development plans towards its 5 million barrels per day (mmbpd) oil production capacity target by 2030, and expanded oil recovery schemes, as well as ongoing in-fill drilling, have provided the base for an increase in ADNOC’s reserves.
The unconventional and conventional gas discoveries and increase in reserves follow the approval last year by the SPC of ADNOC’s integrated gas strategy that will allow ADNOC, commercially and holistically, to unlock Abu Dhabi’s abundant gas resources to enable the UAE to achieve gas self-sufficiency and potentially transition to a net gas exporter.
H.E. Dr. Al Jaber said: “We are very pleased and honoured to have enabled the UAE to move from the seventh to the sixth-largest oil and gas reserves in both global rankings. These achievements underscore ADNOC’s drive to ensure we remain a trusted, reliable and responsible supplier of energy to the world for decades to come. Crucially, the discovery of substantial unconventional recoverable gas resources, for the first time, marks an important milestone in the development of the UAE’s unconventional resources as we execute our integrated gas strategy.
“The significant discoveries and increase in reserves increase are testament to the hard work, innovation, and dedication of the ADNOC family who are ensuring that we continue to thrive and stay ahead of the world’s growing demand for energy. Building on this success, we are expanding our strategic partnerships and leveraging state-of-the-art technologies and world-class expertise to efficiently expedite further exploration of Abu Dhabi’s huge untapped resources while also driving new commercial opportunities, for the benefit of the UAE.”
