How ADNOC-Germany Energy Deal Affects Shipping Sector

Blog October 21, 2022 Hits: 871

After talks with France to increase crude oil exports this year, the UAE's Abu Dhabi National Oil Co. (ADNOC) agreed to supply Germany with LNG and diesel cargoes in 2022, 2023.

This year has witnessed Emirati crude oil sail toward Europe following a gap of two years. Abu Dhabi's crude oil cargo was last transported to Italy in May 2020, according to Refinitiv Eikon data.

As per Reuters, in early May 2022, a shipping unit of France's TotalEnergies provisionally chartered a tanker to load 1 million barrels of Abu Dhabi crude from the port of Jebel Dhanna in the United Arab Emirates for Europe.

More cargoes of Abu Dhabi crude grades were expected to head to Europe this year to replace the recent oil shortfall. The first diesel delivery to Germany took place in September 2022 to be followed by more cargoes in 2023

This recent delivery to Germany came in light of The New Energy Security and Industry Accelerator Agreement between the UAE and Germany

As per the Emirates News Agency (WAM), The UAE President, His Highness Sheikh Mohamed bin Zayed, and German Chancellor, Mr. Olaf Scholz, signed a new Energy Security and Industry Accelerator (ESIA) Agreement. This agreement will advance projects of mutual interest between the UAE and Germany in energy security, decarbonization, and climate action.

According to the agreement, the UAE's Abu Dhabi National Oil Co. (ADNOC) has started supplying German companies with LNG and diesel cargoes in 2022 and will do so in 2023 as Europe's biggest oil consumer seeks to diversify energy sources.

ADNOC, which completed the first direct diesel shipment to Germany in September 2022, agreed with oil company Wilhelm Hoyer GmbH & Co. to supply up to 250,000 mt of diesel per month in 2023.

Oil cargoes that arrived in late 2022 will be used at the country's floating LNG import terminal in Brunsbuttel. ADNOC has also earmarked several other LNG cargoes for German customers for delivery in 2023 without disclosing further details.

Importing Low-carbon ammonia from UAE

The United Arab Emirates continues its green contributions in the field of energy. ADNOC has also entered into several agreements with German customers, including power plant operator Steag and copper producer Aurubis to supply low-carbon ammonia. low-carbon ammonia is a carrier fuel for hydrogen that can play a critical role in decarbonizing hard-to-abate industry sectors.

Furthermore, ADNOC seeks to collaborate with several German companies on hydrogen projects. Earlier this year, the company signed an agreement with Hydrogenious and Uniper on imports to Wilhelmshaven, covering 7,000-10,000 mt/year of green hydrogen deliveries beginning in 2025 as part of a demonstration project.

The demonstration cargoes, produced by Fertiglobe, an ADNOC unit that produces fertilizers, are the first of several test cargoes to be sent from the UAE to Germany. The first delivery of this cargo arrived in Hamburg on Sept. 15, 2022., to be used as a feedstock in its wire rod plant.

That is, ADNOC announced its goal to supply up to 25% of Germany's imported clean hydrogen and derivatives such as ammonia.

Furthermore, both countries closely collaborate on offshore wind energy. Masdar, the UAE's renewable energy pioneer, will actively explore prospects in Germany's offshore wind markets in the North Sea and Baltic Sea, which may provide up to 10GW of renewable energy production capacity by 2030 if the required German policy and regulatory criteria are satisfied. Both nations anticipate exploring more potential to boost growth and collaboration across the hydrogen value chain under the proposed ESIA.

Olaf Scholz stated in this regard: "The "Energy Security and Industry Accelerator - ESIA" allows the rapid implementation of vital lighthouse projects in the priority areas of renewable energy, hydrogen, LNG, and climate action."

"This landmark new agreement reinforces the UAE's and Germany's rapidly expanding energy collaboration," says Dr. Sultan Al Jaber, Minister of Industry and Advanced Technology. As we embrace the energy transition, ADNOC is fully committed to accelerating and investing in projects related to energy security, decarbonization, and climate action to maintain our position as a responsible and reliable provider of low-carbon energy and trustworthy exporter of low-carbon energy."

About ADNOC

The UAE’s ADNOC is a responsible provider of energy products to customers globally. The company accelerates production to meet both domestic and international demand. At the same time, it works in line with the UAE’s sustainable goals to emphasize the country’s leadership in the sustainability and green energy sector.

The carbon intensity of Abu Dhabi's oil and gas resources is among the lowest on the planet. Murban, ADNOC's crude oil, has less than half the carbon output of the whole industry average, and the business is on track to cut the carbon intensity of its activities by 25% by 2030.

Murban crude is freely traded on the ICE Futures Abu Dhabi (IFAD) exchange, where it is offered to purchasers from all over the world as a destination-free crude oil cargo.

The impact of the ESIA on the shipping sector

Amid the global challenges facing supply chains worldwide, the United Arab Emirates has emerged as a stable economy for trade movement and foreign investment. After consolidating the Emirati trade pace in Asia, the UAE is heading to Europe.

We now witness new commercial and trade links between the United Arab Emirates and European countries. With the unprecedented increase in commercial freight and oil shipments from the UAE to France and the United Kingdom, the recent joint energy agreement with Germany has shown its impact on the logistics sector as Europe prepares to face a harsh winter amid a shortage of supplies.

Those new links come with the steady export relations between the UAE and the Baltic countries, such as Poland, the second trading partner of the UAE in the Eastern Europe region. The total UAE non-oil exports to the Polish market amounted to about 242 million dirhams during the first half of 2022, with a growth rate of 13%.

We can associate this cooperation with the procedural facilitation provided by the UAE to encourage import and export operations. Whether through laws supporting an increase in trade flow or the initiatives the UAE takes to optimize shipping operations from Europe, in addition to recent international agreements with European countries to facilitate logistic processes.

Also, the tendency to import UAE energy is related to the policies adopted by the UAE to support diversifying energy sources and promoting the issue of climate change.

Under the National Energy Strategy, the first unified energy plan in the country, the UAE can balance global supply and demand with environmental obligations.

We believe this cooperation is also an outcome of the uniqueness of the UAE's vision and the stability of its economy.

The country's unprecedented contribution to the field of energy encourages our clients and partners in the shipping sector to move their trade to the UAE.

In light of the Ras Al Khaimah Energy Summit held last week, the Ministry of Energy and Infrastructure indicated that this cooperation comes under the UAE's plan to invest in renewable energy projects in more than 40 developed and developing countries. It aims to lay the foundations for greater reliance on hydrogen energy, which is key to achieving zero carbon emissions. The UAE is accordingly targeting a 25% share of the global green and blue hydrogen market by 2030.

The UAE-European cooperation is also not limited to the field of energy. The UAE contributes to international food and beverage trade promotion, including the UAE's exports to Europe, the USA, Africa, and Australia. That is through the participation of Dubai Industrial City in SIAL Paris 2022.

That is why we expect a growing trade flow in 2023 after concluding that recent energy agreement with Germany. Do you think the ESIA agreement with the UAE opens the door to new opportunities for trade flows between Germany and the UAE in other industries related to the energy sector?