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Abu Dhabi favours low equity in oil investments
posted on 29/09/2008
 Abu Dhabi said yesterday it remains committed to long-term projects in its overseas oil investments but would favour low equity in the targeted ventures. The International Petroleum Investment Company (Ipic), the government's downstream investment arm, said it avoids getting involved in direct management of the companies it invests in as it is pushing ahead with a major drive to expand its assets in the UAE and other countries.
The company, which was created 24 years ago to utilise Abu Dhabi's massive oil wealth in downstream projects abroad, said its investment portfolio has grown to 10 major ventures but did not specify their value.
"Ipic operates on commercial principles, with the objective of maximising the long run shareholder value of the company. This is achieved by Ipic's vigorous participation in the board of directors and other strategy making bodies for every company in Ipic's investment portfolio," it said on its newly-launched website.
"As a primarily financial investor, Ipic does not typically participate in the day-to-day management of investee firms, except in exceptional circumstances. Though Ipic has 65 to 70 per cent controlling shares in its largest investments, it typically targets a significant minority equity participation level of 25 to 40 per cent, accompanied by appropriate minority shareholder protections."
The figures showed the company, founded in Abu Dhabi in1984, has between two and 70 per cent in 10 major ventures in Spain, Austria, Portugal, Japan, Pakistan, South Korea, the UAE and other countries.
Its largest percentage stakes include its 70 per cent shareholding in Hyundai Oilbank Ltd and 65 per cent in the petrochemicals producer Borealis OMV.
One of its oldest investments is Ipic's 9.5 per cent shareholding in Spain's Cepsa, which allowed the emirate to market more than 60,000 barrels per day of its crude in Europe when it initiated that stake more than 20 years ago.
At its board meeting last week, Ipic said it discussed new investment opportunities in North Africa and the Mediterranean region within an intensified drive to expand its portfolio worldwide following record profits last year. "The board looked at the first half results of the company and the implementation of its projects as well as the opportunities for investment in a number of countries including in North Africa and the Mediterranean," the company said in a statement.
Buoyed by a 28 per cent surge in its net earnings last year, Ipic has stepped up its investment drive with plans to set up multi-billion dollar refineries and other projects. They include the construction of a major grassroots refinery in Fujairah and two refineries in Morocco and Pakistan despite a sharp rise in the required capital because of high construction costs. The company is expected to pump nearly US$3 billion into a joint refining venture in Morocco, US$5bn
in the refining project in Pakistan and between US$6-10bn in the Fujairah refinery, according oil industry sources. The company is also planning to invest in upstream oil projects although it has not specified such plans, which reflect a new policy of diversification of the investment portfolio, most of which are based in the West. Although Ipic has not announced the exact investments, it has recently spoken of plans to nearly double its assets to more than US$30bn over the next five to 10 years.
In recent press remarks, Ipic Managing Director Khadem Al Qubaisi said the company had drawn up plans to embark on what he described an aggressive investment strategy that will also focus on upstream activities.
"We are planning to move into oil and gas exploration and production and aim to double the investment portfolio. The strategy now is to be very aggressive and to focus more on exploration and production," he said. "If you want to make a lot of money in the oil industry you need some exposure in that sector."
Ipic's net profits leaped by about 28 per cent to a record US$1.2bn last year following an expansion in its investments and strong performance of its portfolios in Spain, Austria and other countries.
The company was created with the aim of using the emirate's oil revenues in funding projects to diversify the economy.
Abu Dhabi pumps about 2.4 million barrels per day of oil and the surge in crude prices boosted its income to a record US$55bn in 2007. The income was nearly 10 per cent higher than the 2006 revenues and five times the 1998 earnings. – Emirates Business 24|7
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