Abu Dhabi SWF Buys Spanish Refiner Capsa for $5 Billion

(February 16, 2011) –International Petroleum Investment Co (Ipic), an Abu Dhabi sovereign wealth fund, is buying the rest of Cia. Espanola de Petroleos SA (Cespa), Spains second-largest oil company, from French oil major Total for $5 billion (3.7 billion), according to the Financial Times.

The deal will allow the Abu Dhabi sovereign wealth fund, which isalready a shareholder of Cepsa with a stake of 47.06%, to take complete control of the Spanish refining and marketing-focused group. It will also give Total the cash it needs to invest in upstream developments while further implementing its goal of reducing its exposure to European Refining, the firm stated on its website.

Ipic, a wholly owned entity of the Government of the Emirate of Abu Dhabi was set up in 1984 to invest in oil and gas businesses around the world. It has $14 billion of investments, including stakes in 14 separate companies, according to the company’s website.

“The move is consistent with what Ipic has done in the past in taking stakes in both upstream and downstream assets abroad,” Rachel Ziemba, a Middle East analyst at Roubini Global Economics LLC in London, told Bloomberg. “What’s different now is that its in Europe. Demand growth is not going to come from Europe but the stock of demand there will remain sizeable.”

Cepsa is the second largest Spanish oil company with a refining capacity of 528,000 barrels per day, a network of approximately 1,750 service stations in Spain and Portugal withand investments in petrochemicals and electricity generation and distribution. It also has exploration and production interests in Latin America and north Africa.

The agreement further signals the attractiveness of Spanish companies for investors due to their access to emerging markets.Last year, for example, China’s Sinopec purchased 40% of the Brazilian subsidiary of Repsol, the largest Spanish oil company.