Energy giant Saudi Aramco is selling a minority stake for 12.4-billion-dollar in a newly formed oil pipeline business to a consortium led by US-based EIG Global Energy Partners.
The consortium has bought a 49% stake in the Aramco Oil Pipelines company. The operational control will still be with Aramco.
“Upon closing, Aramco will receive upfront proceeds of around $12.4 billion, further strengthening its balance sheet through one of the largest energy infrastructure deals globally,” the company said in a statement late Friday. “As part of the transaction, a newly-formed Aramco subsidiary, Aramco Oil Pipelines Company, will lease usage rights in Aramco’s stabilized crude oil pipelines network for a 25-year period.”
Saudi Aramco is trying to monetize its assets for the government to generate revenue for the Saudi government as it accelerates efforts to diversify the oil-reliant economy.
EIG is a Washington-based energy investment firm. It said the new venture is valued at approximately $25.3 billion.
The deal covers all of Aramco’s “existing and future stabilized crude pipelines” in the kingdom, an elaborate network that connects oil fields to downstream facilities, EIG said.
“We are proud to partner with Aramco in this marquee global infrastructure asset,” said EIG chairman R. Blair Thomas.
There is no news about which other companies form a part of the consortium. Neither company said which other firms were part of the consortium. Mubadala, an Abu Dhabi sovereign wealth fund, revealed that it was in talks to join the EIG investor group. EIG beat bids from BlackRock and Brookfield Asset Management, according to market reports.
The old company has been seeing a steady fall in its profits in the last year due to the tumbling oil prices and a cap on oil supply and production. The Saudi government is its biggest shareholder and expects a regular hefty annual dividend, which the company is finding difficult to fulfil.
It has also amassed a huge amount of debt owing to the double whammy of low prices and sharp cuts in production triggered by the coronavirus pandemic.
Saudi Aramco listed on the Riyadh exchange in 2019 and began disclosing earnings since then.
Last month, Aramco posted a 44.4 percent slump in 2020 net profit due to lower crude prices. The Saudi government has undertaken some major multi-billion dollar mega projects in a bid to take the country away from its total economic reliance on oil and its exports. This has added to the pressure for supplying the money on the giant oil company.
Despite the losses, Aramco has met its commitments regarding dividends to its shareholders by paying out $75 billion in 2020 — an amount that exceeds the declared profit and available cash flow.
“The (EIG) deal marks an innovative step for Aramco as it seeks to monetise assets to pay down debt, maintain its dividend payments and fund planned investments,” the Energy Intelligence Group said.
Aramco’s assets are totally under government control. But with rise of Crown Prince Mohammed bin Salman, who is pushing to implement his “Vision 2030” reform programme, the government is finding other uses for its assets. The Prince is planning to diversify into technology and tourism.
Under a programme named “Shareek”, or partner, Aramco and other top Saudi companies will lead the investment drive by contributing five trillion riyals ($1.3 trillion) over the next decade, Prince Mohammed said at a press meet earlier.
Aramco chief executive Amin Nasser said the company was “capitalizing on new opportunities that also align strategically with the recently-launched Shareek programme”.
