Adnoc receives sustainable aviation fuel package bids
26 August 2024
Abu Dhabi National Oil Company (Adnoc) has received bids for a contract to undertake a technical and economic evaluation of sustainable aviation fuel (SAF) production technologies and routes.
According to a document seen by MEED, the proposed study aims to perform a techno-economic evaluation of SAF production technologies and routes, enabling Adnoc to select the right solutions for future SAF production projects.
MEED understands that technical and engineering consultancy companies submitted proposals for the contract earlier this month.
"We are waiting to hear back [from Adnoc]," a source familiar with the project tells MEED.
The selected contractor is expected to define optimal SAF production solutions based on economic and sustainability quantitative considerations, considering Adnoc's potential feedstocks and economic environment.
Adnoc expects the winning consultant to "draw on its know-how and experience, and leverage as far as possible up-to-date market information and partnership arrangements with technology providers or developers, to ultimately define the optimal SAF production solutions".
The study aims to identify applicable technologies, both commercial and emerging, for SAF production from potential Adnoc feedstocks including:
- Waste and tail gases from Adnoc assets: represented by one combined monoxide and/or carbon dioxide (CO2) and hydrogen stream;
- CO2 streams: one post-combustion CO2 stream captured from Adnoc facilities, one CO2 stream from direct air capture;
- One syngas stream derived from UAE solid municipal waste;
- Sugar-based feedstocks: two such feeds will be considered for an international location based on different composition and/or carbon intensity;
- Lignocellulose-based feedstocks: two such feeds will be considered for an international location based on different compositions and/or carbon intensity.
According to Adnoc, technologies should include International Sustainability and Carbon Certification (ISCC1)-certified – or under-certification – pathways, including alcohol-to-jet fuel, which includes ethanol-, isobutanol- and methanol-to-jet; Fischer-Tropsch; and synthetic isoparaffins routes.
Adnoc is keen to consider up to five technology routes for techno-economic evaluations for each feed, to be agreed upon with the contractor.
The study will also include the selection of two reference cases as a benchmark for the techno-economic assessment,
based on hydrotreated esters and fatty acids (Hefa) 2, using both oilseed crop and waste lipid.
SAF is a cleaner-burning fuel made from low greenhouse gas emissions-intensity resources, which can significantly reduce aircraft emissions compared to traditional jet fuel.
Using SAF as a drop-in fuel that is meant to be mixed with conventional kerosene implies producing SAF using ISCC1-certified pathways and feedstocks.
Adnoc said it recognises SAF as a key part of the strategy to deliver lower-carbon fuels to customers, with a position that is reinforced by the acquisition of ISCC1 certification to produce SAF in the Ruwais refining complex in 2023.
Given the market opportunities, SAF is considered a potential driver of growth across the company, it added.
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At a time when global chemicals giants like Saudi Basic Industries Corporation (Sabic) and Dow Chemical are facing financial pressure due to rising feedstock costs and decreasing sales margins, Abu Dhabi National Oil Company (Adnoc) – a relatively small player in the space – is undertaking an ambitious inorganic growth strategy.
In the past 12 months, the company has initiated merger and acquisition transactions that could propel it towards becoming a major global chemicals producer.
The Abu Dhabi energy giant took the first step in that direction by announcing the acquisition of German chemicals producer Covestro in October 2024, making a takeover offer of €14.7bn ($16.3bn). Covestro’s expertise lies in areas such as chemical recycling, which are key for the future of the energy industry and a target area for Adnoc.
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Adnoc’s takeover deal for Covestro has received approvals from regulators in India and South Africa. However, it is still under scrutiny in the EU, with the European Commission having launched an in-depth investigation into the pending deal under its Foreign Subsidies Regulation, which targets non-EU firms perceived to benefit from unfair state subsidy.
[Adnoc] has initiated merger and acquisition transactions that could propel it towards becoming a major global chemicals producer
In early August, the European Commission said it had 90 working days – until 2 December – to make a decision. Adnoc, meanwhile, has contested the investigation into its takeover bid for Covestro, saying that the transaction will add value for all stakeholders.
Covestro’s supervisory and management boards have supported the takeover offer from Adnoc, and in April the firm said it remains hopeful that the transaction will close in the second half of 2025.
Potential merger
Adnoc announced a bigger transaction than the Covestro acquisition deal in March, with Austrian energy company OMV. The two companies agreed the terms of a binding framework agreement for a proposed combination of their shareholdings in Abu Dhabi’s Borouge and Austria-based chemicals producer Borealis.
Simultaneously, Adnoc also entered into a share purchase agreement with Canada-based Nova Chemicals Holdings – a company indirectly wholly owned by Abu Dhabi’s sovereign wealth institution, Mubadala Investment Company – for 100% of Nova Chemicals Corporation.
Adnoc and OMV have also agreed that on completion of the planned merger of Borouge and Borealis, the new entity – which will be known as Borouge Group International – will acquire Nova Chemicals Corporation for $13.4bn including debt, further expanding its footprint in North America.
Borouge Group International will be listed on the Abu Dhabi Securities Exchange (ADX), subject to approval by the UAE Securities & Commodities Authority (SCA) and ADX.
Under the terms of the agreement, Adnoc and OMV will hold equal stakes of 46.94% in Borouge Group International, with joint control and equal partnership. The remaining 6.12% will be in free float, subject to SCA approval and assuming all existing Borouge free float shareholders agree to exchange their existing shares in Borouge for shares in Borouge Group International.
Adnoc and OMV will hold equal stakes of 46.94% in Borouge Group International, with joint control and equal partnership
Upon completion of the deal, Adnoc will transfer its stake in Borouge Group International to XRG, which is also on course to take control of its parent company’s 24.9% stake in OMV.
The purchase price is about 7.5 times the company’s expected long-term profits before interest, taxes, depreciation and amortisation (Ebitda), and is expected to be debt financed through capital markets.
Borouge Group International plans to raise up to $4bn of primary capital in 2026 to qualify for inclusion on global stock index MSCI and secure an investment-grade credit rating, targeting through-the-cycle net leverage of up to 2.5 times Ebitda.
The proposed deal assumes a primary cash injection of €1.6bn ($1.67bn) by OMV into Borouge Group International. This will be reduced on closing in line with the equity value of Borouge and Borealis after expected dividend payments up to completion.
The upcoming Borouge 4 project – which is the fourth expansion phase of Borouge’s petrochemicals complex in Ruwais, Abu Dhabi – is likely to be among the key growth drivers, with projected recontribution by the end of 2026, when the estimated $6.2bn project is expected to be commissioned.
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