UAE’s ADNOC Considered BP Takeover, Sources Say

UAE’s ADNOC Mulls Acquisition of Britain’s BP, Sources Reveal

The recent contemplation by the United Arab Emirates’ state-owned oil company, Abu Dhabi National Oil Company (ADNOC), to acquire Britain’s BP (BP.L), as reported by sources familiar with the matter to Reuters, has sparked considerable interest and discussion within the energy sector. Although initial discussions were held, they did not progress further, with ADNOC ultimately deciding that BP did not align with its strategic objectives, influenced in part by political considerations.

BP, with a valuation of £88 billion ($110.3 billion), has been under scrutiny due to years of underperformance compared to its competitors, making it a potential acquisition target. While U.S. oil giants are undergoing significant consolidation, European counterparts have largely remained on the sidelines. Investors have closely monitored BP’s transition plans away from fossil fuels toward renewables, particularly following its revision of energy transition targets in February 2023.

In contrast, ADNOC, under the leadership of CEO Sultan al-Jaber, has been actively expanding its oil and gas production capacity, aiming to position itself as a global oil major. While discussions between ADNOC and BP took place, ADNOC also sought advice from investment banks. However, ADNOC’s exploration of BP as a potential acquisition target did not progress far, with BP being just one of several companies evaluated.

ADNOC’s interest in international expansion as part of the UAE’s energy transition strategy is underscored by its pursuit of European assets, including discussions with Germany’s Covestro and Austria’s OMV. In December, ADNOC agreed to acquire OCI’s stake in Fertiglobe, a European chemical producer, for $3.6 billion.

Despite reporting profits of $13.8 billion last year, BP’s valuation remains lower compared to its global oil major counterparts, raising concerns among investors. The company underwent a leadership transition in January, with Murray Auchincloss assuming the role of Chief Executive.

Analysts view ADNOC’s interest in BP as reflective of the undervaluation of the European oil and gas sector. However, uncertainties persist regarding BP’s ability to convince the market of its transition businesses’ growth potential.

BP and ADNOC have a longstanding partnership, with a joint venture announced in February to develop gas assets in Egypt. Additionally, the two companies made a $2 billion offer to acquire a stake in Israeli gas producer NewMed, though the deal is currently on hold due to regional conflicts.

The UK’s National Security and Investment (NSI) Act grants the government authority to intervene in acquisitions, particularly in strategic industries like energy, on national security grounds. Recent reports suggest the UAE’s interest in investing in UK nuclear power infrastructure, despite the UK government’s cautious approach to foreign investments.

These developments highlight the intricate dynamics of international energy markets, where geopolitical considerations intertwine with economic factors to shape strategic decisions and investments.

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