Kuwait is quietly courting investors for a stake in its crude oil pipeline network, marking another signal that the country is serious about the revived plans to sell a USD 7 bn stake in the Kuwait Petroleum Corporation’s (KPC) pipeline network. The transaction is said to be structured as some USD 1.5 bn in equity, with the rest loaded as debt, three sources told Reuters.

Meet the possible suitors: The talks included BlackRock and KKR, both familiar faces in regional pipeline investments, as well as Chinese state players like China Silk Road Fund and China Merchants Capital. Other players involved in the early-stage discussions include EIG Partners, I Squared Capital, and Macquarie Infrastructure Partners.

The playbook: The sale will follow a regional playbook of “lease and leaseback” arrangements, in which state-owned oil producers technically lease ownership of the pipeline assets to a new entity for a specific period of time. This new time-bound entity is what’s up for sale, rather than the assets themselves — an arrangement that allows oil producers to raise funds while maintaining sovereignty in operations and long-term ownership of their strategic assets.

Why now?

Kuwait is trying to catch the diversification train, and leveraging strategic assets like pipelines can help it raise the required funds for its USD 65 bn diversification investment plan. “The pipelines are assets owned by KPC and do not generate direct financial returns,” KPC deputy chairman and CEO Sheikh Nawaf Saud Al-Sabah previously said, adding that leasing and re-leasing could secure much-needed financing for the country.

Oil rates are also adding pressure: With oil prices sitting well below what the Gulf needs to bankroll diversification at full speed, selling stakes in hard infrastructure once treated as untouchable — pipelines, gas networks, power plants, ports — is becoming more popular as a means to tap foreign capital while keeping operational control.

For investors, regional pipeline stakes offer steady returns via transportation tariffs, with some similar transactions in the region previously delivering some 12-14% yields from the stable USD-linked returns, sources and analysts told Reuters.

Background

UAE has been central to this playbook, with Adnoc first leasing its crude lines back in 2019 to a BlackRock-KKR consortium for USD 4 bn for 40% stake. Saudi followed suit, with Aramco selling 49% of its pipelines to EIG in a USD 12.4 bn transaction back in 2021. Bahrain also joined in 2024 with its first-ever infrastructure monetization, selling a minority stake in the Saudi-Bahrian pipeline via Bapco Energies to Blackrock.

Others followed-ish: Oman took the public listing path for its pipelines, floating 49% of OQ Gas Networks via an IPO in 2023 and raising some USD 750 mn.

What’s next?

Stay tuned: KPC is approaching additional banks to join HSBC in underwriting the debt portion of the sale, and the formal process to launch the pipeline stake sale could begin as soon as the end of this month, Reuters reported.

More is coming: The Gulf could see several more USD bns in infrastructure agreements over the year, global co-head of M&A advisory at Standard Chartered Rajesh Singhi told Reuters.

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