Oil & Gas

Abu Dhabi National Oil Company (ADNOC) has redirected its medium sour grade Upper Zakum for processing at a local refinery since late 2023. This strategic move allows ADNOC to free up more volumes of the sweeter, lighter, and more expensive Murban crude for export, as confirmed by a source familiar with the plan speaking to Argus.

The Upper Zakum grade is now being utilized at the upgraded Ruwais refinery, which has the capacity to process 837,000 barrels per day (bpd) of crude. ADNOC had announced back in 2018 that it would invest $3.1 billion to enhance crude processing flexibility at the Ruwais oil refinery. This modification enables ADNOC’s Ruwais Refinery-West complex to process up to 420,000 bpd of Upper Zakum crude or similar grades, thereby freeing up more volumes of the UAE’s Murban crude for export sales, which commands a higher price on the global oil markets.

Regarding the refinery's modification, ADNOC stated, “We can maximize the benefit of price differentials to enhance refinery margins, improve the middle distillate products and release valuable Murban crude into the market.” This initiative, known as the crude flexibility project, aims to process medium grades for economic reasons.

According to the Argus source, customers generally prefer more Murban due to its profitability for ADNOC. As a result, the UAE has reduced exports of Upper Zakum, diverting more volumes of the medium sour crude to the Ruwais refinery, as confirmed by traders and analysts speaking to Reuters earlier this week. ADNOC is estimated to have shipped around 650,000 bpd of Upper Zakum crude in March, down from a monthly average of around 940,000 bpd throughout 2023, according to Rystad Energy data cited by Reuters. ADNOC has concurrently increased exports of the lighter and sweeter grade Murban to offset the lower volumes of Upper Zakum.