BlackRock Inc. and KKR & Co. are nearing a deal to sell their multibillion-dollar stake in Abu Dhabi National Oil Co.’s oil pipeline network to local sovereign wealth fund ADQ, people with knowledge of the matter said.
The private equity firms are set to divest the combined 40% holding in Adnoc Oil Pipelines to Abu Dhabi’s ADQ as early as this week, the people said, asking not to be identified discussing confidential information. The stake is set to fetch more than $4 billion including debt, the people said.
ADQ, chaired by influential royal family member Sheikh Tahnoon bin Zayed Al Nahyan, is keen to make long-term investments in domestic infrastructure, some of the people said. BlackRock and KKR bought the stake in Adnoc Oil Pipelines four years ago in what was the first investment by foreign asset managers in the infrastructure of a state-owned oil producer in the Middle East.
Adnoc further reduced its stake in Adnoc Oil to around 51% later in 2019 after selling shares to Abu Dhabi Retirement Pensions & Benefits Fund and Singapore sovereign wealth fund GIC Pte. Adnoc Oil has leases on 18 pipelines and the Abu Dhabi state oil firm continues to manage the pipelines, according to a statement that year.
Any agreement would add to a flurry of potential deals by Abu Dhabi. Adnoc and Austria’s OMV AG are exploring a combination of Borouge Plc and Borealis AG to create a chemicals and plastics company worth more than $30 billion, Bloomberg News reported this month. The energy group is also pursuing a $12 billion takeover of German polymers producer Covestro AG.
Representatives for Adnoc, ADQ, BlackRock and KKR declined to comment.
Strategic Assets
Adnoc, which pumps almost all the oil in OPEC member United Arab Emirates, plans to invest $150 billion to expand production capacity for crude, natural gas and chemicals. It’s also investing in low-carbon energy.
Bloomberg News reported in March that BlackRock and KKR were exploring options including bringing in new backers for their investment in the oil pipeline network.
Private equity firms continue to invest in oil and gas assets even as the world shifts toward greener forms of energy.
Last year, BlackRock Inc. assured Texas it was committed to helping clients invest in the energy industry, rebutting suggestions the firm boycotts fossil-fuel companies through its advocacy for sustainable investing. The world’s largest asset manager was also among those that in October told UK politicians they had no intention of halting the financing on new fossil-fuel supplies. KKR, meanwhile, merged its portfolio company Independence Energy with fellow explorer Contango Oil & Gas Co. in 2021 in what the groups said was a prelude to more share-oil deals.
ADQ was created in 2018 and is Abu Dhabi’s newest wealth fund. It’s one of the 20 biggest sovereign funds in the world with about $157 billion of assets, according to data provider Global SWF.
The firm acts as a holding company for many of the emirate’s strategic assets including Etihad Airways as well as Abu Dhabi’s airport and stock exchange operator. It has invested in top Middle East hypermarket chain Lulu Group and has become more active overseas, buying a stake in agriculture trader Louis Dreyfus Co. and making forays into Egypt.
--With assistance from Nicolas Parasie.
(Adds detail on KKR deal in 10th paragraph.)
Author: Aaron Kirchfeld, Dinesh Nair and Anthony Di Paola