Saudi Aramco agrees on $15.5bn gas pipeline deal with global consortium led by BlackRock

Aramco Gas Pipelines Company to lease and leaseback usage rights of Aramco’s gas pipeline network over 20-year period

Aramco's $15.5bn gas pipeline deal, with global consortium led by BlackRock Real Assets and Hassana Investment Company, is the firm's second major pipeline transaction this year. Reuters
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Saudi Aramco has agreed on a $15.5 billion lease and leaseback deal for its gas pipeline network with a group of companies led by BlackRock Real Assets and state-backed Hassana Investment Company.

As part of the deal, the world's largest exporting company's newly formed unit, Aramco Gas Pipelines Company, will lease usage rights in the state energy company's gas pipelines network and lease them back to Aramco for a 20-year period, the company said.

Aramco Gas Pipelines Company will receive a tariff payable by Aramco for the gas products that will flow through the network, backed by minimum commitments on throughput.

Aramco will hold a 51 per cent majority stake in Aramco Gas Pipeline Company and sell a 49 per cent stake to investors led by BlackRock and Hassana, which is the investment management arm of the General Organisation for Social Insurance (GOSI) in Saudi Arabia.

“Today, we have reached yet another major milestone in our portfolio optimisation programme as we build towards a bigger and stronger gas business," said Amin Nasser, Aramco president and chief executive.

"With gas expected to play a key role in the global transition to a more sustainable energy future, our partners will benefit from a deal tied to a world-class gas infrastructure asset.”

Earlier this year, Aramco agreed on a $12.4bn oil pipeline infrastructure deal with a consortium led by EIG Global Energy Partners, which was the company's largest since its 2019 listing on the Tadawul exchange, when it raised more than $29bn.

Under that agreement, Aramco Oil Pipelines Company will lease usage rights in the state oil company's stabilised crude oil pipeline network, which connects oilfields to the downstream network, for 25 years.

The subsidiary will receive a tariff from Aramco for oil that flows through the network, backed by minimum volume commitments. Aramco's deal with the EIG-led consortium values its pipeline business at $25.3bn.

Upon completion of the gas pipeline transaction with the BlackRock-led consortium, Aramco will receive upfront proceeds of $15.5bn. Aramco will continue to retain full ownership and operational control of its gas pipeline network without any restrictions on the company’s production volumes.

The gas pipeline transaction is expected to close soon and is subject to customary closing conditions, including any required merger control and related approvals, the company said.

“Our gas pipeline assets are critical and growing, and highly integrated with the rest of Aramco’s oil and gas facilities," said Aramco's senior vice president of corporate development Abdulaziz Al Gudaimi.

The latest deals are expected to help the country's drive to pump billions of dollars into its economy to develop various large projects, build up the tourism sector, nurture local non-oil industries and boost job creation.

Non-oil revenue accounted for about half of Saudi Arabia’s total revenue last year. The kingdom’s sovereign wealth fund, the Public Investment Fund, plans to double its assets to $1.07 trillion and invest a minimum of $40bn a year in the domestic economy until 2025, helping to create 1.8 million jobs.

“BlackRock is pleased to work with Saudi Aramco and Hassana on this landmark transaction for Saudi Arabia’s infrastructure,” said Larry Fink, chairman and chief executive of BlackRock.

"Aramco and Saudi Arabia are taking meaningful, forward-looking steps to transition the Saudi economy towards renewables, clean hydrogen, and a net zero future. Responsibly-managed natural gas infrastructure has a meaningful role to play in this transition."

In October, Aramco reported a $30.4bn net profit in the third quarter, which more than doubled from $11.8bn in the same period a year ago, on higher oil prices, improved refining margins and recovery in demand as the coronavirus pandemic eased before the emergence of the Omicron variant.

Aramco's deals follow a similar agreement by Adnoc, which was the largest of its kind last year.

Adnoc signed an agreement worth $20.7bn with a group of companies that included the world’s leading infrastructure and sovereign wealth funds that will invest in Abu Dhabi’s natural gas pipelines infrastructure.

Updated: December 07, 2021, 6:04 AM