Investing giants BlackRock and KKR on Sunday signed a $4 billion agreement with Abu Dhabi’s National Oil Company (ADNOC) to become the first institutional investors joining forces with a national oil producer in the Middle East.
The deal represents a landmark partnership in midstream pipeline infrastructure development for ADNOC. It’s also the latest step in its drive to diversify revenue sources and bring private capital and more commercial management into the company.
The agreement forms a new entity called ADNOC Oil Pipelines, which will “lease ADNOC’s interest in 18 pipelines, transporting stabilized crude oil and condensate across ADNOC’s offshore and onshore upstream concessions,” for 23 years, according to the company’s press release Sunday.
ADNOC will retain a 60 percent majority stake, with BlackRock and KKR collectively holding a 40 percent interest in the consortium, the company said.
BlackRock CEO Larry Fink described what he saw as Abu Dhabi’s push to attract more foreign capital and its potential in global financial markets.
“Abu Dhabi wanted to play on the world stage… and it was not us pushing them, if anything they were already there in terms of what type of transparency is necessary to attract foreign investors,” he told CNBC Sunday. “For a transaction like this, it came very rapidly.”
Coinciding with the growth of private-public partnerships, institutional investors are seeking “long-dated, high quality assets,” the CEO said, pointing to “the stability of the cash flows of the pipeline.”
With $6.4 trillion in assets under management as of late 2018, BlackRock is reported to be the largest asset manager in the world. Fink honed in on the importance of transparency and governance in bringing in international capital, areas where the region more broadly has been known to fall short.
“It’s my hope that with the success of our ADNOC transaction, that not only other entities in Abu Dhabi but the entire region will open up and see that with more transparency, with better governance structure, the foreign capital attraction to the region is quite large — so it’s a win-win for the foreign capital that is looking for investing in stable, solid projects, and it’s a very large win for the region showing that its playing on the world stage. There’s a great opportunity for importing capital.”
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