The Abu Dhabi Government is in talks to help Gazprom, the Russian energy giant, fund the purchase of "distressed" oil and gas assets across the country, the ambassador of the UAE to Moscow said yesterday. The negotiations concerned investments from Abu Dhabi sovereign wealth funds into projects in Russia and other countries, said Omar Ghobash, and are the latest sign of warming ties with Russia's energy sector following co-operation in the natural gas market.
"There are detailed and extensive negotiations over particular investments," Mr Ghobash told Bloomberg, without disclosing more details. "They're interested in getting funding that only sovereign wealth funds can provide." The investments would target assets that have suffered from the recent collapse in oil prices. Investment in oil and gas infrastructure by national oil companies in Russia, the world's second-largest oil producer, has fallen behind capital spending by firms in Brazil and China this year, according to a report released yesterday by Ernst and Young, the tax and business consultancy.
"Russian oil and gas companies have been more adversely impacted by the fall in oil prices, reduced availability of credit and investors' flight from risk," wrote Andy Brogan, an oil and gas analyst. Talks over investment follow co-operation between Gazprom and Abu Dhabi government firms on gas sales and a gas storage facility in the Netherlands. In Abu Dhabi yesterday, Rosario Sgarioto, the marketing manager for liquefied natural gas (LNG) at Gazprom, confirmed that a subsidiary of the Abu Dhabi National Oil Company (ADNOC) supplied his firm with spot cargoes of LNG after the opening of the Sakhalin production train on the eastern coast of Russia was delayed earlier this year. Shipments from the Abu Dhabi Gas Liquefaction Company (ADGAS) were bought by Gazprom and resold to customers in Japan and Korea to allow the Russian company to honour its supply contracts, he told a gas conference in the capital. Gazprom began its own exports at the end of March.
In December, the Abu Dhabi National Energy Company, known as Taqa, signed a joint venture agreement with Gazprom to develop a natural gas storage facility in a depleted gas reservoir in the Netherlands called Bergermeer. The facility will begin operation in 2013 and offer Europe a reserve of gas to use when demand increases or supply routes are disrupted. Mr Ghobash, who took up his post in February, said UAE investment in Russia has lagged other markets.
"It's a market that we haven't really looked at in recent years," he said. "As a country, we've invested into all parts of the world and yet direct investment in Russia is close to zero." * with Bloomberg email@example.com