March 24, 2020 / 1:48 PM / 11 days ago

UAE's ADNOC tells contractors it plans cost cuts after oil price crash - sources

* Brent oil price halved since start of year

* ADNOC letter to contractors calls for “cost savings”

* Global energy firms slash spending over price slide

By Alexander Cornwell and Hadeel Al Sayegh

DUBAI, March 24 (Reuters) - Abu Dhabi National Oil Company (ADNOC) has notified contractors and suppliers that it will review existing deals to find ways to cut costs due to the steep slide in oil prices, according to three industry sources and a letter seen by Reuters.

The benchmark Brent oil price has more than halved in value since the start of the year, trading around $28 a barrel on Tuesday, driven down by the impact of the coronavirus and the end of supply restraint by OPEC and Russia.

“While our corporate strategy currently remains unchanged, we remain focused on delivering our important growth projects and are proactively identifying opportunities for cost optimisation across the ADNOC group,” the ADNOC letter said.

“Our procurement function will, in the coming days, reach out to you to begin a comprehensive review of your existing engagement with ADNOC with the goal of identifying cost savings,” the letter dated March 17 said.

The letter was sent to many companies dealing with ADNOC including firms involved in oil and technical services, engineering, project services and drilling, the sources said.

ADNOC is the state-run oil company of Abu Dhabi, the wealthiest emirate in the United Arab Emirates.

“ADNOC is engaging with our partners and suppliers as we responsibly progress our projects. We are focused on driving performance, efficiency and value across our portfolio in response to market conditions,” an ADNOC spokesman said.

Energy companies around the world are slashing spending in the face of plunging oil prices caused by the spread of the coronavirus and a push by Saudi Arabia and Russia to flood the oil market in a bid to win market share.

ADNOC said on March 11 it would raise its oil supply to a record 4 million barrels per day (bpd) in April, about 1 million bpd more than current output. It also said it would accelerate its plans to increase its production capacity.

A global pact on cutting supplies between Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, collapsed this month.

All production limits were scrapped after Moscow rejected OPEC’s call for deeper production curbs, prompting Saudi Arabia, the world’s top oil exporter, and the United Arab Emirates to say they would both ramp up output to record levels.

For the past three years, ADNOC has been pumping around 3 million barrels of oil per day. The company’s current refining capacity is 922,000 bpd and it plans to triple petrochemicals production to 14.4 million tonnes annually.

In 2017, ADNOC said it planned to spend more than 400 billion dirhams ($109 billion) over five years, to boost its oil and gas output and expanding downstream activities.

Saudi Arabia’s national oil company Saudi Aramco, the world’s top oil producing firm, said this month it planned to cut capital spending for 2020 to between $25 billion and $30 billion, compared with $32.8 billion in 2019.

$1 = 3.6724 UAE dirham Additional reporting by Saeed Azhar, Dahlia Nehme; Writing by Rania El Gamal; Editing by Edmund Blair

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