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Sun 9 Nov 2008 04:00 AM

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Abu Dhabi’s global quest

Written off as too ambitious 12 years ago, the Emirate's investment vehicles have taken the industry by storm.

Written off as too ambitious 12 years ago, the Emirate's investment vehicles have taken the industry by storm.

When the International Petroleum Investment Company (IPIC) of Abu Dhabi started purusing the acquisition of a stake in Borealis in early 1996, industry experts termed the move as too ambitious.

They were simply not aware of a strong desire brewing in the hearts and minds of the emirate's emerging leaders to become global players by making use of one of the world's largest reserves of hydrocarbons bestowed upon them by mother nature.

Today, state-owned and privately-backed companies and investment funds from Abu Dhabi are some of the most aggressive asset-hungry players in the world.

The list of global acquistions is getting longer by the day, thanks to windfall earnings from high prices of crude oil in recent years and returns from well-adviced investment portfolios of Abu Dhabi Investment Authority (ADIA) and its affiliates over the last 25 years.

At the centre of Abu Dhabi's quest for global energy assets and partnerships are IPIC and Mubadala Development Company. Both companies are wholly-owned by the government of Abu Dhabi.

They have recently been joined by Abu Dhabi National Energy Company (Taqa), in which the government holds a 75% controling stake. IPIC says it is working on expanding its investment portofolio to more than $40 billion over the next four-five years. It already holds stakes in refining and petrochemcial companies that yield combined revenues of over US $50 billion

IPIC's global portfolio includes stakes in Austria's OMV, Cepsa of Spain, Pak-Arab Refinery (PARCO) in Pakistan, as well as refinery and petrochemicals companies in Japan and Oman. It may also build a partnership with Wintershall of Germany for exploration in the regional markets.

Mubadala made its mark with the Dolphin gas project, initiated by the UAE Offsets Group in March 1999 in partnerhsip with the now defunct Enron, and Total of France. Enron's 24.5% stake in Dolphin was sold to Occidental Petroleum, which has entered into several other joint ventures with Mubadala.

Both IPIC and Mubadala have agreements with Shell and Occidental for training and serach for innovative technologies and are now increasingly becoming active in the local and regional upstream and downstream sectors. Some industry analysts see the growing involvement of IPIC and Mubadala as competition, but those who have witnessed Abu Dhabi's journey from rags to riches think differently.

"When the Offsets Group started talking about the Dophin project, it was viewed as an encroachment on ADNOC's [Abu Dhabi National Oil Company] territory but the project has created immense value for the UAE and Oman and has set an example of how calculated bold steps could bear good results," says an official at an international oil company (IOC) in Abu Dhabi. "The slow pace of Abu Dhabi is a thing of the past, the key word today is aggression and quick action."

Ambitious TAQA

TAQA has the ambition to become a global leader in the energy sector. Set up in 2005 as a public joint stock company, it is owned 51% by Abu Dhabi Water and Electricity Authority (ADWEA) and already has operations in nine countries around the world including the Netherlands, the UK, Canada, South Africa, Morocco, Ghana and India.

Aside from oil and gas assets, it has interests in power generation, combined heat and water, desalination, structured finance and services. It has total assets of $18.5 billion and annual revenues exceed $2.26 billion.Taqa's acquisition in September of EnCore Oil Nederland B.V., a wholly-owned subsidiary of EnCore Oil, builds on its license to operate in four fields off the western Dutch coast and the acquisition of Talisman Energy's Brae assets in the UK's North Sea.

Taqa bought Calgary-based PrimeWest Energy Trust in late 2007 and has inherited acreage of more than 2.5 million acres of which 1.83 million acres are still to be developed.

It produces gas from more than 23 wells in the Netherlands through onshore and offshore facilities in the North West Alkmaar region of Netherlands, and owns a natural gas storage facility operator set up in February 2007 after the acquisition of BP's Dutch exploration and production facilities.

TAQA's midstream assets include three gas storage facilities in the Netherlands and Canada, as well as the underground Bergermeer Gas Storage Project in the Netherlands, which will be Europe's largest gas storage facility with a total capacity of 3.2 billion cubic metres once it comes on stream in April 2013. It also owns a seven billion cubic feet gas storage facility in Canada's East Cantuar, which supplies gas to Chicago.

"While IPIC and Mubadala are now increasingly focusing on downstream and upstream activities at home and closer to it, Taqa is buying niche assets in Europe and North America.

It seems that Abu Dhabi wants to have presence in every possible corner around the world, especially if the investment opportunities offer profitable prospects in the coming years," says a London-based energy analyst. "The current global downside and liquidity crunch is proving to be good for cash-rich Abu Dhabi."

Mubadala moves

Officials at Mubadala say that the company is more focused on integrating its existing portfolio of $10 billion through the acquistion of energy assets that could add value to its expanding operations in the UAE and regional markets.

The company bought in April upstream assets of Pearl Energy in Indonesia and Thailand for $833 million. It has a stake in nine oil exploration blocks in Libya, and has recently embraced UAE-based Petrofac International.

In early October, Mubadala signed an agreement with Kazakhstan's JSC National Company KazMunayGas and ConocoPhillips to negotiate terms for the exploration and development of the "N" Block in offshore Kazakhstan, under a new subsoil use contract.

Mubadala Petroleum Services Company LLC (MPSC), a wholly-owned subsidiary of Mubadala, is also setting up a joint venture company, Petrofac Emirates, which will provide engineering, design, procurement and construction services for onshore oil and gas, refining and petrochemical projects in the UAE.

In March, Mubadala's wholly-owned subsidiary, Liwa Energy, bought a 20% stake in Shell's current exploration and production ventures in Algeria. Liwa Energy also has a stake in Block 54, in southeastern Oman, adjacent to Block 53 where Liwa currently holds a 15% working interest in the Mukhaizna Field.

Planning for what we are seeing today dates back to over a decade when Sheikh Mohammed bin Zayed started building a team to take on future projects and challenges. Energy is at the core of Mubadala's development strategy, and the development of assets at home and acquisitions abroad are part of a long-term strategy," says the IOC official in Abu Dhabi.

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