Saudi, Short Of Cash? Looking To Monetize Its Pipelines -- April 6, 2021

Another indication of tough times for Saudi Arabia. 

Saudi Aramco may sell upwards of 49% of its vast pipeline holdings -- The WSJ. 

Saudi Arabia’s energy giant is in advanced talks to sell up to a 49% stake in its oil pipelines to a consortium of U.S., Chinese and local investors for between $10 billion and $15 billion, according to people familiar with the matter.

Saudi Arabian Oil Co., known as Aramco, is in talks to sell the minority stake to a group of investors that could include U.S. buyout giant Apollo Global Management Inc., energy investment firm EIG Global Energy Partners, Chinese infrastructure fund Silk Road Fund, and China Reform Fund Management Co., a Chinese private-equity fund, along with Saudi pension funds, the people said.

The talks represent another far-reaching attempt to monetize Saudi Arabia’s prodigious oil assets—once considered so strategic that even a minority stake sale seemed far fetched. With the ascension of Crown Prince Mohammed bin Salman, however, the kingdom has been more willing to lure foreign investors and cede some control over its oil industry in exchange for cash. Over several years, Prince Mohammed promoted an international listing of Aramco shares, before ultimately deciding on a local listing of a very small slice of the company. 

Under any agreement, Aramco is aiming to sell the minority stake for between $10 billion and $15 billion in a deal that could value Aramco’s network of oil pipelines at more than $20 billion, these people said. A deal could be announced as soon as this week.

For me, this was the most interesting part of the story:

The final structure of any winning group is still in flux, these people said, and talks could still collapse. One possibility is that either Apollo or EIG drop out of the consortium, according to people familiar with the matter. That would help ensure all players in the group have enough equity in the deal to make it worth their while. 

Still, there is recent precedent for two Western anchor private-equity investors teaming up. Abu Dhabi National Oil Co. successfully convinced BlackRock Inc. and KKR & Co. to drop their individual bids and join forces to secure a $4 billion midstream pipeline deal in 2019.