Spain’s Cepsa Eyes Southeast Asia with Coastal Energy Acquisition

Cepsa Eyes Southeast Asia with Coastal Energy Purchase

Spain’s Cepsa Eyes Southeast Asia with Coastal Energy Purchase

Cepsa has upped its acquisitions game with a takeover of Coastal EnergyThe Houston-based firm has a high-quality portfolio of upstream assets mainly in Thailand and Malaysia, which will boost Cepsa’s production and exploration potential in the region.

But the around $2.2 billion deal, including Coastal Energy’s net debt, is not just good news for Cepsa. It represents another score for Middle East sheikdom Abu Dhabi, which holds about 6 per cent of global oil reserves. Abu Dhabi sovereign wealth fund International Petroleum Investment Company (IPIC) took full control of Cepsa in 2011.

CEPSA: SPANISH JEWEL IN A FOREIGN CROWN

Cepsa is Spain’s second-largest oil company and fourth-biggest industrial group. Its core activities are refining and fuel distribution in Spain and Portugal. It is also involved in the upstream oil business, as well as petrochemicals, gas and electricity generation. Algeria and Colombia are the main bases for its upstream operations, with on-shore fields in both countries.

It has been a key player in Spain’s energy sector since the late 1920s, starting life as a privately-owned company. Ahead of the liberalisation of the country’s oil industry in the late 1980s, Cepsa had built up a strong market position. But it struggled to exploit this because of its relatively small size.

Fortunately, several foreign investors were on hand to develop the company’s potential, and in May 1988, an Abu Dhabi investment fund bought a 10 per cent stake. In 1990, French oil giant Elf Aquitaine – now known as Total – acquired 20 per cent of Cepsa, by then listed on the Spanish stock exchange.

But Total and IPIC’s “partnership” proved to be a prickly one, with both companies aggressively building up their stakes as they vied for control of the company. Abu Dhabi knocked Total out of the ring in 2011, buying its 48.8 per cent in Cepsa along with the minority shares.

The deal fit with IPIC’s aim of building a global portfolio of investments in energy, petrochemicals and other sectors. One jewel in Cepsa’s crown is its 42 per cent stake in Algerian gas pipeline Medgaz.

A NEW ERA OF MIDDLE EASTERN PROMISE

With IPIC’s full financial and operational support, Cepsa has been able to push ahead with its goal of achieving global growth, mainly through its upstream and petrochemical business units. Coastal Energy provides IPIC with indirect stakes in production and exploration in the Gulf of Thailand, where a unit of Abu Dhabi’s Mubadala Development Co. also holds concessions.

Cepsa’s takeover of Coastal Energy is its largest acquisition since 1999. It has teamed up with investment firm Strategic Resources to fund the deal.

For information on Spain’s oil industry, contact corporate law firm Argali Abogados.

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