Aramco Cracks Open Its Empire to Wall Street in $35 Billion Push

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(Bloomberg) — Days after a BlackRock Inc.-led group signed an $11 billion lease agreement for some of Saudi Aramco’s natural gas facilities, the energy giant was inundated with calls from funds around the world eager for a slice of the business.

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Emboldened by that demand and driven by a desire to shore up the balance sheet, Aramco executives in Dhahran have lined up the most ambitious privatization plan in the company’s 93-year history. In the months since that deal with BlackRock’s Global Infrastructure Partners, the firm has pushed ahead with a wave of divestments spanning everything from energy facilities and even real estate. 

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In all, the deals are likely to eventually raise as much $35 billion, according to people familiar with the matter. The assets are seen as lucrative and likely to generate interest from a swathe of Wall Street firms despite a regional war that began on Feb. 28., the people said.

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Aramco didn’t immediately respond to a request for comment outside normal business hours.  

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Bankers and dealmakers expect Aramco to open up more assets to global private equity and infrastructure investors. The energy giant is keen to retain full control of its upstream assets but is open to selling minority stakes in downstream and midstream assets, they said, declining to be identified as the information is confidential.

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The proposed sales would hand Wall Street firms a lucrative pipeline of deals at a time when regional conflict threatens broader dealmaking, while helping Saudi Arabia bolster foreign investment inflows that remain far below the kingdom’s ambitious targets.

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Aramco is pressing ahead with these deals as the war in the Middle East has disrupted Gulf exports. The company was able to reroute most shipments away from the Strait of Hormuz through its East-West pipeline to the port of Yanbu, helping keep exports flowing even as traffic through the waterway slowed sharply. And Aramco has said it is taking measures to boost that flexibility further.

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The deals also serve another purpose, displaying Saudi Arabia’s ability to attract money, even in the face of Iran’s attacks on Gulf cities and infrastructure across the region. In the months leading up to the war, the kingdom had ramped up efforts to draw foreign capital and pivoting away from some costly endeavors.

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“Before the spending cuts in mega projects and the Iran War hit to export volumes, this might have been interpreted as Aramco reducing exposure to non-core assets,” said Hasnain Malik, head of emerging market equity and geopolitical strategy at Tellimer. “But now this is going to be considered as maximizing access to liquidity for Aramco and its sovereign shareholder.”

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Long a lynchpin of the Saudi economy, revenue from energy sales and the firm’s hefty dividends help support the kingdom’s expensive economic revamp, which has been hamstrung by growing costs. Aramco has also spent years signaling it wants to extract more value from its sprawling asset base, using infrastructure sales and leverage to help fund expansion while preserving cash for the state.