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Interview

Musabbeh Al-Kaabi – CEO, Mubadala Petroleum, Abu Dhabi

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Mubadala Petroleum’s CEO, Musabbeh Al-Kaabi, shares the company’s commitment to growing via acquisitions, how Mubadala’s  unique positioning has helped create partnerships with IOCs such as Total, Oxy and Shell, and how as a government-owned company it has functions across government-to-government channels to create partnerships with NOCs. Moreover, he shares the organization’s objective to create a lean, streamlined, and resilient company structure that can function effectively regardless of volatility in oil prices.

You’ve been in position for just over a year. What would you say have been the challenges, successes, and priorities of your first 12 months in the hot seat?

It’s certainly an interesting moment to be involved in the oil and gas business. We can see that the oil and gas sector has been facing massive challenges over the past year and a half due to a significant drop in global oil prices that is reshaping the industry in a dramatic fashion. When I took over the position of CEO for Mubadala Petroleum, we resolved upon a number of areas of priority. One of them was to quickly adapt to the new reality that we see materializing before us. We have thus reviewed our entire operations in search of cost control while, at all times, ensuring that we maintain our high reputation for HSE and overall quality standards. We have been adamant that there shall be no compromise and cutting of corners in these key pillars which we regard as absolutely fundamental to the Mubadala Petroleum brand. Nonetheless we have been setting in motion a process of portfolio optimization that revolves around identifying those assets that are the best performing and weighting the focus of the business towards them with a view to maximizing overall value.

In terms of growth, we have been proactive in identifying emergent merger and acquisition opportunities, but owing to the sheer market volatility that we are witnessing right now, it’s going to be extremely difficult to embark upon bold steps. We anticipate that supply and demand will rebalance in the short to mid-term with some sort of price rebound around the corner. Initially we were thinking in terms of mid-2016, though 2017 is now looking more realistic in terms of timeframe as the market continues to be afflicted by strong currents of oversupply.

We at Mubadala Petroleum remain strongly committed to growing the company and very much intend to seize any opportunities to do so that might arise, especially as the market starts to stabilize. Last year represented one of the lowest periods for M&A activity across the industry as a direct result of the turbulent market conditions. We can therefore expect there to be some attractive opportunities waiting to be grasped once a degree of oil price normality resumes.

Mubadala Petroleum remains a somewhat hybrid company with IOC characteristics fused with a distinctly NOC function. How significant is this unique set-up and what sort of opportunities does this duel personality afford to the company?

We are blessed to possess such a unique structure. We are owned by the government, but also very active in outside investment so need to be competitive in terms of running our business, flexible decision making, and decentralization. Our public function and responsibility to the nation is thus blended with a governance structure that enables us to operate outside of the country and compete head-to-head with private enterprise on the free markets.

We have established excellent partnerships with IOCs such as Total, Oxy and Shell yet also act as a government company that can function across government-to-government channels and in the realm of bilateral strategic relations. Recently, for example, we have established enhanced collaboration agreements with our Chinese and Mexican counterparts signing MOUs with the NOCs CNPC and Pemex respectively. Through that government channel we are actively unlocking new opportunities that would be beyond the reach of a purely private enterprise.

The Dolphin Energy project is a flagship project that blazes new trails as a showcase of cross-border cooperation. What does it mean to Mubadala Petroleum to be part of this endeavor?

The Dolphin Energy project is very much a trailblazer as the first cross border pipeline in the region. We are immensely proud to have invested significantly in that. Hopefully this initiative will serve as a model that people will look up to in the future and seek to replicate. Currently the pipeline supplies 2bcf of gas per day to the UAE and Oman and technically speaking it could accommodate even more in the future.

This is a project that is emblematic of what Mubadala Petroleum is all about and an excellent example of us supporting the nation, the UAE government, and the greater region. Not only is this project a significant contributor to the UAE’s energy security, but it also serves as a platform where Emiratis and Qataris can be exposed to an international setting and as an opportunity for us to assist in the development of brotherly countries.

You credit Mubadala Petroleum’s solid business performance to date very much to the partnership-driven approach that the company has always exemplified. Tell us about the importance of the synergies that you have been able to leverage through your partnerships with companies like the aforementioned CNPC and Pemex.

We recognized very early in our journey that we needed to establish strong partnerships so as to be able to grow as a company. This is very much the trend in the oil and gas landscape that is evermore complicated. Even the super majors are finding they are needing to join forces with other IOCs and governments, through their NOCs, as E&P activity extends out into deeper, darker and more technically challenging realms. We have thus made partnership formation one of the hallmarks of our business philosophy recognizing the strength of win-win collaboration and the value additions accrued from a combined approach.

IOCs can benefit from having a credible, robust and financially solid counterpart that enjoys the full and unwavering backing of the state. We in turn have historically benefited from accelerated access to cutting edge technologies and advanced know-how. This sort of knowledge transfer very much characterized our relationships in the beginning, though lately we have proved able to amass our own in-house capabilities. Our operations in South East Asia are perhaps indicative of these developments. In Malaysia, for example, we have established ourselves as the operator for a block in which we have made multiple gas discoveries with Petronas and one of the IOCs supporting in the form of junior partners. This demonstrates the extent to which the industry recognizes our technical prowess and value as an experienced and technically savvy partner in our own right.

Given these advancements on the technical side, what then is Mubadala Petroleum seeking from its more recent partnerships?

In our newer partnerships, we are looking to minimize our exposure to risk while at the same time ensuring a reasonable reward for our efforts. Astute partnership building is essential to achieving a balanced risk-reward ratio when oil and gas discovery and production is an inherently risky business, and more so than ever in an era dominated by the development of unconventionals.  Furthermore we still need to address certain technology gaps. Though our in-house capabilities have improved in leaps and bounds, our abilities are not constant across the board so it proves useful to call in specialist support that can make up the deficit. EOR and unconventional oil and gas are both areas where we still have a room to grow in terms of our in-house capabilities and yet both very much represent the future of hydrocarbons development.

Mubadala Petroleum has always been a very growth orientated company. Your former job title was even ‘Chief Growth Officer’. Where do you identify the future market growth spots for Mubadala Petroleum especially as we enter a period of high attentiveness to the cost-base of operations where prioritization is paramount?

South East Asia remains very much a critical geography for us. This is a region where we have successfully attained full operator capabilities and have been able to showcase our abilities to great effect. We are immensely satisfied with our performance and track record out there and are keen to both extend our operations and deepen our footprint within that region.

Meanwhile we also identify new opportunities in the Middle East building upon our existing projects in the UAE, Oman and Qatar. Extending our reach into North Africa could well represent another attractive pathway. Very recently we have also been identifying North American assets that might be attractive additions to our global portfolio. This is, again, an area of the business we are very keen to develop and where we consider there to be high growth potential in the long run.

What’s the rationale behind this incursion into North America?

We very much want to be part of the unconventionals revolution. We feel this is the right opportunity and the right time to get into this market. Oil prices are at distressed levels and accessibility to technology is better than ever. The moment for embarking on this sort of venture is very much now.

Our engagement with Mexico, meanwhile, is a reflection of the growing importance of government-to-government relations. The UAE government is highly committed to expanding its footprint as a trade partner and, as a state-owned entity; we need to be on the same wavelength as these broader economic trends.

From a commercial standpoint, the moment is also ripe to be interacting with the Mexican market and the Mexican NOC, Pemex. Virtually all the main IOCs that are not already there are now putting into effect market entry strategies as Pemex undergoes a historic liberalization and opening up. Form a technical standpoint we are talking about some exceptionally attractive oilfield formations and commercial propositions.

It’s important to extract full advantage from the prevailing circumstances. Volatile times can offer unparalleled opportunities for firms daring to deploy countercyclical strategies. The current market conditions enable us, to a certain degree, to consider opportunities that looked unreachable only a few years back. The possibility of acquiring new oil and gas assets and even making corporate acquisitions is becoming more evident. Mubadala Petroleum has certain capex obligations and this presents an excellent time to move forward on these projects when there has been a significant drop in the cost of carrying them out.

Looking forward, where do you seek to have taken Mubadala Petroleum in four years time?

I wish to see us grow across new geographies to extend our operatorship capabilities out into other regions. The next step will be to replicate what we have achieved in South East Asia elsewhere. Finally, my objective is to create a lean, streamlined and resilient company structure that can function effectively regardless of volatility in the oil price.

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