UAE’s Adnoc Targets More Chemicals Growth After Mega OMV Deal

(Bloomberg) -- The $60 billion company formed by the merger of Adnoc and OMV AG’s chemical units is targeting a more than 50% boost in profits, and remains open for further deals or building new plants.

The transaction is Abu Dhabi National Oil Co.’s latest big bet on chemicals. The company sees demand rising for products like plastics even as the energy transition forces many consumers to switch away from burning fuels for transport. 

The deal, which includes the joint purchase of Nova Chemicals for $13.4 billion, will boost output capacity 30-fold from when Adnoc first started its petrochemical unit Borouge Plc over 25 years ago, Khaleed Salmeen, chief executive officer at Adnoc’s downstream business, said in a Bloomberg TV interview.

Adnoc and OMV on Tuesday said they agreed to merge their units Borealis AG with Abu Dhabi-listed Borouge to create Borouge Group International, which will be be the world’s fourth-biggest chemicals producer in its segment. Middle East oil producers are expanding in the sector as they see increased need for lightweight plastics for everything from electric cars and batteries to mobile phones and computers.

The merged company will have about $7 billion of earnings before interest, tax, depreciation and amortization, Salmeen said, without providing details about when it will achieve that target. It compares with Ebitda of $4.5 billion on a proforma basis between 2020 and 2024, according to an OMV statement.

Borouge Group International’s production capacity will rise to 13.6 million tons a year once the deal is completed and Nova Chemicals is incorporated. That compares with 450,000 tons a year capacity at Borouge’s initial plant, Salmeen said.

“That is about 30 times bigger than where we started, so we’re very proud,” Salmeen said. “At that time in 1998, Borealis and Adnoc signed the first JV to create Borouge.”

Adnoc’s holding in Borouge Group International will become part of the UAE company’s new investment unit XRG, which will focus on buying assets in natural gas and chemicals. XRG and Borouge Group will remain open for further deals or building new plants, depending on market conditions, Salmeen said.

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