Saudi Aramco, the world’s third-most valuable company and largest exporter of crude, closed a $12.4 billion deal with a global consortium, led by Washington-based institutional investor EIG Global Energy Partners, for a 49 per cent stake of its oil pipelines business.
The deal, Aramco’s largest since its 2019 listing on the Tadawul exchange, when it raised more than $29bn, attracted a group of global investors from North America, Asia and the Middle East, including Abu Dhabi’s sovereign fund Mubadala, Aramco said in a statement.
The new venture, 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 interest we have received from investors shows strong confidence in our operations and the long-term outlook for our business,” Aramco president and chief executive Amin Nasser, said. “We plan to continue to explore opportunities to capitalise on our industry-leading capabilities and attract the right type of investment to Saudi Arabia.”
The deal, first announced in April, allows Aramco to monetise its pipeline assets while retaining overall ownership and operational control of the network. The transaction does not impose any restrictions on Aramco’s actual crude oil production volumes, which are subject to production decisions made by the kingdom, Aramco said.
The EIG-led co-investment process in Aramco Oil Pipelines attracted a global group of institutional investors from China, Saudi Arabia, Korea, the UAE and the US, EIG said in a statement on its website. In addition to Mubadala, investors include the Silk Road Fund, Hassana and Samsung Asset Management.
The newly formed oil pipeline venture will receive a tariff from Aramco for oil that flows through the network, backed by minimum volume commitments. Aramco will hold a 51 per cent stake in the venture, while EIG will hold the remainder. The deal has a total equity value of about $25.3bn, according to EIG.
“The caliber of this marquee global infrastructure asset is further evidenced by the leading investors that have invested alongside EIG,” Robert Blair Thomas, EIG’s chairman and chief executive, said.
HSBC Bank was EIG’s financial advisor and Latham & Watkins its legal advisor on the deal, EIG said.
EIG is an institutional investor in energy and energy-related infrastructure with $21.7bn under management as of March 31, 2021, according to its website.
Abdulaziz Al Gudaimi, Aramco’s senior vice president of corporate development, said the deal reinforces the company’s “resilience and ability to adapt in a rapidly changing business environment.”
“The interest we received for this deal is evidence of continued confidence in our company from institutional investors and sets a new benchmark for infrastructure transactions globally,” Mr Al Gudaimi said.
The long-term investment by the global consortium underscores the “compelling investment opportunity presented by Aramco’s globally-significant pipeline assets, the company’s robust long-term outlook and the attractiveness of the kingdom of Saudi Arabia to institutional investors,” Aramco said in the statement.
Aramco, which made a profit of 183.7bn Saudi riyals ($49bn) in 2020, said last week it also plans to tap debt capital markets through the issue of dollar-denominated sukuk. It did not disclose how much it plans to raise, but said the funds raised would be used “for general corporate purposes or for any other purpose specified” in the offer documents for the sukuk.
Aramco’s monetisation of its pipeline network follows similar initiatives taken by Abu Dhabi National Oil Company.
Adnoc completed a $20.7bn deal with a consortium of infrastructure and sovereign funds to buy a stake in its natural gas pipelines in July last year. This followed a $5bn investment in the company’s oil pipelines from other investors in 2019.