Blackstone, Brookfield, KKR Ink $16 Billion Kuwait Oil Deal
(Bloomberg) -- Kuwait has agreed a $16 billion infrastructure deal with Blackstone Inc., Brookfield Asset Management Ltd. and KKR & Co. involving its oil-export pipelines, even as the Gulf nation comes under near-daily attacks from Iran.
The three firms will each hold an equal share of a 49% stake in a joint venture that will lease and lease back the usage rights to all of the pipeline assets of a subsidiary of state-owned Kuwait Petroleum Corp., according to a statement on Saturday. The transaction is expected to generate $7.85 billion in upfront proceeds for Kuwait.
The deal, the largest foreign direct investment in the country’s history, “sends a powerful signal that Kuwait continues to rise as an attractive destination for global capital, even amid a challenging regional environment,” KPC Chief Executive Officer Sheikh Nawaf Al-Sabah said in the statement.
Since hostilities between the US and Iran flared again around July 7, Kuwait has been targeted more than any other country by the Islamic Republic’s drone and missile strikes. Kuwaiti bases, some shared with the US, along with power and water plants, have been damaged.
Still, Kuwait raised $6 billion through a three-part dollar bond sale on Wednesday, underscoring resilient demand for the OPEC member’s debt.
Kuwait opted to press ahead with the pipeline transaction, the first to bring long-term capital from leading global investors into the country’s midstream infrastructure, even amid the conflict. The deal underscores the country’s renewed push to attract foreign investment after years of capital shifting to neighboring Gulf states such as Qatar, the United Arab Emirates and Saudi Arabia.
The JV involves lease usage rights for 13 pipelines. Kuwait Oil Co., a subsidiary of KPC, will hold operating and maintenance rights to the assets for 20.5 years in exchange for a volume-based tariff, according to the statement.
Centerview Partners LLC, HSBC Holdings Plc and JPMorgan Chase & Co. acted as financial advisors on the deal. The proceeds will be used to support KPC’s investment program, which includes boosting crude-production capacity to 4 million barrels a day by 2035.
Kuwait normally pumps about 2.5 million barrels a day, though the war and the effective closure of the Strait of Hormuz forced it to slash output.
Such transactions have become increasingly common across the Gulf as governments seek to diversify their economies and raise money without losing control over their assets.
Abu Dhabi National Oil Co. sold a 40% stake in its oil pipeline network to BlackRock and KKR in 2019, although an Abu Dhabi entity later repurchased the stake. Adnoc also sold leasing rights for part of its gas pipeline business to an investor group led by GIP, while a consortium led by BlackRock acquired a 49% stake in Aramco Gas Pipelines Co.
“This investment reflects our confidence in Kuwait and our commitment to providing long-term capital in support of strategic infrastructure,” said KKR Co-Chief Executive Officers Joe Bae and Scott Nuttall.
Blackstone CEO Stephen Schwarzman said Kuwait’s a “compelling destination for international capital.” Brookfield’s CEO, Bruce Flatt, said Kuwait is a “long-standing and highly valued partner” of the investment company.
Kuwait has suffered multiple strikes on its oil infrastructure this year, including two refineries and KPC’s headquarters in the capital. The country cut production after the Strait of Hormuz was closed and storage tanks filled, with output falling to levels last seen after Iraq’s invasion in the early 1990s. Production has since recovered, though exports remain constrained.
A key US ally in the Middle East, Kuwait is among the world’s wealthiest countries thanks to its vast oil reserves and it one of the largest sovereign wealth funds. Even so, its economy has come under strain this year with the war and production losses, which have caused its fiscal deficit to jump.
KKR, Blackstone and Brookfield — among the world’s largest alternative asset managers — have steadily expanded their Middle East footprint from fundraising outposts into full-scale investing platforms. KKR, which has maintained offices in Dubai since 2009 and Riyadh since 2013, last year appointed former CIA director David Petraeus as chairman of its Middle East business. It established a dedicated regional investment team and subsequently opened an Abu Dhabi office.
Brookfield manages about $16 billion of assets in the region and has continued pursuing acquisitions despite this year’s war, including launching a property joint venture in Dubai and evaluating healthcare and other buyout opportunities.
Blackstone is similarly deepening its presence as the world’s largest alternative asset manager looks to capture a growing pipeline of Gulf transactions. The firm has recently announced partnerships spanning artificial intelligence, logistics and financial technology.
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