16-09-02 Enap, Chile's national oil company, is implementing an ambitious $ 1.3 bn investment plan designed to increase the firm's value as well as internationalise one of the country's top state companies. According to Mining Minister and Enap President Alfonso Dulanto, the initiative will "increase Enap's worth by 50 % within five years, going from $ 2.2 bn to $ 3.3 bn, as well as earning $ 700 mm in profits during the period."
To this effect, Enap is developing joint ventures in countries as diverse as Iran, Libya and Egypt, as well as aiming to increase its refined-oil exports to Argentina, Peru, Ecuador and Central America. Nearly 55 % of Enap's investments will accordingly be spent abroad with the remainder aimed at the local market.

Although several analysts questioned the optimism of Enap's projections, Daniel Fernandez, the company's general manager, stated that the plan's progress would be regularly monitored by the Arthur D. Little consulting firm. The consultant company also participated in the initiative's design as well as assessing the value of Enap's assets.
Dulanto stated that the authorities' goal was "to turn Enap into an integrated chain in every area of the oil industry." Besides the company's traditional activities in the areas of exploration, drilling and refinement, Enap wants to increase its presence in the distribution market by seeking alliances with third parties. Asked about the eventual obstacles the company may find by entering into the fuel distribution business, Dulanto was optimistic and said he saw no problem in it being fully controlled by private companies.

Dulanto cited as an example the case of Brazil's Petrobras oil company, which competes in the distribution business and does not have any problem with private operators. Analysts are speculating about the company's prospective partner in the petroleum distribution business, pointing to the local Copec company, which through its gas station network controls nearly 50 % of the domestic market.
Copec -- controlled by the local Angellini investment group -- is the country's largest business conglomerate, with interests in industries such as fuels, forestry, fishing and mining. The company is, nonetheless, the only local oil distributor that, unlike its competitors -- the Spanish Repsol-YPF, the Dutch Shell and the Exxon subsidiary Esso -- does not participate in the refining business. Given both Enap and Copec's company profiles, industry experts believe a prospective alliance between both is an excellent opportunity to capitalize on their synergies.

Enap's expansion project will be wholly funded by the company, as its executives have ruled out contracting any debt for the implementation of the initiative. Fernandez stated that to attain its goals, Enap might consider selling some of its assets, including several minority stakes in industry companies.
Simultaneously, Enap is engaged on several ventures in the so-called MENA region, encompassing the Middle East and northern Africa. The company is already producing small amounts of oil in Egypt and for more than a year has been undertaking exploration in Iran. It is now set to enter the markets of both Libya and Yemen.

MENA was first targeted by Enap among a list of prospective areas in order to locate a second focus for its foreign oil explorations, after having consolidated its presence in Argentina, Colombia and Ecuador. Two alternatives were seriously considered: MENA and the North Sea.
"We discarded northern Europe because our professionals and technicians were not familiar with its geological characteristics, whereas in the Middle East there are areas that have basins with similar characteristics to those of the Magallanes region (Chile's southernmost region, where Enap concentrates most of its activities)," Fernandez stated.

Enap supplies 40 % of Chile's energy demand as well as providing 85 % of the fuel sold by local petroleum companies. Both its strategic importance as well as the company's efficiency have recently placed it at the centre of an ongoing debate among government officials, Congressmen and economic analysts over the need of privatising state assets. Although President Ricardo Lagos has been emphatic in his desire to keep Enap in public hands, the discussion is representative of the government's dire need to raise money in the face of both the national and regional economic slowdown.
At the same time, the company's expansion project has originated several rumours pointing to the authorities' alleged desire to grant it more value in order to obtain a better price in an eventual sale. Fernandez, nonetheless, refuted the claims by stating that all businessmen seek to add value to their companies and that this does mean "that the owner wants to sell it, but that this measure will grant us more profits in the future. This is our goal and the creation of value is a better formula for estimating a company's real value. This way, besides generating $ 700 mm in profits, we will have a company that starting in 2006 will be earningmuch more than what it did before the plan's implementation."