ADNOC’s XRG Hits the Market with British JV in Egypt

Abu Dhabi’s financially backed group XRG and British oil and gas major BP have closed a deal to set up a new natural gas joint venture in Egypt. The new JV will be called Arcius Energy, 51% owned by BP and 40% by XRG, with Egypt as its main focus. In statements to the press, BP CEO Murray Auchincloss said, “Arcius Energy brings together the strengths of our two companies to create a dynamic new platform for international growth in natural gas in the region.” The British major indicated that Arcius Energy has been assigned a 10% interest in the Shorouk concession, entailing the giant offshore gas field Zohr, a 100% interest in the North Damietta concession, covering the producing Atoll field, and exploration concession agreements in North El Tabya, Bellatrix-Seti East, and North El Fayrouz.

At the same time, ADNOC veteran Naser Saif Al Yafei was appointed as Arcius’ chief executive. Al Yafei previously led the strategy, sustainability, and transformation group of ADNOC Gas. Arcius’ new CFO is Katerina Papalexandri, VP of gas and low-carbon energy growth at BP.

ADNOC CEO Sultan Al Jaber said in a statement that the JV “fully aligns with XRG’s objectives to accelerate the transformation of energy systems and build a world-scale integrated gas and chemicals portfolio to meet rising global demand.”

The BP-XRG JV is the first concrete move made by the latest addition to Abu Dhabi’s expanding sovereign wealth or investment fund portfolio, following the creation of ADQ, IHC, Alpha Dhabi, and others. ADNOC’s substantial war chest, worth several hundred billion dollars, is now being deployed aggressively. XRG was established in recent weeks, and ADNOC announced last week that XRG board members now include Blackstone’s Jon Gray and former BP CEO Bernard Looney. Although Looney was dismissed by BP last year, the new JV between XRG and BP represents a direct link between all parties. ADNOC is playing on multiple chessboards to become an integrated oil and gas company and challenge IOCs’ current power positions. Officially, XRG, which has around $80 billion in assets, is set up to invest in overseas opportunities, mainly in low-carbon energy, including gas, chemicals, and renewables.

XRG, set up to operate separately from ADNOC, aims to double its asset value in the next 10 years. While independent, its strategies are still shaped by ADNOC. XRG’s Global Chemicals division aims to become a top-5 global chemical player, driven by expectations that demand for chemicals will increase by 70%. The group’s Low Carbon Energies unit focuses on cleaner energy, particularly low-carbon ammonia. ADNOC forecasts an overall demand growth of 70-90 million metric tons by 2040. XRG’s International Gas follows ADNOC’s directive to establish a world-scale integrated gas portfolio and support ADNOC’s LNG strategy.

The establishment of XRG, promoted as a low-carbon energy investment company, coincides with ADNOC’s continued expansion of its crude oil production capacity. In May 2024, ADNOC announced that production capacity had increased to 4.85 million bpd from 4.65 million bpd. The Abu Dhabi giant also continues to show a growing appetite for acquisitions. In November, ADNOC advanced its $16.3 billion takeover of German plastics and chemicals maker Covestro. In December 2023, ADNOC acquired a controlling stake (50% + 1 share) in the chemical JV Fertiglobe from OCI, approved in October 2024. In February 2024, ADNOC acquired a 24.9% shareholding in Austrian energy and chemicals company OMV AG from Mubadala Investment Company.

Diversification and monetization of assets have become a strategic priority. Following several successful IPOs, ADNOC is currently assessing the options and timing for a potential float of ADNOC Gas shares. On November 25, ADNOC stated that it continues to explore strategic opportunities to drive growth and prioritize shareholder value, including in ADNOC Gas. While no formal program to float ADNOC Gas has been announced, ADNOC indicated significant value creation potential. A decision regarding a higher free float has not yet been taken.

By Cyril Widdershoven for Oilprice.com

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