TAQA, Peter Barker-Homek

Recently we have seen oil prices achieving record highs. How do you see the future evolution of the oil prices in the global market?

Good question. I was recently asked this and I think for 2008 we will see a trading range between $80 and $120, certainly last I looked we were right around $112 so we are pretty close to that prediction. But what is driving that is probably the more interesting question, and that goes to demand within the GCC and North Africa as well as demand in India and demand in China. Those three areas are driving almost all of global demand growth. We are currently at about 88 million barrels a day of demand and that is forecast to grow somewhere between 2 and 4 percent year on year, so by mid next decade we’ll be somewhere around 120 million barrels a day of demand. What that means is that we have got to bring more production online, production is getting more expensive because capital costs, how remote it is to market, increases the cost of delivering a barrel, so you actually need relatively high prices in order to bring new reserves into the market.

How is the supply going to react to this?

I would say hoping to keep pace. The decline curves in a lot of the established major basins or off peaks, so you are into decline where you are looking at enhanced oil recovery; you are just extending the curve but you are certainly not reestablishing a peak. The big, big reserves that are coming online certainly will meet demand but they are further from market, so I think the market will be well supplied and I think we will be supplied by more costly oil.

And how is TAQA contributing to the world supply?

Today we operate oil and gas assets in the North Sea and in North America and in Canada we’re the 12th largest oil and gas E and P company. We are delivering 100,000 barrels a day, so by super major standards; a very small company, but we have active investment programs in Canada, we are investing 500 million dollars this year to bring more reserves on. Similarly in the North Sea we are investing and we honestly think we will be the next generation of North Sea company. So while the majors are removing themselves from the North Sea there are many marginal fields in the North Sea that can be developed and we will certainly be there to make those investments.

Founded in 2005, TAQA is, according to Arabic Business News “one of the fastest growing energy investment companies in the world”. So how do you assess your competitive edge?

We have a series of competitive advantages. One, we’ve got a very high credit rating, double A minus A, it makes us one of the highest rated corporates in the world. We also are international by inception. In other words, we have 38 nationalities working within TAQA, so there really isn’t a dominant nationality which makes us a good employer everywhere we go. When we’re in the Netherlands, we are Dutchmen and Dutch businesses, the United Kingdom, Brits and British businesses, and Canada, Canadian businesses and at the same time, knitting that all together into a company of scale. So the fact that we are hiring, the fact that we have got a very efficient cost of capital and then also the ability to deploy capital quickly. We did six transactions last year which probably puts us in the top tier as far as identifying opportunities, signing them and completing them.

On numerous occasions, you have mentioned that TAQA’s ultimate goal is to become a 60 billion dollar company, a 60 billion dollar global energy player by 2012. Currently your assets are worth more than 21 billion dollars, so how are you going manage such a rapid expansion carefully?

It is about 25% year on year growth between here and 2012 year-round. We have been growing at an annualized rate since we were accepted in 2005 at 46 percent, so it is actually decreasing our growth curve to meet that objective. If we hit it right, if we don’t it’s because of prudent investing or taking time to insure that the operations are properly consolidated. We did six transactions last year, we have only announced one so far this year. We are focusing very much the first half of 2008 on intergrating and creating a tackle wave doing business through out the organization.

So 2008 will be a consolidating year?

Yes.

How are you going to fund this expansion?

Just like any other corporate really. I mean we use equity and debt and we will be accessing both of those markets along the way. And we have banking relationships that span from Tokyo to San Francisco.

To have the support of the government behind you helping you?

Absolutely. Having key shareholders in TAQA, not only helps us from a credit rating standpoint, but also from a counterparty standpoint. When we go into meetings for such a young company we are recognized not only as a corporate but also as an emissary for the government.

How will your significant acquisitions in Canada, North Rock Resource, Pioneer Canada, and Prime West Energy affect your numbers in 2008? Positively?

We don’t put out forward data, but it should be a very good year for TAQA.

So in terms of profits..?

Again ADSN doesn’t allow me to put out forward data, so all I can say is that it should be a good year.

TAQA is undergoing studies to acquire assets in North America worth 20 billion dollars and assets in Arab regions and Europe worth 40 billion dollars. Can you tell us more about what kind of acquisitions you are investigating in Europe?

The company’s portfolio ideally would be 40 percent in upstream oil and gas exploration production, 20 percent in midstream, so pipelines, the L and G chain, and gas storage, and then downstream, 40 percent, which will be in power generation; and that could be wind, hydro, coal, gas-fired power, for example. We are looking at a number of opportunities within Europe basically to build that chain and we would hope to make some further announcements this year.

So it must be very challenging to carry out this expansion strategy. Can you comment on what the real challenges are?

I think the big challenges are around people. Not that we have had trouble retaining people, in fact we have got over 96 percent retention rate for people we have offered positions to, but keeping people aligned with who TAQA is, where we are going as a group of co-workers, building the identity. TAQA believes completely in health safety, security and the environment. So making sure that system integrity is kept high, making sure that policies insure safety as opposed to just paying lip service to safety, and then monitoring our environmental impact. We are very proud of some of the steps we have taken with our assets but also in trying to change our employee behavior, and the way we do that is we run green offices, we have recycling, we have local community clean ups, we also have one of the most generous hybrid car buying programs; with the idea if you can take a conventional car off the street you basically have removed five cars as far as CO2 emissions.

So this is how you are going to build your corporate identity?

Yes. Now, there is a green agenda to it, there is a responsibility agenda, there is an energy security agenda. For example, we are building one of the largest gas storage facilities to serve continental Europe and the idea there is to provide for energy security not only for the continent but for the United Kingdom.

What are your global expansion plans, looking forward to 2012 and beyond?

Let’s see, beyond 2012, it is really hard to say. If we were to continue to grow, then I would expect us to be over 100 billion dollars, you know within 10 years, probably higher than that. One of the elements when you get to a 60 billion dollar firm is you’ve got profit centers that are large enough to help self-perpetuate themselves, so they end up having enough scale and synergies to actually reinvest in their geography and continue to grow. A good example of that is in Canada. We have assembled basically four companies, Prime West, Shining Bank, North Rock and Pioneer Canada. Because of that landbank that we got as a benefit of that, we have got exploration and production plays that go out the next five years without doing any additional acquisitions in Canada. So that, again, once you get to a company of scale and you start getting a landbank in the E and P sector, you very much get into maintaining and being able to develop your reserves. When you are in the power business and you build assets there, you basically have a cash flow stream for 20 or 30 years. So again you get to a scale that self perpetuates.

I have also read that you have offices in Michigan.

Yes.

Maybe you are considering a very careful approach to the U.S market?

We have non-operated oil assets in the Rockies today, we produce about 1,000 barrels of oil a day. We have our Ann Arbor office, which is the seat for our global power group and we are looking at opportunities in the United States to invest in.

Can you comment on the opportunities to invest in?

Well they have been one of our 3 core segment but I would think that we would announcing probably an upstream or power deal this year.

As an energy company, how do you integrate the renewable energies?

In a number of ways. On our facilities we look to use solar pumps where we can, or solar heating and cooling where we can. On any fleet vehicles that we’ve got we are looking to replace them with either LPG natural gas or hybrid vehicles. With our employees of course, we extended the hybrid car buying program. We also a member of the 3C movement, which is led by Battenfall, which is to combat climate change and it is designed really to create awareness throughout industry about how to go green. We have green chairman policy that looks at suppliers to TAQA and how they treat and manage the environment. So on a power side it is looking at our facilities, it is also looking at our landbank. For example, we have got lots of acreage in off shore in Netherlands, as well as on shore in Canada, and we are looking to develop wind farms there.

What is your fitting into the Abu Dhabi 2030 strategic plan? I know that your provide 85 percent of drinking water and the water supplies in general, so are you looking to extend your facilities over here?

There are power assets for about 9,000 megawatts of power generation and desalination. That will grow to some 16,000 megawatts by 2013 to 2015. So we are looking to continue to grow, probably be adding somewhere in order of about 1,000 megawatts per year over the next 10 years to make the expected growth forecasts.

Are you also considering some desalination facilities expansion into other markets in Northern Africa and regional?

Desalination is a core competency. In fact we have been in discussions with, not only other North African nations, but with certain states, specifically California, in the United States, about our expertise in desalination. California has a very similar climate, particularly in the southern half, to that of the UAE, so they’re always water-short.

If I get it correctly, you are also an exporting company; you export oil and other things. Which are your major export markets?

Where we export oil to today, as TAQA, is through pip lines basically into continental Europe or into the United Kingdom, and then in North America, into the United States and also into Canada.

So are you considering future expansion in this area?

We will certainly be expanding in Europe as far as our production, which would mean we will be delivering more barrels of fuel to continental Europe and to the United Kingdom.

You have been nominated the CEO of the Year at Platt’s 2007 Global Energy Awards. So what is your personal motivation?

I thrive on creative discontent. Basically, we at TAQA are set up as a meritocracy, so whether you are the CEO or one of our admin staff you have got a right to voice your opinion, you certainly have a right to our respect and dignity. What we try to do is try to keep ourselves as a very flat organization with the idea that people can participate whether you are in Calgary or Chennai, India, in the voice of managing the company. So I think I’d have to say, one thing that stands for TAQA is being a meritocracy, everyone is given an opportunity.

Is there any particular message you would like to address to our audience, our viewers and readers?

Probably the commercial for Abu Dhabi and the UAE. It is a very open society, 8 out of 10 people in Dubai are from somewhere else, 2 out of 3 in Abu Dhabi are from somewhere else. It is a very intentional community where people come, work in their chosen profession and prosper.