Adnoc pens $4bn pipeline investment deal with KKR, BlackRock

According to Adnoc, the transaction with KKR and BlackRock will result in upfront proceeds of around $4 billion to Adnoc
Adnoc pens $4bn pipeline investment deal with KKR, BlackRock
Dr Sultan Al Jaber, UAE Minister of State and ADNOC Group CEO (centre) pictured with Laurence D. Fink, chairman and CEO of BlackRock; and Henry Kravis, co-chairman and co-CEO of KKR.
By Bernd Debusmann Jr
Sun 24 Feb 2019 11:20 AM

The Abu Dhabi National Oil Company (Adnoc) has entered into a multi-billion dollar midstream pipeline infrastructure partnership with institutional investors KKR and BlackRock, the company announced on Sunday.

As part of the transaction, a new entity – Adnoc Oil Pipelines – will lease Adnoc's interest in 18 pipelines for a 23-year period.

In turn, Adnoc Oil Pipelines will receive a tariff payable by Adnoc for its share of volume of crudes and condensates that flows through the pipelines, backed by minimum volume commitments.

Funds managed by BlackRock and KKR will also forma  consortium to hold 40 percent interest in the new entity, while Adnoc will hold the remaining 60 percent.

According to Adnoc, the transaction will result in upfront proceeds of around $4 billion to Adnoc. The deal is expected to close in Q3 2019.

In conjunction with the deal, Adnoc said it is “laying the groundwork” for additional infrastructure-related investment opportunities.

Adnoc’s 60 percent equity stake in Adnoc Oil Pipelines will be held through Adnoc Infrastucture LLC, an 100 percent-owned subsidiary, which in the future is expected to include more Adnoc infrastructure assets.

KKR’s investment was made through its third Global Infrastructure Investors Fund – which closed in September at $7.4 billion – while BlackRock is investing through its Global Energy & Power Infrastructure Fund series.

“The level and sophistication of the investors that we are attracting as financial partners to invest, alongside Adnoc, in these select pipeline assets is a clear reflection of the UAE’s stable, attractive and reliable investment environment,” said Adnoc Group CEO and UAE Minister of State Dr. Sultan Al Jaber.

“It also demonstrates the global investment community’s validation of Adnoc’s progressive and smart approach to unlocking value from its portfolio of assets while retaining control over their ownership and operation,” he added.

In a statement, Adnoc noted that the 18 pipelines being leased have a total length of over 750 km, with an aggregate capacity of approximately 13,000 Mbblpd (gross).

Abu Dhabi, home to about 6 percent of the world’s crude reserves, is attempting to generate cash from its prime assets while also attracting more overseas investors as it seeks to further diversify its economy.

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