ENOC plots expansion path

21 November 2018, Week 46, Issue 382

Senior executives from Dubai government-owned Emirates National Oil Co. (ENOC) in October revealed plans for expansion along the oil and gas value chain – as completion neared of the firm’s flagship domestic project.

An ambitious aim was pronounced of roughly trebling production by recently absorbed upstream arm Dragon Oil while a study was launched on a potential LPG terminal in Bangladesh – a country increasingly attracting the attention of GCC energy producers. Meanwhile, expansion continued in the core domestic retail market – in the form of a return to Sharjah after a seven-year absence.

ENOC acquired Dragon Oil in 2015 and the firm was integrated last year to become the parent company’s upstream subsidiary – while retaining its operational independence.

The core asset is 100% operatorship of Turkmenistan’s offshore Cheleken contract area, which produces around 90,000 bpd, while Block 9 in southern Iraq – in which the UAE company owns a 45% non-operating interest and where output is running at around 22,000 bpd – is a growing source of equity output.

The firm also has interests in exploration blocks in Algeria, Egypt, the Philippines and Tunisia. In an October interview, Dragon CEO Ali al-Jarwan revealed plans to invest around US$500 million in expansion over the next year and said that the company was eyeing opportunities in existing areas of operation – with an ultimate aim of raising output to 300,000 boepd by 2025.

Chekelen is thought to be producing at close to the field’s maximum potential but the current operator of Block 9, Kuwait Energy Co. (KEC), has mooted possible production of up to 250,000 bpd by the middle of next decade.

The planned acquisition of the cash-strapped Kuwaiti independent by Hong Kong-listed United Energy Group – announced in September – could unlock investment in the asset. Ambitions to expand further in Iraq were signalled by a successful prequalification application to participate in Baghdad’s international licensing round in April – although the firm ultimately declined to bid.

However, North Africa is envisaged being the chief target, Al-Jarwan disclosed with a “programme of acquisition” in place to supplement organic growth. The operated Tinrhert Nord and M’sari Akabli onshore blocks in Algeria are currently under exploration and expected to begin commercial gas production sometime soon after 2019, he said.

Dubai sits on minimal indigenous oil and gas resources, and ENOC’s historic focus has been on downstream and distribution activities – centred around the company’s condensate refinery at Jebel Ali, where an estimated US$1 billion expansion due for completion by year-end will lift production from 140,000 bpd to 210,000 bpd.

The government firm plans spending of US$1-2 billion – excluding Dragon’s outlays – over the coming year in further expansion, with several overseas markets being targeted, CEO Saif al-Falasi said in interview with UAE daily The National.

The assertion came two weeks after ENOC agreed with state-owned Bangladesh Petroleum to conduct a feasibility study into a joint venture project to develop an LPG import terminal, likely to be located at the port of Matarbari on Moheshkhali Island in the Bay of Bengal.

Dhaka is looking to increase the use of LPG to compensate for a growing natural gas deficit – the latter now being addressed through LNG imports from ENOC’s GCC counterparts.

In September, the south Asian country began receiving regular shipments from Doha-owned Qatargas under a 15-year sales and purchase agreement (SPA) for 2.5 million tpy signed late last year. Deliveries from Muscat-owned Oman Trading International as per a 10-year SPA for 1 million tpy signed in May are due to start by mid-2019.

Al-Falasi revealed that ENOC was also intending to expand the firm’s jet fuel trading business in Nigeria and Egypt, following agreements with Nigeria’s privately owned Raven Energy and Cairo-owned Egyptian General Petroleum in June and September respectively.

At home, the company completed the first phase of Project Falcon – comprising a 58-km pipeline supplying jet fuel from storage terminals at Jebel Ali to Dubai International Airport – in 2015 and announced on October 24 that a 16-km spur to Al-Maktoum International Airport was on track for completion in the first quarter of 2020, following the award of the 24-month EPC contract to the local Albanna Engineering in March.

The core of ENOC’s business is the Dubai retail market, where the company enjoyed a 69% market share by fuel volume at the end of 2017 and plans to increase the network to more than 170 outlets by year-end.

However, the Dubai-based firm is also poised to return to the federation’s third largest market – in Sharjah – after receiving permission in September from Sharjah Economic Development Department, lifting a bar imposed in 2011 over the delayed reopening of some existing outlets. ENOC intends to open five service stations next year and 25 within five years.

Elsewhere in the GCC, plans are in train to expand further in the fast-growing Saudi retail market – with the network scheduled to comprise 15 outlets by year-end and 50 by 2020.

Edited by

Ian Simm


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