Under the impact of the Iran war, Abu Dhabi oil giants shift tens of billions of dollars toward US natural gas.

The overseas investment arm of the UAE national oil company is planning a massive entry into the US natural gas market, with deals worth tens of billions of dollars. This is Abu Dhabi's latest move to accelerate asset diversification in the context of the Iran war reshaping the Middle East energy landscape.

According to the Financial Times, XRG Chief Investment Officer Nameer Siddiqui, in his first media interview since taking office in January this year, stated, the company is evaluating 29 potential deals, aiming to build a vertically integrated global business covering the entire natural gas value chain. Siddiqui made it clear that the commitment to invest in the US energy value chain is "steadfast," emphasizing that "the US is the market where we want to make bold moves."

The Iran war is impacting the Middle East energy sector, prompting companies in the region to accelerate diversification efforts. Meanwhile, global demand for US liquefied natural gas continues to climb, coupled with surging demand from US data centers, providing market support for XRG’s strategic layout.

Ambition for the Entire Value Chain: From Extraction to End User

Siddiqui describes XRG’s US plan as true vertical integration: covering underground gas extraction, pipeline transportation, processing, liquefaction export facilities, as well as regasification units and end-user pipelines in destination countries. He said the deals being evaluated include controlling acquisitions, joint drilling developments, and minority equity investments.

XRG currently holds shares in the Rio Grande liquefied natural gas project in Texas, marking its initial foothold in the US market.

Industry veteran Martin Houston, chairman of Australian exploration company Omega Oil and Gas, commented positively: "XRG has ambitions, financial strength, and execution capability to chase big targets. Its determination to build a vertically integrated gas business should not be underestimated." But he also warned that such projects are structurally complex and will take years to advance.

Financial Advantages & Market Challenges Coexist

On the financing side, XRG has unique competitive advantages. According to Alex Munton, global gas business director at Rapidan Energy Group, banks are generally cautious about US LNG projects due to concerns over global LNG oversupply, giving Middle Eastern investors with their own capital a lead in financing.

However, market dynamics also present challenges. Munton pointed out that XRG missed two US construction booms triggered by the Russia-Ukraine conflict and Trump’s return to the White House. "The US LNG market already has several strong players all seeking expansion. XRG will need to clarify its position within this established landscape."

XRG was founded just over a year ago and has already completed asset acquisitions in Egypt, Mozambique, and Azerbaijan, but progress with bigger deals has not been smooth—last September, it withdrew its $19 billion takeover bid for Australian oil and gas group Santos. Siddiqui refused to comment on reports of XRG seeking to acquire a stake in Australia's North West Shelf project, but said the company is "clearly interested" in Australian LNG assets.

Strategic Focus Shift: Farewell to Low Carbon, Concentration on Natural Gas

In its business direction, XRG has undergone a significant strategic shift. Michele Fiorentino, president of XRG’s Energy Solutions division, said the department, formerly known as "Low Carbon Energy," originally focused on hydrogen and carbon capture technologies but has now fully abandoned these directions—the reason being insufficient market demand and lack of commercial viability.

XRG previously had a stake in ExxonMobil’s low-carbon hydrogen project in Texas, but plans have now been suspended indefinitely. Fiorentino said XRG will focus on natural gas production, transportation, and utilization in the future.

To date, XRG’s largest investments are concentrated in chemicals, all inherited from its parent Abu Dhabi National Oil Company. This includes merging its assets with Austria’s OMV to create Borouge International and acquiring Germany’s Covestro. The Covestro deal cost 14.7 billion euros and was widely criticized for its high pricing, coinciding with weak European chemical demand and soaring energy costs. Fiorentino said it’s too early to assess the performance of this acquisition, but "regarding our core capabilities, we have no doubts."

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