Saudi’s BlackRock-led Investor Group Take Large Minority Stake In Aramco Gas Pipelines Co.

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Saudi’s BlackRock-led Investor Group Take Large Minority Stake In Aramco Gas Pipelines Co.

Fri, 12/10/2021 - 11:49
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A man in a business suit offers money (© Shutterstock/Oleksandrum)
A man in a business suit offers money (© Shutterstock/Oleksandrum)

A Saudi investor group led by a financial giant, BlackRock Real Assets and Hassana Investment Co., will take the largest minority stake of 49% in the recently formed Aramco Gas Pipelines Co. under a 20-year lease deal.

The partnership will see state-owned Saudi gas and oil giant Aramco remain with a 51% stake and receive a whopping $15.5 billion, making the entire project one of the world’s biggest energy infrastructure deals, Aramco said in their Monday’s press release.

The company also added that the project would not limit the gas produced by the company.

Aramco’s investment deal comes barely two years after BlackRock’s CEO Larry Fink made waves for promising to make climate change the centre of the company’s investment strategy.

And a year after the pledge, Fink told the group’s CEOs to get serious with the net-zero emissions target or face the consequences. But now, the finance giant takes the lead in a major investment deal.

Even though BlackRock didn’t publish a release on the details of the project, the group’s CEO, Larry Fink, believes the new developments are in line with his pledge of putting climate at the core of the company’s investment strategy.

“Aramco and Saudi Arabia are taking meaningful, forward-looking steps to transition the Saudi economy toward renewables, clean hydrogen, and a net-zero future. Responsibly managed natural gas infrastructure has a meaningful role to play in this transition,” said Fink in Aramco’s release.

The mega project deal comes at an unusual time when the global energy markets are straining to live up to the inflating demands, as the high energy prices in the U.S and Europe continue to shoot amid the onset of winter, threatening fertilizer production industry and food security in extension.

‘Transition Fuel’ Controversy

While the latest deal forms part of the controversial debate about the role of gas in energy transition, some state-owned gas and oil giant companies view natural gas as a critical bridge in the energy transition due to its low emission compared to coal.

But, other companies view the idea of using natural gas as a “transition fuel” as a contradiction to climate change goals, considering its high methane emission.

Additionally, such a large-scale project may not be completed until around 2050, when many countries in Paris agreement, including Saudi Arabia, promised to achieve net-zero emissions.

Despite the controversial debate, BlackRock finds no contradiction between its investment in gas infrastructure and climate goals since its gas lease project would expire by 2040, ten years before its net-zero target set for 2050.

Saud Arabia is also in the process of reorienting its oil-dependent economy to a massive infrastructure boom, including the development of brand new cities, as it moves to achieve its net-zero emissions target by 2060, as it announced ahead of COP26.

The gas and oil infrastructure deal is the second infrastructure deal for Aramco this year, after selling off stakes for $21.4 billion in its oil pipeline network to investors, with US-based EIG being one of the companies that got a significant share.

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