Despite BP's Hopes for SWF Backing, Abu Dhabi Is Hesitant

(July 12, 2010) — BP’s chief Tony Hayward was thought to have  sought investment from sovereign wealth funds when visiting the gulf state last week, but Abu Dhabi is reluctant to invest in the British oil company.

The Abu Dhabi Investment Authority (ADIA) is considered the world’s largest SWF with assets of more than $600 billion. The Middle East Economic Survey, published today, reported that it “understands that Abu Dhabi has signaled a reluctance to buy into BP.”

The survey stated that investment funds may be apt to monetize some of BP’s holdings in the region granted they avoid problems with the US Department of Justice, which has requested it be kept informed of BP asset disposals and other large transactions, the publication reported.

After BP’s stock dropped by 50% since the start of the Gulf of Mexico disaster, the firm has been reportedly turning to SWFs in the Middle East and Asia (Abu Dhabi, Kuwait, Qatar and Singapore) to guard itself against takeover bids. On Wednesday, BP’s Hayward visited Abu Dhabi in what one BP investor described to the Wall Street Journal as an international “charm offensive,” with a goal of reassuring investors and rebuilding confidence in the value of BP’s share price. Yet, the CEO declined to directly comment on whether he was approaching SWFs for support. The Dow Jones Newswires said the CEO conducted talks with Abu Dhabi’s crown prince, Sheikh Mohammad bin Zayed al-Nahayan, and discussed the possibility of the emirate taking a 10% equity stake in BP.

“BP is seeking a strategic partner so it doesn’t get taken over by other major oil companies such as Exxon and Total,” an anonymous source said to Reuters. “It’s BP that is approaching the sovereign wealth funds not the other way around. They are the ones in need of a partner.”

The oil giant said recently that the cost of the Gulf of Mexico spill has hit $3.5 billion.