Aramco Raises $12.4 Billion in Cash Off Pipeline-Lease Deal With EIG

Under pressure from the Kingdom to help boost the private sector’s contribution to Saudi Arabia’s GDP to 65% by 2030, Aramco secures a cash payout of $12.4 billion in one of the world’s largest energy infrastructure deals ever.

The Abqaiq oil-processing facility, located 60 km southwest of Dhahran in Saudi Arabia's Eastern Province, is the world’s biggest oil-processing and crude-stabilization plant. Source: Saudi Aramco.
Abqaiq oil-processing facility_Aramco

Aramco and a consortium led by EIG Global Energy Partners (EIG) have agreed one of the world’s largest energy infrastructure deals to date, one in which Aramco will raise cash while optimizing assets through a lease-and-leaseback agreement involving its crude-oil pipeline network.

At closing, Aramco will receive an upfront payment of $12.4 billion, strengthening its balance sheet and supporting the company’s efforts to attract foreign investment to support the Kingdom’s plan to diversify its economy in this decade, Aramco said in a press release on 9 April.

Central to the transaction is a newly created Aramco subsidiary, Aramco Oil Pipelines Company, which will lease usage rights in Aramco’s stabilized-crude-oil pipelines network for a 25-year period. Aramco holds 51% in the subsidiary; the EIG-led consortium holds 49%, Aramco said.

In return, Aramco will pay a tariff to Aramco Oil Pipelines Company for the stabilized-crude-oil that flows through the network, backed by minimum volume commitments.

Aramco retains full ownership and operational control of its stabilized-crude-oil pipeline network. The transaction will not restrict Aramco’s actual crude-oil production volumes that are subject to production decisions issued by the Kingdom, the news release said.

“This landmark transaction defines the way forward for our portfolio optimization program,” Aramco President and CEO Amin H. Nasser was quoted as saying.We are capitalizing on new opportunities that also align strategically with the Kingdom’s recently launched Shareek program.”

In referencing Shareek (the Arabic word for partner), Nasser is speaking about a program announced by Crown Prince Mohammed bin Salam that promises to spend 27 trillion Saudi Riyals ($7.2 trillion) over 10 years to diversify the Kingdom’s economy, according to arabianbusiness.com.

Saudi Aramco and SABIC, the Kingdom’s petrochemical, fertilizer, and metals business in which Aramco holds 70%, have been tapped to lead the Shareek effort which seeks also to boost private sector support of GDP to 65%, regional media reported.

“In addition to strengthening our balance sheet, this deal sets a new benchmark for infrastructure transactions both regionally and internationally,” said Abdulaziz M. Al Gudaimi, Aramco senior vice president of corporate development, in Aramco’s press release. “It is a vote of confidence in our long-term outlook by EIG and other heavyweights in the investment world and reflects the significant progress we are making in our portfolio optimization program.”

EIG, which has invested more than $34 billion in energy and energy infrastructure, was the deal’s underwriter and is working with Aramco to decide on other parties for the consortium, a source familiar with the deal told Reuters.

Abu Dhabi state investor Mubadala is reportedly one of those interested parties. Abu Dhabi’s National Oil Co. (ADNOC) has signed similar deals over the past 2 years, raising billions of dollars through sale-and-leaseback agreements tied to its own oil and gas pipelines.