Cover story: ADNOC will produce zero sulphur content bunker fuels by 2020

Creating a more valuable downstream business will allow ADNOC to become a more flexible, resilient and diverse global energy company, says Abdulaziz Abdulla Alhajri, director, Downstream Directorate, ADNOC.

Abdulaziz Abdulla Alhajri, director, Downstream Directorate, ADNOC.
Abdulaziz Abdulla Alhajri, director, Downstream Directorate, ADNOC.

Abu Dhabi National Oil Company – ADNOC – last year announced a $109bn capex programme to be deployed across its entire value chain. As part of this programme, at the Downstream Investment Forum, which took place on 13 May 2018 in Abu Dhabi, UAE, ADNOC unveiled plans to invest $45bn alongside partners, over the next five years, to become a leading global downstream player, enabling it to further stretch the value of every barrel it produces to the benefit of the company, its partners and the UAE.

The unprecedented investment progra-mme will underpin a new downstream strategy to significantly expand ADNOC’s refining and petrochemical operations at Ruwais in Abu Dhabi, and undertake highly targeted overseas investments to secure greater market access.

Through a combined programme of strategic partnerships and investment, ADNOC will increase its range and volume of high-value downstream products, secure better access to growth markets around the world and create a manufacturing ecosystem in Ruwais that will significantly stimulate in-country value (ICV) creation, private sector growth and employment. The strategy is expected to add more than 15,000 jobs by 2025 and contribute an additional 1% to GDP per year.

The experience of Abdulaziz Abdulla Alhajri, who is director, Downstream Directorate, ADNOC, since May 2016, as CEO of Borouge for almost a decade and a combined 25 years in senior management roles in ADNOC Group companies, could prove crucial in making this strategy a reality.

“ADNOC has always been a long-term, reliable supplier of crude and we will remain a major global producer of crude and gas. However, we now aim to significantly expand our downstream business to further access the growing markets and global demand for refined and petrochemical products,” says Alhajri.

Ambitious downstream strategy

“A major focus of our downstream strategy will be on investing in, and significantly expanding, our assets, capabilities and product range at Ruwais, transforming it into one of the world’s largest, fully integrated refining and petrochemicals complex, underpinned by a $45bn investment programme,” Alhajri adds.

The majority of the $45bn will be invested in the Ruwais Industrial Complex, with the ambition of turning it into the main engine of growth for ADNOC’s downstream strategy. The investment in Ruwais will optimise production and efficiency, diversify the breadth of the products it produces, and expand its refining and petrochemicals capacity and flexibility.

Some of the larger, key projects being undertaken under the strategy include a new mixed cracker and polypropylene plant (PP5) at Borouge, and a new refinery as well as investments to optimise production, including a Crude Flexibility Project (CFP) to allow ADNOC to process a wider range of crudes. The investment for the $45bn downstream programme will be mobilised and raised jointly by ADNOC and its strategic partners.

In March 2018, ADNOC awarded a Crude Flexibility Project, enabling ADNOC Refining to process medium sour crude in the new Ruwais Refinery West Complex, to a joint venture led by Samsung Engineering. The agreement was signed by Abdulaziz Alhajri (sitting, right), director, Downstream Directorate, ADNOC, and Choi Sung-An (sitting, left), CEO, Samsung Engineering, in the presence of Dr Sultan Ahmed Al Jaber (standing, right), UAE minister of state and ADNOC Group CEO, and Paik Ungyu, minister of trade, industry and energy, Republic of Korea.

Key downstream projects

ADNOC’s main projects – under implementation and announced – are the mixed feed cracker, Ruwais Derivatives Park, Ruwais Conversion Park, new refinery, CFP, PP5, Gasoline and Aromatics Project (GAP), and Carbon Black and Delayed Coker Project.

The mixed feed cracker is targeted to produce 2.5 million tonnes per annum (mtpa) of polymers and also maximise integration opportunities and operation flexibility within Borouge 1, 2 and 3, and other ADNOC Group companies. It enables focus on growth industries such as packaging, infrastructure, energy, mobility, agriculture and healthcare applications.

“The project has 1.8mtpa of ethylene cracker capacity, and will produce polyethylene and polypropylene as well as other products, including butadiene, benzene, methyl tertiary-butyl ether (MTBE) and pyrolysis gasoline. In this project, we hope to move to the front-end engineering and design (FEED) stage in H2-2019,” reveals Alhajri.

“Ruwais Derivatives Park will hold several downstream projects, utilising production from the new GAP and mixed feed cracker projects. The park will act as a prime catalyst for the next stage of petrochemical transformation for ADNOC. Companies and partners are being invited to produce products and solutions, such as the linear alkyl benzene (LAB), and we expect to award the FEED contract for this by the end of this year.”

“Ruwais Conversion Park enables new business and investments further down the value chain to convert products from the derivatives park into further end-products, or industrial products. We have been working with industry specialists on the compounding facility and have received strong expressions of interest, and expect to announce updates in the coming months,” Alhajri explains.

The pre-FEED tender for the new ADNOC refinery will be issued shortly. When completed, the new refinery will double ADNOC’s existing crude refining capacity, by adding 600,000 barrels per day (bpd) additional capacity.

CFP will enable ADNOC Refining to process medium sour crude in the new Ruwais Refinery West Complex (RRWC). This project will enable RRWC to process up to 420,000bpd of Upper Zakum crude, or similar crude types from the market, allowing ADNOC to extract greater value from its crude resources by liberating Murban crude, which commands a higher price on global oil markets, to be utilised for export sales.

“Output from the project will increase our refining products of liquefied petroleum gas (LPG), naphtha, kerosene (Jet-A1), gas oil, gasoline components, propylene and sulphur, targeted for export fuel markets, local fuel consumption and raw material for petrochemical plants in Ruwais,” observes Alhajri.

In March 2018, the CFP has been awarded to a joint venture led by Samsung Engineering. It is currently on the engineering, procurement and construction (EPC) stage and due for handover by the end of 2022.

The PP5 addition to the existing Borouge complex aims to add 480 kilo tonnes per annum (KTA) of polymer materials using surplus propylene from the ADNOC Refining expansions. This will increase ADNOC’s polymer production capacity to almost 0.5mtpa by 2021.

This volume will be targeted to enhancing Borouge’s competitive edge and boost its supplies in major Asian markets. Borouge has awarded the EPC contract for PP5 to Maire Tecnimont in July 2018.

“GAP will increase gasoline production capacity for ADNOC Refining from 5.4mtpa to 9.6mtpa in addition to producing 1.6mtpa of aromatics (paraxylene/benzene). This will be achieved by utilising naphtha from existing ADNOC Refining plants in Ruwais. This is to support growing gasoline/aromatics demand in the local/export markets,” Alhajri points out.

“The project also aims at maximising ADNOC’s value from naphtha by converting it into aromatics. We expect to issue the technical EPC bids for the project in the coming months and make the final investment decision by this year-end, or early 2019.”

“The Carbon Black and Delayed Coker Project aims at reducing our environmental impact while creating value by improving refinery margins. This will be achieved by utilising heavy oils, slurry, residue fluid catalytic cracking (RFCC) and residues to produce 1,700kta of value products (polypropylene, gas oil, coke and carbon black), which will feed into existing ADNOC petrochemical plants in Ruwais, and create new product lines for local industries (carbon black and coke),” comments Alhajri.

Digitalisation as a key driving force
“ADNOC’s digitalisation ambitions capitalise on value-creating opportunities by bringing together people, data and technology, enabling delivery of our 2030 smart growth strategy,” Alhajri opines.

“Our digital transformation approach is focused on business needs and supporting agile, effective and verified decision-taking. Digitalisation is very significant in refining and petrochemical business; it gives us much greater visibility into our operations and helps us to make informed decisions.”

Developing the Integrated Production Planning platform – a digital twin of the entire ADNOC value chain – enabling increased production, better planning and identification of market opportunities, is a prominent example for ADNOC’s digitalisation endeavour.

It models the key work processes, including crude and feedstock selection, distribution planning, production planning, operations planning, and blending, to optimise these processes, improve product slates, and maximise profit within given operational constraints.

The application facilitates enterprise-wide linear and non-linear planning, allowing for multi-plant and multi-period views visible to various parts of the organisation. Scheduling supports comprehensive optimisation of refinery activities, including crude receipts, process operations, product blending, and product shipping. It does not end at the refinery gate, and optimises all margins along the entire value chain. It increases margins due to the ability to get the right product to the right location at the right price via the right transportation mode.

“Our IRIS – Integrated Refinery Information System – runs various refinery specific applications all in sync with each other to give us a holistic view of the entire operation. It facilitates inventories of refined products available in near real time,” remarks Alhajri.

“The system features access to a range of refinery specific applications for production accounting, scheduling systems, etc. This helps us to see ‘Refining Margin’, the profit on a given barrel of crude oil after it has been processed. Being able to access that information rapidly has a knock-on effect, and could fundamentally change the way ADNOC Refining does its business.”

“We seek partners who can deliver access to high growth economies, who can apply the latest technology to upstream and downstream operations, and who are financially savvy, including international institutional investors, who can deploy long-term capital for attractive sustainable returns,” Abdulaziz Abdulla Alhajri, director, Downstream Directorate, ADNOC.

Partnerships with leading organisations

Strategic partnerships are at the very heart of ADNOC’s growth strategy. ADNOC has a successful track record of long-term, mutually beneficial partnerships from its earliest days.

“We will expand our international footprint across the full downstream value chain, including securing additional crude refining capacity in growth markets, and enhancing our petrochemical portfolio to participate in high-growth, high-margin markets,” Alhajri states.

“Our partnerships bring complementary strengths and capabilities, such as technology, operational excellence, financial acumen and market access, allowing us to enhance innovation, research and to invest together and grow together.”

“We seek partners who can deliver access to high growth economies, who can apply the latest technology to upstream and downstream operations, and who are financially savvy, including international institutional investors, who can deploy long-term capital for attractive sustainable returns,” mentions Alhajri.

“Together with our joint venture partner Borealis, Borouge is further investing in its plastics compounding capabilities to support our Chinese customers. Borouge’s compoun-ding manufacturing plant in Shanghai, China, started operations in 2010 with a pro-duction capacity of 50,000 tonnes per annum (tpa). By the end of 2015, we had increased the production capacity to 90,000tpa.”

“In 2017, we started the second phase of expansion at the plant to increase its production capacity to 125,000tpa to meet growing demand from China’s automotive industry,” Alhajri declares.

Co-investing in Ratnagiri refinery

In June 2018, a framework agreement was signed between ADNOC, Saudi Aramco and a consortium of three Indian oil companies, to explore a strategic partnership and co-investment in the development of a new $44bn mega refinery and petrochemicals complex at Ratnagiri, on India’s west coast.

The Ratnagiri refinery announcement should be seen in the wider context of our broader downstream strategy. By investing in this project, we will both secure off-take of our crude to a key market for ADNOC, as well as strengthen access in one of the world’s largest and fastest growing refining and petrochemical markets. We will consider partnership opportunities that will allow us to meet our business growth and investment objectives,” explains Alhajri.

“By targeting such strategic international investment opportunities and initiatives, we will ensure long-term market access for our hydrocarbons; enhance and deepen our global marketing and crude/product placement activities, including the development of a group-wide and integrated non-speculative trading platform; and establish select and focused, international businesses through new joint ventures, partnerships and acquisitions.”

In-country value initiatives

In January 2018, ADNOC introduced a new ICV programme to increase the company’s contribution to the UAE economy and to strengthen its relationship with the UAE’s private sector.

“Our goal is to encourage the use of local goods, services, manufacturing and the employment of Emiratis in the private sector, to stimulate economic diversification and growth,” Alhajri reveals.

All business partnerships with ADNOC now include an ICV assessment as part of the tender evaluation and award process. The $109bn capital expenditure programme, over the next five years, will create multiple opportunities for local companies to grow alongside ADNOC.

A major focus of ADNOC’s downstream strategy will be on investing in, and significantly expanding, its assets, capabilities and product range at Ruwais, transforming it into one of the world’s largest, fully integrated refining and petrochemicals complex.

Health, safety and environment (HSE) standards

“We ensure compliance with HSE and Asset Integrity standards, and embed ADNOC Group 100% HSE culture across the downstream business. We strive for continuous improvement in health, safety, environment and process safety. We identify opportunities to improve environmental performance in terms of flaring intensity, energy efficiency and sustainability measures. We embed climate change strategy framework within ADNOC,” observes Alhajri.

“The downstream business is undoubtedly a major future growth driver for ADNOC. We are facing many challenges, but I am confident that with continued focus on 100% HSE and our other priorities, we will continue to build momentum and deliver continuous success for the next five years and beyond,” Alhajri declares.

Talent shortage in the regional industry

“Here at ADNOC, we are readdressing the talent challenge by embracing and leveraging equality, inclusion and diversity. We have appointed two female CEOs, one of them in downstream business,” says Alhajri.

“We have revised our recruitment policies, launched leadership and skills building training programmes through ADNOC Technical Academy for our brightest and best Emirati workers, and we are supporting STEM initiatives in our own ADNOC schools to encourage young people to become the scientists, technologists, engineers and mathematicians of the future.”

“We have also created the ADNOC Future Leaders programme that will provide our high-performing young Emirati employees with the knowledge, skills and experience necessary to be successful at the highest levels of the organisation,” Alhajri points out.

IMO sulphur regulation

ADNOC is well-positioned to benefit from the IMO 2020 sulphur regulations, as the state-run company has complex refining facilities that can produce cheaper heavy crude, while maximising output of distillates.

“The Carbon Black and Delayed Coker Project announced in Q3-2018 will strengthen our ability to market and sell marine fuels, following the International Marine Organization’s decision to reduce the sulphur content in marine fuels to 0.5% by 2020. Our CFP will be able to process heavy crude to produce high-value products. ADNOC will produce zero sulphur content bunker fuels by 2020,” concludes Alhajri.

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