The Arab Petroleum Investments Corporation (Apicorp) has launched a US$150mn shariah-compliant shipping fund for the petroleum product tanker charter market.

Co-managed by Tufton Oceanic, a maritime and energy fund manager, the fund has already acquired five medium-range tankers to be used in the regional and international market over the next five years.

The fund is composed of 30% equity provided by Apicorp and Tufton Oceanic, and 70% debt. Standard Chartered, SMBC, Riyad Bank and Natixis funded the debt part of the fund, with StanChart and Natixis acting as agent bank and documentation agent respectively. The debt was jointly co-ordinated by Apicorp and Tufton Oceanic, and is fully underwritten by Apicorp.

This is the first investment fund established by Apicorp, and reflects the increase in demand for petroleum product carriers in the GCC region despite tight market conditions. It is also the first fund aimed at a specific vessel category in the region.

Ahmad Bin Hamad Al Nuaimi, Apicorp’s CEO and general manager, says: “Apicorp’s petroleum shipping fund is aimed at helping oil and gas companies grow their business while also generating regular yield and returns for the equity investors. In this case, the fund helps companies meet their requirements for petroleum products transportation without burdening their balance sheets. At the same time, the fund provides a mechanism for regional investors to participate in a highly specialised investment class in international marine assets that is not normally open to them.”

The new fund is part of Apicorp’s strategy of diversifying its business streams into midstream sectors. “We are exploring the development of similar new funds in shipping and other oil and gas sectors to take advantage of further such growth opportunities. Tufton Oceanic’s strong capabilities in managing funds and deep knowledge of the global shipping sector make it the ideal partner for this fund,” Al Nuaimi adds.

Tufton Oceanic director Marcus Machin explains: “Our decision to invest in the fund along with Apicorp reflects the growth opportunities that we see in the sector. According to our research, we expect the product tanker market to witness a compound average demand growth of above 5% per annum over the next five years. At the same time, there has been a decline in the vessel order book as a result of constraints in the placement of new orders. Both these factors create the conditions for market growth in the coming years. The fund acquired the product tankers at highly competitive rates at what we believe was a low point in the shipping market cycle.”