Abu Dhabi oil giant lands largest energy agreement of 2020

Abu Dhabi oil giant lands largest energy agreement of 2020

A consortium of global investors has entered into a $20.7 billion [AU$ 29.8 billion] agreement with Abu Dhabi National Oil Company (ADNOC).

Last month, the Internation Energy Agency (IEA) reported about the economic impact of the global energy markets amid the coronavirus pandemic. With the recent announcement this week of ADNOC, it looks like this deal could spark some optimism in the energy markets.

The six powerhouse companies that are involved in this deal are Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities, and Snam.

The consortium will acquire a 49% stake in ADNOC Gas Pipeline Assets, its new subsidiary, with lease rights to 38 pipelines amounting to $10.1 billion.

ADNOC will lease the network for 20 years and pay a tariff based on the amount of gas it transports through it. The subsidiary will distribute all its free cash to the investors through quarterly dividends.

Largest transaction since 2017

This gas pipeline deal has surely taken the attention of investors as this deal may help reduce the negative economic impact of COVID-19. Sultan al-Jaber, chief executive officer of ADNOC Group and UAE’s minister of state told CNBC:

“It is in fact a huge achievement, particularly given the current challenging economic climate and business environment, and it is, if anything, a testament to Abu Dhabi and the UAE’s position as a trusted, reliable and credible investment destination”

In addition, Ahmed Al Zaabi, the chief financial officer of ADNOC, also expressed his excitement over the completed deal as the deal will attract more global investors not only in Abu Dhabi but in the entire UAE.

As per Bloomberg, this massive transaction value surpassed KKK & Co.’s agreement in March to purchase the waste management arm of U.K. utility Pennon Group for $5.2 billion, and Portuguese oil company Galp Energia SGPS SA’s plan to sell its gas-distribution assets for $1.7 billion.

Oil prices go back near $40 per barrel since the historic April drop

Last April, oil had a historic price drop which resulted in negative figures. After more than two months, the price rebounded back to its proper levels despite surprise production cuts by Saudi Arabia last month.

Abu Dhabi oil giant lands largest energy agreement of 2020

It also looks like investors won’t see oil fall anytime soon especially with most countries reopening its businesses. With the UAE opening its doors to global investors, economic recovery could take place amid the coronavirus pandemic.

Images courtesy of Gerd Altmann/Pixabay, TradingView

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