The Saudi oil giant to cash in $ 12.4 billion in an agreement with a US fund on the use of its pipeline network, a welcome contract as the kingdom struggles to attract foreign investment and diversify its economy.
Cash cow of the kingdom, the largest exporter of crude in the world, Aramco announced late Friday the signing of a contract for the creation of a joint venture with a consortium led by the American fund EIG Global Energy Partners, which will hold 49% against 51% for Aramco.
The joint venture, Aramco Oil Pipelines Company, will lease Aramco’s pipeline system for 25 years, the oil giant added in a statement, adding that it would retain “full ownership and control” of the network.
The transaction is expected to bring in $ 12.4 billion (around € 10.42 billion) for Aramco, which will in return pay the joint venture user rights on the volume of crude passing through the network, with no restriction on the quantity. .
Formerly the preserve of the Saudi state, Aramco has in recent years become a spearhead in the diversification of the kingdom’s economy, which is ultra-dependent on hydrocarbons, with oil revenues financing part of the megaprojects headed by Crown Prince Mohammed ben Salman in within the framework of the “Vision 2030” plan.
The Covid-19 pandemic having weighed on the demand for oil, accentuating the fall in the price of black gold, the kingdom asked at the end of March for an additional effort from large Saudi companies, including Aramco, to stimulate the private sector as part of the a mega-investment plan called “Shareek” (partner in Arabic).
The agreement on the use of its pipeline network “reinforces Aramco’s catalytic role in attracting significant foreign investment in the kingdom”, the company adds in its press release, while Saudi Arabia struggles to attract foreign funds.
Aramco did not specify the names of the other companies forming the consortium.
“New opportunities”
“We are capitalizing on new opportunities strategically in line with the Shareek investment program,” said Aramco CEO Amin Nasser, quoted in the statement, hailing a “major transaction” that will “maximize returns for investors. shareholders ”.
In March, the company announced a 44.4% drop in its net profit in 2020, to $ 49 billion (41 billion euros), weighed down by falling crude oil prices and the pandemic.
This second consecutive decline since the company began reporting results in 2019 is putting pressure on the kingdom’s public finances.
Despite the situation, Aramco has paid out $ 75 billion in dividends to its shareholders, as it committed to when it went public with great fanfare in 2019.
Aramco’s dividend payments are helping the Saudi government, the company’s largest shareholder, manage the kingdom’s abysmal budget deficit.
As part of the Shareek investment program, Mohammed bin Salman said 24 of the largest Saudi companies, including Aramco, had agreed to lower their dividend level, in order to redirect this money to the domestic economy in exchange for financial incentives.
The plan foresees an injection of 12 trillion riyals (about 3.2 trillion dollars, 2.7 trillion euros) into the private sector by 2030, of which 5000 trillion riyals (1.13 billion euros) from large Saudi companies.
“Most important”
The agreement on the pipeline network is “one of the most important agreements on oil infrastructure in the world,” said Aramco, whose assets until recent years were under the exclusive control of the Saudi state, which has dropped ballast under the leadership of the crown prince in recent years.
The oil giant debuted on the Riyadh stock exchange in December 2019 with a then-record IPO – $ 29.4 billion for the sale of 1,725% of its shares.
In January, Mohammed ben Salman announced his country’s intention to sell more Aramco shares in the coming years, with the money generated to be transferred to the Public Investment Fund, the main instrument of the diversification policy. of the country’s economy.
But given the economic and health situation, these sales may not arouse the interest of investors, analysts said.