Financial pressure is pushing Saudi Arabia to sell oil pipelines

’s Abqaiq facility in eastern Saudi Arabia (Getty)

In a new strategic move that reflects the size of the financial distress in Saudi Arabia, Aramco plans to sell part of the oil pipeline assets to international investment funds, including the American Blarock Fund, according to the American Oil Price bulletin.

Aramco hopes, through this deal, to obtain 10 billion dollars, to ease the financial hardship it is currently experiencing.
Aramco is seeking to fulfill its promise to distribute $ 75 billion in dividends to shareholders, at a time when its oil revenues are declining due to falling prices in global markets, and it is finding it difficult to obtain new financing.
The Saudi budget relies on spending on oil income, at a time of high debt, and international banks are reluctant to grant easy and flexible financing to international oil companies.

The CEO of Aramco, Amin Nasser, said, in an interview with “Energy Intelligence” last week, that Aramco is seeking to sell part of its assets, but he did not give details about the type of assets that the company will sell.

This step appears to be in coordination with Abu Dhabi, as the Abu Dhabi National Oil Company (ADNOC) sold, last June, part of the gas pipeline assets to six international investment funds for $ 20.7 billion. ADNOC sold a 49% stake in pipeline assets to funds, including the Brookfield Asset Management Fund and the Singapore Wealth Fund. The ADNOC deal gives buyers the rights to 38 oil and gas pipelines in Abu Dhabi.
And Moody’s international investor service agency had stated, two days ago, that Saudi Arabia would not be able to rely on making profits from the state oil company, Aramco, in filling its budget deficit due to the drop in the global price of oil amid the Corona virus pandemic.

Brent crude oil prices have declined by 35 percent this year. In addition, the American rating agency said that Aramco’s commitment to purchase the Saudi Basic Industries Corporation, in addition to buying 70 percent of the chemical manufacturer, and the consequent cash commitments, burdened the company’s finances.

This comes at a time when there are no signs of an imminent recovery in crude oil prices. It is noteworthy that Aramco’s share continued to decline during the current week’s trading.

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