BlackRock and KKR invest US$4 billion in midstream assets in Abu Dhabi

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BlackRock and KKR invest US$4 billion in midstream assets in Abu Dhabi

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Abu Dhabi National Oil Company (ADNOC) has announced that it has entered into a landmark multi-billion-dollar midstream pipeline infrastructure partnership with KKR and BlackRock, two American 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 stabilized 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% interest in the entity, while ADNOC will hold the remaining 60% majority stake.

The 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 million barrels per day (gross). 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 take-away 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 international oil companies as JV partners, each with an average remaining concession life of over 35 years. 

Sovereignty over the pipelines and management of pipeline operations remains with ADNOC.

The transaction will result in upfront proceeds of approximately US$4 billion to ADNOC and is expected to close in Q3 2019, subject to customary closing conditions and all regulatory approvals.

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.

KKR’s investment was made through its third Global Infrastructure Investors fund, which closed in September 2018 at US$7.4 billion. BlackRock is investing through its Global Energy & Power Infrastructure Fund (GEPIF) series.
 
Bank of America Merrill Lynch and J.P. Morgan acted as financial advisers to ADNOC while Moelis & Company acted as an independent financial advisor to ADNOC.  

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