Abu Dhabi wins $10bn FDI in gas pipeline deal

Sultan Ahmed Al Jaber, UAE Minister of State and the Abu Dhabi National Oil Company (ADNOC) Group CEO at ADNOC’s headquarters in Abu Dhabi, UAE, December 10, 2019. (Reuters)
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Updated 24 June 2020

Abu Dhabi wins $10bn FDI in gas pipeline deal

  • Major investment pact highlights appetite for regional energy assets despite fall in oil prices, experts say

DUBAI: Abu Dhabi, capital of the UAE, has pulled off a large foreign direct investment (FDI) deal with a transaction to sell a stake in its gas pipeline network to an international consortium of investors for $10.1 billion.

The deal, between the Abu Dhabi National Oil Corporation (ADNOC) and some of the most prominent global names in infrastructure investment, is the latest in a series of transactions that have seen ADNOC bring big foreign investors into its energy industry.

Sultan Al-Jaber, UAE minister of state and ADNOC CEO, said: “We are pleased to once again partner with some of the world’s leading global infrastructure and institutional investors in what marks the region’s largest energy infrastructure investment.”

He told Bloomberg TV: “Given the global economic climate, it is a great endorsement of ADNOC and the UAE’s world-class assets.”

The new investors comprise some of the biggest institutional players in infrastructure projects, led by US firm Global Infrastructure Partners, Singaporean sovereign wealth fund GIC, Canadian investor Brookfield Asset Management and the Ontario Teachers’ Pension Plan Board.

Investment experts said the deal, which values the pipeline network at $20.7 billion, highlighted the attraction of regional energy assets despite the fall in global oil prices since the outbreak of the coronavirus pandemic.

Tarek Fadlallah, CEO of Nomura Asset Management in the Middle East, told Arab News: “This shows there is still appetite for fossil-fuel related assets in the Middle East.”

Other investors in the gas pipeline network included NH Investment and Securities, the second-largest bank in South Korea, and Italian investment firm SNAM.

The foreign investors will acquire 49 percent of a new ADNOC subsidiary, which will have leasing rights to 38 gas pipelines spanning 982 km for a period of 20 years, in return for a volume-based tariff subject to upper and lower caps.

“The innovative transaction structure allows ADNOC to tap new pools of global institutional investment capital, while at the same time maintaining full operating control over the assets included as part of the investment,” a statement added.

Al-Jaber insisted that ADNOC’s focus would remain on cost control, despite the cash the new deal would throw up, in the middle of a volatile period for world energy markets.

“In today’s low-price environment, we must focus on the things we know we can control and that is, of course, our cost. We need to remain agile. We will continue to stay laser-focused on cost, efficiency, optimization and preserving our resources,” he said.

Adebayo Ogunlesi, chairman and managing partner of GIP, said: “ADNOC’s gas network is a core piece of midstream infrastructure in the UAE, and this transaction presents a unique opportunity to invest in an asset of this quality and importance, while also supporting ADNOC in its smart growth strategy.”

Some investors have backed away from fossil fuel-related assets in the global debate about climate change, but Ziad Hindo, chief investment officer of the Ontario Teachers’ Pension Plan Board, said: “This strategic transaction is attractive as it provides us with a stake in a high-quality infrastructure asset with stable long-term cash flows, which will help us deliver on our pension promise.”

Iranian oil in perfect storm of storage shortage, low demand, sanctions

Updated 29 min 50 sec ago

Iranian oil in perfect storm of storage shortage, low demand, sanctions

  • Coronavirus, US economic action sees inventories reach bursting point

LONDON: Iranian oil production has reached its lowest point in almost four decades, according to industry experts, with the country’s storage facilities fast approaching full capacity.

The news comes amid a dip in Iran’s oil exports due to a crash in global demand, and in a period when its refineries have been hampered as a result of the coronavirus outbreak.

With over 11,000 confirmed fatalities, Iran has suffered the worst coronavirus outbreak in the Middle East, affecting all areas of industry. 

This has created a perfect storm for the country’s vital oil sector, with what little selling ability it has further disrupted by sanctions imposed by the US in 2018 following Washington’s withdrawal from the Iran nuclear deal.

Iran’s total liquid production dropped from 3.1 million barrels per day (bpd) in March this year to 3 million bpd in June, according to FGE Energy, which predicts that the figure will drop by an additional 100,000 bpd in July.

Crude production was as low as 1.9 million bpd in June, the lowest since the beginning of the Iran-Iraq war in 1981.

Exports also fell, with estimates varying depending on source — 100,000 bpd in May according to market intelligence firm Kpler, and around 210,000 bpd according to FGE — well under 10 percent of the 2.5 million bpd Iran exported in April 2018.

Iran’s onshore crude stocks, meanwhile, hit 63 million barrels in June, having been just 15 million barrels in January, according to FGE.

Kpler said Iran averaged 66 million barrels in storage throughout June, meaning that around 85 percent of the country’s total onshore storage capacity was full.

“However, it will technically not be possible to fill tanks to 100 percent, given technical constraints at storage tanks and potential infrastructure bottlenecks,” Homayoun Falakshahi, a senior analyst at Kpler, told Reuters.

Offshore the story is much the same, with options running out fast. Iran has 54 crude oil tankers, according to valuations specialist VesselsValue, and is thought to be using around 30 ships, mainly supertankers with a maximum capacity of 2 million barrels of oil each, to store over 50 million barrels of crude and condensate.

“The exact number of Iranian vessels on floating storage is a bit of a black box as they have all turned off their AIS (tracking transponder) signals,” said a spokesman for shipping group NORDEN.

“Storage is expected to continue as we do not see these vessels being able to trade anytime soon.”

The Iranian-American Harvard analyst Dr. Majid Rafizadeh told Arab News: “Thanks to the re-imposition of sanctions against Tehran by the Trump administration, the regime seems to have suffered a significant loss of revenue.
“Iran’s oil revenues and exports have been steadily declining since President Trump pulled out of the Joint Comprehensive Plan of Action and adopted a policy of ‘maximum pressure.’

“Consequently, the flow of funds to the Iranian regime has been cut off, thwarting the Iranian leaders’ efforts to fund and sponsor Bashar Assad’s regime in Syria and various terror groups.”