Singapore’s sovereign wealth fund joins BlackRock and KKR in landmark Abu Dhabi oil investment


View of Abu Dhabi’s skyline at sunset from Dhow Harbour in the UAE.

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Singapore sovereign wealth fund GIC has joined major Wall Street investors in a landmark oil pipeline partnership with Abu Dhabi’s National Oil Company (ADNOC), bringing the total investment in the project to nearly $5 billion.

The move, which will see GIC invest $600 million in select ADNOC crude pipeline infrastructure, follows a deal signed in February between the United Arab Emirates’ national oil company and U.S. heavyweights BlackRock and KKR. The $4 billion agreement marked the first time institutional investors joined forces with a Middle Eastern national oil producer.

The addition of GIC, which follows a further $300 million investment in the project by Abu Dhabi’s Retirement Pensions and Benefits Fund (ADRPBF) in April, brings the combined lease-based investment by the investors to $4.9 billion.

The follow-on investment agreement will give GIC a 6% stake in the entity ADNOC Oil Pipelines LLC, which was created in February. BlackRock and KKR together hold 40%, with ADRPBF holding 3% and ADNOC the remaining 51%, according to an ADNOC press release issued Tuesday.

ADNOC retains sovereignty over and management of the pipeline operations, with the transaction expected to close by the end of this year, subject to approvals.

The Sovereign Wealth Fund Institute ranks Singapore’s GIC as the sixth-largest sovereign wealth fund in the world, and estimates it holds approximately $440 billion in total assets.

ADNOC’s diversification drive

The initial deal with KKR and BlackRock, which represented a key partnership in midstream pipeline infrastructure development for ADNOC, was the latest step in the company’s drive to diversify revenue sources and bring private capital and more commercial management into the company.

ADNOC Oil Pipelines will “lease ADNOC’s interest in 18 pipelines, transporting stabilized crude oil and condensate across ADNOC’s offshore and onshore upstream concessions,” for 23 years, the company said in February.

GIC’s Chief Investment Officer for Infrastructure Ang Eng Seng described ADNOC as “a leading operator with a strong track record and an innovative approach.”

“As a global long-term investor, we are confident in the quality of ADNOC’s substantial oil pipeline network, which is a core element of Abu Dhabi’s energy ecosystem. We look forward to supporting ADNOC in the future growth of its oil pipeline business,” he said in a statement Tuesday.

Singapore’s Parliament grounds

Source: Institutional Investor || Photo: AngMoKio

Formed in 1971, the same year as the United Arab Emirates, ADNOC is now playing a leading role in leveraging its assets to attract foreign capital into the country and diversify its funding streams.

In the last year, it’s signed a raft of agreements with international oil and gas companies, including granting minority shareholding to Italy’s ENI and Austrian OMV in its $5.8 billion refinery wing. The two European firms in December joined Germany’s Wintershall in winning minority stakes in developing ADNOC’s offshore gas fields, and Baker Hughes was recently awarded a 5% stake in the national company’s drilling unit.

Ratings agency Fitch earlier this year gave ADNOC a double-A plus credit rating, among the highest it awards oil and gas companies. The UAE ranked 11 out of 190 economies in the World Bank’s 2018 “Ease of Doing Business” ranking.

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