Adnoc signs deals worth Dhs3.67 billion for project engineering services

The Abu Dhabi National Oil Company (Adnoc) announced on Monday, the signing of framework agreements for Concept and Front-End Engineering Design (FEED) services for major projects across its full value chain to support the delivery of its 2030 strategy.

The framework agreements - which were signed with eight top-tier global engineering contractors - have a combined scope worth up to $1 billion (Dhs3.67 billion) and the potential for 50% of the value to flow back into the United Arab Emirates’ (UAE) economy under Adnoc’s In-Country Value (ICV) program, over the agreement term between 2021 and 2026. The scope of the agreements is based on the forecast requirement for external project engineering services across the Adnoc Group.

The nature of the agreements underpins Adnoc’s smart approach to procurement which is enabling it to drive value and commerciality across its portfolio. By structuring the framework agreements with a group of top-tier contractors instead of procuring smaller individual agreements, Adnoc was able to secure pre-agreed terms and conditions thereby reducing tendering cycle by months, achieve highly competitive rates by leveraging long-term contracts that service its entire portfolio, and establish a group-wide performance management and review process that provides high visibility of contractor performance.

Abdulmunim Saif Al Kindy, Adnoc People, Technology & Corporate Support Executive Director, said: “We are very pleased to engage with the eight top-tier engineering contractors awarded to provide best-in-class engineering expertise on our strategic projects across our full value chain. These framework agreements follow a very competitive tender process and the smart nature of the deals will deliver substantial cost savings, optimise project delivery schedules and provide Adnoc with increased flexibility to drive its growth targets and proactively respond to the demands of the fast-evolving energy landscape. In addition, the agreements offer the potential to create additional skilled employment opportunities for Emiratis and include commitments that contracted services will primarily be carried out in the UAE, ensuring more economic value remains in the country from our contract awards.”

Adnoc signed the framework agreements with AMEC International Ltd (part of the Wood Group), Fluor, McDermott, Mott MacDonald, SNC-Lavalin International Arabia Limited - Abu Dhabi (part of the Kentech Group), Technip Energies, Worley, and a joint venture between Tecnicas Reunidas and NPCC. The agreements will run for five years, with an option for a two-year extension. The eight contractors have committed to set up and run enhanced training programs to further develop local expertise and enable knowledge transfer.

As an integral part of its 2030 strategy, Adnoc is optimising its procurement strategy to reflect market dynamics, focusing on long-term contracts with a reduced number of suppliers that provide stable and reliable delivery at highly competitive rates.

Adnoc Distribution announced recently that it will be included in the FTSE Emerging Markets (EM) Index, from Sept.16, 2021 (close of business). Inclusion is subject to final confirmation by FTSE on Sept.6. Adnoc Distribution was included in the FTSE EM Index by FTSE Russell after meeting the requirements and will now be part of this widely tracked index, a go-to for global institutional investors. The inclusion is expected to increase the attractiveness of Adnoc Distribution’s shares to potential international investors and further diversify the company’s overall investor base.

In September 2020, Abu Dhabi National Oil Company (Adnoc) completed a private placement of 1.25 billion of Adnoc Distribution shares (valued at $1 billion) to institutional investors, increasing the Company’s free-floating equity to 20 per cent. In May 2021, Adnoc placed an additional 3 per cent of Adnoc Distribution’s share capital (valued at $445 million), increasing free float further to 23 per cent. It also issued approximately $1.195 billion of senior unsecured bonds (Exchangeable Bonds) due 2024, exchangeable into existing shares of Adnoc Distribution, constituting approximately 7 per cent of the registered share capital of Adnoc Distribution under certain conditions. Following the transactions, Adnoc will retain at least a 70 per cent strategic stake in the company as it continues to see significant growth potential in Adnoc Distribution.

These equity placements leveraged significant investor demand for Adnoc Distribution shares, driven by its attractive value proposition. These transactions also diversified the company’s shareholder base and allowed for greater liquidity of its shares on the Abu Dhabi Securities Exchange.

Adnoc Distribution recently reported that its first half 2021 EBITDA stood at Dhs1.53 billion, with net profit of Dhs1.15 billion. For the second quarter, EBITDA was Dhs 712 million with net profit of Dhs521 million. The strong results were driven by higher fuel volumes, improvement in non-fuel and commercial gross profit margin and increased operational efficiencies made in the first half of 2021.