Saudi Aramco strikes $12.4bn oil pipeline deal
Riyadh, Saudi Arabia – Energy giant Saudi Aramco said it has struck a US$12.4bn deal to sell a minority stake in a newly formed oil pipeline business to a consortium led by US-based EIG Global Energy Partners.
The deal underscores how Aramco - the kingdom’s cash cow - seeks to monetise its onceuntouchable assets to generate revenue for the Saudi government as it accelerates efforts to diversify the oil-reliant economy.
‘Upon closing, Aramco will receive upfront proceeds of around US$12.4bn, 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 stabilised crude oil pipelines network for a 25-year period.’
The EIG-led consortium will hold a 49 per cent stake in the subsidiary, Aramco said, adding that it will retain ‘full ownership and operational control’.
In a separate statement, EIG, a Washington-based energy investment firm, said the new venture is valued at approximately US$25.3bn.
The deal covers all of Aramco’s ‘ existing and future stabilised 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.
Neither company said which other firms were part of the consortium.
The announcement comes as Aramco faces pressure to maintain hefty dividend payments to the Saudi government, its biggest shareholder, despite posting consecutive falls in profits since it began disclosing earnings in 2019.
In the statement announcing the deal with the EIG-led group, Aramco chief executive Amin Nasser said the company was ‘capitalising on new opportunities that also align strategically with the recently-launched Shareek programme’.
Last month, Aramco posted a 44.4 per cent slump in 2020 net profit due to lower crude prices, piling pressure on government finances as Riyadh pursues multibillion dollar projects to diversify the economy. Even so, Aramco said it stuck by its commitment to pay shareholders dividends worth US$75bn in 2020 - an amount that exceeds the declared profit and available cash flow.