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In Iraq Oil Deal, Tony Hayward And Nat Rothschild Are Now Partners With Sinopec
Forbes - [9/8/2011]
Fascinating news today on the continuing professional rehabilitation of Tony Hayward, the former ceo of BP. Hayward had recently joined up with pal Nathaniel Rothschild to launch the $2 billion IPO of investment vehicle Vallares. Today came the announcement of their first foray — the acquisition of Turkish oil company Genel Energy, a subsidary of Cukurova Holdings, owned by billionaire Mehmet Emin Karamehmet, the richest man in Turkey ($4 billion net worth at Forbes’ last reckoning). To fund the deal Vallares will issue $2 billion of new stock. Hayward will be chief executive.
This deal is intriguing because of the prime position that Genel has in the Kurdish region of northern Iraq. Even before the fall of Saddam Hussein, Genel’s CEO Mehmet Sepil negotiated with the Kurds for the rights to explore untapped oil prospects. After Saddam, the Kurds reaffirmed those licenses to the dismay of Baghdad, which wanted all of Iraq’s oil wealth controlled centrally. As a result of Genel’s first mover advantage, today Genel has stakes in seven fields in the Kurdish region and an interest in a refinery.
It also has a smorgasbord of international partners, which include Norway’s DNO International and Canada’s Heritage Oil and Longford Energy. But the most significant partner is Sinopec. The Chinese giant is a relatively new partner for Genel. In 2009 Sinopec acquired Addax Petroleum, taking over its ventures with Genel.
The background is worth noting. Five years ago Genel’s Sepil attracted the attention of Addax founder, the billionaire Jean Claude Gandur. Gandur convinced Sepil to ignore the overtures of bigger oil companies and forge a joint venture with Addax to drill a prospect called Taq Taq. (You can read all about the history of Gandur and Taq Taq in my 2007 Forbes Magazine profile: Trouble Is My Business.) Addax and Genel also teamed up to explore the Kewa Chirmila prospect. The fields are said to have upwards of 3 billion barrels of recoverable oil.
Hayward and Rothschild are likely salivating at the opportunity of partnering with Sinopec. The Chinese giant is among the biggest oil companies in the world, with revenues of $200 billion. Successful development with Sinopec of these Iraqi fields could potentially serve as an entry point for Hayward and Vallares to partner with Sinopec elsewhere in the world. That is, if the Chinese are interested in cooperating; rumor is that they have offered to buy out all of Genel’s portion in the Taq Taq and Kiwa Chirmila fields.
What Hayward and Rothschild will offer Sinopec is a value proposition. Hayward will be bringing world-class BP-style managerial and engineering depth to Vallares/Genel. This opens opportunities for Sinopec. The Chinese could easily put up the cash to acquire those other Genel partners like DNO and Heritage, and roll up the Kurdish fields into a nice-sized JV, to be overseen by Hayward. Heritage, which has interesting prospects in places like Congo, Malta, Pakistan, Russia, but not enough cash to develop them, would be an especially savory tidbit.
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