Taqa shelves $12bn Turkish coal project and scales back in Canada

Reorganisation in Canada represents one of the final stages of the clean up from Taqa’s earlier years, while Turkey deal called off due to 'other commitments'.

Taqa let go of 162 people from its North America business this year. Above, a Taqa staff in Alberta, Canada.

Abu Dhabi National Energy (Taqa), the Government's utility owner that invests in oil and gas abroad, plans to further consolidate its operations in Canada and has "shelved" a US$12 billion coal project in Turkey, said its chief executive.

The company let go of 162 people from its North America business this year, where gas prices have sunk to half the price they were when Taqa bought the property thanks to an influx of shale supplies. In the coming few years it will continue to consolidate its acreage to focus on central Alberta, where its cost of production is cheapest, said Carl Sheldon, Taqa's chief executive.

“What we’re trying to get to is say a business about two thirds its current size with about a third its cost base,” he said in an interview, adding that most personnel cuts had already been made in Calgary. “Like everybody who invested at the time we invested, gas was $7, it went to $13. So now when gas is at $3 dollars it’s much less profitable. But if you’re careful about it and especially in those central areas, we can make money when gas prices are where they’re at now.”

The reorganisation in Canada represents one of the final stages of the clean up from Taqa's earlier years, when under another chief executive it bought assets as wide-ranging as power plants in the Caribbean and oil and gasfields in Montana.

Although many of those purchases have since been offloaded, the company’s operations remain wide-ranging – besides the North American acreage it pumps oil in the North Sea, produces power in Ghana, and stores gas in an underground reservoir in the Netherlands. For now it is turning its focus more to opportunities closer to home, such as Iraq, where it is drilling in the semi-autonomous Kurdistan region, and Egypt, where along with Mubadala Petroleum and International Petroleum Investment Corporation (Ipic) it is evaluating opportunities as part of a government-led effort to aid the ailing economy through infrastructure investment.

“It’s where our political passport is probably the most valuable,” said Mr Sheldon. “It has in it places like Iraq where you’ve got very significant reserve bases that we’re capable of accessing. Other big firms are outside. They’re in the deepwater or they’re in the very hard-to-find areas – to play there you need much more capital stamina than we have.”

For now those regional opportunities do not include Turkey, where in January Taqa signed a government-backed agreement to spearhead a $12bn coal mining and power production project. The deal spanned the development of lignite coal mines in southern Turkey’s Afsin-Elbistan region and the construction of 7,000 megawatts of coal-fired power plants, able to meet 10 per cent of Turkey’s projected power demand at the end of the decade-long construction period.

In August, Taqa said it was delaying an investment decision because of spending priorities and pulled staff out of the country. Turkey's energy minister, Taner Yildiz, accused Abu Dhabi of delaying a commercial investment because of the governments' different views on Egypt and Syria.

“For the time being we’ve shelved our plans in Turkey, because we have other commitments,” said Mr Sheldon. “Certainly things in the region change quickly, so in some sense we’re opportunistic. So there’s a wait-and-see answer to this. It’ll depend on circumstances, so it’s hard to give you a time frame. But in purely commercial terms, as with many countries in the region, Turkey has good growth dynamics and we think it’s an interesting market.”