Here’s why Abu Dhabi petrochemicals chief has his eye on North American shale

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While North American shale may be competition for OPEC members, some oil-exporting countries in the Persian Gulf are simultaneously banking on the commodity as a potential investment opportunity.

The United Arab Emirates is one of them, and Musabbeh al-Kaabi, chief executive of Abu Dhabi’s Mubadala Petroleum and Petrochemicals, is keeping an eye on U.S. shale.

The petrochemicals firm is a major component of Mubadala Investment Company, Abu Dhabi’s state-owned holding company. It operates as a sovereign wealth fund with assets of more than $360 billion, and is aimed at diversifying the emirate’s economy.

“We as an investor made big investments in the last 18 months, north of $12 billion dollars, and some of these big investments are happening in North America,” al-Kaabi told CNBC’s Hadley Gamble during the Atlantic Council Energy Forum in Abu Dhabi.

This was for two simple reasons, the CEO said. “It is a big market and it is enjoying a highly competitive feedstock. So we like the business in that part of the world because of these two reasons.” Feedstock refers to raw material, such as crude oil, that is processed for conversion into a different, or refined, product — like gasoline.

“Other parts of global energy I would say, the energy industry, the price would be set by the high cost producers going forward,” al-Kaabi added. “And who are the high cost producers nowadays? The shale producers. And we will keep monitoring what is happening in that part of the world.”

Shale production has fueled America’s rise to becoming the world’s top oil producer. The Energy Information Administration expects U.S. domestic oil production to increase by 1.18 million barrels per day (bpd) next year, with output averaging 12.06 million bpd.

That flood of fresh U.S. crude supply “will cement its newfound position as the world’s top oil producer,” according to consultancy firm PVM Oil Associates.

Mubadala Investment Company was formed in early 2017, through a merger of Mubadala Development Company and the International Petroleum Investment Company, which owns stakes in energy projects all over the world.

The petrochemical unit made a small private equity investment in U.S. shale in 2017, but so far has made its biggest investments closer to home. In November, it snapped up a 20 percent stake in Italian oil major Eni’s share of the Egyptian Nour North Sinai Offshore Area concession, its second foray into the North African country that year.

It also owns 10 percent participating interest in an Eni concession that contains the Egypt’s offshore Zohr natural gas field.

The company oversees assets and operations in 10 countries, focusing primarily on the Middle East, Russia and South Asia, and currently produces about 360,000 bpd of oil equivalent.