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Feature: Backed by influential Emiratis, obscure BGPIC has global oil storage, refining ambitions

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Feature: Backed by influential Emiratis, obscure BGPIC has global oil storage, refining ambitions

Highlights

Fujairah company already a major terminal operator

Plans for 250,000 b/d refinery raise eyebrows

Growth may depend on successful Nasdaq IPO

London — Six months ago, Brooge Petroleum & Gas Investment Co. -- a little-known Fujairah oil storage company aiming to become a major terminal operator and refiner in the fast-growing UAE port -- found itself with a new lease on life.

Its attempt last winter to raise $400 million by listing shares on the London Stock Exchange had been stymied by a plunging market and weakened British pound.

Turning its sights instead to New York, BPGIC in April unveiled plans for a reverse merger on the Nasdaq that it said would value the company at $1 billion, reduce its currency risk, and put its aspirations back on track.

Since announcing the alternative IPO, which is expected to close by the end of the year, the company has broken ground on eight new oil tanks to expand its crude and refined product storage capacity to 1 million cu m and raised eyebrows by announcing intentions to build a greenfield 250,000 b/d refinery complex in Fujairah. (Brooge is the anglicized Arabic word for towers.)

Global expansion could be next, CEO Nico Paardenkooper said in a recent interview with S&P Global Platts.

"With the merger completed, we have loaded ourselves with enough funds for the next year or so to come," he said in BPGIC's offices at its terminal. "For now, we want to stick to what we're good at, and that is storage and refining. Next year, we can look for opportunities outside the UAE."

MOOTED MURBAN BENCHMARK AN OPPORTUNITY

Fujairah, with its strategic position outside the volatile Strait of Hormuz, has risen rapidly in the last two decades to become the second-largest global bunkering port, after Singapore. At the free zone just north of the main city, the landscape between the rugged mountains and the ocean is dominated by rows of tall, cylindrical oil tanks on both sides of the highway.

Abu Dhabi's national oil company, ADNOC, has a crude export terminal there, fed from its 1.5 million b/d Habshan pipeline. Under one of the mountains, ADNOC is excavating caverns that will form the world's largest single-site underground storage reserve, holding 42 million barrels of crude.

Dubai's Emirates National Oil Company, Fujairah Oil Terminal FZC, Vopak and Gulf Petrochem are among the other companies with tank farms at the port, while Vitol has an 82,000 b/d refinery and Uniper owns a LSFO plant.

BPGIC, backed by undisclosed investors in Abu Dhabi, is the newest arrival, formed in 2013 with an advantageous location just across the highway from ADNOC's facility. Its first 14 tanks, which can hold 400,000 cu m of middle distillates and fuel oil, became operational in January 2018.

An expansion underway will add 600,000 cu m of crude and product storage and is scheduled for completion by mid-2020 -- just in time for BPGIC to benefit from ADNOC's push to launch a futures contract for its flagship Murban crude grade.

ADNOC and the Intercontinental Exchange plan to offer the contract on a new Abu Dhabi exchange early next year, sources have told Platts, a move that could transform Middle East oil trading by creating a new benchmark for the region.

"We're right at the mouth of the Habshan pipeline," which delivers Murban for export, Paardenkooper said. "We connect to all the jetties in the port, so we're connected to all the players in the market."

ADDING REFINING TO STORAGE

Also in the works is a 250,000 b/d refinery complex, a joint venture with Sahara Energy Resources, that would make BPGIC one of the largest refiners in the Middle East.

The first phase -- a 24,000 b/d unit to produce bunker fuel compliant with the International Maritime Organization's new sulfur regulations -- is on schedule to start up by spring, Paardenkooper said.

BPGIC last week announced it had secured an initial lease agreement for additional land in Fujairah to build the rest of the refinery complex and more than triple its storage capacity to 3.5 million cu m.

Once completed, the refinery will produce fuels "from all ends of the barrel," Paardenkooper said, with Sahara responsible for sourcing the crude and trading the products.

He declined to reveal its cost and timeline, referring questions about its construction to Sahara, which could not be reached for comment.

John Auers, executive vice president of downstream consultancy Turner, Mason & Co., estimated that a new-build Middle East refinery of the size BPGIC has proposed would cost $10 billion to $15 billion.

He is among the many skeptics of the project, noting it would have to compete against ADNOC's own 840,000 b/d Ruwais refinery, which is undergoing a $3.1 billion upgrade, and the 230,000 b/d Duqm refinery being built down the coast in Oman, a joint venture of Oman Oil Co. and Kuwait Petroleum Corp.

"I just don't see a place for it," Auers told Platts.

"Global demand is slowing, especially in the short term, so it's going to be a very challenging project to build a greenfield refinery without major sponsor support."

INFLUENTIAL ABU DHABI BACKERS

Paardenkooper, however, said BPGIC's vision dovetails with the Fujairah government's goal of creating a regional refining hub and that interest among major oil companies in BPGIC's expansion is high.

Saudi Arabia's state-owned oil giant Aramco, for example, opened a trading office in Fujairah earlier this year, with officials telling Platts that it intends to build or lease storage there.

The Port of Fujairah expects its total 10.5 million cu m of storage capacity to increase 75% by 2022 under a strategic plan to develop new industries, particularly in the downstream sector.

"The focus of traders is on Fujairah, and it will be for many years to come," Paardenkooper said.

The jovial Dutch CEO is a 35-year industry veteran, having previously managed Oman's Oiltanking Odfjell Terminal after a long tenure at Vopak.

His bosses have kept a low profile. Paardenkooper would not unmask BPGIC's primary shareholders ("Let's say they are influential people in Abu Dhabi," he said), and the company's website and US Securities Exchange Commission filings offer no clues.

OPEC Secretary General Mohammed Barkindo is a cheerleader, having appeared at multiple company events to praise its investments. Barkindo did not respond to a request for comment on his relationship with BPGIC.

The reverse merger will see BPGIC create a Cayman Islands-registered subsidiary that would combine with blank check company Twelve Seas Investment Co. to trade on the Nasdaq.

Paardenkooper said the deal is the key to BPGIC's growth ambitions, which could eventually include gas storage. Giving Platts a tour of the terminal, he was keen to point out BPGIC's state-of-the-art environmental, safety and operational technology that he said the company would seek to implement in projects across the world.

"Our expansion plans are global, not just in Fujairah," he said. "We are something different than normal."

-- Herman Wang, herman.wang@spglobal.com

-- Dania Saadi, dania.el.saadi@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com