Abu Dhabi’s ADNOC inks $10 billion gas pipeline deal

By Monitoring desk

Abu Dhabi: Abu Dhabi National Oil Company (ADNOC) said on Tuesday it has agreed to sell a 49-percent stake in its gas pipeline subsidiary to leading global investors for over $10 billion.

Under the deal, the consortium of investors acquires a 49-percent stake in Gas Pipeline Assets, a newly formed subsidiary of ADNOC with lease rights to 38 pipelines covering a total of 982.3 kilometres (614 miles).

State-owned ADNOC, which manages all the hydrocarbon resources of the emirate of Abu Dhabi, will continue to hold a 51-percent majority stake in the gas subsidiary, it said in a statement.

The deal puts the value of the gas pipeline assets at $20.7 billion, the statement said.

A consortium of Global Infrastructure Partners (GIP), Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities and Italy’s Snam will invest in select ADNOC gas pipeline assets valued at $20.7 billion, ADNOC said.

The venture will bring $10.1 billion in foreign direct investment to Abu Dhabi, where real gross domestic product (GDP) is expected to contract by 7.5 percent this year, according to S&P Global Ratings.

The group of investors will acquire a 49 percent stake in newly formed subsidiary ADNOC Gas Pipeline Assets, while ADNOC will hold the remaining 51 percent.

The deal comes as the world’s top oil and gas companies, including ADNOC, scramble to control costs in response to the coronavirus crisis which has hammered oil demand and prices.

A transformation strategy embarked on four years ago has helped ADNOC adapt more quickly to market changes, and it would continue to work with strategic investors to attract foreign capital and maximise value from its resources.

Under the gas infrastructure deal, ADNOC will lease its ownership of the pipeline assets to ADNOC Gas Pipelines for 20 years in return for a volume-based tariff. The new subsidiary will distribute 100 percent of free cash to the investors as quarterly dividends, ADNOC said.

ADNOC said the deal provides over $10 billion in cash proceeds to the state-owned firm amid a sharp plunge in oil income, which makes up the majority of Abu Dhabi´s public revenues.

Last year, it raised $4 billion by selling 40 percent in ADNOC Oil Pipeline, a subsidiary that carries all Abu Dhabi crude, to US-based investors BlackRock and KKR.

Since 2017, ADNOC has granted concession rights in existing and new oilfields to leading international companies.

ADNOC CEO, Sultan al-Jaber, said the latest deal is the region´s largest infrastructure investment and that it "signals continued strong interest in ADNOC´s low-risk, income-generating assets".

The United Arab Emirates, a leading OPEC crude producer, holds the world´s sixth biggest gas reserves, and in recent months it has announced fresh discoveries of massive quantities of gas and crude oil.

ADNOC plans to boost gas production so that the UAE becomes a net exporter, and also to raise crude output capacity to four million bpd in 2020 and to five million bpd a decade later.