FSUOGM: US asset fund buys stake in Trans-Adriatic gas pipeline

US asset management fund Apollo Funds is to buy a non-controlling stake in the BP subsidiary that controls a 20% interest in the Trans-Adriatic Pipeline (TAP) that flows Azeri gas to Europe, the companies announced on September 16.

The deal, worth around $1bn, will expose Apollo to a world-class energy asset while enabling BP to unlock near-term value and capital that it can reallocate, the companies said. Separately, the pair also agreed to explore greater strategic cooperation, including on energy transition opportunities.

The exact share Apollo is purchasing was not disclosed. The deal is expected to close in the fourth quarter of this year, subject to regulatory and partner approvals. BP said proceeds would go towards the company’s 2024 divestment target of $2-3bn.

“While bringing in a new investor, this does not diminish BP’s role in a strategic asset for our Azerbaijan gas business,” the UK major’s vice president for gas and low-carbon energy, William Lin, said in a statement. “We see great potential in building innovative arrangements such as this and look forward to continuing to explore further opportunities with Apollo through growing this collaborative relationship.”

Skardon Baker, a partner at Apollo said that the transaction would “provide our investors with long-term exposure to an industry-leading infrastructure asset with a stable cash flow profile, while allowing BP to meet its objectives of retaining control and executing on its capital efficiency strategy.”

TAP is the final 880-km leg of the Southern Gas Corridor (SGC) network of pipelines that pumps gas from Azerbaijan to Georgia, Turkey and southern Europe. The section stretches from east Turkey through Greece and Albania before running under the Adriatic Sea to make landfall in Italy.

The pipeline has a current capacity of 10bn cubic metres per year, but its shareholders are planning an expansion that would double this to 20 bcm per year, to support additional Azeri gas flow to Europe.

Pipeline infrastructure is seen as an attractive investment for asset management funds seeking stable, long-term earnings. As of the end of June, Apollo held $88.2bn of assets globally.

In addition to BP, TAP’s shareholders include Azerbaijan’s SOCAR, Italy’s Snam, Belgium’s Fluxys and Spain’s Enagas, all of which own 20% shares. BP is also the operator of the giant Shah Deniz gas field off Azerbaijan’s coast that supplies the SGC with its gas.

If you’d like to read more about the key events shaping the former Soviet Union’s oil and gas sector then please click here for NewsBase’s FSU Oil and Gas Monitor.