On Tuesday, Abu Dhabi National Oil Company (ADNOC) stated, it had signed a $10 billion gas infrastructure deal with a consortium of investors. The deal comes at a time when gas prices are at a low.
The pipeline deal is the world’s single largest energy infrastructure investment this year, said ADNOC’s CEO Sultan al-Jaber.
ADNOC’s investors include Global Infrastructure Partners (GIP), Singapore’s sovereign wealth fund GIC, Brookfield Asset Management, NH Investment & Securities, Ontario Teachers’ Pension Plan Board, and Italy’s Snam.
The pipeline deal will bring $10.1 billion in foreign direct investment to Abu Dhabi whose gross domestic product (GDP) is forecast to contract by 7.5% in 2020, according to S&P Global Ratings.
The consortium will acquire 49% stake in newly formed subsidiary ADNOC Gas Pipeline Assets, while ADNOC will hold the remaining 51%.
The deal comes in the background of the world’s top oil and gas companies scrambling to control costs in response to the coronavirus crisis which has hammered down the demand for gas which in turn has resulted in rock bottom prices.
ADNOC has worked on a four year transformation strategy which has enabled it to quickly adapt to to dynamic market changes. The company will continue to work with strategic investors to attract foreign capital and maximize value from its resources, said al-Jaber while adding, “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”.
“As part of the gas infrastructure deal, ADNOC will lease its ownership of the pipeline assets to ADNOC Gas Pipelines for twenty years in return for a volume-based tariff. The new subsidiary will distribute 100% of free cash to the investors as quarterly dividends,” said ADNOC.
With OPEC+ countries continuing to cut oil production, the oil market has seen a tightening in recent weeks, and with global economies slowly reopening, demand for oil is seeing a slight recovery. This trend is expected to continue for the rest of the year.