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Corporate Strategy

Adnoc’s Green Transformation

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AP-21314442782143-United Arab Emirates Sultan Ahmed Al Jaber Minister of Industry and Advanced Technology
  • Recent moves announced by Adnoc look set to transform Abu Dhabi’s national oil company into a cleaner producer of hydrocarbons and a major green energy business.
  • Key developments include a renewable energy joint venture with Taqa, using nuclear power to supply low-carbon energy to Adnoc’s operations and progress on the NOC’s blue hydrogen initiative.
  • While the United Arab Emirates is to host COP28, Adnoc is keeping up its aggressive expansion plans in oil and gas.

The Issue

The UAE is starting to deliver in a tangible manner on its green energy targets. This is despite the Gulf producer having one of the highest per capita emissions rates globally. State oil behemoth Adnoc — which brings financial and project management muscle, strategic acumen and leadership — is a big part of the reason why. As energy transition challenges have proliferated, so Adnoc has turbo-charged its response, with the company targeting leading positions in carbon, capture and storage (CCS), blue hydrogen and, most recently, green hydrogen and renewables. Adnoc is the key lever for the UAE to hit its Net-Zero by 2050 target. Nevertheless, success is going to be difficult and will depend in large part on two things: firstly, the development of a global hydrogen market, with the Mideast gaining critical market share; and, secondly, continued demand for oil to fund what is going to be an expensive transition.

Abu Dhabi Inc.

Adnoc has an advantage over its corporate and NOC rivals in that it is uniquely placed to fast-track decision-making. It has a dual role as both operator and regulator — not to mention a CEO, Sultan al-Jaber, who is also minister of industry and advanced technology. Consequently, implementation of its projects benefits from full alignment with government policy.

Nuclear energy has proved transformational for both the UAE and Adnoc. From January, the switch of all grid-connected Adnoc operations to nuclear power will further enhance the green credentials of what was already some of the world’s lowest-cost and lowest-emission oil and gas production. “In one move, this ... brings us more than one-third of the way towards our 2030 carbon intensity target,” al-Jaber told this month’s Adipec conference in Abu Dhabi. However, some offshore operations, such as the giant Upper Zakum field, will take until 2025 to receive their power from electricity derived from nuclear energy.

Nuclear energy could also be pivotal for green hydrogen developments within the UAE. Intermittency means that, in the short term, solar power alone is probably not going to be enough to make Gulf-produced green hydrogen commercial. Plus, unlike regional rivals in Saudi Arabia and Oman, the UAE does not have significant wind resources. But by using nuclear power at night, 24-hour production via a blend of green and so-called “purple” hydrogen could potentially be achieved.

The Power of Partnerships

Developing a hydrogen economy poses a whole new challenge for the Gulf. It has bountiful solar resources, but so do Chile, Australia and North Africa, which are all closer to the key initial hydrogen adopter markets of Europe, South Korea and Japan. Overcoming transportation issues will be a formidable task. Adnoc’s project management and the UAE’s stable political and commercial environment bolster its hydrogen credentials, but commercial alignment will be absolutely vital. The news last week that Japan’s Mitsui and South Korea’s GS Energy were joining Adnoc and partner Fertiglobe’s planned Taziz blue hydrogen project could be the push that gets the pioneering 1 million ton per year initiative through to a final investment decision (FID).

In recent months, consensus has been building that the hydrogen industry’s future will be green, with the energy used to produce it coming from renewables. Currently the dominant industry narrative is that blue hydrogen, derived from a combination of gas and CCS — up to now the focus of Adnoc’s efforts — will secure a limited transitional role. This explains the rationale behind Adnoc’s renewables megadeal with Taqa, also announced on the sidelines of Adipec.

The new joint venture (JV) aims to create “a clean energy powerhouse, with a total generating capacity of at least 30 gigawatts of renewable energy by 2030, that will position Abu Dhabi and the UAE at the forefront of the energy transition and further advance its global leadership role in green hydrogen,” according to Adnoc. The deal is in its early days, and further details are scant, but the JV’s ambitions dwarf the UAE’s previous clean energy target.

For Abu Dhabi, succeeding in the energy transition is existential. Already, the UAE is using new energy as a diplomatic tool — as seen by its involvement in Monday’s tri-government memorandum of understanding with Israel and Jordan, whereby Israel will provide water to Jordan in exchange for 600 MW of solar-powered electricity.

Oil, Gas Production Remains a Priority

Despite these green initiatives, oil and gas production remains a priority and made up the bulk of Adnoc’s announcements at Adipec. $6 billion worth of drilling contracts were signed. Adnoc also awarded two packages of contracts amounting to $1.46 billion to build the 340 million cubic foot per day Dalma sour gas project. The company’s planned 1 million barrel per day production capacity boost, to 5 million b/d by 2030, is progressing well — with Upper Zakum capacity recently hitting 1 million b/d, some three years ahead of schedule — sources say.

Downstream, energy transition concerns recently prompted Adnoc to cancel plans for a new 400,000 b/d refinery at Ruwais. But the company is pushing hard on its petrochemicals expansion, announcing — with partner Borealis — a $6.2 billion go-ahead for Borouge 4, which will see the construction of a 1.5 million ton/yr ethane cracker.

Adnoc’s natural gas plans remain uncertain. The combination of energy efficiency measures and nuclear expansion has flipped the outlook for gas from scarcity to surplus. Now, a major greenfield LNG project at Fujairah, outside the Strait of Hormuz, with capacity of up to 9.6 million tons/yr, is being studied. But much depends on the extent of future gas expansion, which will depend on FIDs across a range of projects. At Adipec, Adnoc announced it was redesigning the front-end engineering for its giant 1.5 billion cubic foot per day offshore Ghasha sour gas project, with the aim of cutting costs and integrating CCS into the project.

The sheer scale of Adnoc’s ambitions across multiple industry sectors should prompt some healthy skepticism. But make no mistake, Adnoc and the UAE mean business. The decisions to proceed with the 5.6 GW Barakah nuclear program and the 2 GW Dhafra, the world’s largest solar project, along with Adnoc’s own transformation since 2016, suggest that it won’t be far off target.

Adnoc's Green Autumn: Three Game-Changing Deals
ProjectPartnersStatus
Nuclear Power for OperationsDewa (state utility)Four 1.4 GW units, of which two operational and third just completed
New Partners for Taziz Blue Ammonia Mitsui and GS Energy join Adnoc and Fertiglobe on World Scale ProjectFront-end engineering and design for 1 million ton/yr project awarded to Wood Group; FID in 2022
Nov. 16 30 GW Renewables MegadealState energy firm TaqaTargeting "at least 30 GW" of renewables, green hydrogen and waste-to-energy capacity both domestic and internationally

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