Abu Dhabi - Part 3 - The Oil Exports & Logistics.

Abu Dhabi's crude oil exports average about 1.675 million b/d, compared with 1.72 million b/d in the first quarter of 1997. Its exports of refined oil products beyond the UAE average about 95,000 b/d. Sales of products locally and to the other UAE emirates total around 100,000 b/d. But products exports are to more than triple from April 1999. The peak in Abu Dhabi's crude oil and products exports occurred during the Gulf crisis, from August 1990 to end-February 1991, as they exceeded 2m b/d and Dubai was selling 420,000 b/d. Abu Dhabi's crude oil and products exports declined to 1.7m b/d in 1992 and fell to nearly 1.65m b/d in 1993. In 1994 they averaged about 1.7m b/d. In 1995 they rose to 1.85m b/d. To compare, total oil exports from Abu Dhabi in 1988 did not exceed 900,000 b/d and averaged about 1.23m b/d in 1989. About 60% of Abu Dhabi's oil exports go to Japan and a further 20% go to other Far Eastern markets. The Japanese market absorbs most of the emirate's exports of LNG, LPG and condensates, though some of the LNG and gas products now are being sold to Western markets on spot basis. The capacity to produce LNG on Das island for export has more than doubled. From 2.3 million tons a year, the nominal capacity in late 1994 reached about 4.9m t/y. But the actual production of LNG in the past two years has averaged almost 5.3m t/y. With Tokyo Electric Power Co. (Tepco) buying 4.3m t/y under a 25-year contract, a surplus of 1m t/y is being sold on spot basis mostly to European utilities (see Gas Market Trends). The capacity to produce LPG for export from onshore and offshore associated gas and from the LNG complex on Das island has risen to 4.75m t/y, from about 3.93m t/y in 1994. A further increase will be expected by 2000. The onshore gas processing joint venture at the Ruwais industrial zone, the Abu Dhabi Gas Industries Co. (GASCO), is expanding its capacity to produce up to 6m t/y of ethane, LPG and NGLs. In addition, GASCO has the capacity to produce 2.12m t/y of pentane-plus, which is expected to expand as well. Most of these products will be exported, with ethane tail gas to feed the new petrochemical complex being built at Ruwais. Abu Dhabi's share of crude oil exports is less than 1m b/d. This is tied up by term contracts handled by the Marketing and Refining Directorate of the Abu Dhabi National Oil Company (ADNOC), which was restructured in October 1998 (see who's who in Part 4). Like most other NOCs of the Middle East, ADNOC seldom engages in spot trading. But its foreign partners in E&P ventures - such as BP, Total, Shell, Mobil, Exxon and Japanese companies with equity in JODCO and other Japanese operators - have established a spot market for Abu Dhabi crudes. Some of these companies also buy a part of ADNOC's share of oil production on term basis and trade the crudes on the spot market. The number of spot deals in Abu Dhabi crudes done by these companies has increased in recent years. ADNOC has a very pragmatic management authorised by the Supreme Petroleum Council (SPC) to widen and consolidate Abu Dhabi's share of the oil markets. It maintains direct relationships with refiners using Abu Dhabi crudes on both sides of Suez, including companies in which ADNOC has a stake acquired through the emirate's International Petroleum Investment Co. (see Downstream Trends). ADNOC's marketing unit keeps prices competitive. It monitors the market and applies the most convenient premia, or price differentials, that correspond to the qualities of Abu Dhabi crudes. The marketing unit has good experts in pricing. The same unit handles oil products sales from Abu Dhabi's two oil refineries, with total refining capacity set to rise from 205,000 b/d to over 485,000 b/d in April 1999. Part of the Marketing and Refining Directorate, ADNOC-FOD, does its own marketing for lubricants and some products locally, in the UAE and abroad. It has offices in several countries. It markets over 40,000 tons/year of lubricants. ADNOC-FOD sells its products mainly in the Middle East including the GCC, in South-East Asia and in some African countries. ADNOC-FOD has the second biggest grease plant in the world at the Umm Al Nar refining complex, about 25 km east of Abu Dhabi city. The plant came on stream in October 1993 with a capacity of 4,000 t/y. It also operates a 30,000 t/y lube oil blending plant at Umm Al Nar which came on stream in the late 1980s. Another lube oil plant is to be built at the Ruwais oil refining complex (see Downstream Trends No. 2). Abu Dhabi's crude oil exports consist mainly of the four major grades: Murban, 40.4 deg. API with 0.8% sulphur, a blend of crudes produced from ADCO's onshore fields; Lower Zakum, 40.1 deg. API with 1.1% sulphur, produced offshore by ADMA-OPCO; Umm Shaif, 37.4 deg. API with 1.5% sulphur, also produced offshore by ADMA-OPCO; and Upper Zakum, 33.9 deg. API with 1.8% sulphur produced by ZADCO in which JODCO of Japan has a 12% equity (see profiles of the fields and foreign operators in Gas Market Trends No. 2). ADNOC is expected to follow Saudi Aramco's example in hedging its oil income against price fluctuations. It would do this by trading in oil derivatives at NYMEX in New York and IPE in London. It will have to train its staff in paper trading, as Saudi Aramco has done.