ADNOC, Wanhua Chemical ink shipping JV and downstream partnership framework agreements worth $12bn

Agreements further demonstrate ADNOC’s ambition to expand downstream portfolio and international market access as part of its 2030 growth strategy

Dr Sultan Ahmed Al Jaber, UAE minister of state and ADNOC Group CEO.
Dr Sultan Ahmed Al Jaber, UAE minister of state and ADNOC Group CEO.

ADNOC signed partnership framework agreement with Wanhua Chemical Group to explore the collaborative development of new opportunities in the downstream sector in the United Arab Emirates and China.

ADNOC and Wanhua Chemical also signed a shipping joint venture (JV) agreement building on the 10-year LPG supply contract signed in November 2018. The signing of both agreements was witnessed by His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.

The agreements with Wanhua Chemical were signed by Dr Sultan Ahmed Al Jaber, UAE minister of state and ADNOC Group CEO, and Zengtai Liao, chairman of Wanhua Chemical Group.

Under the terms of the JV contractual agreement, ADNOC Logistics & Services (ADNOC L&S) and Wanhua Chemical will establish an LPG shipping joint venture, building on the existing 10-year LPG supply contract, which was signed in Shanghai, China, in November 2018. The JV includes the operation of two VLGC (Very Large Gas Carriers) vessels. Both companies will optimise their respective supply programmes and maximise value through the operation and management of these vessels. Through the JV, ADNOC will maximise the value of its LPG portfolio.

In an additional partnership framework agreement, ADNOC and Wanhua Chemical have agreed to explore and develop JV opportunities in both the UAE and in China. The UAE JV would be focused on producing downstream derivatives, including polyurethanes value chain chemicals at ADNOC’s integrated refining petrochemicals complex in Ruwais, Abu Dhabi. The China JV would focus on exploring investment opportunities for the development and production of petrochemical and derivative products in Yantai, Shandong Province, China.

These JVs will yield increased feedstock supplies from ADNOC to Wanhua and further strengthen the existing long-term relationship between both companies. The opportunities will allow ADNOC and Wanhua Chemicals to combine and leverage their market leadership and expertise in technology, marketing and competitive feedstocks.

The potential total value of the collaboration between ADNOC and Wanhua is estimated to be up to $12bn, further solidifying the strong business and investment ties between the companies, but also reflecting the strong partnership across the energy sector between the two countries. This Agreement and potential joint ventures demonstrate further development of the deep relationship between the two companies, recently demonstrated in ADNOC concluding a long-term liquefied petroleum gas (LPG) agreement with Wanhua Chemical Group.

The combination of ADNOC’s leadership in polyolefins and Wanhua Chemical’s expertise in specialty material markets, will allow both companies to deliver a much more diversified offering to customers in several end-application segments such as building and construction, appliances, automotive, electronics and furnishings.

The collaboration between ADNOC and Wanhua Chemical will play an important role in shaping a value-creating downstream cluster in the new Ruwais Derivatives and Conversion Parks, leading to the creation of an expanded and further advanced petrochemicals ecosystem in the UAE.

Dr Al Jaber said: “The new agreements with Wanhua Chemical further reinforce the strong bilateral ties between the UAE and China and how ADNOC is creating smart, mutually beneficial partnerships. Building on our existing cooperation in the LPG space, the shipping JV will see ADNOC capture additional margins and further maximise value across our LPG portfolio.”

The bilateral nature of our planned joint cooperation into both the UAE and China is unique, as it will allow the combined platforms to benefit from ADNOC’s competitive feedstock availability in Abu Dhabi, as well as capture the promising growth opportunities in China. It also serves two key strategic objectives for ADNOC.”

“First, it demonstrates our ongoing commitment to China, and second, it represents another milestone in our journey to grow and diversify ADNOC’s downstream portfolio and establish Ruwais as a global refining and petrochemicals hub. These are key elements of our downstream expansion strategy that seeks to maximise value from our existing resources and secure more effective market access for our expanding portfolio of products.”

Liao said: “Wanhua has always viewed ADNOC as a suitable and reliable strategic partner. Both parties already have a sound business connection through the LPG supply activities. We are pleased to witness the ever-strengthening relationship between Wanhua and ADNOC, including both parties seeking to extend the collaboration beyond the feedstock level.”

Both Wanhua and ADNOC share a similar vision and ambitions, and such deeper collaboration serves the strategies through jointly excavating and leveraging great synergies of both companies.

As part of its 2030 smart growth strategy, ADNOC has recently embarked on a significant expansion of its downstream business. At the centre of its new downstream strategy is a $45bn investment plan aimed at creating the world’s largest integrated refining and petrochemicals complex in Ruwais, which will see the company triple production of petrochemicals to 14.4 million tons per annum by 2025.

Ruwais’ appeal as a unique feedstock engine, capable of producing the full range of essential building blocks along the petrochemical value chain will see the Ruwais Derivatives and Conversion Parks become a global destination of choice for investors and manufacturers wishing to establish a strategic presence in the UAE.

ADNOC’s expansion and new investment in the downstream will accelerate the delivery of its 2030 strategy and create a more flexible, resilient and diverse energy business, optimising its performance and stretching the dollar from every barrel of oil it produces. Furthermore, the downstream strategy will also act as another catalyst for Abu Dhabi’s economic growth and diversification plans, attracting new foreign and domestic investment, creating numerous specialised employment and career opportunities, and significantly boosting ADNOC’s in-country value creation initiatives.

Wanhua is developing into diversified segments beyond its strong presence in the polyurethane business. The petrochemical segment is a key strategic area for Wanhua’s future growth. Wanhua is currently transforming from a regional MDI player into a global chemical company. Wanhua initiated its global development strategy over a decade ago, after the successful acquisition of BorsodChem in Europe in 2011 and a production hub in US. Wanhua is currently exploring the feasibility to produce downstream derivatives targeting the world’s emerging market growth regions.

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