The oil market has changed substantially since 2014, so it is crucial that oil companies change with it.
While it might seem difficult to change the role of an “oil company,” Adnoc has found a way to do just that. The company’s announcement yesterday that it would invest Dh165 billion into expanding the Ruwais refinery, which when completed will be the largest in the world, will change it from just an “oil company” into a supplier of petrochemicals and polymers to international markets. Sultan Al Jaber, Minister of State and chief executive of Adnoc, said he expects demand for these products to double over the next 20 years.
This isn’t just a change in who the company sells to, either. This is a smart strategic move that takes advantage of market dynamics. Now, instead of just exporting oil into a highly competitive and often flooded market, Adnoc will refine its Murban crude into products that are in high demand. This means greater economic stability for the UAE’s oil sector. Oil demand has risen and fallen over the past 40 years in dramatic fashion with devastating consequences for oil producers. With this decision, the UAE will no longer have to worry that revenue from oil will rest solely on the economic health of other economies. It is now tapping directly into one of the most dynamic industries in the world.
In effect, this investment combined with the company’s decision to keep developing its upstream (oil production) capacities, means that Adnoc will now control the economic benefit from its own products from the oil well to the manufacturer. It has, to use the old phrase, cut out the middle man, which will bring thousands of jobs and an economic boost to the country.
