March 11, 2019 [Tank News International] – ADNOC has entered into a landmark multi-billion-dollar midstream pipeline infrastructure partnership with KKR and BlackRock, two of the world’s leading institutional investors.
As part of the transaction, a newly formed entity called ADNOC Oil Pipelines – Sole Proprietorship LLC – will lease ADNOC’s interest in 18 pipelines, transporting stabilised crude oil and condensate across ADNOC’s offshore and onshore upstream concessions, for a 23-year period.
The entity will, in turn, 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.
Sovereignty over the pipelines and management of pipeline operations remain with ADNOC. The transaction will result in upfront proceeds of approximately $4bn to ADNOC and is expected to close in Q3 2019, subject to customary closing conditions and all regulatory approvals.
BlackRock and KKR’s long-term investment underlines the attractiveness of Abu Dhabi and the UAE as a rapidly emerging investment destination for international capital. This transaction marks the first time that leading, global institutional investors have deployed capital into key midstream infrastructure assets of a national oil company in the Middle East.
In conjunction with this transaction, ADNOC is laying the groundwork for additional infrastructure-related investment opportunities with institutional investors. ADNOC’s 60% equity stake in ADNOC Oil Pipelines will be held through ADNOC Infrastructure LLC, a 100% ADNOC-owned subsidiary, which also holds ADNOC’s 100 percent stake in Abu Dhabi Crude Oil Pipeline (ADCOP). In time, ADNOC Infrastructure LLC is expected to add further select ADNOC infrastructure assets and become the key vehicle for a new and innovative ADNOC infrastructure investment platform.
As announced in July 2017, ADNOC is significantly expanding its strategic partnership model and creating new investment opportunities across all areas of its value chain, while at the same time, more proactively managing its portfolio of assets and capital.
This transaction follows several other recent value creation initiatives including ADNOC’s debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (ADCOP) bond, the IPO of ADNOC Distribution, the recent strategic equity and commercial partnerships between ADNOC Drilling and Baker Hughes as well as ADNOC Refining and Eni and OMV. Fitch Ratings also recently assigned ADNOC a standalone credit rating of AA+ and a Long-Term Issuer Default Rating of AA with a Stable Outlook. Both ratings are the highest currently assigned by Fitch for any oil and gas company, globally.
The deal represents a major step in ADNOC’s commercially focused 2030 smart growth strategy, marked by significant milestones of the last three years. The company has consolidated its businesses and unified its brand identity; entered the global capital markets for the first time; completed the first ever IPO of an ADNOC business; opened-up its concessions to new strategic partners; competitively tendered new exploration blocks for the first time in Abu Dhabi’s history; launched the UAE’s unconventional industry; embarked on an ambitious gas strategy aimed first at self-sufficiency and then transitioning to become a potential net exporter of gas; launched a major $45bn expansion to its downstream operations; undertaken a comprehensive digital transformation and taken its first steps to expand internationally.
Guided by the strategic pillars of People, Performance, Profitability and Efficiency, ADNOC is creating a dynamic corporate culture that optimises resources, maximises value and incubates talent. In 2018, ADNOC achieved its 3.5 million bpd production capacity target and last month was named the most valuable brand in the Middle East.
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