Even as major economies around the world start to slide into recession, Abu Dhabi seems determined to continue its investment drive, buoyed as it is by several years of bumper oil revenues.

The emirate’s downstream investment arm, International Petroleum Investment Company (Ipic), is to push ahead with a plan to develop refineries in Pakistan, Morocco and Fujairah. The firm hopes to stagger the development of the refineries at three-month intervals to use the same project manager and take advantage of design and engineering efficiencies.

With its combined revenues topping $50bn, there are few doubts that Ipic has the financial muscle needed to carry out its ambitions proposals. The scale of the refinery projects also fits neatly with Ipic’s objective of strengthening its investment portfolio by $40bn over the next five years.

Its timing, however, looks misplaced. Analysts are forecasting a much more volatile refining environment over the next three years, as the twin effects of weakening demand and new refining capacity hit the sector.

Fuel demand from the US and Europe has already been slowing, with US consumption recently falling to its lowest level in three years. A string of new refinery projects in the Middle East and China, which are due to start operations over the next five years, will add to the problem.

Ipic, which favours taking long-term stakes in projects and joint ventures, is keen to show that its commitment to diversification continues despite the prospect of rocky times ahead.

But while Ipic sits on a healthy pile of cash, thanks to its government backers, it should still tread carefully. Its ability to move into more markets in the future will be determined by the success it has in pulling off this high-risk expansion programme.

News page 14