Aramco Weighs Sale of Stake in Natural Gas Pipelines

Aramco is considering the sale of a stake in its vast natural gas pipeline network to help free up cash and draw more international investors to Saudi Arabia, people familiar with the matter said.

The state-owned energy producer is holding preliminary discussions on the potential move, the people said, asking not to be identified because the information is private. Any deal could raise billions of dollars for Dhahran-based Aramco depending how a transaction is structured, they said.

The discussions are happening barely two weeks after the company announced that a consortium led by Washington-based EIG Global Energy Partners LLC would invest $12.4 billion in its oil pipelines.

It’s unclear if the gas deal would be structured in a similar way. For the oil pipelines, investors will own a 49% stake in a new subsidiary that has leasing rights over the network. Aramco will retain ownership of the oil pipelines themselves and will likely continue to hold a majority stake in the subsidiary.

Strategic Review

Governments in the Persian Gulf are increasingly using their energy companies to raise money and bolster their finances following last year’s coronavirus-triggered collapse in oil prices. Abu Dhabi National Oil Co. raised more than $10 billion last June by selling leasing rights over its gas pipelines to investors including Global Infrastructure Partners and Brookfield Asset Management Inc. Qatar Petroleum is planning to sell up to $10 billion of what would be its first dollar bonds.

Aramco is also conducting a strategic review of its upstream business in a move that could see it introduce external investors to some of its oil and gas assets, Bloomberg News reported last week. Aramco Chairman Yasir Al-Rumayyan has started selling stakes in non-core assets to help maintain the company’s $75 billion dividend, almost all of which goes to the Saudi government.

Aramco’s Master Gas System is a network of pipelines connecting its production with processing sites throughout the kingdom. The infrastructure has a capacity of about 9.6 billion cubic feet per day, according to Aramco’s annual report.

Deliberations are at an early stage, and there’s no certainty Aramco will proceed with a transaction, the people said. Aramco, formally known as Saudi Arabian Oil Co., declined to comment.

The company reshuffled its senior management last year and created a division focused on “portfolio optimization,” which will “assess existing assets” and boost access to growth markets. It is headed by Abdulaziz Al Gudaimi, who reports to Chief Executive Officer Amin Nasser.

Saudi Arabia has the eighth-largest gas reserves globally and the largest in the Arab world after Qatar, according to BP Plc. They had mostly been overlooked by the kingdom as it instead focused on its huge oil deposits. In recent years, the government has sought to increase gas production -- which reached a record level in 2020 -- to diversify the economy and transition to cleaner fuels for local power plants.

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