APICORP announces $ 150 m Petroleum Shipping Fund

The Arab Petroleum Investments Corporation (APICORP), the multilateral development bank owned by the Organization of Arab Petroleum Exporting Countries (OAPEC), yesterday announced the establishment of APICORP Petroleum Shipping Fund, a landmark $ 150 million fund aimed at leveraging growth opportunities in the petroleum product tanker charter market. The government of Saudi Arabia owns a 17 percent stake in APICORP.
The first investment fund to be established by APICORP, the initiative is also the first fund in the region aimed at a specific vessel category. The fund has acquired five medium range (MR) petroleum product tankers. These will be employed in the regional and international tanker market for five years to help meet the projected upsurge in demand for petroleum product carriers. The fund is co-managed by Tufton Oceanic, a leading global fund manager in the maritime and energy-related industries.
Ahmad bin Hamad Al-Nuaimi, APICORP's CEO and GM, said: “APICORP Petroleum Shipping Fund is a $ 150 million Shariah-compliant fund aimed at helping oil and gas companies grow their business while also generating regular yield and returns for the equity investors. In this case, the fund helps companies meet their requirements for petroleum products transportation without burdening their balance sheets. At the same time, the fund provides a mechanism for regional investors to participate in a highly specialized investment class in international marine assets that is not normally open to them.”
He said: “The new fund supports APICORP's strategic objectives of diversifying its business streams into new midstream sectors as well as tapping promising new growth avenues in the industry. We are exploring the development of similar new funds in shipping and other oil and gas sectors to take advantage of further such growth opportunities. Tufton Oceanic's strong capabilities in managing funds and deep knowledge of the global shipping sector make it the ideal partner for this fund. Our partnership with them brings the required technical expertise to the region in investing and managing investment funds focused on shipping assets,” Al-Nuaimi added.
Tufton Oceanic is regulated by the Dubai Financial Services Authority (DFSA) in the region and has strong relationships with regional institutions built over 30 years.
APICORP and Tufton Oceanic also served as joint coordinators for arranging debt funding for the shipping fund from Standard Chartered, SMBC, Riyad Bank and Natixis. Standard Chartered and Natixis acted as the agent bank and the documentation agent respectively for the debt. “The Shariah-compliant fund manages a total of $ 150 million fully underwritten by APICORP, of which 70 percent is composed of debt and 30 percent equity provided by APICORP and Tufton Oceanic,” Al Nuaimi said.
Marcus Machin, director, Tufton Oceanic, said: “The positive outlook for demand growth in the global product tanker market creates the right conditions for the success of the fund. The growth of rapidly industrializing mega-economies like China and India is expected to drive volumes of seaborne petroleum products in the next few years. Combined with changes in trade patterns, this is expected to lift product carrier demand growth above general global economic activity in the coming years.”
He added: “Our decision to invest in the fund along with APICORP reflects the growth opportunities that we see in the sector. According to our research, we expect the product tanker market to witness a compound average demand growth of above 5 percent per annum over the next five years. At the same time, there has been a decline in the vessel order book as a result of constraints in the placement of new orders. Both these factors create the conditions for market growth in the coming years. The fund acquired the product tankers at highly competitive rates at what we believe was a low point in the shipping market cycle,” Machin added.
Over the last 36 years, APICORP has invested, as an equity owner, in a total of 22 oil and gas joint venture projects worth in excess of $ 16 billion. At the same time, APICORP has participated in direct and syndicated energy finance transactions worth in excess of $ 130 billion. APICORP's aggregate commitments in these transactions, both in equity and debt, are valued in excess of $ 11 billion.
Tufton Oceanic is a pre-eminent fund manager for investors in the maritime, energy-related and wider global transportation and infrastructure sectors with innovative, solution oriented investment advisory services. The firm is committed to providing excellence in structuring, investing and managing asset backed investment and equity funds focused on its target sectors.