Ipic eyes Cepsa deal

The fund already owns 9.5% of second-largest Spanish oil refiner and is in advanced talks for a further 35.7% stake.

VIENNA // The International Petroleum Investment Company (Ipic), the Government's energy investment fund, is in advanced talks to buy a 35.7 per cent stake in Spain's second-largest oil refiner, Spanish media reported on Saturday. Ipic already controls 9.5 per cent of Compania Espanola de Petroleos (Cepsa) and reportedly would buy a 30.7 per cent stake from Banco Santander and five per cent from Union Fenosa, a utility, if the deal goes through.

Ipic officials did not respond to phone or email messages for comment. A greater stake in Cepsa would give Ipic access to refining and marketing infrastructure in Spain, according to Catherine Leveau, an analyst at Natixis Securities. "They've said publicly they want to increase their stake in downstream in Europe," she said of Ipic. "It's coherent with their strategy." Ipic already owns 17.6 per cent of OMV, an Austrian oil and gas company, and two per cent of Energia de Portugal, a Portuguese utility. Ipic and Total, the French oil major, would essentially have total control over Cepsa. Total holds a 48.8 per cent stake in the Spanish company.

The proposed asset purchase is the latest billion-dollar deal involving the Dh51 billion (US$14bn) fund, which has sought to invest in a diverse array of energy firms around the world. Last week, Ipic announced it would buy a controlling stake in Aabar Investments, a UAE energy company, for Dh6.6bn. In June, it said it would build three oil refineries in Pakistan and Morocco. And in July, the company said it would create a $1bn fund in partnership with the government of Kazakhstan to invest in oil and gas projects across the region.

Ipic also has several projects in the works in the UAE. It is building a pipeline to ship Abu Dhabi's crude directly to Fujairah, bypassing the Strait of Hormuz, and investing in a large chemicals complex near Taweelah. For Santander, the Cepsa deal would end a long struggle to sell its stake. In 2003, it sought to get out of a joint investment stake that it held with Total, leading to a three-year court battle.

With the 2006 dissolution of the investment agreement, the company reportedly agreed to sell a 30 per cent stake to Algeria's state oil company, Sonatrach, but the deal was never concluded. Several reports at the time suggested that the Spanish government quietly blocked the sale, as it was at the time engaged in a quarrel with Sonatrach and the Algerian government over natural gas prices. Ms Leveau said she was not surprised by the reports that Ipic was willing to increase its stake in the Spanish refiner. "The only remaining company who can get an approval from the state and knows Total well is Ipic, so that makes sense," she said.

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