Page 7 - MEOG Week 14 2021

MEOG FINANCE & INVESTMENT MEOG

Apollo in pole position

for Aramco pipeline lease

SAUDI ARABIA APOLLO Global Management is reported to be being upgraded to increase its capacity from
leading a group of investors to lease a stake in 5mn to 7mn barrels per day (bpd).
Saudi Aramco’s oil pipelines business. Continuing the ambiguity and fluidity of the
According to sources quoted by Bloomberg sale, one source told Bloomberg that Aramco
and Reuters, BlackRock and Canada’s Brookfield could choose the winner in the coming weeks,
Asset Management are no longer in the running, though it may yet decide not to proceed with the
though New York-based Global Infrastructure deal. In October, it was reported that BlackRock
Partners (GIP) remains in the running, while the was in talks to acquire the stake in what Aramco
China Investment Corp. (CIC) sovereign wealth dubbed internally ‘Project Seek’.
fund is considering making a bid. However, talks cooled when appetite for an
In late March, Aramco is believed to have sent agreement under previously discussed terms
a request for proposals (RFP) to a pool of banks diminished amid concern from the conservative
believed to include Al-Ahli NCB, Al Rajhi and Energy Minister Prince Abdulaziz bin Saud, with
Riyad, for funding that it intends to provide to further due diligence deemed necessary.
bidders for the pipeline stake. Meanwhile, with Crown Prince Mohammed
The proposed $10bn deal would cover the bin Salman (MbS) saying this week that the state
lease of as much as 49% in the pipeline division could forego part of its $73.5bn per year dividend
for a period of up to 25 years. from Aramco, the company may find itself under
Under this proposal, Aramco would pay a set less pressure to monetise assets than had previ-
tariff for use of the infrastructure, which includes ously been envisaged. Aramco is being advised
the massive East-West Pipeline that is currently on the deal by JP Morgan and Moelis & Co.™
POLICY

OPEC+ to ease taps in May

OPEC THE OPEC oil cartel and its allies have agreed recovery and the market risks that the extended
to ease production cuts in May following their lockdowns are bringing, decision-makers have
monthly meeting, Reuters reported on April 1 another vision.”
citing sources. The group is set to bring 350,000 Rystad said the market was set to be balanced
barrels per day of oil supply back online in May, in May, with heavy maintenance taking place
followed by a further 350,000 bpd in June and across several countries and the delay to the
around 400,000 bpd in July. Saudi Arabia is Luanda refinery expansion in Angola.
expected to return a further 250,000 bpd of oil to “By mid-summer, we expect the vaccine
the market next month, having made a voluntary hiccups to be a distance memory, and for many
1mn bpd cut earlier this year. developing countries to be nearing 50% vacci-
Under the new agreement, OPEC+ will nation rates,” Dickson continued. “Thus, we still
produce 6.5mn bpd less oil than the baseline expect end-user demand to pick up over the
in May, versus 7mn bpd currently. The group summer as economies open, and in line with
agreed to take an unprecedented 9.7mn bpd of seasonal demand.”
supply offline this time last year in response to Extra supply and rising demand should push
the oil price collapse triggered by the coronavi- implied stocks to a nearly 3mn bpd deficit by
rus (COVID-19) pandemic. OPEC+ member August, according to Rystad. Wood Mackenzie
Kazakhstan has said it will produce more oil in said the deal aligned with its analysis for the sec-
May and June, but has not disclosed numbers. ond and third quarters of 2021.
No other countries have commented on if or “We see the supply and demand balance
how their quotas have been revised. tightening in both quarters with global stock
“The decision by OPEC+ shows that patience draws in each,” Wood Mackenzie vice-president
was exhausted among producers, who could not Ann-Louise Hittle said. “The agreement is sup-
accept that some countries – mainly Russia – portive of oil prices, yet should also help avoid
were allowed to constantly hike their production a sharp spike upward as oil demand picks up.”
while others kept it flat,” Rystad analyst Louise Wood Mackenzie anticipates a strong recov-
Dickson said. “The outcome of the meeting is ery in US oil demand by the third quarter, with
also revealing that even though the group’s own global demand rising 6.2mn bpd year on year in
experts warned about the lagging oil demand 2021.™

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