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Page added on September 29, 2007

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Oil income boosts Gulf producers’ foreign buying power

Gulf Arab states’ oil revenues this year are likely to be near last year’s record $336 billion, giving them an edge in buying foreign assets as credit dries up for competing investors.

U.S. crude oil futures hit a record of $83.90 a barrel last week. Oil prices have quadrupled since 2002, triggering a transfer of wealth from energy consuming countries to producers’ coffers.
Gulf investment agencies and state-owned and private companies spent $40 billion on foreign assets in the first-half, more than in any other year, according to London-based data research company Dealogic.

Saudi Arabia, the United Arab Emirates and the four other Gulf Arab states from the world’s biggest oil producing region are looking to reduce their reliance on crude oil, which accounts for about a third of their combined gross domestic product, to cushion against a decline in prices and an eventual end to their petroleum reserves.

Competition for assets may ease as the global credit crisis makes it more difficult for private equity funds to finance buys.

“We’re going through a period now on global financial markets that will open doors for the Gulf producers,” said Giyyas Gokkent, head of research at the National Bank of Abu Dhabi. “If there is bigger fallout from the credit crisis, the region’s funds will be able to cherry pick the assets they want.”

“It has created tremendous opportunities for us,” said Kenneth Shen, the head of strategic and private equity at the Qatar Investment Authority (QIA), earlier this month. “Things that were a bit pricey before are looking more interesting for us.”


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