Saudi Arabian Oil Company ('Aramco') has signed a $15.5 billion lease and leaseback deal involving its gas pipeline network with a consortium led by BlackRock Real Assets and Hassana Investment Company, the investment management arm of the General Organization for Social Insurance (GOSI) in Saudi Arabia, in one of the world’s largest energy infrastructure deals.
This represents significant progress in Aramco’s asset optimization program and is the second such infrastructure transaction by Aramco this year after the closing of the oil pipeline infrastructure deal earlier in June 2021.
Upon completion of the gas pipeline transaction, Aramco will receive upfront proceeds of $15.5 billion, further strengthening its balance sheet. The deal 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.
As part of the transaction, a newly-formed subsidiary, Aramco Gas Pipelines Company, will lease usage rights in Aramco’s gas pipelines network and lease them back to Aramco for a 20-year period. In return, Aramco Gas Pipelines Company will receive a tariff payable by Aramco for the gas products that will flow through the network, backed by minimum commitments on throughput. Aramco will hold a 51% majority stake in Aramco Gas Pipeline Company and sell a 49% stake to investors led by BlackRock and Hassana.
Aramco will continue to retain full ownership and operational control of its gas pipeline network and the transaction will not impose any restrictions on Aramco’s production volumes. Aramco is fully committed to sustainable practices and is an industry leader in reducing greenhouse gas emissions, which are among the lowest in the sector.
Amin H. Nasser, Aramco President and CEO, said: 'Today, we have reached yet another major milestone in our portfolio optimization program as we build towards a bigger and stronger gas business. 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.'
The announcement follows a $12.4 billion lease and leaseback transaction concluded in June with a consortium led by EIG Global Energy Partners, which involved Aramco’s stabilized crude oil pipeline network.
Abdulaziz M. Al Gudaimi, Aramco Senior Vice President of Corporate Development, said: 'Our gas pipeline assets are critical and growing, and highly integrated with the rest of Aramco’s oil and gas facilities. We are pleased that we are concluding the second transaction, seeking 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.'
Larry Fink, Chairman and CEO of BlackRock, said: 'BlackRock is pleased to work with Saudi Aramco and Hassana on this landmark transaction for Saudi Arabia’s infrastructure. 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.'
Saad Al-Fadly, CEO of Hassana Investment Company, added: 'Hassana is delighted to be part of this landmark transaction and the associated world-class assets. We are 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.'
Mark Florian, Managing Director, BlackRock Real Assets, said: 'We look forward to partnering with Aramco and leading the equity consortium in this deal involving Aramco’s gas pipeline network. The strongly contracted nature of this investment is a core part of our investment philosophy and represents an attractive opportunity for our clients who are seeking portfolio diversification through infrastructure.'
The gas pipeline transaction is expected to close as soon as practicable, subject to customary closing conditions, including any required merger control and related approvals.