Thu. Jan 20th, 2022

The deal is part of Saudi Arabia’s efforts to sell assets and use the money to finance new industries.

By Bloomberg

A group led by BlackRock Inc. will invest $ 15.5 billion in Saudi Arabia’s natural gas pipelines as the kingdom seeks to boost fuel production and open up more to foreign companies.

The consortium will buy a 49% stake in a new entity that holds 20-year leases over pipelines transporting Saudi Aramco’s gas across the country. Hassana Investment Co., which is controlled by the Saudi government’s pension fund, will co-chair the group with BlackRock Real Assets.

The deal, announced by Aramco on Monday, is part of Saudi Arabia’s drive to sell assets and use the money to fund new industries ranging from artificial intelligence to electric vehicles, while also increasing both oil and gas output. . In a similar deal in April, Aramco sold a $ 12.4 billion stake related to its oil pipelines to investors, including the Washington-based EIG.

Bloomberg reported last month that BlackRock was one of the firms bidding for the gas pipelines. Others include EIG, Italian infrastructure firm Snam SpA and China’s state-sponsored Silk Road Fund Co.

Other investors could later join the consortium with BlackRock and Hassana.

Aramco, the world’s largest energy company, is also considering allowing foreign investment in its gas fields. Saudi Arabia has said it will spend about $ 100 billion to increase output, including at the giant Jafurah field. This is in addition to Aramco’s plan to spend billions of dollars to increase daily crude production capacity to 13 million barrels by 2027 from 12 million.

The new subsidiary, Aramco Gas Pipelines Co., will receive a tariff for flow through the network. Aramco, which guarantees certain levels of throughput, will retain a 51% stake in the unit.

Aramco said the deal would strengthen its balance sheet. The firm’s debt levels soared last year after it took control of chemical manufacturer Sabic for $ 69 billion and demand for oil collapsed with the onset of the coronavirus pandemic.

Its financial position recovered this year thanks to a bounce in oil prices. Free cash flow rose to nearly $ 29 billion in the third quarter, covering its $ 18.75 billion quarterly dividend, the world’s largest. Yet its leverage ratio, a measure of net debt to equity, stood at 17.2%, above management’s preferred limit of 15%.

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