UAE, Qatar to set up $2 billion acquisition fund

By Simon Webb and John Irish

DUBAI (Reuters) - Abu Dhabi government-owned IPIC and Qatar Investment Authority (QIA) will invest $2 billion in a new fund for global acquisitions, the managing director of IPIC said on Tuesday.

"We plan to invest in all sectors, including oil and petrochemicals," Khadem al-Qubaisi told Reuters by telephone in an interview. The fund could thus mark a new direction for the International Petroleum Investment Co (IPIC), which until now has limited its investments to the energy sector.

IPIC and QIA initially will each invest $1 billion in the fund, Qubaisi said. Investment will be leveraged to maximize acquisition potential, and the fund will be operating in about six months, he said.

"We will look at any opportunities where we can make money and add value. That could be anywhere -- the Middle East, Asia, Africa, Europe and the United States," Qubaisi said.

IPIC is an investment vehicle for the government of Abu Dhabi, which controls more than 90 percent of the United Arab Emirates' oil reserves.

QIA is Qatar's sovereign wealth fund. Its assets stand at around $60 billion, according to an estimate by Standard Chartered.

IPIC and QIA investment in the fund, which Qubaisi said had yet to identify any specific targets, will likely be increased later.

"We will be conservative with the first investments and build carefully," he said. "You cannot be aggressive from day one."

QIA officials were unavailable for comment.

GAS STRATEGY

The tie-up fits with the ambitions of both countries for gas trade, said Mustafa al-Alani from Dubai-based think-tank the Gulf Research Centre.

Abu Dhabi is short of gas, while Qatar holds the world's third-largest gas reserves. Qatar started gas exports through a pipeline to the UAE last year, but Abu Dhabi needs more to meet spiraling domestic demand from both power generators and heavy industry.

Qatar has looked beyond the Gulf for years for gas markets and is the world's top exporter of liquefied gas. But as petrodollars fuel a regional economic boom, Doha is eyeing markets closer to home, Alani said.

"I see this very much as a question of gas," Alani said. The UAE needs gas. The Qataris ... for the last 10 years were looking at distant markets. Now they feel that the political impact of their policy was negative, so they are moving closer to other Gulf states, and are talking about joint projects and more integration."

Last year, Qatar also set up joint investment funds with the governments of Oman and Dubai, the commercial hub of the UAE.