Adnoc’s Stumbles in Global Dealmaking Hinder Quest to Expand Influence - Bloomberg #AbuDhabi #UAE

Adnoc’s Stumbles in Global Dealmaking Hinder Quest to Expand Influence - Bloomberg

Abu Dhabi’s state oil company has megabucks to deploy in global energy M&A, seeking to expand its influence internationally and secure its future in a less carbon-intensive world.

But finding the right targets at the right price is proving to be a challenge.

Last week, Abu Dhabi National Oil Co.’s new investment unit XRG walked away from its biggest transaction yet, a planned $19 billion takeover of Australian natural gas producer Santos Ltd.

Another major deal to buy German chemical maker Covestro AG is at risk of being derailed by a European Union competition probe.

Bagging Santos would’ve taken XRG to the top ranks of global producers of liquefied natural gas — a fuel that Abu Dhabi sees as key to its economic growth — and given it quick access to fast-growing Asian markets. But disagreements over taxation and a methane leak unexpectedly killed the deal.

The saga puts the spotlight on Adnoc and XRG’s ability to see through complex cross-border transactions. The willingness to walk away from Santos suggests a discipline not to overspend in the pursuit of their growth ambitions, but raises questions about the pace of expansion that can be achieved.

The focus now turns to the Covestro deal, into which the European Commission launched a probe in July amid concerns that Adnoc’s state funding by the United Arab Emirates could allow it to behave in a way that hampers fair competition across the bloc.

XRG said this month that the investigation could torpedo the transaction. Such an outcome would call into question its ability to do any major deals in Europe, where state-aid concerns are paramount. Reuters has reported that the company was willing to make concessions to the EU.

The challenges in Europe and Australia could push Adnoc more firmly into the American orbit, where the UAE has pledged hundreds of billions of dollars of investments following President Donald Trump’s tour of the Middle East earlier this year.

In 2024, it bought an interest in NextDecade Corp.’s LNG export project, then a stake in Exxon Mobil Corp.’s proposed hydrogen venture, both in Texas. Its first acquisition of US natural gas fields could follow.