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Abu Dhabi to acquire Japan’s Cosmo Oil for $776 mln

An investment arm of the Abu Dhabi government will spend about $776 million to buy one-fifth of Cosmo Oil, becoming the top shareholder in Japan’s fourth-largest oil company.

International Petroleum Investment Co (IPIC) is rapidly expanding into the global oil and natural gas sectors. IPIC invests in oil and gas related assets for the Abu Dhabi government, which controls more than 90% of oil reserves in the United Arab Emirates. Japan buys about 40% of the UAE’s oil exports. “The purchase reflects Japan’s strategic importance to the UAE,” an IPIC source told.
Japan has seen a drop in the amount of oil it buys as consumers move to fuel-efficient cars.

The International Energy Agency said in August oil product demand in Japan for June fell for the fifth month in a row, down 2.9% on annual basis. But Cosmo Oil was focusing on the export market for expansion. The company aims to double its oil product exports to 4 million kiloliters per year, a Cosmo company official said yesterday. IPIC was eyeing the growth potential of Cosmo’s fuel product exports to the west coast of the United States, the IPIC source said. “IPIC finds Cosmo’s US strategy particularly interesting and it has growth potential,” the source said.

Cosmo operates a US subsidiary on the West Coast with sales of 400,000 to 600,000 kiloliters per year of diesel oil, according to its Web site. IPIC was also eyeing international joint venture opportunities with Cosmo, the IPIC source said. “There are a lot of opportunities we have identified internationally,” the source said declining to be more specific. “We see many opportunities for additional investment with Cosmo in the Asia-Pacific region,” Khadem Al-Qubaisi, IPIC’s managing director said in a statement. Cosmo said it would issue 176 million new shares to Infinity Alliance Ltd, a wholly owned unity of the IPIC, for ¥510 ($4.4) per share, a discount of 6% from Tuesday’s closing price of ¥544.

The Japanese company will raise about ¥89.2 billion ($770 million) through the share issue. Infinity Alliance will become the biggest shareholder, owning 20.76% of the Japanese company after the acquisition of the new shares. The paid-in date is Oct. 5. Cosmo Oil said the share issue would strengthen its financial health and help it expand. Cosmo Oil’s President Yaichi Kimura told reporters that although IPIC would have voting rights and will accept two IPIC executives to its board, the company’s business strategies will remain unchanged. He added that the deal will lead to steady crude supplies from the UAE, which supplies about 25% of Cosmo’s crude imports. UAE is Cosmo’s biggest crude supplier and the second biggest supplier to Japan after Saudi Arabia.

Cosmo said it and IPIC will also consider upgrading its refineries.
Cosmo last year unveiled plans to upgrade refining facilities at its Sakai plant in Osaka, western Japan, by 2009. “The fund-raising scheme is a plus for Cosmo, which is planning new refinery facilities and is in strong need of cash,” said Toshinori Ito, an analyst at UBS. “But there is a possibility that the new facilities could further weaken the domestic oil market,” he said. Fuel sales in Japan declined for a ninth straight month in July and oil product demand was expected to fall 1.8% on the year, according to government projections.
IPIC said that the investment in Cosmo would boost its global refining capacity by 40% to 2.1 million barrels per day (bpd). IPIC’s investment portfolio was valued above $10 billion, IPIC said. It includes stakes in Austrian oil and gas group OMV and the Borealis Group, a large petrochemical producer. IPIC also owns 70% of Hyundai Oil Refinery, South Korea’s fourth-largest refiner. (menafn.com)