BlackRock, investors in $15.5 billion oil and gas Pipeline deal

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BlackRock, investors in $15.5 billion oil and gas Pipeline deal

A group led by BlackRock Inc. plans to invest $15.5 billion in Saudi Arabia's natural gas pipelines as the kingdom opens up more to foreign companies and looks to fund a huge increase in fossil fuel production.

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The consortium will buy a 49% stake in a new entity that holds 20 year leasing rights over pipelines carrying Saudi Aramco gas across the country. Hassana Investment Co., which is controlled by the Saudi government's pension fund, will lead the group alongside BlackRock Real Assets.

Aramco announced on Monday that the deal was part of Saudi Arabia's drive to sell assets and use the money to fund new industries from artificial intelligence to electric vehicles, while increasing output of both oil and gas. Aramco sold a $12.4 billion stake related to its oil pipelines to investors, including Washington-based EIG, in a similarly structured transaction in April.

BlackRock was one of the firms that bid for the gas pipelines, according to Bloomberg last month. Others included EIG, Italian infrastructure firm Snam SpA and China's state-backed Silk Road Fund Co.

Other investors may join the consortium later, along with BlackRock and Hassana.

Aramco, the world's biggest energy company, is considering allowing foreign investment in its gas fields. Saudi Arabia is expected to spend around $100 billion to increase output, including at the giant Jafurah field. That is in addition to Aramco's plan to raise daily crude-production capacity to 13 million barrels by 2027 from 12 million barrels.

Aramco Gas Pipelines Co., the new subsidiary, will receive a tariff for flows through the network. Aramco, which guarantees certain levels of throughput, will retain a 51% stake in the unit.

Aramco said the deal will strengthen its balance sheet. The firm's debt levels went up last year after it took control of chemicals maker Sabic for $69 billion and oil demand fell with the onset of the coronaviruses epidemic.

The financial position has rebounded this year thanks to a bounce in oil prices. In the third quarter, free cash flow rose to almost $29 billion, covering its quarterly dividend of $18.75 billion, which is the world's largest. Its gearing ratio, a measure of net debt to equity, was 17.2%, above management's preferred cap of 15%. None of the Fall of a Russian cyberexecutive who Went Against the Kremlin