ADNOC Is Evaluating Possibility of Buying Some BP Assets

Abu Dhabi’s main oil company is evaluating whether it can buy some of BP Plc’s key assets should the embattled British firm decide to break itself up or come under pressure to divest more units, according to people with knowledge of the matter.

Abu Dhabi National Oil Co. has been internally studying the prospects for acquiring some BP assets and has held initial consultations with bankers, the people said, asking not to be identified because the discussions are private. It is also considering partnering with another bidder to split some of the assets, they said.

ADNOC is most interested in BP’s LNG and gas fields, rather than taking over the entire company, though it has also considered that option, the people said. ADNOC, one of the most active dealmakers in recent months, recently started an international unit called XRG PJSC, which is on the hunt for gas and chemicals deals as it targets an $80 billion enterprise value. 

Any deal is likely to be pursued through XRG, some of the people said. ADNOC or XRG could also look at BP’s fuel retailing business, according to the people. 

Adnoc referred questions to XRG, which declined to comment. The company’s plans are still under consideration and it may also decide not to bid for any assets at all, the people familiar with the situation said. BP also declined to comment.

BP has been battling a prolonged underperformance stemming in large part from its previous focus on a net zero strategy. Chief Executive Officer Murray Auchincloss is trying to reset that with a pivot back to oil and gas, and promises to sell assets. Other oil companies have been running the numbers on BP, whose market value has slid by a third in just over a year to below $80 billion.

Adnoc isn’t interested in BP’s oil production assets or refineries, the people said. That makes the option of buying all of BP unattractive, they said. The political risks associated with taking over the storied British company outright is also likely to deter Adnoc, according to the people familiar with its internal thinking.

Some of that risk played out last year when a firm with ties to UAE Deputy Prime Minister Sheikh Mansour bin Zayed Al Nahyan ran into trouble in its effort to buy the UK’s Telegraph after the country announced plans to block foreign states from owning newspapers. However, Abu Dhabi-based entities have recently started to dip into British assets, indicating that tensions between the two could be starting to thaw.

Another hurdle for a full takeover of BP would be funding. Even for cash rich ADNOC – which also has the ability to tap billions of dollars from the debt market – the price tag would still be huge, given it would have to pay entirely in cash since it doesn’t have publicly traded stock.

Adnoc and BP have a long history of working together on projects. The London-headquartered company helped discover oil in Abu Dhabi more than half a century ago, and is a minority shareholder in Adnoc’s largest onshore field which produces the company’s benchmark Murban crude. 

BP last year agreed to take a 10 percent stake in a LNG plant under construction in the emirate, and has a joint venture to develop gas in Egypt and the eastern Mediterranean region.

ADNOC’s unit XRG in May said it aims to become one of the world’s top integrated gas companies over the next decade, with a big jump in LNG capacity totaling 25 million tons a year.