Q&A: Mubadala petroleum and petrochemicals CEO on diversifying in a changing industry
Musabbeh Al Kaabi, CEO of the petroleum and petrochemicals division of Abu Dhabi’s sovereign wealth fund Mubadala Investment Company, on his strategy for economic diversification, and operating globally in a shifting industry
Tell me about Mubadala Investment Company, and the company’s energy portfolio.
Mubadala Investment Company was created in 2017 following the merger of the International Petroleum Investment Company (IPIC) and Mubadala Development Company. Today, we are active across 15 sectors with businesses and partnerships in more than 50 countries worldwide and assets under management valued at over $225bn.
The petroleum & petrochemicals platform is a core pillar of Mubadala’s strategy for economic diversification. It comprises a global portfolio of operating companies active across the full oil and gas value chain. Through our operating companies, we are present in over 30 countries. On aggregate, our portfolio companies produce close to 500,000 barrels of oil equivalent per day (boed), split between 51% liquids and 49% gas.
Our portfolio of energy investments encompasses leading companies within the upstream, midstream and downstream sectors, including key industry players Cepsa, Mubadala Petroleum, NOVA Chemicals and Borealis. When it comes to our strategy, we focus on sustaining a balanced portfolio through our involvement in selective E&P projects, energy integrated solutions, and joint ventures around the world. We build our businesses on strong foundations of partnership to leverage synergies and maximise value by working hand in hand with our business partners. Ultimately, the success of our investments is measured by the extent of our contribution to Mubadala’s goal by delivering sustainable financial returns from our various local and international investments.
What are the priorities for Mubadala’s petroleum and petrochemicals arm?
Firstly, we need to ensure that the $13bn deployed over the past 24 months to fund projects managed by our portfolio companies are delivered on time and within budget. As an active investor, we are committed to the growth of our businesses through fit-for-future investments and commercially attractive projects supporting increasing global energy demand. Our investment decisions are based on a few fundamental principles: creating long-lasting value for our shareholder, supporting the UAE’s economic growth and promoting responsible environmental and safety stewardship.
Looking forward, we want to continue cementing our position as an engaged investor in best-in-class assets, driving synergies across the value chain. We will do this by continuing to partner with and invest in leading industry players with a wealth of industry knowledge, subject matter expertise and leading market position in their relevant areas of experience.
What are the challenges associated with working internationally as a UAE-based investment company?
Mubadala ranks among the top 15 sovereign wealth funds in the world. We are proud to play a part in further enhancing our country’s competitive position globally. The global portfolio of our petroleum and petrochemicals business spans the oil and gas value chain with operations in over 30 countries.
I am proud of the accomplishments we have achieved through the portfolio that sits within Mubadala’s petroleum & petrochemicals business, which has developed over the two years since its establishment. I am also confident in Mubadala’s overall global growth, and pleased to be part of this expansion as we continue to look for prominent and profitable investment opportunities.
Furthermore, Mubadala has built excellent partnerships with leading industrial players and continues to build its track record as a responsible and engaged global investor, tangible proof of which is the opening in recent years of our international offices in New York, San Francisco, Rio de Janeiro and Moscow.
Gas seems to be a key focus area —Mubadala Petroleum has snapped up a 40% stake in an offshore gas project in Thailand and picked up a 20% interest in the Nour concession from Eni. How does gas play into your long-term strategy?
Yes, we have made a strategic decision to favour investments in the gas sector. Last year alone, we witnessed an increase in demand for natural gas by 4.6%. The International Energy Agency is forecasting an average of 1.6% increase per year in global gas demand going forward. Gas is now considered a crucial energy resource, and trade in gas has quadrupled over the past two decades thanks to burgeoning demand and the ability to transport it in refrigerated form, as liquefied natural gas (LNG).
We firmly believe in the investment potential of this resource, particularly in South and East Asian economies such as Pakistan and Indonesia. Our presence in Indonesia through our exploration and production business Mubadala Petroleum (MP) spans over a decade, where we are an active operator and partner in the Makassar Strait and in the Andaman fields.
Another milestone achieved at the start of the year was our first gas project in the largest economy of South East Asia, Thailand’s Erawan field, where MP has worked tirelessly to establish itself as one of the largest crude oil producers while operating three prolific oil fields. MP’s global gas portfolio also includes the development of Pegaga gas field in Malaysia.
Southeast Asia continues to be a core region of our operated activities where we have developed a track record of safe and efficient operations. In the MENA region, our crown-jewel assets include a stake in the supergiant Zohr gas field in Egypt, and in the Nour offshore exploration block.
What are some of the key milestones from the past year for Mubadala’s petroleum and petrochemicals unit?
Last year was a successful year for us as an investor, as well as for our operating companies within the petroleum and petrochemicals portfolio. In the past 18 to 24 months, we have seen frequent activity by several of our portfolio companies in which we deployed substantial capital to support their growth activities.
In upstream, Mubadala Petroleum made further progress in the development of the Pegaga gas field in Malaysia – the first cut of steel was made in December 2018. Last year also marked Mubadala Petroleum’s entry into Egypt through the Shrouk and Nour concessions with Eni. Mubadala Petroleum, in partnership with PTTEP, was the successful bidder for the major Erawan gas field in Thailand when the current concession expires. These projects are testament to our commitment towards building a significant proportion of gas position in our portfolio.
Investments in oil production with very cost effective development and operating costs were added through OMV and Cepsa’s new interest offshore Abu Dhabi, and in Russia through Mubadala Petroleum’s JV with RDIF in partnership with Gazpromneft.
In the downstream segment, Borealis and NOVA Chemicals teamed up with Total in the US Gulf Coast to pool their respective technologies, market positions and operating experience to leverage access to competitively priced feedstock; they combined existing facilities with the planned construction of a new ethane cracker and polyolefins plant in Texas, USA.
Here in the UAE, we play an active role in supporting the development of Abu Dhabi’s downstream capabilities, particularly through the Borouge JV and by promoting the development of the Cepsa’s LAB technology in a Ruwais based facility, a project for which the FEED contract was recently awarded.
Through our partnerships and investments, we are continuing to create value, deliver strong financial returns to our shareholder, bring technology and operating experience to the UAE, and provide development opportunities for our young professionals in the context of our global portfolio of industry leading businesses.
What are the industry trends that you have noticed, and how do they impact your role as an investor?
The global energy industry is at a crossroads. Amid growing urban population and energy supply constraints, demand is forecasted to grow by 27% worldwide by 2040 according to research by the International Energy Agency.
Against this backdrop, Mubadala is committed to execute an investment strategy aiming to ensure reliable and sustainable energy supply through responsible and fit-for-future investments. I foresee that this will help maintain investor confidence and encourage further commitment by key industry players to support the development of the energy sector. In an era of technological disruption, we are focusing our next investments on assets that will remain timely and relevant across the energy spectrum and amidst an evolving energy sector.
Certain industry experts refer to the introduction and growth of electric vehicles as a threat. On the contrary, for us the future expansion of electric vehicles presents an incredible opportunity as our presence in polyolefins (advanced compounds produced by Borealis and NOVA Chemicals) will enable us to create value from the increasing demand for lightweight materials used in the production of electric vehicles and other modes of future transportation.
We are proud of the leading market position that our portfolio companies hold in their sectors, the diversity of specialty products they manufacture, and the innovative cutting-edge technologies they implement, leading them to competitively perform in our industry today and in the foreseeable future.
As our portfolio grows and our operating companies flourish, we continue to look for further suitable investment opportunities built on mutually beneficial partnerships with market leaders and key industry players with a competitive advantage. Creating value for our shareholder is our overarching goal and drives everything we do.
We have seen topics like digitalisation, the talent gap and vertical integration come up increasingly often. What are your thoughts on these trends within the region?
The energy industry is going through an era of disruption driven by technological innovations, environmental concerns and geopolitical challenges; we, as Mubadala, are continuously looking at ways to champion innovation. For example, Cepsa, one of Spain’s largest integrated energy companies, is responsible for meeting 15% of global demand for Linear Alkylbenzene (LAB), and is the world’s leading producer of this raw material primarily used in the production of biodegradable detergents and household products.
The company made a breakthrough as the first company to obtain an Environmental Product Declaration (EPD) for its LAB products. As part of our commitment to support the advancement of Abu Dhabi’s downstream sector, Cepsa has been selected as the ideal partner to establish a LAB manufacturing facility here in the UAE, as part of the wider refining complex in Ruwais, and is expected to have a production capacity of 150,000 tonnes per year of LAB upon completion.
Our portfolio companies NOVA Chemicals, Borealis, OMV and Borouge, are proactively addressing the increasing challenges to the use and poor disposal of single-use plastic products. Borealis is emerging as a strong leader in implementing a circular economy strategy with the signing of an agreement with OMV to utilise recycled plastic waste as feedstock in its polyolefin plant and with the launch of Borcyle™, a new technology producing high quality compounds with up to 80% recycled content (targeting appliances manufacturing).
When it comes to talent, we look to attract youth into the energy industry and retain them through various initiatives and opportunities. We are particularly focused on nurturing our future energy leaders through a programme that has been developed to support the career journey of youth within the petroleum and petrochemicals platform of Mubadala Investment Company.
The Future Energy Leaders programme’s mission is to advance talent, boost the local workforce, and equip youth with crucial business and industrial skills for upward career progression. Ultimately, the FEL programme looks at enabling to become a driving force of the UAE’s economic development. The programme provides participants with the opportunity to learn and understand industry operations, gain local market experience, get exposure to new international business cultures and have the opportunity to build a global network.
It is built on a personalised basis catering to participants’ most pressing needs, and helpign to upgrade their core job skills to ensure maximum positive impact and value-added contribution to Mubadala as an organisation, the energy industry and ultimately the government of Abu Dhabi.
Where do you see the most opportunity for growth, going forward?
Mubadala is committed to make socially sustainable and commercially robust investments that will generate significant and sustainable financial returns to our shareholder, the government of Abu Dhabi. The petroleum & petrochemicals strategy in simple: we aim to maximise long-term value while effectively managing risks and creating resilience at a broad range of commodity prices.
This strategy plays out through our portfolio that is geographically diverse and integrated across the oil and gas value-chain. Drilling down into each of the three sectors of the value-chain; in upstream our main focus is on material investments in gas development and production with a secondary focus on low-cost, opportunistic oil plays, in midstream we look at investments in energy infrastructure, such as gas pipelines, that provide low-risk, predictable income stream largely insulated from commodity price risk, in downstream, our focus remains on projects that target growing or premium markets for refined or chemical products, leveraging the proprietary technologies and operating expertise of our portfolio companies and access to competitively priced feedstock.
This strategy is aligned with the priorities of Mubadala and of our shareholder. It is specifically aimed at supporting Abu Dhabi’s global ambitions and hydrocarbon diversification strategy while generating superior financial returns.