LNG

Sempra, the US utility whose LNG unit Sempra Infrastructure owns Cameron LNG in Louisiana and other projects in Mexico, has taken a positive final investment decision to build the Port Arthur liquefaction and export plant in Texas.

The Abu Dhabi National Oil Company, the oil, natural gas and LNG producer, has signed a landmark midstream infrastructure partnership with two of America’s largest equity funds, BlackRock and Kohlberg, Kravis Roberts (KKR), for an initial upfront payment to Adnoc of $4 billion.

The deals were signed in Abu Dhabi by Ahmed Al Jaber, the United Arab Emirates Minister of State and Adnoc Group Chief Executive and Laurence D. Fink, BlackRock Chairman and CEO and Henry Kravis, Co-Chairman and Co-CEO of KKR.

The UAE is the oldest LNG producer in the Middle East from its Das Island plant offshore Abu Dhabi consisting of three Trains with capacity of around 5.5 million tonnes of LNG per annum.

Adnoc recently confirmed new discoveries of gas in place totaling 15 trillion cubic feet and intends to continue LNG production for 40 more years and to increase its discovered resources and oil and gas infrastructure development.

It is also embarking on multiple sour gas projects and others onshore and offshore.

As part of the Adnoc transaction with the US funds, a newly formed entity called Adnoc Oil Pipelines will lease Adnoc’s interest in 18 pipelines, transporting stabilized crude oil and condensate across Adnoc’s offshore and onshore upstream concessions for a 23-year period.

“The entity will, in turn, receive a tariff payable by Adnoc, for its share of volume of crude and condensate that flows through the pipelines, backed by minimum volume commitments,” they explained.

Funds managed by BlackRock and KKR will form a consortium to collectively hold a 40 percent interest in the entity, while Adnoc will hold the remaining 60 percent majority stake.

Sovereignty over the pipelines and management of pipeline operations remain with the UAE company.

“The transaction will result in upfront proceeds of approximately $4 billion to Adnoc and is expected to close in the third quarter of 2019, subject to customary closing conditions and all regulatory approvals,” said Adnoc and the two equity funds.

“BlackRock and KKR’s long-term investment underlines the attractiveness of Abu Dhabi and the UAE as a rapidly emerging investment destination for international capital,” they said.

“This transaction marks the first time that leading, global institutional investors have deployed capital into key midstream infrastructure assets of a national oil company in the Middle East,” they added.

In conjunction with this transaction, Adnoc said it was laying the groundwork for additional infrastructure-related investment opportunities with institutional investors.

Adnoc’s 60 percent equity stake in Adnoc Oil Pipelines will be held through Adnoc Infrastructure, a subsidiary.

“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’s Al Jaber.

Commenting on the transaction, KKR’s Kravis said it could be a catalyst for further foreign investment and broader economic transformation in the UAE.

“Having long had a presence in the region, we appreciate the high quality of Adnoc as a partner and Abu Dhabi’s investor-friendly environment to enable our first direct investment in the region. With this transaction as a precedent, we believe there is substantial potential to do even more,” stated Kravis.

This transaction follows several other recent value creation initiatives including Adnoc’s debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (Adcop) bond, the IPO of Adnoc Distribution, the recent strategic equity and commercial partnerships between Adnoc Drilling and Baker Hughes of the US as well as Adnoc Refining’s deal with Eni of Italy.