Arabian Gulf Business Insight - Adnoc Gas IPO tipped to break record for Abu Dhabi exchange

Adnoc’s listing of its gas business could take place as soon as this month – and become the largest IPO on the Abu Dhabi Securities Exchange, according to reports.

The state-owned oil giant is looking at a valuation of at least $50 billion for Adnoc Gas, two sources close to the matter have told Reuters.

The float is slated for this quarter, the news agency reported, but the sources stressed that the valuation and the size of the IPO had not been finalised.

As a result of the tight schedule, Goldman Sachs and Bank of America have given up their roles as lead managers, Bloomberg reported. HSBC has been appointed to work with First Abu Dhabi Bank on the IPO, the news site added.

Vijay Valecha, chief investment officer at Century Financial, told AGBI that Adnoc Gas was “a robust business backed by the Abu Dhabi government with high-quality assets. Large-scale international investors would like to have these tangible assets in their portfolios, so we could see a new set of investors making their presence felt in UAE.”

Under group CEO Sultan Al Jaber, who was named last month as president of the Cop28 climate change summit, Adnoc has drawn up a roadmap to decarbonise its operations by 2050.

Valecha said: “This is the best time to list a gas-focused business in the markets. There is now a broad consensus that the path to a carbon-free future is not straightforward, and natural gas can act as a bridge during the transitionary period.

“Adnoc Gas is well-positioned to capitalise on this trend through its 10 billion standard cubic feet of gas output per day.”

The merger of the oil giant’s gas processing arm and its liquefied natural gas (LNG) subsidiary to create Adnoc Gas was approved by the board last November.

The company is sharpening its focus on the gas market as Europe seeks to replace all Russian energy imports as early as mid-2024, after the gradual supply cuts that followed Moscow’s invasion of Ukraine and the sanctions imposed by Western governments.

“With geopolitical tensions still in the background and this year’s natural gas demand forecast to grow due to China reopening, we could see good demand for the Adnoc Gas shares,” added Valecha.

Last year Adnoc unveiled plans to build an LNG plant in the northern emirate of Fujairah. The facility would provide 9.6 million metric tonnes of gas per year and is scheduled for completion between 2026 and 2028, according to S&P Global Commodity Insights.

The gas IPO is part of Adnoc’s wider plan, launched more than four years ago, to monetise assets as part of the UAE government strategy to diversify the economy.

Over the past two years, the oil giant has listed petrochemicals joint venture Borouge – current holder of the record for Abu Dhabi’s biggest IPO – its fertiliser and clean ammonia subsidiary Fertiglobe and Adnoc Drilling.

If Adnoc Gas is valued at $50 billion, the business would be broadly comparable to the Italian energy group Eni or the US oil producer Occidental Petroleum, Reuters said.

Stock markets in the Middle East and North Africa are preparing for a healthy crop of IPOs over the course of 2023, according to a report from consultancy EY.

The bourses are looking to build on the success of 2022, which had 51 IPOs with combined proceeds of $22 billion. Lulu Group, an Abu Dhabi supermarket chain, is also planning an Abu Dhabi listing in 2023.