Eni SpA and Austrian oil and gas producer OMV AG agreed to pay about $5.8 billion for a combined 35 percent stake in the Abu Dhabi state oil company’s refining unit.
The deal values Abu Dhabi National Oil Co. Refining at $19.3 billion, Adnoc said in a statement. The companies also agreed to partner in a trading unit that will sell the refined products to international buyers.
Adnoc plans to retain its remaining share of the refining business for now but could be “open to engage in another competitive bidding process to sell another 5 to 10 percent,” Sultan Ahmed Al Jaber, chief executive officer of the government-run company, told Bloomberg TV.
“This is one of the largest-ever refinery transactions and reflects the scale, quality, and growth potential of Adnoc Refining’s assets, coupled with an advantageous location from which to supply markets in Africa, Asia and Europe,” Eni said in a statement.
Middle Eastern crude producers, including state-owned companies in Saudi Arabia and Kuwait, are diversifying away from sales of raw oil by boosting their capacity to process it into refined fuels and petrochemicals. They have been seeking partnerships with foreign firms to attract the latest technologies and accelerate these expansion plans.
Adnoc Refining operates the Ruwais and Abu Dhabi refineries, which can process a combined 922,000 barrels of oil per day. The company plans to invest $45 billion by 2024 to add 600,000 barrels a day of capacity to the Ruwais refining and petrochemicals complex.
Eni and OMV, which is part-owned by the Abu Dhabi government’s Mubadala Investment Co., are partners in an Adnoc offshore natural gas concession. Italy’s Eni won rights earlier in January to explore in two offshore blocks.
Eni said the deal will reduce its refining break-even target margin by 50 percent, to about $1.50 per barrel.
“In Adnoc, we found the best unique opportunity to grow our downstream capacity, creating flexibility, more efficiency, a lot of synergy because we won a lot of new licenses in producing, developing and exploration assets in Abu Dhabi,” CEO Claudio Descalzi told Bloomberg.
OMV will own 15 percent of the refining unit and trading business, while Eni will hold 20 percent. OMV has already committed $4 billion to Abu Dhabi, the Austrian producer’s CEO Rainer Seele told Bloomberg TV.
“We will add 40 percent additional refining capacity,” Seele said. OMV’s break-even oil price is $25 a barrel, he said.
OMV may have time to finance the deal with a bond because the transaction will be completed in the the third quarter, Seele said. The company doesn’t plan to seek a larger stake in the Adnoc unit or invest in other refineries this year, he said.
Adnoc said it expects to export about 70 percent of its refined products and that the trading joint venture will start the physical and derivative trading of those volumes as early as 2020.