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UAE's ADNOC sells 49% stake in gas pipelines valued at $20.7 bil

Highlights

Six investors to own 49% in ADNOC Gas Pipelines

ADNOC Gas Pipelines to lease rights to 38 pipelines

Lease will be for 20 years in return to volume-based tariff

Dubai — Abu Dhabi National Oil Co., the UAE's biggest energy producer, has inked a deal worth more than $10 billion with a group of investors to sell a 49% stake in its gas pipelines a year after striking a similar transaction for its oil pipelines.

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A consortium grouping Global Infrastructure Partners, or GIP, Brookfield Asset Management, Singapore's sovereign wealth fund GIC, Ontario Teachers' Pension Plan Board, South Korea's NH Investment & Securities and Italy's Snam will invest in select ADNOC gas pipeline assets valued at $20.7 billion, ADNOC said in a statement on June 23. ADNOC will get upfront proceeds of more than $10 billion from the transaction, subject to regulatory approvals, it said

The consortium will collectively hold a 49% stake in ADNOC Gas Pipelines, a newly-formed ADNOC unit, with the parent company holding the remaining interest.

ADNOC Gas Pipelines will lease rights to 38 pipelines spanning a total area of 982.8 km, the company added.

"The innovative transaction structure allows ADNOC to tap new pools of global institutional investment capital, whilst at the same time maintaining full operating control over the assets included as part of the investment," it said.

"ADNOC will lease its ownership interest in the assets to ADNOC Gas Pipelines for 20 years in return for a volume-based tariff."

Oil pipeline deal

ADNOC last year clinched a $5 billion deal, with a consortium that includes GIC, BlackRock Inc., KKR & Co and Abu Dhabi Retirement Pensions and Benefits Fund, to sell them select pipeline infrastructure and collectively hold a 49% stake in ADNOC Oil Pipelines, a subsidiary of the parent company.

ADNOC Oil Pipelines will lease the national oil company's interest in 18 pipelines and give rights to transport crude and condensates from the company's onshore and offshore concessions over 23 years.

The transaction was the first midstream partnership between institutional investors and a Middle East national oil company.

The gas pipeline network links ADNOC's upstream assets to local UAE off-takers, while ownership and management of the pipeline and all responsibility associated with operation and capital expenditures will remain with ADNOC, it said.

"The strategic joint venture will see ADNOC pay ADNOC Gas Pipelines a volume-based tariff for the use of pipelines that transport sales gas and natural gas liquids (NGL) from ADNOC's upstream assets to Abu Dhabi's key outlets and terminals," it said. "The tariff will be charged on the total volumes transported through the pipelines, together with liquefied natural gas (LNG) flows, subject to a volume cap."

ADNOC Gas Pipelines will distribute 100% of free cash to the investors in the form of quarterly dividends, it added.


Self-sufficiency

ADNOC is undertaking a series of gas projects to beef up its production as part of plans of reaching gas self-sufficiency. For example, ADNOC plans to boost production from its Shah sour gas field from about 1.3 Bscf/day to 1.5 Bscf/day through a joint venture with Occidental Petroleum.

ADNOC and Dubai's gas supplier, DUSUP will develop a new shallow gas reservoir with estimated reserves of 80 Tscf, it announced in February.

Last year, Abu Dhabi's Supreme Petroleum Council announced increases in hydrocarbon recoverable reserves of 7 billion stock tank barrels of oil and 58 Tscf of conventional gas, bringing the total to 105 billion STB of recoverable oil, 273 Tscf of conventional gas and 160 Tscf of unconventional gas resources.

(Updates with background.)