More offtake agreements in pipeline for ADNOC's Ruwais LNG project

The UAE's state-owned Abu Dhabi National Oil Company has signed 70% of the required offtake agreements for its new Ruwais LNG project, with more agreements to be announced "in due course," ADNOC's Executive Vice President for downstream asset management Fatema al-Nuaimi told S&P Global Commodity Insights.

Existing offtake agreements include those with Shell for 1 MMtpa and Mitsui for 0.6 MMtpa. Other agreements include those with Germany's EnBW and SEFE and China's ENN. Combined, the announced contracts total 4.2 MMtpa, or roughly 44% of the project's capacity – implying that contracts worth 2.5 MMtpa are still needed – according to analysis from Commodity Insights.

"There are a few offtake agreements that have been signed but not announced," Nuaimi said. "We're still having active engagement with many other [companies]."

The latest offtake agreements were announced alongside a deal that will see Shell, BP, Mitsui and TotalEnergies each take a 10% stake in the project, while ADNOC will hold a 60% share and serve as the lead developer and operator of the 9.6 MMtpa Ruwais LNG liquefaction plant.

Regarding any room for more partners to enter the project, Nuaimi said: "As of now, this partnership is going to be our focus to develop and execute the project and [bring it online] in 2028."

Commodity Insightsforecasts slight delays in the project(opens in a new tab), with both commercial trains starting in 2029.

Work on the site has begun, and Nuaimi said that prerequisites for the construction phase are ongoing and that ADNOC had engaged with the EPC contractors earlier in the project lifecycle than would typically be done, awarded the long-lead items before the formal FID.

"We've tried to shrink the amount of time [a project] usually takes... to meet the 2028 timeline," she said.

Final investment decision on the project came on June 13, with a $5.5 billion engineering, procurement and construction contract awarded to a joint venture led by Technip Energies NV, with JGC Holdings Corp. and NMDC Energy.

Commodity Insights found that current estimates for US greenfield land-based projects are higher than $1,000 per mt. Based on the announced EPC contract for Ruwais LNG, Commodity Insights estimates costs for this project are likely closer to around $700 per mt, which is notably low when compared to other greenfield projects around the world.

When asked how ADNOC managed the significantly lower EPC contract rates, Nuaimi said: "It was a competitive tender, and we've done a lot of optimization when it comes to value engineering and technical work."

Meeting global LNG demand

The Ruwais project – part of the UAE's plan to become gas self-sufficient by 2030 – will come online alongside a slew of projects globally.

The global LNG market is expected to remain relatively tight until the next large wave of new liquefaction capacity reaches the market in 2025-26, according to a recent analysis by Commodity Insights.

Asian spot prices are set to rise over the coming winter, with buyers preparing for warmer temperatures in the coming months, while competition with European offtakers for LNG cargoes is expected to endure.

While Europe's reliance on fuel is expected to reflect higher import requirements, demand growth for markets outside Europe is expected to outpace new supply capacity growth in the short term, according to Commodity Insights.

Despite this, Nuaimi seemed unconcerned about a possible overbuild of LNG capacity worldwide.

"This is the nature of the LNG industry," she said. "It's the wave that comes with new supply, and it's a supply that creates demand and enables more customers to tap into the market."

For ADNOC, because the Ruwais project is greenfield, securing long-term agreements for the project is crucial to protect it from fluctuations that might happen in the spot market, Nuaimi said.

ADNOC's LNG production capacity is currently some 6 million mt/year from its three-train Das Island LNG export plant.

According to data from Commodity Insights, the UAE exported a total of 5 million mt of LNG in 2023, predominantly to markets in Asia led by India, Japan, China and South Korea.

The UAE is well-positioned to serve the Asian markets and has traditionally done so. With more offtake agreements in the pipeline, Nuaimi said the targeted geography is primarily Asia because of ADNOC's "historic strength" in the region.

ADNOC in LNG overdrive

Beyond Ruwais, ADNOC has been shoring up its LNG operations globally with two acquisitions announced in late May.

The first one marked its expansion into the US when the state-owned energy company bought an equity stake in NextDecade's Rio Grande LNG project(opens in a new tab) in Texas.

In the second deal announced days later, ADNOC said it would acquire Galp Energia's 10% stake in the Area 4 concession of the Rovuma Basin in Mozambique, in a deal previously said to be worth $1.15 billion.

The company is evolving into an LNG powerhouse, having also built its LNG trading capabilities.

"We believe in the role LNG will continue to play in the market," Nuaimi said.

Spot LNG prices continue to trade above the $10.00/MMBtu threshold in recent weeks as expectations of a hot summer in Asia saw a significant boost in Japanese power demand.

Platts, part of Commodity Insights, assessed the benchmark Japan/Korea Marker (JKM) for spot LNG cargoes at $11.795/MMBtu on July 11, up 1.05% on the day.