State owned Kuwait Petroleum Corporation (KPC) has signed a $16 billion lease-and-lease-back agreement for its oil pipeline network aimed at raising capital for its long-term oil production growth ambitions.
In a statement released on Saturday, KPC said that wholly-owned subsidiary Kuwait Oil Company (KOC), the operator of the country’s 320-kilometre pipeline network, signed the agreement with a consortium of global investors comprising Blackstone, Brookfield and KKR.
KOC and the consortium will establish a new joint venture, in which KOC will hold a 51% stake and the consortium the remaining 49%.The Kuwaiti-incorporated joint venture will lease from KOC the usage rights to the country’s network of 13 pipelines. The venture will then grant back to KOC the exclusive use, operational and maintenance rights in the pipeline assets for a 20.5 year period, in exchange for a volume-based tariff, the statement said.
KOC will retain full ownership and operational control of the pipeline network. The joint venture will not impose any restrictions on Kuwait’s refining throughput or production volumes, all of which remain subject to decisions made by the State of Kuwait, according to the statement.
Upon closing, the deal will generate upfront proceeds of $7.85 billion for KOC and KPC, which will be used to support the Kuwaiti company’s capital expenditure plans, according to the statement.
These include a target to reach production capacity of 4 million barrels per day of oil by 2035.
Kuwait’s current Opec oil production quota is around 2.63 million bpd, although output has been trimmed substantially in recent months after conflict in the Middle East triggered the effective closure of the Strait of Hormuz.
KPC estimates production capacity at the fields it operates at between 2.8 million and 2.9 million bpd.
The lease-and-lease-back agreement will be governed under Kuwaiti law and is subject to customary closing conditions and regulatory approvals, the statement said, without providing a timeline.
“The agreement ranks among the first major inward investments in the Arabian Gulf region since the onset of recent tensions” in the Middle East, KPC said.
Three similar pipeline lease-and-lease-back deals in the region were concluded between 2019 and 2021.
KPC deputy chairman and chief executive Nawaf Saud Al-Sabah welcomed the involvement of the three investment companies, adding that “their investment reflects confidence in Kuwait’s resilience, the quality of KPC’s assets and our long-term vision for the country’s energy sector”.
“This transaction sends a powerful signal that Kuwait continues to rise as an attractive destination for global capital, even amid a challenging regional environment,” he said.