The UAE company ADNOC resorts to Iraqi oil. Find out the reasons

ADNOC has modernized its Ruwais refinery to process heavier and cheaper oil such as Iraqi crude and Abu Dhabi offshore crude. This means it can export more supplies of its Murban crude, which is lighter and more valuable.

The tanker Orient M delivered a cargo of about 1 million barrels of Basra crude from Iraq to Ruwais earlier this month, according to Bloomberg tanker tracking data and ship agent reports.

After completing maintenance work in Ruwais last month, ADNOC is preparing the new units to process a variety of raw materials, according to people familiar with the project. The people, who requested to remain anonymous while talking about the matter, added that this would allow ADNOC to continue buying oil from other producers if their oil was cheaper.

ADNOC also refused to comment on the matter.

Emirati “Murban” crude
The Ruwais refinery can process more than 900,000 barrels per day of crude to transform it into fuels such as gasoline, diesel, and jet fuel, in addition to products for chemical plants. It was initially designed to process Abu Dhabi’s flagship Murban crude, which is pumped from onshore fields in the emirate.

Murban crude is lighter and sweeter than most other Middle Eastern crudes, which means it flows more easily and contains less sulfur. This makes it easier to refine and usually allows it to be sold at a higher price.

The price of “Upper Zakum” crude exceeds “Murban”
Modernizing the refinery allows ADNOC to use its heavier crude, “Upper Zakum,” which is produced from offshore fields, in addition to similar crudes. Advanced refineries can process these cheaper and more difficult crudes into valuable fuels for transportation purposes, helping to boost profit margins.

However, the value of heavier Middle Eastern crudes increased compared to their counterparts, as OPEC+ production cuts further reduced the supply of these types of oil from the market. For example, prices for Upper Zakum crude, which usually trades below Murban, rose due to OPEC+ production cuts and ADNOC’s transfer of some crude to Ruwais, with marine crude trading at a higher price than its lighter onshore counterpart this month.

Brent crude is trading near $90 a barrel, partly due to supply cuts by the Organization of the Petroleum Exporting Countries and its allies.

Regular flights between Zirku and Ruwais
ADNOC also sends tankers on regular trips between the marine loading terminal on Zirku Island, from which Upper Zakum crude is shipped, to Ruwais over the past two months, ship tracking data shows. Thus, it cut off some supplies of this crude to customers due to the use of more of it in Ruwais, and instead sold other raw materials such as “Murban” to buyers.

It should be noted that ADNOC has purchased non-Emirati crudes before, such as light African crudes, some American shale oil, and even Russian shipments. This is the first time that it has purchased heavy oil from the Middle East to operate it through the developed refinery.