(Bloomberg) -- The biggest oil company in the United Arab Emirates is expanding its fledgling trading business with a deal to supply crude and take products from a refinery in the country’s coastal region of Fujairah.
Abu Dhabi National Oil Co. has had at least one cargo of crude processed at the refinery that’s partly owned by trader Montfort Group, according to people with knowledge of the situation. Adnoc is in talks to extend the agreement to more shipments, said the people, who asked not to be identified discussing business details.
The move is the latest example of Middle Eastern oil companies’ push to expand their trading operations by tapping into new markets and experimenting with different types of transactions, rather then simply selling their crude on long-term contracts. Adnoc and rival Saudi Aramco are both expanding their trading units in an effort to maximize profits and replicate the success of international firms such as Shell Plc and BP Plc.
Adnoc and Montfort are working on an expanded tolling agreement, which will allow the UAE state company to process in the Fujairah refinery crude that it sources from elsewhere and then sell the fuels in the market. Fujairah — on the UAE’s Gulf of Oman coast outside the Strait of Hormuz chokepoint — is one of the world’s biggest ship refueling hubs and a key storage point for traders stocking and transshipping cargoes.
Adnoc and Montfort declined to comment.
Adnoc has supplied at least one cargo of Sudanese Nile crude to the Fujairah facility, according to the people. The refinery, jointly owned by Montfort and Dubai royal family member Sheikh Ahmed bin Dalmook Al Maktoum, is configured to process heavy sweet crude into low-sulfur marine fuel and other products.
The specific type of oil that’s suited to that refinery is relatively thick and low in sulfur. Supply is limited to a few countries, mainly in Africa, including grades like Dar blend from South Sudan and Chad’s Doba crude. With Dar crude shipments cut off for the past several months due to pipeline disruptions in Sudan, the Fujairah refinery has been squeezed on supply, making it difficult for the plant to run at capacity, according to people with knowledge of the situation.
That’s giving Adnoc an opportunity to expand its trading operations. It plans to step up operations to buy and sell crude and products from other oil companies. For example, Adnoc has deals to take Nigerian crude and is looking for other supply agreements, according to people with knowledge of the situation.
Adnoc has its own refinery at Ruwais on the Persian Gulf that supplies gasoline domestically and ships fuels like diesel, jet fuel and naphtha to buyers worldwide.
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