In a telling sign of shifting tides in the global energy market, two of the Middle East’s most influential oil companies—Saudi Aramco and Abu Dhabi National Oil Company (Adnoc)—are reassessing their aggressive acquisition strategies in the face of declining oil prices.
Once the most assertive players in energy M&A, both state-backed firms have collectively poured over $60 billion into international ventures in recent years. From downstream investments to chemicals and gas plays, the Gulf giants had turned their attention beyond crude. But as benchmark oil prices dropped from $80+ per barrel earlier this year to under $70, the calculus is changing.
From Global Expansion to Dividend Discipline
With pressure mounting from sovereign stakeholders, both Aramco and Adnoc appear to be pivoting toward capital discipline, prioritizing dividends over dealmaking. According to sources familiar with internal discussions, there’s a growing mandate to focus on value preservation rather than continuous expansion—especially with fiscal breakevens under threat in several Gulf economies.
For Aramco, each $1 fluctuation in oil prices reportedly swings earnings by nearly $900 million. That volatility, paired with geopolitical tensions and shifting demand forecasts, has triggered caution—even for companies with seemingly unlimited financial firepower.
Aramco: Counter-Cyclical, But Selective
Aramco’s recent deal flow has included:
- A strategic stake in China’s Rongsheng Petrochemical
- The acquisition of Valvoline’s global lubricants business
- Expanded commitments in LNG, with targets in India and the U.S. Gulf Coast
Despite a slowdown, Aramco’s CEO has reiterated the company’s ability to “invest counter-cyclically,” suggesting select opportunities may still be pursued—albeit with greater scrutiny.
Adnoc: From All-Out Offense to Integration Mode
Adnoc, by contrast, has been even more assertive, with over $50 billion in M&A activity underway, including:
- An $18.7 billion bid for Australian energy firm Santos
- A $15.5 billion play for Germany’s Covestro
- Strategic stakes in the Borouge Group International, valued at $60 billion
To drive this, Adnoc built its own internal investment engine—XRG—with aspirations of becoming a top-five global gas company. However, sources now say the company is entering an integration phase, pressing pause to evaluate recent buys amid market volatility.
Notably, both Aramco and Adnoc have reportedly backed out of bidding for Castrol, BP’s lubricant brand—a symbolic move that reinforces a shift from aggressive bidding to strategic patience.
Join the 365247 Community here.
IMAGE: PA WIRE/ZUMA PRESS
