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Gulf oil and energy producers selling assets, bonds to raise needed funds

Saudi Aramco, ADNOC, and other Gulf oil producers are capitalizing on a rebound in crude prices to attract foreign investors towards asset sales and bond issues

Aramco already sold a 49% stake in its pipeline business this year ADNOC was the first regional oil major to seek outside investment Qatar Petroleum sold $12.5 billion in bonds to help fund the North Field expansion

Saudi Aramco, ADNOC, and other Gulf oil producers are capitalizing on a rebound in crude prices to attract foreign investors towards asset sales and bond issues.

Aramco and ADNOC are both looking to invest in clean energy projects. Aramco also needs to secure minority shareholders their share of the company’s proposed $75 billion of annual dividends in the five years since a 2019 IPO.

Aramco

Aramco is looking to sell its gas pipelines under a leaseback arrangement, and part of upstream and downstream assets, and could offer stakes in refineries, power plants, and potentially export terminals in the future, sources told Reuters.

Stakes in upstream projects such as hydrogen could also be offered to strategic investors, according to Reuters 

Earlier this year, Bloomberg reported that Aramco was reviewing its upstream business and could decide to sell stakes in some not-so-strategic fields to external investors.  

Aramco already sold a 49% stake in its pipeline business this year to a consortium led by U.S. EIG Global Energy Partners for $12.4 billion.

“We plan to continue to explore opportunities to capitalize on our industry-leading capabilities and attract the right type of investment to Saudi Arabia,” Aramco’s president and chief executive Amin Nasser said at the closing of the deal in June.

ADNOC

In the UAE, ADNOC is getting ready for an initial public offering (IPO) of its drilling business, which in 2018 had an enterprise value of about $11 billion, and aims to attract foreign investors to it, sources told Reuters.

ADNOC has already sold a 49% stake in its gas pipelines last year, for $10 bn. This sale marked the start of asset sales from Gulf oil producers.

According to Reuters’ sources, Oman and Bahrain are also looking to monetize assets via stake sales or IPOs.

ADNOC was the first regional oil major to seek outside investment, forming partnerships in both strategic and non-core assets to raise over $30 bn over the past four years.

In a somewhat related development, Abu Dhabi National Energy Company (TAQA) is nearing a deal to sell some light oil and natural gas-producing assets in Alberta and British Columbia to privately-owned Blue Sky Resources Ltd, reported Reuters.

The deal is now awaiting approval from the Alberta Energy Board.

Other Gulf countries

The GCC sits on almost 30% of the world’s oil and more than 20% of its natural gas.  

Saudi and the UAE started privatizing before COVID-19. In late 2019, Saudi Aramco made the headlines by raising $25.6 bn in a record IPO. In 2017, ADNOC sold part of its fuel distribution network for $851 mn in a similar deal.

The slew of deals coming from the UAE and Saudi are also creating a benchmark for assets and bond sales of other regional players.

In April this year, Bloomberg reported that the government of Oman was looking at several options to plug the widened budget hole, including selling a stake in state oil firm OQ via an initial public offering (IPO).

OQ is also reportedly looking to sell assets and tap the international debt market in order to fund its planned $7.9 bn expenditures over the next five years.  In April, Oman’s oil company sold $750 million in bonds.

Bahrain’s Nogaholding, which manages the government’s portfolio in oil and gas assets, is in the process of a “full review of the company’s existing business and strategic plans,” a spokesperson told Reuters.

Qatar Petroleum sold $12.5 billion in bonds to help fund the North Field expansion, a megaproject that should allow the tiny Gulf state to become the world’s largest liquified natural gas producer by 2030.

According to Bloomberg, Kuwait Petroleum plans to borrow up to $20 bn on international debt markets to maintain production levels.