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Middle East looks west for security
It’s not just the United States that seems anxious to hedge its energy security bets outside the Middle East.
Companies based in the Middle East itself are looking for alternatives to their home territory.
And the one being most closely followed is Abu Dhabi National Energy Co., better known as TAQA, which started its existence in 2005 as a utility in the United Arab Emirates and is now chasing a portfolio of US$60 billion by 2012.
So far, it is US$15 billion along that road after a shopping trip to the United Kingdom, the Netherlands and Canada.
Although publicly traded, TAQA is 75 percent owned by the Abu Dhabi government, which has the strongest grip on the UAE’s oil reserves and has set itself a goal of diversifying its holdings and its economy.
TAQA’s strategic moves that are of most interest in North America involve two deals in Canada to provide the underpinning for its newly-created subsidiary, TAQA North.
TAQA has 40,000 boe per day In quick order, it acquired Houston-based Pogo Producing’s Northrock Resources unit for US$2 billion and snapped up Dallas-based Pioneer Natural Resources’ Canadian operations for US$540 million cash.
That gives TAQA North a portfolio of 200 million barrels of oil equivalent in reserves and 47,000 boe per day of production, rapidly closing in on its goal over the next 15 months of 500 million boe and 100,000 boe per day.
Having established its desire to do business, TAQA is learning there is no shortage of willing sellers in Canada.
Chief Executive Officer Peter Barker-Homek said he has been approached by a wide array of prospective deal-makers, including a number of U.S.-based companies.
He has established a “rule of thumb” for acquisitions in the Western Canada Sedimentary basin of US$45,000 per flowing barrel of conventional crude, implying that TAGA has a budget of about US$3 billion to meet its immediate objective.
Beyond that barrier, TAQA said it is ready to invest up to US$10 billion to join the ranks of Canada’s top 10 producers.
What mystifies many observers is why TAQA believes there is strategic value in entering the most expensive operating region in the world, unless it is merely the chance to grow quickly at a time when Canadian assets are seen as under-valued.
But TAQA is not alone among Middle Eastern companies in spreading its wings.
Other Middle East purchasers Kuwait Energy Co., an independent, has taken a 49 percent stake with Indonesian partner PT Medco Energi Internasional in a new Somali state oil company.
Liwa Energy, another subsidiary of Abu Dhabi government-owned Mubadala, has teamed up with Occidental Petroleum to control oil and gas exploration concessions in Libya.
UAE-based Dana Gas had previously established a foothold in Egypt by acquiring Canada’s Centurion Energy for C$1.02 billion.
UAE’s Abar Petroleum bought Singapore’s Pearl Energy last year to participate in operations in Indonesia, Thailand and the Philippines.
But if TAQA does serve as a door-opener to Canada for other Middle Eastern companies, the Canadian government’s laissez-faire view of the marketplace could take on more of a U.S. style, where investment from the Middle East is deterred by regulations and lawmakers concerned about national security.
When the Chinese companies made their flurry of investments in the oil sands in 2005, Canadian legislators expressed some unease and have since named a panel to evaluate foreign takeovers and the dangers they might represent to national security. That same degree of unease has been quietly voiced by some observers in the United States, worried about the impact diversified markets could have on the flow of oil from Canada.
—Gary Park
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