Kuwait pipeline M&A is dicey spin on old formula

Blackstone, Brookfield and KKR are paying $7.9 bln for a 49% stake in the Gulf state’s oil network. Past deals by ADNOC and Aramco have been safe, mutually beneficial infrastructure plays. Iran hostilities make Kuwait’s one potentially riskier for either the buyer or seller.

Kuwait Petroleum Corporation (KPC) has signed a $16 billion deal to lease and lease back its crude oil pipeline network with a consortium comprising global funds Blackstone, Brookfield and KKR, the state-owned Gulf firm said on Saturday.

Under the investment called Project Peregrine, KPC's unit Kuwait Oil Company (KOC) is establishing a joint venture with the three global investors in a lease and leaseback structure for a 20.5-year period that includes a volume-based tariff, KPC said in a statement.

"This transaction sends a powerful signal that Kuwait continues to rise as an attractive destination for global capital, even amid a challenging regional environment," KPC Deputy Chairman and CEO Shaikh Nawaf Saud Al-Sabah said in the statement.

"This transaction is part of KPC’s long-term strategy to fund future growth and support our ambition of reaching 4 million barrels per day of crude oil production capacity by 2035. It was launched before the recent hostilities in the Gulf and its execution remained on schedule throughout," a spokesperson for KPC said in response to Breakingviews' requests for comment.

"The transaction reinforces Kuwait’s position as an attractive destination for international investment and, because investors’ returns are contingent upon KPC’s oil production, the transaction confirms investors' trust in KPC’s ability to reach its production targets. While the commercial terms remain confidential, the transaction followed a highly competitive process and reflects the confidence global investors place in KPC and the State of Kuwait." they added.

JPMorgan and HSBC, which advised KPC on the transaction, declined to comment.