Adnoc Doubles Down on Petrochemicals Despite Industry Headwinds

The Abu Dhabi National Oil Company (Adnoc) is doubling down on the petrochemicals industry, committing billions in investments to expand its operations, even as the oil and gas industry contends with historically low margins and a challenging economic outlook.

Industry analysts argue that while the return on investment may not be immediate, Adnoc’s strategy aims to reinforce its global position and technological capabilities, especially in the petrochemicals sector, which remains a key pillar of its diversification agenda.

“Abu Dhabi is aiming to build a global petrochemicals powerhouse,” says Yousef Husseini, Director of Chemical Equity Research at EFG Hermes. He notes that the current climate of depressed asset prices could be a unique opportunity for petrochemical companies to execute strategic acquisitions and mergers.

The UAE, home to one of the largest oil reserves in the world—over 107 billion barrels—also boasts the seventh-largest natural gas supply globally. These immense energy assets have traditionally sustained the country’s robust oil field operations. Still, rather than solely relying on its petroleum industry, Adnoc is steering towards high-value chemicals and advanced materials.

In recent months, Adnoc has intensified efforts within the petrochemicals segment, despite mounting industry pressure. Even Sabic, one of the largest regional oil companies and a leader in petrochemical production, reported a $333 million loss in Q1.

In a significant move, Adnoc and Austria’s OMV plan to merge their stakes in Borouge and Borealis under a new entity, Borouge Group International. Each partner will hold 46.9%, with the rest publicly traded. The merger aligns with Adnoc’s broader ambition to compete with global petrochemical companies and to strengthen its presence across the international oil and gas value chain.

Another major milestone was Adnoc’s acquisition of German firm Covestro for $16.5 billion—a bold entry into the polycarbonates market. This deal complements Adnoc’s earlier investment in Canada’s Nova Chemicals, purchased by its affiliate Mubadala Investment Company for $13.4 billion. Nova’s strength lies in polyethylene production, a sector highly profitable when derived from low-cost ethane found in Abu Dhabi’s shale gas reserves.

With this feedstock advantage, Adnoc secures a competitive edge many oil and gas producers in Europe lack. “Ethane-rich shale gas from the UAE allows for cheaper production and higher margins,” an industry expert explained.

Meanwhile, Borealis, known for its proprietary technologies, has seen financial gains even amid broader downturns. Last year, it posted a €566 million profit, up significantly from €159 million, due to patented polyethylene innovations that balance strength and flexibility, enabling premium pricing.

As Sultan Ahmed Al Jaber, Adnoc’s CEO, remarked during the merger announcement, the company’s trajectory is about more than profitability: it’s about long-term resilience. “To lead globally in petrochemicals, you need to innovate, scale, and diversify your portfolio beyond traditional oil and gas”.
This vision reflects a broader regional trend, as oil-dependent economies seek new revenue streams while still leveraging their petroleum and gas assets. From a return on invested capital perspective, some moves may raise eyebrows. But from a future-facing strategy, Adnoc’s expansion into the petrochemical industry, despite short-term volatility, marks a decisive shift in positioning the UAE among top global oil and gas players.