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BlackRock to invest $10 billion in Aramco Jafurah Infrastructure Deal

Two people familiar with the matter said that Saudi Aramco was close to signing a deal for the group BlackRock to invest around $10 billion in Aramco’s Jafurah Gas Project infrastructure.

This agreement is the latest in a long line of financial arrangements that are similar to borrowing and allow Gulf oil-producing countries to raise funds to diversify their economy while offering investors a steady revenue stream.

Two people confirmed that the new transaction would be similar to the two infrastructure deals Aramco signed in 2021. This included one where BlackRock invested into Aramco’s gas pipeline network, allowing it to generate funds.

Aramco controlled the infrastructure, while investors received tariffs for using the pipelines.

The talks were private, so both sources requested anonymity. The sources did not specify a date for the finalisation of the deal. Aramco declined to comment.

The $100 billion Jafurah Project, which is potentially the largest shale-gas project outside of the United States, will be central to Aramco’s ambitions to become the world's leading natural gas company and to increase its production capacity from 2021 to 2030 by 60%.

One source said that the assets of Jafurah underpinning this deal included gas pipelines as well as a gas treatment plant.

Aramco is the largest source of revenue for the Kingdom. Saudi Arabia is trying to diversify its economic base as the oil price has come under pressure due to global economic uncertainty.

The Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and aiming to increase market share, has also increased production.

Aramco is reportedly looking to sell five gas-fired plants in order to raise money.

Previous Deals

BlackRock and EIG, two investor groups, took stakes in 2021 in companies leasing usage rights for Aramco's oil and gas pipeline networks. In two separate deals, the groups leased back these rights to Aramco over a period of 20 years. This helped raise $28 billion for Aramco.

Robin Mills is the chief executive officer of Qamar Energy, a consultancy. He said that these transactions were described by Aramco as lease-and-leaseback transactions at the time. They were structured in a way to borrow money.

Mills stated that "the pipeline deals were essentially a securitisation", and not a sales of the asset. Ownership remained with Aramco.

Aramco holds 51% of the shares in Aramco Oil Pipelines & Aramco Gas Pipelines. Aramco pays a tariff to the subsidiaries for crude oil and natural gas flows, with minimum commitments.

The deal followed similar transactions in the region including Abu Dhabi ADNOC's sale of minority stakes to companies that own the leasing rights for its oil and natural gas pipelines. Reporting by Sarah McFarlane, Hadeel al Sayegh, and Federico Maccioni, in Dubai. Additional reporting by Anirban Saba and Yousef Sabah, and editing by Anousha Takoui and Barbara Lewis.

(source: Reuters)