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September 27, 2017

Volume 17 Issue 52

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Adnoc Distribution Considers Listing

Abu Dhabi’s Adnoc Distribution, which markets finished lubricants under the Voyager brand, could offer stock worth more than 10 percent of its value by early 2018, according to unconfirmed press reports. Earlier reports suggested an initial public offering of the business – which also includes filling stations, service centers and convenience stores – could value the company at up to U.S. $14 billion.

Adnoc did not reply to a question from Lube Report about the accuracy of the report, but a spokesperson outlined Adnoc’s plans in an e-mail statement.

“As announced on July 10, Adnoc is expanding its partnership model and creating new investment opportunities across all areas of its value chain. Central to Adnoc’s new approach will be the more active management of its portfolio of assets and businesses. Adnoc is, therefore, considering the potential IPO of minority stakes of some of its service businesses, which have attractive investment and growth profiles.”

If the company’s IPO does go ahead, it will be the first that a Middle East Gulf national oil company has opened its retail business to outside investment. “I can’t think of any other times [a national oil company] has opened its retail distribution business to international investors. However, we’ve seen a number of joint venture refinery and petrochemical projects over recent years,” said Johnny Stewart, principal analyst at Wood Mackenzie’s refining and chemicals research team in Dubai.

Adnoc Distribution owns lubricant blending and packaging operations and markets lubes both within the United Arab Emirates and internationally. Analysts say the group is well positioned to take advantage of an API Group II and III base oil plant operated by refining subsidiary Takreer in Ruwais, UAE. The plant commenced production last year and can produce up to 500,000 metric tons per year of Group III and 100,000 t/y of Group II. Approximately 50,000 t/y of the total is earmarked for use in lubricant blending by Adnoc Distribution, according to previous data.

In July, Adnoc unveiled a radical organizational revamp in a move that could alter the base oil landscape in the Middle East. According to group CEO Sultan Al Jaber, Adnoc seeks to create new investment and partnership opportunities. “We are offering strategic partnerships and co-investments across our service and refining businesses and select infrastructure assets,” he said at the time of the announcement. But Adnoc’s conservative corporate culture could be tested at least in the short-term as it adjusts to a minority public shareholding.

Base oil supply chains in the Middle East evolved dramatically in recent years thanks to construction of Adnoc’s plant and several other Group II and III facilities. Historically the region produced only Group I plants, but Bahrain, Saudi Arabia, Qatar and the UAE now all export significant volumes of Group II and III – mostly to regions outside the Middle East. Saudi Aramco was the latest national oil company to announce its entry into the base oils market, as it sought to bolster its downstream assets ahead of a highly anticipated IPO. Adnoc’s strategy differs from Saudi Aramco, which is slated to float 5 percent of the parent company, a move Adnoc has ruled out.