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Special Report Part II: Gulf companies target African energy plays

February 2008
In the second part of this Special report, compiled in association with GSN's sister publication African Energy, GSN continues its examination of the companies buying into emerging African markets, looking at players based in Kuwait, Qatar, Saudi Arabia and the UAE. We start with the most recent deal, Premier Oil's Abu Dhabi tie up.
The United Arab Emirates has emerged as a hub for Gulf based investors and international oil companies (IOCs) looking to exploit emerging exploration and production (E&P) margins in Africa - as analysed in the first half of this report. The most recent sign of UAE muscle was the London Stock Exchange-listed Premier Oil's mid- January announcement of an agreement with Abu Dhabi's Emirates International Investment Company (EIIC) to form two new Abu Dhabi-based joint ventures to pursue the acquisition of upstream oil and gas assets in the Middle East/North Africa (Mena) region. One JV (structured on a 50/50 split) will be called PREMBV, and will hold all joint venture assets acquired in Mena, excluding the UAE. Premier brings acreage in Mauritania, Gabon, Congo, Guinea Bissau and Egypt. It said it would benefit from EIIC 's "relationship networks" in accessing acquisition opportunities.

In late 2006 Premier Oil was targeted by a mystery-buyer, then widely thought to be Dubai-based. One observer told GSN, "this deal was originally signed early last year, and Premier were then very excited about it. Then it all went quiet, but it looks as though things are moving again."

Premier's new partner, EIIC , already has investments in North Africa, holding 4% of the Societe Tunisienne de Transport de Hydrocarbures Par Pipelines . Abu Dhabi's National Holding company - said to be closely related to EIIC - has an agreement with the Egyptian government to set up a $1bn holding company, and holds shares in Orascom Telecom Algeria and a Sudanese cement company.

EIIC shareholders include UAE Interior Minister Sheikh Saif Bin Zayed Al-Nahayan, and Sheikh Ahmed Bin Zayed Al-Nahayan, previously with the Abu Dhabi Finance Ministry.

He is now managing director of the mighty Abu Dhabi Investment Authority (Adia) . Both are sons of the late UAE ruler Sheikh Zayed Bin Sultan Al-Nahayan. EIIC chairman is Jawaan Al-Khaili, also chairs Abu Dhabi Investment House .

Aabar Petroleum represents a 'new breed' The Abu Dhabi Stock Market-listed Aabar Petroleum Investments Company is another recently established player, representing the new breed of upstream company now emerging in the Gulf. Private investors include Abu Dhabi based Al-Bateen Investment , partly owned by former foreign affairs minister Sheikh Hamdan Bin Zayed Al-Nahayan.

Aabar was established in 2005 with a board of directors largely comprising ex-Abu Dhabi National Oil Company (Adnoc) executives and founders including major local institutions such as Abu Dhabi Investment Company and Mubadala Development Corporation (MDC) . Aabar CEO DavidWoodward recently told Abu Dhabi's British Business Group that "outside Asia, expansion into new areas will centre on North Africa and the Middle East... where we will be able to leverage the international experience and relationships of our board of directors and founders. Algeria, Libya,Tunisia and Egypt will be key focus areas." Aabar recently announced it had signed a heads of agreement to sell 90% of its Asia-focused Pearl Energy for some $877m to another Abu Dhabi giant MDC - possibly freeing up funding for Africa acquisitions.

Accessing African Energy
A version of this Special Report appeared in African Energy issue 131. A copy of this has been lodged for access by GSN readers in the Subscriber Reference Library at www.gulfstatesnews.com. For further details of African Energy please contact Nick Carn (Tel: +44 1424 721667. Email: nick@cbi-publishing.com).

Kuwait
Indies add to major state players
In addition to major state companies that have long been regarded as major Gulf investors abroad - such as Kuwait Foreign Petroleum Exploration Company (Kufpec) a number of Kuwait-based companies have been established in recent years with aspirations to become major E&P companies by investing in Africa and other emerging frontiers. One example is KGL Petroleum , chaired by Dr Yousef Al-Zalzalah - a former Kuwaiti commerce minister and MP - and 100%-owned by KGL Investment Company .

KGLP was set up in January 2007, and in June announced that it would invest some $45m in London Alternative Investment Market-listed Circle Oil through a $30m five-year loan to Circle. KGL is now thought to own some 29% of Circle, which is exploring in Tunisia,Morocco and Namibia. KGL is also looking at acreage in Sudan, Libya, Egypt and Tanzania - where it says it has a strong relationship with the Tanzanian government. KGL has alliances with Australia's Woodside, India's Reliance Industries and RAK Petroleum .

Kuwait Energy Company (KEC) , established in 2005, already has acreage in Egypt - 50% in the Western Desert Burg Al- Arab concession and a 60% stake in 'Egypt Project II' in the southern area of the Abu Gharadig basin. Also active in Cambodia, Yemen, Oman, Pakistan, Indonesia and Russia, KEC in mid-2007 announced it had signed a preliminary agreement with Somalia to take a 49% stake in a newly formed state petroleum firm with Indonesia's PT Medco Energi Internasional. Managing director Sara Akbar said KEC helped draw up the oil law which set a guideline for production sharing agreements between IOCs and the newly formed Somali state oil company. Akbar was a friend of the recently resigned Somali prime minister Ali Mohammed Gedi - who in early January announced he would run for president in 2009. With Nur Hassan Hussein's appointment as PM of Somalia's Transitional Federal Government, observers have cast doubts on whether there will be a national oil company.

Akbar is an experienced oil hand - she gained prominence during her time with state-owned Kuwait Oil Company (KOC) , where she was the only female volunteer to join firefighters who helped extinguish more that 700 oil wells set ablaze by retreating Iraqi forces during the 1991 GulfWar.

KEC 's main shareholders include Kuwait's Global Investment House with 40%,Aref Investment Group (37%) and a Chicago based company with 15%. Smaller shareholders include a brother of a recent Kuwaiti oil minister, Sheikh Mohammed Al-Jarrah Al-Sabah (who holds less than 2%) and Kuwait's Zahra Holding Group.

Qatar
IAS International's CAR play
Doha-based IAS International Holding was last October awarded oil and gas exploration and exploitation rights in Central African Republic, in a joint venture with China's state-owned Poly Technologies Inc (PTI). Chairman Issam Abu Issa told GSN that "work exploration is already in progress in the CAR and some field work is being planned for February." The agreement covers a 21,000km2 area of land in north-east CAR close to the borders with Chad and Sudan.

The joint venture - a CAR-registered company called PTIIAS, in which IAS holds 40% and PTI the rest - will carry out an initial four-year exploration programme, with the option for two further four-year terms. Abu Issa said a subsidiary of the JV was operator,"tapping expertise from in house and with the co-operation of renowned Chinese and international companies who specialise in different areas of the industry."

Abu Issam has said that the joint venture is open to bids from other companies to operate the project. He told GSN that "we are receiving proposals from European, Chinese, Middle Eastern and American companies who are interested in joining forces with us. Discussions are on-going but no commitments have been made as yet." Abu Issa observed that "the CAR is seeing a lot of progress under President Francois Bozizé, in spite of carrying the heavy baggage of the past regimes... UN/EU troops are being deployed in our exploration area to help in keeping peace and order." IAS is also behind what it says is CAR's first tax-free town,while Abu Issa has been appointed Bozizé's special envoy.

Abu Issa comes from a prominent Qatar-based Palestinian family; his father was the late Abdulsalam Abu Issa, who established the Salam conglomerate in the early 1950s in Doha. Issam's brother runs Salam International Investment , which has numerous business activities and is the Doha agent for De Beers Jewellery, Calvin Klein, Chanel, Christian Dior, Estee Lauder and other global brands. In the mid-1990s Abu Issa set up Palestinian International Bank, but it was later consficated by Yasser Arafat's government, prompting several years of arguing and Abu Issa's exile in Doha. He claimed that when the bank was seized its assets amounted to some $105m; these have since disappeared. In 2004, the Palestinian Legislative Council voted to return control of the bank to its earlier board of directors, including Issam Abu Issa. He has been lauded by supporters for what they say were his attempts in exposing corruption in the Arafat establishment, and recently met US President GeorgeW Bush.

Venessia has a taste for risk
Doha-basedVenessia Group, chaired by ruling family member Sheikh Dr Abdelaziz Bin Mohammed Bin Jabr Al-Thani (probably distantly related to the ruling clique), is another Qatari firm hoping to tap the Africa oil boom. Venessia has agreements with Zimbabwe, Malawi and Kenya, but little detail about these projects has yet been made public - nor indications of how they will be financed - although there are plenty of photos ofVenessia officials with celebrities including a grinning Robert Mugabe and Malawian Finance Minister Goodall Gondwe on the company's website.

Venessia has a deal to build a strategic fuel reserve and a number of five-star hotels in Malawi, and says it has similar projects in Kenya. Malawi's Gondwe and Energy Minister Henry Banda visited Doha in late January to sign an agreement for Venessia to build a fuel storage facility and pipelines worth $140m-150m. Venessia said the storage unit would take an estimated 36 months to complete, with 1m-2m ltrs/d of petrol to come from BP South Africa,; the fuel storage facility could be open to use by neighbouring countries.

In October, Venessia said it would invest some $1.5bn in Zimbabwe, for work on a 120,000 b/d oil refinery and a five star hotel. Venessia says it is experienced in Africa, and brushes off concerns over political risk. Its general manager told Reuters that consultants would soon start designing the refinery after a feasibility study was completed. Crude may be imported from Qatar - if so, suggesting thatVenessia has good relations with the government.

Saudi Arabia
Petrol One and Afex: more ambitious indies
GSN's analysis of Saudi-backed companies active in Africa, was not exhaustive - and several other players are worthy of attention (GSN 821/10). These include Canadian-listed Petrol One Corporation, which in 2006 took a stake in a production-sharing agreement for the Nkani G4-222 property in the Gabon Estuary, with partners Vancouver-based Austin Developments and the Saudi Atas Group. They paid a $4.5m signature bonus to Gabon's Ministry of Mines and Energy and took a 72% stake in the concession. However, following a recent agreement with a South Korean consortium Petrol One's share has been diluted.

In August, Petrol One signed an agreement with Seoul-based KM Energy to form a Dubai-based joint venture called Petro KME. Petrol One says it will manage the Gabon property and any future holdings in Africa or elsewhere. KM Energy will provide an initial $25m to be used for the Nkani G2-222 work programme. Petrol One holds one-third of the joint venture, which is also thought to be looking at operations in Egypt.

Petrol One's president and CEO is Sheikh Walid Al-Rawaf, who was a founding member of Petromin, a sister company to national giant Saudi Aramco . Al-Rawaf is also vice chairman of Atas Group, headed by Abdulrahman Bin Turki Bin Ahmed Al-Sudeiri,who is a first cousin of the late King Fahd (his aunt was Hessa Bin Ahmad Al-Sudeiri, mother of the Sudeiri seven group of senior princes).

Bermuda-registered Afex Global is another (probably) Saudi backed firm that is fast acquiring African acreage. It recently picked up Equatorial Guinea's Block 9 and 14 (where it partners Nigerian National Petroleum Corporation) and Mali's Block 13. It is also in negotiation for Cameroon's PH72/Matanda licence along with Glencore Exploration. Afex also has a financial interest in Angola through a partnership with local player Angola Consulting Resources.

© Gulf States Newsletter 2008