Abu Dhabi’s ADNOC seals $5.8bn refining and trading deal with ENI, OMV

ADNOC’s chief executive Sultan Al-Jaber said the equity partnership was a ‘one of a kind’ deal. (AFP)
Updated 27 January 2019

Abu Dhabi’s ADNOC seals $5.8bn refining and trading deal with ENI, OMV

  • The transaction is one of the largest ever in the refinery business
  • The partners will also establish a joint trading venture

ABU DHABI: Italy’s Eni and Austria’s OMV have agreed to pay a combined $5.8 billion to take a stake in Abu Dhabi National Oil Company’s (ADNOC) refining business and establish a new trading operation owned by the three partners.
The transaction, which expands ADNOC’s access to European markets, furthers Eni’s diversification away from Africa and gives OMV a downstream oil business outside Europe. It was hailed as a “one of a kind” deal by ADNOC’s Chief Executive Sultan Al-Jaber.
“The whole oil and gas industry hasn’t seen a transaction of this size and sophistication,” he said.
Under the agreement, Eni and OMV will acquire a 20 percent and a 15 percent share in ADNOC Refining respectively, with ADNOC owning the remaining 65 percent, the three companies said in statements on Sunday.
The partners will own the same proportions of the joint trading venture, they added.
OMV said that it would pay around $2.5 billion, while Eni said it would pay around $3.3 billion, giving ADNOC Refining, which has a total refining capacity of 922,000 barrels per day, an enterprise value of $19.3 billion.
The agreement includes output from the Ruwais Refinery, the fourth largest single site refinery in the world.
WIN/WIN
The new trading venture will expand market access for ADNOC Refining’s products with export volumes equivalent to approximately 70 percent of throughput.
“We are already well-positioned in Asia and we want to increase our market share there .... but this will also help us to have access to European markets and beyond,” Al-Jaber said.
Eni has signed several deals in the Middle East in recent months as it expands outside Africa where it is the biggest foreign oil and gas producer.
The company’s CEO Claudio Descalzi said the partnership would increase its global refining capacity by 35 percent.
“This transaction, which allows us to enter the United Arab Emirates’ downstream sector...(will make) Eni’s overall portfolio more geographically diversified, more balanced along the value chain, more efficient and more resilient to cope with market volatility,” he said.
OMV described the deal, which is set to close in the third quarter of 2019, as a major milestone in relation to its “Strategy 2025” plan. It said it would finance the deal primarily out of its cash flow.
“With (this transaction) OMV has established a strong integrated position in Abu Dhabi...spanning from upstream production to refining & trading and petrochemicals,” CEO Rainer Seele said.
Founded in 1971, ADNOC has undergone major change since Al-Jaber’s appointment in 2016, part of wider economic reforms led by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan, who witnessed the signing of the three-way agreement.
Al-Jaber has embarked on privatising its services businesses, ventured into oil trading and expanded partnerships with strategic investors.


‘The stock market, stupid’ — Trump’s claim is looking hollow 

Updated 29 October 2020

‘The stock market, stupid’ — Trump’s claim is looking hollow 

  • The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency
  • The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost

Before the US election of 1992, candidate Bill Clinton summed up what he saw as the reason he would become president: “It’s the economy, stupid.” He was proved right as voters disowned the economic policies of President George H.W. Bush in their droves to elect Clinton. 

Until the COVID-19 pandemic began to ravage the US economy in March, President Donald Trump would have been able to make the same claim. For the four years of his presidency, the US economy had continued the progress initiated by his predecessor to recover from the 2009 global financial crisis.

By most measures — growth, employment, inflation — the Trump years had been good, and those on the top of the pile had even more reason to be grateful thanks to the big tax cuts he had made a flagship policy.

The pandemic changed all that in the space of a few weeks as lockdown measures shocked the economy. Jobless claims soared to all-time records, bankruptcies and closures affected large swathes of American business, and gross domestic product collapsed. The International Monetary Fund forecasts that the American economy will shrink by 4.3 percent this year.

But Trump could still claim instead that “it’s the stock market, stupid” as a reason he could be re-elected. Mainly because of the trillions of dollars injected into the economy in the form of fiscal stimulus, US share indices had swum against the economic tide.

The S&P 500 index hit an all-time high in September, allowing Trump to boast that under his administration, investors and the millions of people whose livelihoods depended on the financial industry had never had it so good.

Now, it looks as though even that final claim is looking more fragile. For the past couple of days, US and European stock markets have gone into reverse as investors took fright at the rising number of COVID-19 cases and the re-imposition of economic lockdowns in many countries.

Trump might argue, with a little justification, that Wall Street is worried about the prospect of Joe Biden being elected president by the end of next week. Certainly the contender, by definition, is something of an unknown quantity in terms of economic policy.

He is also known to favor some policies — such as tighter regulation on environmental sectors, more spending on health care, and higher taxes for federal services and projects — that have traditionally been regarded as contrary to the philosophy of “free market” America.

In particular, the energy industry is worried about possible restrictions on shale oil and gas production that Biden and his “green” team are believed to favor. However, it should be pointed out that the Democratic candidate has specifically said he will not ban shale fracking, as some environmentalists want.

In any interesting side-story, the state of Texas — one of the biggest in terms of electoral college votes — would seem to have more to lose than any other if the energy scare stories about Biden were true. Yet the contest there between Democrats and Republicans is the closest it has been for decades, according to opinion polls.

The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency and a sign of his deal-doing prowess. If even this claim is denied to him in the final week of campaigning, it would make the uphill battle against the polls even more difficult.

There is a chance that Big Tech might offer some relief. The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost, given that they were the ones largely responsible for the big market gains earlier in the year.

But for Trump, any such respite might be too little, too late. It looks as though Wall Street and Main Street are finally catching up in their gloom, and there is nothing the president can do about it.