x Abu Dhabi, UAEMonday 22 January 2018

IPIC to fund LNG plant stake with $700m loan

Abu Dhabi's International Petroleum Investment Company will take out the loan to buy the stake for a facility in Papua New Guinea.

Abu Dhabi's International Petroleum Investment Company (IPIC) will take out a US$700 million (Dh2.57 billion) loan to help it buy a stake in a liquefied natural gas (LNG) facility in Papua New Guinea. IPIC, an energy-focused sovereign wealth fund worth $15bn, will pay 300 basis points above the London interbank offered rate (LIBOR) for the loan, Reuters reported, citing two anonymous sources close to the deal.

IPIC officials could not be reached for comment on the report today. Last week, IPIC announced it had concluded its acquisition of a Dh4.04bn bond from the government of Papua New Guinea, convertible to a 17.6 per cent stake in the Australian-based firm Oil Search. Oil Search owns 30 per cent of an LNG facility being built in partnership with a consortium of energy companies that includes ExxonMobil and Nippon Oil. The plant will produce between 5 million and 6 million tonnes of LNG a year when it is completed in 2012.

The primary underwriters, or "bookrunners", in the loan to IPIC are Abu Dhabi Commercial Bank, Calyon, Deutsche Bank, First Gulf Bank and Natixis, Reuters reported. IPIC usually declines to discuss its financing strategy, but the fund's managing director, Khadem al Qubaisi, has indicated he will aggressively push for more acquisitions this year, possibly through greater use of convertible bonds. "This is only the second acquisition in which IPIC has used a convertible instrument and we envisage wider use of such mechanisms in future IPIC investments," he said.

In addition to finalising its position in Oil Search, IPIC has made several high-profile deals this year. Last month, the fund offered to buy Nova Chemicals, a Canadian firm, for more than $500m. The deal is still under review by the Canadian government. Days after the Nova announcement, IPIC said it would set up a $1.5bn joint venture shipping company with Restis, one of Greece's largest shipping companies. This will allow IPIC to transport oil and chemicals from its numerous refineries and chemical plants.

The Papua New Guinea project will mark IPIC's debut in the lucrative LNG market. The LNG plant is at the front-end engineering and design stage, with a final investment decision expected this year. Gas will be extracted from the remote interior highlands of Papua New Guinea and transported more than 700km via pipeline to the liquefaction plant. At the plant, the gas will be cooled to minus-163 degrees Celsius, loaded on to tankers and shipped to markets in East Asia where LNG is rapidly becoming a key source of energy. cstanton@thenational.ae