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Saudi Aramco signs $15.5 bil gas pipeline deal; continues to monetize assets

Highlights

Blackrock, Hassana-led group to own 49% stake in gas pipelines

Deal to strengthen Aramco's balance sheet

Deal follows oil pipeline transaction

Saudi Aramco has signed a $15.5 billion lease deal for its gas pipeline network, its second infrastructure transaction with international investors, as part of plans to monetize its assets and strengthen its balance sheet.

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A consortium led by BlackRock Real Assets, a unit of the world's biggest asset manager, and Hassana Investment Co, the investment management arm of Saudi Arabia's General Organization for Social Insurance, will own a combined 49% of Aramco's gas pipeline network, Aramco said in a Dec. 6 statement.

"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," Aramco's CEO Amin Nasser said in the statement.

Aramco Gas Pipelines Co. will lease usage rights in its parent company's gas pipelines network and lease them back to Aramco for a 20-year period. In return, Aramco Gas Pipelines Co. 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% majority stake in Aramco Gas Pipeline Co. and sell a 49% stake to investors led by BlackRock and Hassana.

Aramco, the world's biggest oil company, is spending billions of dollars to ramp up its oil and gas output. It plans to boost its maximum sustainable capacity of oil to 13 million b/d by 2027 from 12 million b/d now.

Oil pipeline deal

Aramco added that it will continue to have full ownership and operational control of its gas pipeline network and the transaction will not impose any restrictions on its production volumes.

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

The deal follows a $12.4 billion lease and leaseback transaction involving Aramco's oil pipeline network which was concluded in June with a consortium led by EIG Global Energy Partners.

Under the oil pipeline deal, the investor consortium will hold a 49% stake in the then newly-formed Aramco Oil Pipelines Co., which will receive a tariff payable by Aramco for stabilized oil flows, backed by minimum volume commitments. Aramco continues to hold a 51% majority stake in Aramco Oil Pipelines Co. and retains full ownership and operational control of its stabilized crude oil pipeline network.

ADNOC transactions

Aramco's asset sales mimic transactions by Abu Dhabi National Oil Co. in the last two years.

ADNOC inked in June 2020 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.

A consortium consisting of Global Infrastructure Partners, 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 selected ADNOC gas pipeline assets valued at $20.7 billion.

In 2019, ADNOC clinched a $5 billion deal with a consortium that included GIC, BlackRock, KKR & Co and Abu Dhabi Retirement Pensions and Benefits Fund, to sell selected pipeline infrastructure and collectively hold a 49% stake in ADNOC Oil Pipelines, a subsidiary of the parent company.