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ADNOC-ledging the Need for Change

The Abu Dhabi National Oil Company (ADNOC), one of the world’s major oil producers in a strategically crucial region, is restructuring itself to increase operational efficiency and ensure it remains a core contributor to the future prosperity of the UAE.

ADNOC is the 12th largest oil producer in the world, accounting for essentially all of the UAE’s output.

According to 2014 data, ADNOC is the 12th largest oil producer in the world, accounting for essentially all of the UAE’s output. A veritable conglomerate of 21 entities, parent company ADNOC acts as a fully integrated holding company with a controlling stake (typically 60 percent) in the various subsidiaries, with the rest held by IOCs. In 2013, ADNOC announced it was increasing production to 3.5 million barrels per day (bpd) from 2.7 million. Despite crashing oil prices, it remains on an impressive track to achieve this target, with production in June 2016 reaching 3.15 million bpd.

Nevertheless, with ADNOC embodying the traditional role of an NOC as wealth generator for the country, contributing to 60 percent of the Federal budget and 30 percent of the UAE’s GDP, a dramatic shake-up was announced in February 2016, starting right from the top with H.E. Dr. Sultan Al Jaber announced as the new CEO. Within the first hundred days, the reshuffling of top-tier leadership commenced, most notably with previous Abu Dhabi Company for Onshore Petroleum Operations (ADCO) CEO Abdulmunim Al Kindi moving to Director of Exploration and Production at the parent company. This reflects ADNOC’s intention to streamline activities across its three main E&P entities – ADCO, the Abu Dhabi Marine Operating Company (ADMA-OPCO) and the Zakum Development Company (ZADOC) – in pursuit of a more cohesive and efficient production strategy.

ADNOC’s relatively high performance compared to its peers can be attributed to its unique system of corporate governance, where it performs the twin functions of regulating the Abu Dhabi oil sector and governing one of the world’s largest oil companies. This has allowed for the absorption of foreign expertise and talent directly as technical and operational personnel are installed within ADNOC alongside Emiratis. Nevertheless, it still remains worryingly dependent on IOCs, with the development of its own internal capabilities offset by the increasing complexity of its maturing fields.

The buzzword du jour was therefore very much ‘operational efficiency’. While the full masterplan has yet to be unveiled, with some suggestion that ADNOC is keen to use its own Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in November as platform, some tantalizing hints have been doled out.

Four strategic themes have been identified: performance, profitability, efficiency and people, all of which will buttress a new commercial mentality within the company.

H.E. Al Jaber sums up, “ADNOC must evolve into a more agile organization to main­tain its competitive edge in today’s global economy. This will ensure ADNOC remains a core contributor to the UAE’s progress, future development and long-standing efforts to diversify the economy.”

ADNOC’s Key initiatives

Upstream: leverage group power

Centralize procurement in parent company (e.g. mega tenders)

Benchmarking practices based on best industry standards on criteria like operating cost per barrel

Optimize inventory and working capital

Downstream: smarter use of crude

Replace flagship Murban (sold at a premium) with offshore blended crude in refining process

Develop new refining products

New corporate branding

Writer: Karen Xi

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