Investors Enter $20 Billion Deal With UAE Oil Company

2020’s Largest Energy Investment Yet

Yesterday, six investment firms entered a $20 billion agreement with the United Arab Emirates’ state oil company. This marks the biggest energy infrastructure investment in the region to date, and the biggest global energy deal so far in 2020.

The six firms will buy a 49% stake in ADNOC Gas Pipeline Assets, a new subsidiary. ADNOC will own a majority 51% stake. In return for the historic amount of foreign direct investment, the group will have lease rights to 38 pipelines. The transaction will generate an initial $10 billion windfall for ADNOC, and allow the partners to invest in infrastructure assets that have a relatively low risk-profile with recurring cash flows.

An Important Step for the UAE Oil Industry

The six companies entering the deal include Global Infrastructure Partners, Brookfield Asset Management, Singapore’s Sovereign Wealth Fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities, and Snam (SNMRF).

Sultan al-Jaber, the UAE’s Minister of State and the CEO of ADNOC Group, hopes this investment will attract other foriegn capital to the UAE’s oil industry. As he put it, “By completing this landmark transaction, we are sending a very strong signal to other potential partners from around the world, that ADNOC continues to be open and in fact, very ready for business.”

Recovering From Low Oil Prices

Oil prices plummeted as the pandemic set in. This battered the economy in the UAE and in other oil-producing Gulf countries. In addition to oil, the UAE relies heavily on aviation and tourism, industries that also suffered significantly because of coronavirus. The IMF expects that the UAE economy will shrink by 3.5% this year.

Oil prices began ticking back up recently due to OPEC+ countries curbing production and demand for oil trickling back as people begin to travel again. West Texas Intermediate crude recently crossed the $40 per barrel mark for the first time since March. The UAE is hopeful these developments, along with the new injection of foreign investment will give its economy a much-needed boost.

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