The strategic ties between the UAE and China in the past five years have led to close cooperation on all fronts, with the UAE becoming China’s main commercial partner in the region, reflecting the vision and the mutual coordination of the leadership of the two friendly countries.
During the past five years, the UAE and China have established a number of important partnerships in various sectors, especially in the field of energy, which has witnessed the signing of strategic partnership agreements confirming the important role of the UAE in supporting the Chinese "Belt and Road" initiative.
In the following report, the Emirates News Agency, WAM, is presenting the key strategic agreements between the Abu Dhabi National Oil Company, ADNOC, and a number of major Chinese companies in the oil, gas and petrochemicals sector.
In 2018, ADNOC's sales of crude oil and refined petroleum products to Chinese companies, in addition to the production quotas of Chinese companies, amounted to US$7.9 billion. The total value of their current major projects with Chinese companies reached $4.1 billion.
The following projects come within the framework of the partnership between the UAE and China: The China Petroleum Engineering and Construction Corporation, CPECC, is implementing the Bab Integrated Facilities Expansion project valued at $1.5 billion, with an expected completion by the end of 2020. The project's scope of work involves the expansion of integrated processing facilities at the Thamama-A, Thamama-B and Thamama-H production zones located at Habshan, Abu Dhabi. The project will have a total sustainable oil production rate of 450,000 barrels a day. The digital oil field technology will be introduced to remotely monitor and analyse well performance.
CPECC has also participated with the China Offshore Oil Engineering Company, COOEC, to design the Belbazem oil project, one of the Al Yasat projects, at an estimated cost of $1 billion. The outcome will be declared in Q4 of 2019. The Abu Dhabi National Oil Company, ADNOC, has awarded contracts worth $1.6 billion for the world’s largest continuous 3D onshore and offshore seismic survey, covering an area up to 53,000 sq km, to BGP Inc, a subsidiary of China National Petroleum Company, CNPC.
ADNOC had strengthened its strategic partnership with Chinese companies by signing an agreement in 2014, stipulating the establishment of the Al Yasat Company for limited petroleum operations. In this joint project, ADNOC holds a 60 percent share and the CNPC holds the remaining 40 percent.
In February 2017, ADNOC signed a concession agreement with the CNPC, under which CNPC acquired an eight percent stake in Abu Dhabi's offshore oilfields, valued at AED6.5 billion.
The agreement with the CNPC has contributed to the reinforcement of economic and commercial ties between the UAE and China, and is based on the vision of both sides to establish a mutually strategic partnership aimed at achieving additional value, in line with ADNOC’s long term growth objectives.
In March 2018, ADNOC signed two concession agreements with CNPC, under which CNPC acquired a 10 percent stake in the Umm Shaif and Nasr concession and a 10 percent stake in the Lower Zakum concession.
The CNPC, through its subsidiary PetroChina, has provided AED2.1 billion towards participation in the Umm Al Shaif and Nasr concession, and AED2.2 billion for the Lower Zakum concession managed by ADNOC Offshore, on behalf of its partners.
In July 2018, ADNOC and the CNPC signed a framework agreement for expanded cooperation, aimed at strengthening a strategic partnership in the energy sector between the UAE and China. The agreement is based on the partnership between ADNOC and the CNPC, aimed at establishing a joint mechanism to explore ways to bolster cooperation in various sectors, including exploration, development, production, petrochemical refining, drilling, oilfield services, crude oil supply and storage, technology transfers and research and development.
In November 2017, the Chinese Company for Petroleum Construction acquired the engineering, procurement and construction rights for the Bab oilfield as part of ADNOC's plans to develop it and increase its production capacity. In December 2018, North Petroleum International of Shenhua Oil Company Limited acquired four percent of ADNOC's land concession.
In line with ADNOC’s comprehensive smart growth strategy, aimed at reinforcing value through the expansion in the field of refining, petrochemicals and gas processing operations, the company produces some 10,500,000 metric tonnes per year of LPG, that is marketed and sold domestically and worldwide.
In November 2018, ADNOC signed a long-term agreement with China's Anhui Chemical Industry Group, stipulating the purchase of up to one million metric tonnes annually of ADNOC’s Liquefied Petroleum Gas, LNG, production over 10 years, which contributes to the reinforcement of ADNOC’s ties with its partners and clients in China.
These key agreements have contributed to strengthening the strategic partnerships with China, making the energy sector one of the most important areas of cooperation between the two countries.
The UAE is considered one of the largest oil and gas producers in the world, with 96 percent of its reserves in Abu Dhabi. Undiscovered and undeveloped resources remain in many oil and gas-rich reservoirs, with the UAE capital located on one of the world's richest reservoirs of hydrocarbon resources.
In April 2019, ADNOC signed a long-term agreement with Xiamen Sinolook Oil Co., of China, to sell its its high-quality base oil, ADbase, in the Chinese market. The agreement is in line with ADNOC's strategy to enhance value in refining operations. The ADNOC Refining Company, one of the ADNOC Group companies, produces about 500,000 metric tonnes of high-quality essential oils annually from the third group of the Ruwais Refining and Petrochemicals Complex.
In April 2019, about 10,500 tons of calcined coke were loaded by Adnoc Refining, a subsidiary of the Abu Dhabi National Oil Company (Adnoc), onto the Lucky Ocho, a vessel chartered by Adnoc Logistics & Services, and delivered in Yantai, China.
ADNOC's refining and petrochemicals programme is expected to witness an increase in the company's refining capacity by more than 65 percent, or about 600,000 bpd by 2025, by adding a third new refinery, bringing the total capacity to 1.5 million bpd.
ADNOC has a solid presence in China through Borouge, which manufactures plastic compounds used in the automotive industry. Borouge also produces 1.2 million tonnes of polyolefin annually from China, equivalent to one-third of its sales around the world.
During its investment in the Refining and Petrochemicals Forum, ADNOC declared that it would pump large investments in new projects in the field of refining and petrochemicals at the local and global levels, aimed at boosting its refining capacity and increasing its petrochemical production threefold to reach 14.4 million tonnes per year by 2025.
The CNPC is China's largest oil and gas producer and supplier, and is one of the largest oilfield service providers in the world. The CNPC is involved in the production of 52 percent of Chinese crude oil and 71 percent of natural gas. It has assets, and oil and gas interests in 37 countries in Africa, Central Asia, Russia, America, the Middle East, Asia and the Pacific.
The demand for petrochemical and plastic products, including some light components made of plastic used in the automotive, pipe and insulation industries, is expected to double in Asia by 2040.