UAE oil giant sees chemical firm Covestro as base for growth

The largest oil producer in the United Arab Emirates is focused on closing its nearly $13bn acquisition of German chemical maker Covestro AG which would establish a base for international growth.

Abu Dhabi National Oil Co, which secured 91.3% of Covestro stock after an offer period that closed on December 16, plans to keep it as a standalone business, according to the executive that led the UAE firm’s push for its biggest deal yet.

“This deal was a milestone deal for us,” Khaled Salmeen, Adnoc’s executive director for downstream and trading, told Bloomberg Television in an interview. “We have a growth strategy around it” which Adnoc will implement once it completes the “significant amount of regulatory approvals” needed to close the deal, he said.

Adnoc is the biggest oil producer in the United Arab Emirates. The country is expanding its energy business beyond oil to focus on natural gas trading and chemicals like plastics on expectation they’ll benefit from the energy transition.

While Salmeen sees current markets as stable, Adnoc is preparing for a future that favours different types of energy supplies. China, for example, should see continued demand growth even though its gasoline consumption is unlikely to expand further, he said.

“Globally fundamentals are sound and oil markets are strong,” Salmeen added. “We are far away from the peak oil scenario or peak energy.” Adnoc is still in the process of setting up XRG PJSC, its vehicle for expanding in international gas and chemicals businesses and developing low-carbon energy supplies like blue ammonia or biofuels, Salmeen said. The unit will hold the shares and become the majority owner of Covestro.

XRG, announced last month with an $80bn enterprise value, is planned as Adnoc’s investment vehicle to expand in natural gas, chemicals and low-carbon energy. The company will hold the oil producer’s stake in a Middle East gas venture with BP Plc in addition to the Covestro stake.

Adnoc offered nearly $13bn for Covestro in what’s set to be the largest Middle Eastern acquisition of a European firm. The takeover would give the state behemoth control over a pioneering company that supplies materials for some of the world’s most prominent phone and carmakers.