Page 7 - DMEA Week 13 2020

DMEA POLICY DMEA
ADNOC tells contractors it plans cost cuts after oil price crash
UAE
ADNOC has a refining capacity of 922,000 bpd.
ABU Dhabi National Oil Co. (ADNOC) has notified contractors and suppliers that it will review existing deals to find ways to cut costs owing to the steep slide in oil prices, according to three industry sources and a letter seen by Reuters.
The benchmark Brent oil price has more than halved in value since the start of the year, trading around $23 a barrel on Monday, driven down by the impact of the coronavirus (COVID-19) and the end of supply restraint by OPEC and Russia.
“While our corporate strategy currently remains unchanged, we remain focused on delivering our important growth projects and are proactively identifying opportunities for cost optimisation across the ADNOC group,” the ADNOC letter said.
“Our procurement function will, in the coming days, reach out to you to begin a com- prehensive review of your existing engagement with ADNOC with the goal of identifying cost savings,” the letter dated March 17 said.
The letter was sent to many companies deal- ing with ADNOC, including firms involved in oil and technical services, engineering, project services and drilling, the sources said.
ADNOC is the state-run oil company of Abu Dhabi, the wealthiest emirate in the United Arab Emirates.
“ADNOC is engaging with our partners and suppliers as we responsibly progress our projects. We are focused on driving performance, efficiency and value across our portfolio in response to mar- ket conditions,” an ADNOC spokesman said.
Energy companies around the world are slashing spending in the face of plunging oil prices caused by the spread of the coronavi- rus and a push by Saudi Arabia and Russia to flood the oil market in a bid to win market share.
ADNOC said on March 11 it would raise its oil supply to a record 4mn barrels per day (bpd) in April, about 1mn bpd more than current out- put. It also said it would accelerate its plans to increase its production capacity.
A global pact on cutting supplies between OPEC, Russia and other producers, a group known as OPEC+, collapsed this month.
All production limits were scrapped after Moscow rejected OPEC’s call for deeper produc- tion curbs, prompting Saudi Arabia, the world’s top oil exporter, and the United Arab Emirates to say they would both ramp up output to record levels.
For the past three years, ADNOC has been pumping around 3mn bpd of oil. The company’s current refining capacity is 922,000 bpd and it aims to triple petrochemicals production to 14.4mn tonnes per year (tpy).
In 2017, ADNOC said it planned to spend more than 400bn dirhams ($109bn) over five years, to boost its oil and gas output and expand downstream activities.
Saudi Arabia’s national oil company (NOC) Saudi Aramco, the world’s top oil producing firm, said this month it intended to cut capital spending for 2020 to between $25bn and $30bn, compared with $32.8bn in 2019. ™
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