ABU DHABI'S ADNOC EXPANDS OIL TRADE

The United Arab Emirates’ largest oil company is expanding its fledgling trading business with a deal to supply crude and products from a refinery in the coastal region of Fujairah.

Abu Dhabi National Oil Co. has already processed at least one cargo of oil at a refinery partly owned by trader Montfort Group, according to people familiar with the matter. Adnoc is in talks to extend the deal for more supplies, said the people, who asked not to be identified when discussing details of the deal.

The move is the latest example of Middle Eastern oil companies seeking to expand their trading operations by expanding into new markets and experimenting with different types of deals rather than simply selling their oil under long-term contracts. Adnoc and rival Saudi Aramco are expanding their trading units in an effort to maximize profits and emulate the success of global companies such as Shell Plc and BP Plc.

Adnoc and Montfort are working on an expanded tolling deal that would allow the UAE state-owned company to process crude oil it receives from other countries at its Fujairah refinery and then sell the fuel on the market. Fujairah, located on the Gulf of Oman coast in the United Arab Emirates outside the Strait of Hormuz, is one of the world’s largest naval bunkering hubs and a key storage point for traders who store and tranship cargo.

Adnoc and Montfort declined to comment.

Adnoc has delivered at least one cargo of Sudanese Nile crude to the Fujairah plant, the sources said. The refinery, jointly owned by Montfort and Dubai royal family member Sheikh Ahmed bin Dalmouk Al Maktoum, is set to process heavy, sweet crude into low-sulfur marine fuels and other products.

The specific type of oil suited to this plant has a relatively high density and low sulfur content. Its supply is limited to a few countries, especially in Africa, including varieties such as the Dar blend from South Sudan and Doba crude from Chad. With supplies of Dar crude disrupted in recent months due to pipeline disruptions in Sudan, the Fujairah refinery has struggled with supply, making it difficult for the plant to operate at full capacity, according to people familiar with the situation.

This gives Adnoc the opportunity to expand its business operations. It plans to step up its buying and selling of oil and products from other oil companies. For example, Adnoc has struck deals to supply Nigerian oil and is seeking other supply deals, according to people familiar with the matter.

Adnoc has its own refinery in Ruwais on the Persian Gulf, which supplies gasoline to the domestic market and ships fuels such as diesel, jet fuel and naphtha to customers around the world.