By Wael Mahdi
(Bloomberg) — A venture between Arab Petroleum Investment Corp., known as Apicorp, and National Shipping Co. of Saudi Arabia will create the world’s largest fleet of oil tankers and support the kingdom’s plan to boost crude exports, Saudi Energy Minister Khalid Al-Falih said.
Apicorp, a multilateral energy-finance lender, and the Saudi shipping company, known as Bahri, formed a $1.5 billion investment fund to add 15 very large crude carriers, or VLCCs, to the shipper’s planned fleet of 46 such vessels. The deal announced late Sunday will support Saudi Arabia’s efforts to ensure a secure supply of oil to its customers worldwide, Al-Falih said.
“The additional 15 VLCCs will be on top of the current and future fleet of Bahri that is over 45, and this will make Bahri the world’s largest oil shipping company,” he told reporters in Riyadh.
Saudi Arabia is the world’s biggest oil exporter and is producing at close to a record, the Organization of Petroleum Exporting Countries said in its monthly report published July 12. Oil prices have rebounded more than 70 percent from the 12-year low earlier this year as a Saudi Arabian-led OPEC strategy to pressure rivals, including some U.S. shale drillers, with lower prices slowly eliminates a global supply glut.
State-run Saudi Arabian Oil Co., known as Saudi Aramco, ships about 20 percent of all oil cargoes at sea globally, and it needs more tankers to meet rising demand for its crude, Al-Falih said. The biggest owner of very large and ultra large crude carriers, the industry’s biggest ships, is China Merchants Group, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. China Merchants has 53 vessels including those on order.
Bahri, which merged its fleet with that of Saudi Aramco, owns 36 very large crude carriers and plans to add 10 more in the next two years, its chairman, Abdulrahman Mohammed Al Mofadhi, said.
Apicorp will be the main investor and manager of the $1.5 billion Apicorp Bahri Oil Shipping Fund, with an 85 percent stake, while Bahri will own the remainder and serve as the 10-year fund’s commercial and technical manager, the partners said in a statement. The additional 15 VLCCs will be financed with a mix of debt and equity, Apicorp said in the statement.
The fund should generate returns of more than 10 percent, Raed al-Rayes, Apicorp’s deputy chief executive officer and general manager, said in an July 17 interview. Apicorp may invite other institutional investors, such as regional pension funds, to invest in the oil-shipping fund, he said.
Apicorp, based in Dammam, Saudi Arabia, is owned by the Organization of Arab Petroleum Exporting Countries, with Saudi Arabia, Kuwait and the United Arab Emirates each holding 17 percent, according to its website.
–With assistance from Alaric Nightingale.
© 2016 Bloomberg L.P