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MEOG: Pipelines and payments

In this week’s MEOG, we look at the ongoing asset monetisation of the world’s largest oil producer and a breakthrough budget payment in Iraq.

Saudi Aramco was this week reported to have invited banks to pitch for work on a deal to monetise its gas pipeline network in much the same way it did for oil. Meanwhile, the company's senior vice-president for corporate development was quoted as saying that such moves would not be reliant on market conditions, suggesting that Saudi Aramco intends to continue developing its relationship with investors.

Speaking to Reuters, sources said that Aramco is seeking a bank for the financing advisory role as the company aims to replicate the success achieved when it closed a $12.4bn deal in April for a consortium led by EIG Global Partners to acquire a 49% stake in Aramco Oil Pipelines Co. (AOPC) for a duration of 25 years. Morgan Stanley was first reported to have been appointed as M&A adviser, but then removed from the role, with Goldman Sachs and JPMorgan brought in as replacement with the latter having advised on the oil pipelines lease agreement.

Under that deal, the Saudi firm will be liable for all maintenance and to make rate payments for crude transferred through the extensive pipeline network. The gas pipeline deal – for Aramco Gas Pipelines Co. (AGPC) – will be a “copy paste” of the oil network arrangement.

Meanwhile, with financial strain rarely out of the headlines in Iraq, good news came by way of a report from Iraq Oil Report that quoted officials in both the Federal and KRG administrations as confirming the first transfer of funds from the 2021 state budget.

The sources said that IQD200bn ($138mn) was transferred to Erbil from Baghdad.

However, it was unable to confirm whether this would be followed by further payments, as challenging discussions remain ongoing between the governments relating to oil sales.

In late March, the Iraqi Cabinet passed an agreement pegging the 2021 budget at IQD130 trillion ($89.65bn) with the deficit estimated at IQD28.7 trillion ($19.79bn). With the country 97%-reliant on oil exports, the budget is based on an oil price of $45 per barrel with total exports averaging 3.25mn bpd.