Offshore Technology

Daily Newsletter

10 August 2023

Daily Newsletter

ADNOC brings together team to pursue acquisitions worth $50bn

The investment team is led by former top Morgan Stanley executive Klaus Froehlich.

Abu Dhabi National Oil Company (ADNOC) is exploring purchases worth around $50bn (Dh184bn) in a bid to diversify operations and grow internationally, reported the Financial Times (FT).

To this end, sources told the FT, the oil giant has assembled a team of nearly 50 dealmakers.

Led by former top Morgan Stanley executive Klaus Froehlich, the investment team has grown to be one of the most crucial parts of the ADNOC's strategy, the sources said.

ADNOC's pursuit of multibillion-dollar purchases comes in a year when few deals are being made overall.

It is simultaneously negotiating with German chemical company Covestro, Austria's OMV and Brazilian petrochemical manufacturer Braskem.

Last week, the state-owned oil company announced the acquisition of a 30% stake in the Absheron gas and condensate field, located offshore Azerbaijan in the Caspian Sea.

In July, ADNOC began formal negotiations with OMV to build a $30bn-plus petrochemical behemoth.

The Abu Dhabi energy major has also raised the offer price for the acquisition of Covestro to around €11bn ($12.4bn) after the earlier offer was rejected.

“They are supercharged, with the investment team given the mandate to go out and look at investments,” a banker familiar with ADNOC was quoted by the FT as saying.

“They have pivoted from an internally focused portfolio management mindset to one that is internationally focused.”

To increase its oil and gas production, the business has set aside $150bn in capital expenditure over the next five years. An additional $15bn is set aside for low-carbon solutions over a longer time frame.

ESG 2.0 marks a shift towards stricter environmental rules

ESG is moving into a different era, which we call ESG 2.0. While ESG 1.0 was driven by voluntary corporate action, spurred by pressure from activist consumers and investors, ESG 2.0 is being driven by a new wave of government policies. The EU has taken the regulatory lead, with rules introduced or in the pipeline that will price emissions, regulate the use of the terms ‘ESG’ and ‘sustainability’ in marketing materials, and make ESG reporting mandatory. The US has taken a different approach, favoring less regulation and more financial support in the form of tax breaks for clean industry (renewables plus nuclear and hydrogen). China is planning to expand its emissions trading system to more sectors, decarbonize its heavy industry, and ramp up its use of renewables. The new policy direction is mainly motivated by the ambition to hit net zero emissions targets. But on top of this, governments are now competing for clean industry and trying to challenge China’s leadership on the production of the world’s green technologies such as solar panels and batteries, as well as the production and refinement of materials needed for energy transition such as lithium. These driving forces are leading to policy that will impact every sector, not just heavy industry, and will keep ESG near the top of the regulatory agenda over the longer term.