Adnoc advances tanker fleet expansion

Abu Dhabi's state-owned energy giant Adnoc plans to expand its tanker fleet by nearly a fifth over the next four years to help accommodate the emirate's upstream and downstream output growth.

The firm plans to quadruple the amount of product it ships in the coming decade, which will require a substantial expansion of its fleet, both newbuilds and second-hand vessels. "Our deep-sea fleet currently includes LR1s, LR2s, ultramax, supramax, handysize, containers, VLGCs and VLCCs," chief executive of Adnoc's shipping arm Abdulkareem al-Masabi told Argus. "We expect to increase this fleet size by nearly 20pc to more than 50 vessels by 2025, with further expansion going into 2030."

Adnoc's shipping subsidiary, Adnoc Logistics & Services (Adnoc L&S), currently has a total of 240 ships, including support vessels. The tanker fleet includes eight VLCCs, six VLGCs, 15 clean product tankers and eight LNG carriers, and the firm's total crude cargo capacity stands at 16mn bl. The expansion drive is already underway. Adnoc announced the acquisition of eight VLCCs and six LR2 tankers this year, and it plans to continue adding to the fleet throughout the rest of 2021, including offshore support and oil spill response vessels, Al-Masabi said.

The need to increase the fleet is underpinned by several factors, not least Abu Dhabi's target to boost its crude production capacity to 5mn b/d by 2030 from 4mn b/d now, and a major expansion in refining and chemicals capacity. Adnoc L&S has become an integral part of Abu Dhabi's ambition to deepen its exposure to the whole of the oil and gas value chain. Its expansion is also being driven by increased demand from two new trading arms set up by Adnoc last year — Adnoc Trading, which is focused on crude trading, and Adnoc Global Trading, a joint venture with Italy's Eni and Austria's OMV that trades oil products from the Ruwais refining complex. This year's launch of a futures contract for Abu Dhabi's flagship Murban crude is another driver.

Adnoc is also moving away from its traditional free-on-board (fob) shipping model to using cost, insurance and freight (cif) terms, where the cost of transportation is assumed by the seller. This places greater value on creating synergies between Adnoc and its shipping subsidiary, Al-Masabi said.

Second-hand purchases

The fleet expansion includes 18 second-hand vessels. Most of these were built in 2018, but the oldest dates back to 2011. "Favourable market conditions have enabled us to purchase these vessels at competitive prices, enhancing the capital efficiency of the acquisitions compared to the leasing of vessels," Al-Masabi said.

Adnoc is investing in new technology as well, ordering four VLCCs from South Korea for delivery in 2023. These will be fitted with LNG-fuelled engines. It has also ordered five LPG-fuelled VLGCs. "These new vessels we have purchased will be IMO 2030 compliant years ahead of schedule and will be the cleanest vessels in their category on the water today," Al-Masabi said.

Using LNG as a bunker fuel can cut CO2 emissions by up to 25pc compared with heavy fuel oil, making it a "realistic step in the right direction" for meeting the shipping industry's goal for a 50pc reduction in greenhouse gas (GHG) emissions by 2050 compared with 2008 levels, he said.

By Adal Mirza