Abu Dhabi is showing a renewed appetite for European oil refining assets as international companies seeks to shed them.
The International Petroleum Investment Company (Ipic), owned by the Abu Dhabi Government, yesterday said it would offer about €4 billion (Dh19.9bn) to acquire the 53 per cent of the Spanish refiner Compania Espanola de Petroleos (Cepsa) that it did not already own.
"In the context of the takeover offer, the French oil and gas company Total has irrevocably agreed to sell its 48.83 share in Cepsa to Ipic. The transaction is conditional on obtaining requisite competition law approvals," Ipic said.
The company said it would offer €28 in cash for each Cepsa share, a 23 per cent premium over Tuesday's closing price in Madrid. The stock rose sharply yesterday after the announcement, peaking slightly above Ipic's proposed offering price in afternoon trading.
"Ipic has been a shareholder in Cepsa since 1988, and we consider it an integral part of our global portfolio," said Khadem al Qubaisi, the managing director of Ipic. "We very much look forward to building upon Cepsa's foundation as one of Spain's leading companies and working together to ensure the company's continued prosperity and growth."
Ipic, which had US$48.2bn (Dh177.03bn) of assets at the end of last June, has a Government mandate to invest in energy and related assets overseas. It has built up a global portfolio predominantly in the refining and petrochemical sector, known in the industry as downstream, while other Abu Dhabi Government-owned entities such as Mubadala Development and Taqa have invested in foreign oil and gas exploration and production assets, or upstream.
During the recent economic downturn, with the geographic centre of the downstream petroleum industry shifting from West to East, Ipic has shown a propensity to acquire troubled refining and chemical assets in North America and Europe. In 2009, it acquired the Canadian commodity chemical producer Nova Chemicals, which operates large plants in Canada and Europe.
In choosing to sell its stake in Cepsa, the second-largest Spanish petroleum concern after Repsol, Total is following several other European oil companies that have recently shed domestic assets, and some US oil majors that have unloaded refining and chemical assets in Europe.
"Everybody looks to reduce their refining capacity, and we do the same. We do it in France, we do it in Europe," a Total spokesman said. "People do consume less oil in Europe. You cannot produce if you do not sell."
Total is also in talks to sell its Lindsey refinery in the UK, he said.
This month, Chevron sold its service stations and most of its fuel and lubricant business in Spain and the Canary Islands to Cepsa for an undisclosed sum.
Royal Dutch Shell is seeking to sell its UK Stanlow oil refinery to India's Essar Oil. Last year, Shell agreed to sell two Scandinavian refineries and said it would convert its Harburg refinery in Germany to a storage site.
The Swiss refiner Petroplus has announced plans to convert its unprofitable Reichstett refinery in eastern France to a storage terminal after failing to find a buyer.
Ipic started building its stake in Cepsa in 2008, as crude tumbled from its record $147 a barrel peak. In September of that year, the Abu Dhabi investment company disclosed it was in advanced talks to buy a 30.7 per cent stake in Cepsa from Spain's Banco Santander and an additional 5 per cent interest from the Spanish utility Union Fenosa.
The resulting deal boosted Ipic's holding to 45.2 per cent from 9.5 per cent, making it Cepsa's biggest shareholder. Ipic's current holding stands at 47.06 per cent.
Although Cepsa is regarded as primarily an oil refining and chemical enterprise, it has taken substantial steps in the past two decades towards transforming itself into an integrated oil and gas company, able to supply its downstream operations with feedstock from its own oil and gas production. Most notably, it has developed several oil and gas discoveries in Algeria.
Cepsa is also a partner in the Medgaz pipeline, which is expected to start up in coming weeks. Technical problems have delayed the project for more than a year. The pipeline would have the capacity to export 8 billion cubic metres of Algerian gas annually to Spain.
Some analysts have suggested that would be more gas than Spain could absorb, given declining demand in the country since the start of the economic crisis that is still gripping much of southern Europe.