Abu Dhabi National Oil Company (ADNOC) announced that it has entered into a landmark midstream pipeline infrastructure partnership with KKR and BlackRock, two of the world’s leading institutional investors.
Based on the agreement, a newly formed entity called ADNOC Oil Pipelines – Sole Proprietorship LLC 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.
ADNOC Oil Pipelines will 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.
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 which will maintain sovereignty over the pipelines and management of operations.
The transaction will result in upfront proceeds of approximately $4 billion to ADNOC and is expected to close in Q3 2019.
The agreement was signed by UAE Minister of State and ADNOC Group CEO Sultan al-Jaber, Co-Founder, Co-Chairman and Co-CEO of KKR Henry Kravis, and Chairman and CEO of BlackRock Laurence D. Fink.
Commenting on the agreement, Jaber said that this transaction is another example of the innovative steps ADNOC is taking to constantly optimize our assets and capital and deliver sustained value.
“We are creating a range of attractive opportunities for global and regional institutional investors to partner and invest alongside ADNOC to enhance value from our sizeable infrastructure base, drawing on our expertise in structuring and packaging value-enhancing partnership programs that preserve Abu Dhabi’s ownership and control of its assets.”
He described the transaction as a “milestone for ADNOC and Abu Dhabi” as it paves the way for further significant foreign direct investment into the UAE.
“We have created an innovative core midstream infrastructure platform alongside ADNOC and BlackRock that can be a catalyst for further foreign investment and broader economic transformation in the United Arab Emirates,” said Co-Founder of KKR.
Kravis expressed the company’s appreciation for ADNOC as a partner and Abu Dhabi’s investor-friendly environment to enable its first direct investment in the region.
“With this transaction as a precedent, we believe there is substantial potential to do even more.”
“For many years BlackRock has had strong relationships in the United Arab Emirates and across the region, so we are especially pleased to be able to play a role in this landmark transaction,” indicated CEO of BlackRock.
Fink explained that public-private partnerships are essential for investment to drive continued economic growth in the region, and the agreement among ADNOC, BlackRock, and KKR will be followed by many more such partnerships to invest in the future growth of the region.
KKR’s investment was made through its third Global Infrastructure Investors fund, which closed in September 2018 at $7.4bn.
The company invests in infrastructure assets on a global basis, with $12.6 billion in assets under management within its Infrastructure strategy.
The agreement explains that collection of 18 pipelines being leased by ADNOC Oil Pipelines has a total length of over 750km, and a total aggregate capacity of approximately 13,000 Mbblpd. These assets represent key midstream infrastructure for Abu Dhabi’s energy ecosystem, allowing for the vast majority of Abu Dhabi’s crude oil production to be transported from ADNOC’s onshore and offshore upstream assets, to Abu Dhabi’s key takeaway outlets and terminals for conversion to other high-value products, or on to global energy markets.
The pipelines have underlying long-term minimum volume commitments and are supported by stable crude oil production from ADNOC Onshore and ADNOC Offshore, the leading onshore and offshore operating companies in ADNOC with global IOCs as JV partners, each with an average remaining concession life of over 35 years.
