Active abroad: State-owned firms are investing in energy-related assets overseas

In the decades since the formation of the International Petroleum Investment Company (IPIC) in the early 1980s, Abu Dhabi has become an important investor in foreign energy and energy-related concerns. In addition to the IPIC, which has holdings around the world, both the Abu Dhabi National Energy Company (TAQA) and the Mubadala Development Company have made a series of large-scale energy acquisitions overseas over the course of the past decade. The government of Abu Dhabi either wholly or partially owns all of these firms and all three have a mandate to invest in diversifying the emirate’s energy holdings and developing expertise and technological know-how.

IPIC

 Etablished in 1984 by Sheikh Zayed bin Sultan Al Nahyan, the UAE’s founder, IPIC is considered to be a primary driver of economic diversification within the emirate’s energy sector. Unlike TAQA and, in some cases, Mubadala, IPIC functions primarily as an investment vehicle, though in recent years IPIC has been mandated by the government of Abu Dhabi to take on board strategic projects on the emirate’s behalf.

As of the end of 2013 IPIC’s portfolio was made up of 19 companies covering all aspects of the energy value chain. In 1988 the company made its first acquisition, buying a stake in Compañia Española de Petróleos (CEPSA), a Madrid-based firm that is involved in exploration, production, refining and marketing activities. In 2011 IPIC increased its stake in the firm to 100% and simultaneously launched a five-year strategic plan to streamline operations, boost exploration and production activities, and reduce costs.

In 1994 IPIC acquired a 24.9% stake in the integrated energy company OMV, the largest listed industrial company in Austria. Other key IPIC investments include PARCO, a joint venture with Pakistan’s government; Sumed, which operates pipelines in Egypt and is jointly owned by Egyptian General Petroleum, the Saudi Arabian Oil Company and Qatar Petroleum; Energias de Portugal, a Portuguese power provider; Cosmo Oil, a Japanese production, refining and marketing firm; and Oasis International Power, an Abu Dhabi-based independent water and power plant operator.

Other IPIC holdings include Borealis, an Austrian polyolefin producer; Gulf Energy Maritime, one of the world’s largest independent tanker companies; Aabar Investments, a UAE-based investment company with major energy holdings of its own; NOVA Chemicals, a petrochemicals firm founded in 1954 and acquired 100% by IPIC in 2009; Oil Search, Papua New Guinea’s largest oil and gas producer; and Gulf Energy Maritime, a leading independent product/chemical tanker firm formed in 2004. In 2012 IPIC entered into a 50:50 joint venture with Mubadala to launch Emirates LNG, which is in the process of developing regasification facilities at Fujairah.

Also in 2012, IPIC completed the Abu Dhabi Crude Oil Pipeline (ADCOP), a strategically important project that allows Abu Dhabi to export crude oil directly from Fujairah. The company entered into a 50:50 joint venture with the Oman Oil Company to establish a refinery complex in the coastal town of Duqm, a new industrial centre in southern Oman, and undertook to construct, operate and maintain a grassroots refinery complex in the Fujairah, close to the new ADCOP pipeline and oil terminal and deepwater oil export terminals.

TAQA

Established in June 2005, TAQA is currently one of the largest listed companies on the Abu Dhabi Securities Exchange. The Abu Dhabi Water and Electricity Authority – the government’s water and electricity regulatory arm – owns 51% of the firm, while 24.1% is owned by the state-owned Fund for the Support of Farm Owners and the remaining 24.9% is publicly held.

The company is the single largest independent power producer in the Middle East and North Africa, boasting total generation capacity of 16,395 MW as of the end of 2013. Altogether, TAQA facilities meet 98% of Abu Dhabi’s power and water requirements. The firm operates eight joint power and desalination plants in the UAE, including six in Abu Dhabi and two in Fujairah.

In recent years TAQA has completed work on two new plants, including Fujairah F2, with generation capacity of 2000 MW, and Shuwaihat S2, with capacity of 1500 MW. All of TAQA’s UAE power plants generate power by burning natural gas.

In an effort to support its domestic activities and expand its reach, TAQA has made energy-related investments in Oman, Saudi Arabia, Morocco, Iraq, Ghana, India, Canada, the Netherlands, the UK and the US. Most recently, in December 2013 the company won approval from the UK government to develop the Morrone field in the North Sea, around 320 km north-east of Scotland. The project will be carried out in conjunction with the Danish firm Maersk Oil. The firm operates five platforms in the North Sea, in addition to the Brent pipeline system, which carries around 10% of the UK’s total oil production on an annual basis.

In October 2013 TAQA won approval from the Kurdistan regional government to develop the Atrush block in northern Iraq, some 85 km north-west of Erbil. As part of the initial development phase of the 25-year contract, the company plans to invest upwards of $300m in drilling and processing activities. Elsewhere in the Middle East, TAQA owns 40% of Sohar Aluminium in Oman and 25% of the 250-MW co-generation Jubail power plant in Saudi Arabia. In India the company operates a 250-MW power plant in Tamil Nadu, a southern state, and has a controlling stake in a 100-MW hydro-electric power plant in Himachal Pradesh, in the north of the country.

Mubadala Development 

Founded in 2002 with a mandate to contribute to diversifying the emirate’s economy, Mubadala is active in a range of industries, including financial services, health care, logistics, information and communications technology, mining, real estate, and oil and gas. The company boasts a variety of energy-related holdings. For example, Mubadala owns 51% of Dolphin Energy, which is responsible for production and export of natural gas from the offshore North field in Qatar, as well as a network of pipelines to distribute gas to the UAE and Oman. The system, which began transporting gas in 2007, is one of the largest hydrocarbons investment projects in the Middle East.

In 2012 Mubadala launched a new wholly owned subsidiary, Mubadala Petroleum, a fully-fledged upstream exploration and production company that manages Mubadala’s oil and gas interests. In addition to Dolphin Energy, these include enhanced oil recovery projects in Oman and Bahrain, as well as exploration activities in Kazakhstan, Libya and Tanzania.

Mubadala Petroleum also operates production, development and exploration activities in South-east Asia, including the Jasmine field in the Gulf of Thailand and the Ruby gas field in Indonesia, which was brought on-line in 2013. Other activities include the Manora and Nong Yao oil field projects, which are under development in Thailand, and holdings in Malaysia, where the firm recently announced successful exploration results.

In November 2013, Mubadala Petroleum signed a memorandum of understanding with the Abu Dhabi National Oil Company to open the way for greater cooperation between the two companies in terms of small gas field development, technology use and training.