International Petroleum Investment Company (Ipic), the Abu Dhabi Government investment enterprise, has teamed up with a British financial firm, Man Investments, to launch a US$1.5 billion (Dh5.5bn) fund to invest in environmentally beneficial energy projects throughout the Middle East and North Africa. The Mena Associated Gas and Global Environment Fund, established yesterday at a signing ceremony in the capital attended by the UAE's minister of energy, Mohammed bin Dhaen al Hamli, will invest in projects to capture gas that is normally an inconvenient by-product from oil wells. Such "associated gas" is commonly burnt or "flared".
Projects financed by the new fund would have the potential both to increase the supply of gas available as fuel or industrial feedstock and decrease atmospheric emissions of pollutants and the greenhouse gas carbon dioxide. The initiative "shows that smart environmental thinking is not just about coming up with new sources of energy, but also about how we harness existing energy sources," said Peter Clarke, chief executive of Man Investments.
Citing data from the World Bank, the group said oil and gas installations worldwide burnt or vented 150 billion cubic metres of unwanted gas last year, equivalent to 25 per cent of US annual gas consumption or 30 per cent of European consumption. Ipic's managing director, Khadem al Qubaisi, stressed the potential for the investment fund to benefit underdeveloped oil-producing countries, especially in North Africa.
"Africa needs a lot of electricity, and a lot of petrochemicals and plastics. Africa will play a big role [in these industries] in the future, and will use this gas as a vehicle to do that," he predicted. Gas is the fuel of choice for many projects that generate thermal power, as it produces less carbon dioxide when burnt than oil or coal in order to produce equivalent amounts of electricity. Natural gas components are also used as feedstock in the production of petrochemicals and fertilisers.
Mr Qubaisi predicted that the new fund, to which Ipic has agreed to contribute $300 million, would also be able to do "a lot of business" in Iraq and possibly Saudi Arabia. Due partly to the neglected energy infrastructure in war-ravaged Iraq, the oil-producer has in recent years been one of the top countries in terms of flaring gas. Its state oil companies have recently been trying to reduce the amount of gas they flare.
Mr Qubaisi and Mr Clarke said the Mena gas fund partners already had a number of project agreements in place and are negotiating others. They declined to elaborate. Rikky Hasan, the managing director of MTM Capital Partners, said the fund will be open to investors for one year, and could exceed its target of attracting an additional $1.2bn of investment capital. MTM, a subsidiary of the Man group, will manage the fund.
Despite, or perhaps because of, the tumultuous state of global securities markets, there is strong demand for so-called alternative investments that are not related to stocks or bonds, Mr Clarke said. In the Mena gas fund's case, investments would be secured by gas-capture infrastructure to be developed and installed by the fund's technical partner, Fluor Corporation, a big US engineering firm. Among the world's largest publicly traded hedge fund managers, Man specialises in alternative investments. The Mena gas fund is the second environment-related vehicle it has launched in the past eight months. Last December it raised 400m (Dh2.3bn) for the China Methane Recovery Fund, which finances methane gas extraction from coal mines in northern China for electricity generation.
Man said in April it would establish a subsidiary to focus on financing projects that cut pollution. Ipic, a joint creation of the sovereign wealth fund, Abu Dhabi Investment Authority, and Abu Dhabi National Oil Company, has a Government mandate to invest in oil and gas projects outside the emirate of Abu Dhabi. The company said its "strategic partnership" with Man will position it for a lead role in the global convergence of the energy, resources, infrastructure and environmental sectors.