Adnoc spurs downstream gas expansions

13 October 2023

This package on the UAE’s downstream sector also includes: 

> Adnoc Gas picks site for planned LNG terminal
> Adnoc Gas receives prices for Estidama package
> Adnoc and Dusup sign key gas supply agreement

> Adnoc receives bids for gas pipeline packages
> Adnoc receives prices for sales gas pipeline packages
> Adnoc Gas awards $3.6bn Project Meram contract


 

Demand for natural gas has risen exponentially in this decade, with its share in the global energy mix set to grow further in the decades to come.

Regional energy producers are deploying major capital expenditure programmes to increase their gas production and processing capabilities to cater to growing demand.

The UAE is striving to achieve self-sufficiency in gas production by 2030. With this objective in mind, Abu Dhabi National Oil Company (Adnoc) has committed significant investment towards expanding its midstream and downstream gas capabilities.

These projects seek to increase the availability of gas for utility providers and industrial customers in the UAE and ramp up ethane output to grow the country’s petrochemical sector and its derivatives ecosystem.

Hail and Ghasha galvanises UAE upstream market

Ruwais LNG project

Adnoc Gas, the gas processing business of Adnoc, has finalised the location for its planned liquefied natural gas (LNG) export terminal. The facility will have the capacity to produce about 9.6 million tonnes a year (t/y) of LNG from two processing trains, each with a capacity of 4.8 million t/y.

The overall value of the planned project is estimated to be upwards of $4.5bn, based on capital expenditure by operators on similar schemes worldwide.

Adnoc Gas received technical bids from contractors in May for the engineering, procurement and construction (EPC) works on the project, which will be built in Ruwais Industrial City in Abu Dhabi’s Al-Dhafrah region.

Adnoc Gas had originally planned to build the LNG terminal in the UAE emirate of Fujairah, which sits outside the Strait of Hormuz on the coast of the Gulf of Oman. In early May, however, the company announced it was shifting the location of the project from Fujairah to Ruwais, Abu Dhabi.

Sales gas pipeline network

Adnoc Gas is progressing the Estidama project, which is crucial to enhancing Adnoc’s sales gas pipeline network across the UAE. The project aims to cater to rising demand for gas from industrial consumers across the UAE, particularly in the Northern Emirates.

Contractors submitted commercial bids in August for combined package numbers 4 and 7. The combined package involves laying a new pipeline from the Al-Shuwaib pig launcher and pig receiver station to the Sajaa gas facility in Sharjah.

The scope also covers building a new gas pipeline between BVS-2/KP28.7 in Abu Dhabi to Dubai’s Margham gas facility to meet increased gas demand from Adnoc Gas’ customer Dubai Supply Authority (Dusup).

EPC works on the estimated $2bn-plus Estidama project have been divided into seven packages. Abu Dhabi-based contractor Integrated Specialised General Contracting Company (Iscco) won package 1, understood to have a contract value of $18m, in December 2021.

In early July, Adnoc Gas awarded contracts worth a combined $1.34bn for two other packages of the Estidama project. UK-headquartered Petrofac was awarded the EPC contract for package 2 of the Estidama project, estimated to be worth $720m.

A consortium of Abu Dhabi’s National Petroleum Construction Company (NPCC) and Lebanon-headquartered CAT Group won Estidama package 3, which is valued at about $630m.

Contractors submitted technical bids for package 6 in August 2022 and commercial bids by 21 November. Work on package 6 entails the installation of a 52-inch, 74-kilometre pipeline from Sweihan to Al-Shuwaib in Abu Dhabi and building two block valve stations.

Package 5 is expected to be tendered separately to contractors as part of a planned second phase of the sales gas pipeline upgrade project.

As per the original project schedule, EPC works on the Estidama project are due to be completed in 2025.

Ramping up ethane output

Adnoc Gas is in charge of one of the world’s largest gas processing complexes in Abu Dhabi, with the capacity to process about 8 billion cubic feet a day from its Asab, Bab, Bu Hasa, Habshan and Ruwais plants.

Increased volumes of ethane production will allow the company to commercialise it to supply feedstock to Borouge for its under-construction Borouge 4 petrochemicals complex, as well as to derivatives plants in the upcoming Taziz complex. Adnoc Gas intends to achieve this through the Maximise Ethane Recovery & Monetisation (Meram) project.

Adnoc Gas awarded a $3.6bn contract for Project Meram to a consortium of NPCC and Spanish contractor Tecnicas Reunidas in early August, with EPC work on the project starting later that month. The scope of work on the contract includes commissioning new gas processing facilities to enable an optimised supply to the Ruwais industrial complex, Adnoc Group said.

The strategic Meram project aims to achieve dual objectives, Adnoc stated.

The first goal is to increase ethane extraction by 35 to 40 per cent from Adnoc Gas’ existing onshore facilities in the Habshan gas processing complex by constructing new gas processing facilities.

The second goal is to unlock further value from existing feedstock and deliver it to Ruwais via a 120km natural gas liquids (NGL) pipeline.


LATEST NEWS FROM THE UAE's CHEMICALS SECTOR:
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> Borouge and Borealis launch recycled products range
> Fertiglobe makes $84m profit in second quarter
> Borouge announces $231m profit in second quarter
> Adnoc opens formal chemicals integration talks with OMV


Taziz chemicals complex

Meanwhile, investors in the Taziz petrochemicals derivatives-producing industrial complex in Ruwais are pushing ahead with their projects.

Taziz – a 60:40 joint venture (JV) of Adnoc and Abu Dhabi’s industrial holding company ADQ – is overseeing the development of the sprawling industrial complex, which will mainly draw ethylene feedstock from the Borouge 4 facility to produce several in-demand chemicals.

A JV of UAE-based Fertiglobe, South Korea’s GS Energy and Japanese investment firm Mitsui awarded Italian contractor Tecnimont the main EPC contract for its planned blue ammonia project in the Taziz Industrial Chemicals Zone in February.

The JV has appointed KBR to provide the technology licence, basic engineering design, proprietary equipment and catalyst for the low-carbon ammonia plant, which will have a capacity of 1 million t/y.

India’s Reliance Industries is also an investor in the Taziz complex, having forged a partnership with Taziz and Abu Dhabi-based Shaheen Chem Holdings Investment to invest $2bn in developing three chemical plants producing chlor-alkali (940,000 t/y), ethylene dichloride (1.1 million t/y) and polyvinyl chloride (360,000 t/y).

Switzerland-based Proman has committed to building the UAE’s first methanol plant at Taziz, with a planned production capacity of 1.8 million t/y. The Proman-Taziz JV completed the contractor prequalification process for the EPC tendering round for the methanol production project in August. The operator is expected to issue the main EPC tender later this year.

As projects in the first phase of the chemicals complex move forward, Taziz is also understood to be gearing up for a second phase to more than double the number of chemicals produced at the derivatives hub.

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Indrajit Sen
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    That focus points to where McGrail expects the next few years of growth to come from. Rail sits at the centre of the UAE story, alongside road upgrades and other major developments in Abu Dhabi. In Dubai, the clearest signal of intent is the expansion of Al-Maktoum International airport.

    “Al-Maktoum is a really good indicator of the future direction of travel,” he says. “That is not a project that is slowing down. There has been a commitment to Emirates that it will move there, and it is still progressing.”

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    Saudi reset

    In Saudi Arabia, the recalibration story predates the conflict, and McGrail says the change should be read as a strength rather than a retreat.

    “I am positive,” he says. “When the reprioritisation started at the beginning of 2025, having lived through the global financial crisis here, I saw the decision to stop, re-evaluate and reprioritise expenditure as a positive. When Vision 2030 was set, Saudi Arabia had not won Expo or the World Cup, so the reprioritisation was the right thing to do. Saudi Arabia will come out of it stronger. Short-term pain, long-term gain.”

    The nature of the work is shifting with the budget. McGrail sees the kingdom moving towards a model long familiar in the UAE, in which core infrastructure and a handful of landmark buildings are delivered first, before surrounding plots are carved up and sold on.

    “You establish a few key iconic buildings, then the plots on the outside are carved up and they look for external investment to come in and develop them,” he says. “It is no different from Downtown Dubai, where Emaar built the Burj Khalifa and a few buildings, then started selling plots.”

    That approach is increasingly tied to public-private partnerships (PPPs), although McGrail is measured on how far the model will stretch.

    “PPP is definitely becoming more prevalent on some of the larger infrastructure projects, though still not as significant as it was made out to be when they first started talking about it,” he says. He sees industrials, mining, healthcare and schools as a natural fit, rather than PPP becoming a blanket procurement route.

    Aviation is another priority. WSP was recently appointed to the rehabilitation of the existing terminal at Jeddah’s King Abdulaziz International airport, alongside a new terminal. It also recently secured a role on the expansion and upgrade of King Fahd International airport in Dammam.

    “Aviation is definitely a key area of focus for us as we head into the next 12, 24, 36 months,” McGrail says.

    Beyond the two dominant markets, McGrail sees pockets of activity but no challenge to the balance of the portfolio. In Qatar, he points to a recovery taking shape towards the end of last year, with WSP active on the Qatar Children’s Museum and continuing its long-running work with the Public Works Authority (Ashghal). Oman is generating masterplanning work, including reviving the Blue City scheme.

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