Crisis is a ‘call to double down’, says Adnoc Drilling CFO

• Speeding up deployment of oil rigs
• Points to ‘significant underinvestment’
• Focus on resilient supply chains

Adnoc Drilling is accelerating the expansion of its Gulf fleet despite the geopolitical crisis – and calling for global investment in oil and gas capacity, its chief financial officer has told AGBI.

The Abu Dhabi-listed company has accelerated rig deliveries in the UAE, Oman and Kuwait since the Emirates left Opec on May 1. The UAE’s oil production is expected to increase now it is outside the group’s quota system.

“There has been significant underinvestment in oil and gas capacity globally,” said Youssef Salem, CFO of Adnoc Drilling.

“You always see these record [capital expenditure] plans to make sure that we’re investing in a responsible and creative way to [meet demand].”

Adnoc Group announced this month that it would award $55 billion in contracts over the next two years to support upstream and downstream expansion. On Monday Adnoc Drilling reported its strongest quarterly performance to date.

Salem said the Gulf’s competitive advantages – including some of the world’s lowest production costs and emissions intensity per barrel, long-term capacity expansion programmes and strong state backing – reinforce the growth prospects for the sector.

Further reading:

• Abu Dhabi plans construction rush after quitting Opec
• Adnoc says Habshan gas plant repairs to run into 2027
• Why the UAE left Opec

The UAE’s target to raise oil production capacity to 5 million barrels per day has been brought forward from 2030 to 2027, while Kuwait is aiming for 4 million bpd.

Adnoc Drilling had initially planned to operate 127 rigs in the UAE by 2030, but already has 140 rigs deployed domestically.

Salem said the company had accelerated the deployment schedule for several island rigs that were originally due to come online over the next few years.

“Four additional rigs secured recently through completed regional platform deals would also be deployed within the next 12 months,” he said.

The company remains heavily focused on the Gulf, with about 80 percent of net income generated in the UAE.

“The region as a whole will continue to be the main serving part for the world because [we have] the most advantaged barrel,” he said.

Demand is expected to fall this year, with the International Energy Agency forecasting a drop of 80,000 bpd, in part because of “demand destruction”.

Salem said Gulf countries typically plan investments over a five to 10-year horizon rather than reacting to market volatility, meaning contracts had not been cancelled or reduced.

“If anything, it’s really a call to double down,” he said.

On May 12 Adnoc CEO Sultan Al Jaber posted on social media that the world is already 1 billion barrels short because of the closure of the Strait of Hormuz.

For Salem and Adnoc Drilling, “the key thing is that we have a level of readiness to provide any demand that Adnoc needs”.

The CFO added that when the Iran war is over, “there’s going to be continued demand for more energy security, more storage, more people thinking about how to build more resilient supply chains”.

Shares in Adnoc Drilling closed at AED6.20 on Wednesday. The stock is up 16 percent so far this year.