Major infrastructure investors, including BlackRock, Brookfield and Apollo, are aggressively pursuing oil and gas companies to acquire their pipeline networks and storage facilities, capitalising on the sector’s struggle with low equity valuations and declining investor interest.
Private Equity Makes Its Pitch to Energy Majors
At a private meeting held before this month’s Adipec energy conference in Abu Dhabi, executives from ExxonMobil, TotalEnergies, Eni and BP heard a direct appeal from infrastructure investors to monetise more of their physical assets.
“You guys need to rethink how you think about capital,” one participant told the oil company leaders, noting that public equity markets were “not as receptive” to the energy sector.
The pitch was straightforward: with oil majors trading at four to seven times earnings multiples, why not sell infrastructure assets that could command valuations of 10 to 12 times earnings and then redeploy that capital into core operations?
Saudi Aramco Leads State-Owned Company Trend
Saudi Aramco has become a prominent early adopter of this strategy. In August, the state oil giant completed an $11 billion sale-and-leaseback transaction with BlackRock-owned Global Infrastructure Partners for the gas network associated with its Jafurah project.
According to a person familiar with the situation, Aramco is now considering additional asset sales. “Why sit on such a vast and lucrative asset base?” the person said, adding that major sovereign wealth funds and private investment firms expressed frustration at missing the Jafurah deal and have subsequently flooded Aramco’s deals team with offers.
While Aramco has not determined the total value of potential future sales, such transactions could raise billions of dollars to strengthen its balance sheet and finance capital expenditure programmes.
Why Infrastructure Funds Are Interested
Fossil fuel infrastructure has become increasingly attractive to private capital groups as expectations evolve around the pace of the green energy transition. Many investors now anticipate a slower shift away from hydrocarbons than previously projected.
Oil and gas pipelines and related infrastructure offer steady revenue streams backed by long-term contracts, making them appealing to funds managing insurance capital that require reliable returns and long-duration assets.
“They have captive insurance money, which is long-term and cheap,” said the head of a deals team at one oil company. “They sit in the middle and take 2% to 3%.”
This refers to the management fees infrastructure funds charge while providing lower-cost capital than traditional equity financing.
Major international oil companies have proceeded more carefully with infrastructure sales, though activity is increasing as they balance growth ambitions against shareholder demands for disciplined capital allocation, consistent dividends and share buyback programmes.
This year, Shell sold its stake in the US Colonial pipeline to Brookfield in a deal valuing the asset at $9 billion. BP separately sold a position in the Trans-Anatolian pipeline network to Apollo for $1 billion.
Market Dynamics Driving the Trend
The appeal of these transactions reflects fundamental challenges facing the oil and gas sector in public equity markets. Energy companies trade at relatively low valuation multiples compared to historical norms and other sectors, limiting their ability to raise capital through traditional stock offerings.
Infrastructure investors, by contrast, can offer higher valuations for specific assets because they target different return profiles and serve institutional investors with different time horizons and risk tolerances.
Waring suggested the influx of infrastructure capital into state-run oil companies would pressure international oil majors to adopt similar strategies.
“Can the IOCs afford to operate within the confines that the equity market imposes, without considering more innovative solutions?” he asked.
What This Means for Energy Markets
The growing trend of infrastructure investment in oil and gas assets has several implications. First, it provides energy companies with an alternative source of capital at a time when traditional equity investors are reducing energy sector exposure.
Second, it signals continued long-term demand expectations for fossil fuel infrastructure despite climate transition commitments. Infrastructure investors typically deploy capital with 15- to 30-year time horizons, suggesting confidence in sustained hydrocarbon demand.
Third, the sale-and-leaseback model allows oil companies to maintain operational control of critical infrastructure while improving balance sheet flexibility, potentially enabling accelerated investment in both traditional and alternative energy projects.
The trend also highlights how private capital markets are increasingly filling gaps left by public market investors who have become more selective about energy sector exposure amid environmental, social and governance concerns.
