Dr. Sultan Al Jaber, Minister of State & CEO of the ADNOC Group, sat down with The National and shared his thoughts on the future of ADNOC and how the company will maintain its competitive edge in the current market environment.
Dr. Al Jaber emphasized the ongoing important role of ADNOC to the UAE economy. He also highlighted the company’s focus on operational efficiency, optimizing resources, developing growth opportunities and leveraging ADNOC’s pool of talent.
1. As the new Group CEO of ADNOC, what is your vision and strategy for the Group? The ADNOC Group is an integral part of our economy and prosperity, and will remain so for many years to come. Most importantly, it will continue to play a central role in helping achieve the ambitious socio-economic development objectives of the UAE.
Today ADNOC is a reliable energy provider supplying its customers in the UAE and abroad with oil, gas, refined products and petrochemicals. What ADNOC has achieved so far is a testament to our leadership’s vision and support, the skill and dedication of our people, and the strength of the relationships the Group has built with its partners throughout the years.
ADNOC’s vision is therefore no different from what it has been for many years now, which is to be a responsible and reliable energy provider dedicated to maximizing the value of Abu Dhabi’s hydrocarbon resources for the benefit of our country and our customers.
Ensuring we continue to achieve this vision requires us to be agile and responsive to short term challenges, while staying focused on our longer term strategic growth.
At the moment, everyone in the oil and gas industry is confronted with challenging market conditions: oil prices have declined significantly since mid-2014, and in most markets natural gas prices are following suit. These market conditions are the main short term challenges. And like others in our industry, ADNOC is ensuring it retains a competitive edge in this new environment. This means we are improving operational efficiency, optimizing resources and adapting the mind-set of our people to focus on our strategic objectives and on maintaining our competitive edge.
That being said, large oil price swings happen periodically this is not the first time we are seeing markets going through a major adjustment. We have been through similar experiences in the past.
And like before we will respond accordingly and emerge stronger. We are being proactive and looking across the entire Group to find ways to improve and optimize operational efficiency.
It is important to remember that the oil and gas industry, by its nature, is a long term business. And so, as we respond and adapt to the current market environment in the short term, we have set longer term strategic goals that will enable us to continue to deliver ADNOC’s vision and objectives.
I would summarize these strategic goals as follows: We need to continuously strive to improve efficiency; we need to constantly explore ways to improve our commerciality and profitability; and, to have any success with these goals, we need to continue investing in our people to strengthen their capabilities . We will do this while remaining committed to the integrity, health and safety of our operations and the communities in which we work.
2. You have identified your areas of strategic focus as optimizing efficiency; increasing commerciality and profitability; and investing in people. Can you elaborate on your plans for these pillars? The current low price of oil gives us an opportunity we should not shy away from to examine more closely the efficiency of everything we do. This process will ensure our company’s resilience and make it even stronger. We are working closely with everyone across the ADNOC family and with our strategic partners to identify, across the whole range of activities in our group, where we can do things better, be less cost intensive, and perform more intelligently.
In terms of increasing commerciality and profitability, we are examining the entire length of the value chain to identify new areas for growth. For example we are working on strengthening and expanding our down-stream petro-chemicals and refining business to ensure we harness maximum value.
We are also focusing on innovation and technology development. ADNOC will look to strengthen its ability to develop and integrate new technologies. We will leverage internal capabilities and also look to our partners to continue contributing to our technological progress. This is crucial, especially as we explore new methods to extend the life and maintain strong production levels of our fields in the future.
In terms of people, we are developing the rich pool of talent that already exists within the ADNOC Group of companies. Our people are the past, present and future of ADNOC and our most valuable resource. So we are identifying and bringing along the next generation of the company’s leadership. We have a responsibility to develop ADNOC’s potential from within and to forge a forward-looking organization underpinned by a performance-led culture.
3. ADNOC has set a production target of 3.5 million bpd by 2018. Are you on track to achieve this? As I’ve mentioned, our mission is to remain a reliable supplier focused on maximizing value. Most importantly, we are focused on maintaining our current level of production as well as our investment program. And of course, we are also committed to achieving the overall target of 3.5 million bpd, while we take into consideration prevailing market conditions. Like everyone, we are closely monitoring price, supply and demand, among other market variables. ADNOC has always been an agile company capable of quickly responding to the market and ensuring that its supply is aligned with projected demand.
4. Will ADNOC continue to work with IOCs or will you be adjusting the relationship with them going forward? We have longstanding relationships with a number of IOCs. These relationships are true partnerships based on mutual trust that go back to the birth of our company and have been part of ADNOC’s successful growth. We are keen to work with all those who appreciate the value of long term collaboration aimed at delivering benefits for both partners.
As for the ADCO concession, as you know we currently have participating partners, and we are pleased with their speed of integration within ADCO. Having said that, the door is still open to discuss the participation of other international players in the remaining 22% share in ADCO. In the spirit of partnership we are enthusiastic to work with the industry and to mutually benefit from what is a very attractive, long-term and sustainable opportunity in the upstream oil and gas sector.
5. With Abu Dhabi’s growing demand for gas, how does ADNOC plan to ensure future gas supply for its own operations and for the emirate? Without a doubt, meeting Abu Dhabi’s growing demand for gas is a critical objective and rests high on ADNOC’s list of priorities. We are pursuing a variety of solutions across our portfolio, from conventional and sour gas all the way to a floating storage and regasification unit (FSRU).
Last year, Al Hosn Gas, the largest sour gas facility of its kind in the region, achieved its full production target of 1 billion standard cubic feet per day. Later this year we will be bringing online an FSRU facility, which will add an additional 500 million standard cubic feet per day.
Furthermore, we are continuously evaluating new and undeveloped fields, including unconventional gas. We are also assessing the use of innovative technologies and alternative methods, such as carbon capture, usage and storage (CCUS) that will enable us to improve efficiency, optimize our own consumption, and liberate some gas.
These activities will help develop our capacity and supply, and will be conducted on the basis of commercial viability across our broader portfolio of gas assets.
6. To what extent will ADNOC remain focused only on hydrocarbons or do you see a role for renewables? All sources of energy will be needed to meet the current and future growing global demand for energy, so I don’t see the world as divided by renewable and traditional forms when meeting that demand. It is not an either or proposition. As for ADNOC, our business is the upstream, midstream and downstream of oil and gas. This focus will remain intact.
And as you know there are already various entities and organizations within the UAE who are making significant strides both domestically and internationally in advancing the development and deployment of renewable energy. Of course Masdar is a good example.
7. What’s your prognosis on the oil price and what does it mean for the industry in the near and medium term? Firstly, no one can accurately predict oil prices, so it is important to note that while we closely monitor fluctuations and projections in price, we are always focused on ensuring we remain resilient and competitive regardless of market conditions.
That being said, I can share our current assessment of what is a very dynamic situation.
Over the last few weeks, we have seen some recovery in prices. While we expect to experience continued volatility in the short term, we also expect to see a slow but upward improvement in prices in the medium term. Overall we think that 2016 and 2017 will be the years during which markets will start to rebalance the gap between demand and supply, barring unforeseen events. But while we do not have any degree of control over the future direction of oil prices, in ADNOC we are totally focused on the aspect of our business that we can control: be a cost effective and efficient producer.
Irrespective of the current market realities, the outlook for our industry remains strong. ADNOC can be counted on today to continue to be an efficient, safe and reliable source of hydrocarbon production in any price environment. And ADNOC can be counted on in the future to meet the needs of the next generation of energy consumers.