ABU DHABI - Overseas Investments.

The International Petroleum Investment Company (IPIC) of Abu Dhabi, now an important player on the market, has a major share of Europe's second biggest producer of polyolefins (raw materials for production of plastic) and in Austria's largest industrial group. It has spread its investments in the oil markets of the Far East, Europe and North Africa.

By far the wealthiest state in the Persian Gulf in per capita terms, Abu Dhabi has more than $220 billion worth of investments outside the emirate. Thanks to high oil and gas export prices since March 1999, this emirate has more cash reserves and overseas assets than Kuwait and Saudi Arabia put together. Abu Dhabi's income from oil and gas exports and petrochemicals will be rising considerably in the coming years as its production capacities are being expanded (see OMT & Gas Market Trends No. 2 of last week).

IPIC is considering investment in major downstream oil and gas operations on both sides of Suez, as Kuwait Petroleum Corp. (KPC) and Saudi Aramco have done. But it is more cautious than these two neighbours.

The Abu Dhabi Investment Authority (ADIA) is the powerhouse behind IPIC. Established in the 1970s to channel the emirate's surplus oil revenues into profitable investments both at home and abroad, ADIA has since become the second most important institution in Abu Dhabi's economic system next to the Supreme Petroleum Council (SPC). The previous UAE oil minister and key officials in various sectors in Abu Dhabi have come from ADIA. The Abu Dhabi Investment Co. (ADIC) is the executive arm of ADIA. The current UAE minister in charge of Abu Dhabi's OPEC, OAPEC and other multilateral petroleum affairs is Mohammed Bin Dhaen Al Hamili, the man responsible for the federal sector of energy who formerly was a deputy minister of petroleum (see profiles in APS Review No. 4 of next week).

IPIC was created in 1984 as a 50-50 venture between ADIA and the Abu Dhabi National Oil Co. (ADNOC) to focus on petroleum-related acquisitions overseas. The main logic behind IPIC's investments is the same as that of its Kuwaiti and Saudi counterparts: to secure long-term access to premium markets for Abu Dhabi's crude oil, gas liquids, refined petroleum products and petrochemicals; and to diversify Abu Dhabi's economy to offset the impact of low crude oil prices on its revenues.

Foreign acquisitions are decided on the basis of their financial merits, as recommended or judged by ADIA, and their strategic importance to Abu Dhabi's petroleum sector as recommended by ADNOC. All its acquisitions must be approved by the SPC. Therefore each investment proposal by IPIC must be studied carefully by both ADIA and ADNOC, which takes a long time. When ADIA and ADNOC disagree on an acquisition, the SPC has the final say.

Reflecting ADIA's way of thinking, IPIC has a low-key style, rather than an aggressive approach. So far it has tended not to acquire controlling equity, preferring to invest just enough to have a strong influence. But it keeps the option of gradually increasing its stake and insists on having its key executives on that company's board of directors.