The Saudi Arabian Oil Company, Saudi Aramco, has signed one of the world’s largest ever energy infrastructure deals worth $12.4 billion with the Washington DC-based EIG Global Energy Partners fund as part of a program to secure private capital for more broad-based activities such as new energy projects.
Aramco, a future player in the LNG market and a developer of green energy such as hydrogen, reported record production during 2020 of natural gas as well as oil.
This is the first major deal by Aramco since its stock exchange listing in late 2019 when the Saudi government sold a minority stake in the firm for $29.4Bln in the world’s biggest initial public offering.
The EIG group has now signed a lease and lease-back agreement with Aramco, acquiring a 49 percent equity stake in the newly formed Aramco Oil Pipelines Co., with rights to 25-years of tariff payments for oil transported through Aramco’s crude oil pipeline network.
Aramco will still own a majority 51 percent stake in the new company. The deal comes at a time when the Saudis are aiming to boost domestic natural gas output and are looking at investments in the LNG market and green gases for clean energy supplies for Asia.
“The transaction reflects ongoing progress in Aramco’s portfolio optimization program, which aims to unlock value and maximize shareholder returns,” said Aramco.
“Significant injection of foreign capital reinforces Aramco’s leading position in the international energy arena and Saudi Arabia’s appeal to prominent institutional investors globally,” added the Saudi company.
Upon closing, Aramco will receive upfront proceeds of around $12.4Bln, further strengthening its balance sheet.
The investment firm EIG has invested more than $34Bln in energy and energy infrastructure projects around the world.
Analysts noted that the transaction would not impose any restrictions on Aramco’s actual crude oil production volumes that are subject to production decisions issued by the Kingdom itself.
“This landmark transaction defines the way forward for our portfolio optimization program,” said Aramco President and Chief Executive Amin H. Nasser.
“We are capitalizing on new opportunities that also align strategically with the Kingdom’s recently-launched Shareek program,” added Nasser.
Saudi Arabia’s Crown Prince Mohammed bin Salman launched the Shareek program in March 2021 to strengthen collaboration between the government and the private sector, which he said would enable private investment of 5 trillion Saudi riyals ($1.33 trillion) through 2030.
The word “Shareek” , which means “Partner” in Arabic, and its associated program is aimed at helping the world’s largest oil exporter to reduce its dependence on crude oil and achieve its other ambitious goals in the realms of clean energy and smart-city technologies.
“Aramco’s strong capital structure will be further enhanced with this transaction, which in turn will help maximize returns for our shareholders,” explained Nasser.
“Additionally, our long-term partners in this venture will benefit from investment in one of the world’s most robust energy infrastructures. Moving forward, we will continue to explore opportunities that underpin our long-term strategy,” added Nasser.
R. Blair Thomas, EIG’s Chairman and CEO, said he was honoured to partner with Aramco, describing the company as an undisputed industry leader.
“Aramco’s oil pipeline network is a marquee global infrastructure asset. We look forward to investing in this infrastructure which is critical to the global economy, and to driving value for our institutional investors worldwide,” stated Thomas.