Saudi Arabian Oil Co., aka Aramco, on Tuesday agreed to take $15.5 billion for a 49% interest in its natural gas pipeline infrastructure to a consortium led by BlackRock Inc.
In the transaction, newly formed Aramco Gas Pipelines Co. would have lease and leaseback usage rights of the network over a 20-year period. BlackRock clinched the deal with partner Hassana Investment Co., the investment management arm of Saudi Arabia’s General Organization for Social Insurance (GOSI).
Aramco has “reached yet another major milestone in our portfolio optimization program as we build toward a bigger and stronger gas business,” said CEO Amin H. Nasser. “It further underscores our commitment to long-term value creation for our shareholders, while bringing in BlackRock and Hassana as partners demonstrates our unique value proposition and ability to attract leading global investors to Saudi Arabia.
“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.”
As part of the transaction, Aramco agreed to pay a tariff to Aramco Gas Pipelines for the gas that flows through the network, backed by minimum commitments on throughput. Aramco would continue to retain full ownership and operational control of its gas pipeline network.
The transaction “will not impose any restrictions on Aramco’s production volumes,” executives noted.
The gas pipeline sale follows the megal deal last April to sell off a minority stake in the oil pipeline infrastructure. In that transaction completed in June, Aramco agreed to take $12.4 billion from a consortium led by EIG Global Energy Partners for a 49% stake in the oil pipeline network.
The national oil company’s “gas pipeline assets are critical and growing, and highly integrated with the rest of Aramco’s oil and gas facilities,” said Aramco’s Abdulaziz M. Al Gudaimi, senior vice president of Corporate Development. The company was looking for “long-term partners who understand and appreciate the industry. This transaction represents the largest energy infrastructure deal in the region to date and exemplifies Aramco’s unique positioning as a partner for prominent global institutional investors.”
The latest sale “unlocks additional value from Aramco’s diverse asset base and has attracted interest from a wide range of worldwide investors, highlighting the compelling investment opportunity,” executives said.
The “landmark transaction” was hailed by BlackRock CEO Larry Fink. “Aramco and Saudi Arabia are taking meaningful, forward-looking steps to transition the Saudi economy toward renewables, clean hydrogen and a net zero future. Responsibly managed natural gas infrastructure has a meaningful role to play in this transition.”
Aramco, the largest oil company in the world, in October set the goal to cut direct and indirect emissions by 2050, which complement the Kingdom’s aim to reach net-zero emissions by 2060.
Hassana CEO Saad Al-Fadly said the firm was “particularly excited about this deal as it comes in line with Hassana’s strategy to create enduring value for GOSI and further strengthen our long-lasting partnerships with strong and reputable players such as Aramco and BlackRock.”
Aramco had planned by 2030 to be among the world’s top gas producers and liquefied natural gas (LNG) exporters. However, the speed of the energy transition upended plans, with the oil giant now eyeing a goal to become a leading blue hydrogen manufacturer and exporter. Exporting LNG is no longer a priority.
Blue hydrogen is manufactured from natural gas, with emissions reduced through carbon capture and sequestration (CCS). That makes CCS a big priority for Aramco too, CFO Ziad al-Mursheal-Murshe told analysts in August.
While no closing date was provided, the principals said the gas pipeline transaction was expected to be completed as soon as it was practical, pending approvals.
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