By: AGBI

State-backed Kuwait Petroleum Corporation (KPC) has signed a multibillion-dollar lease-and-leaseback agreement for its crude oil pipeline network with an international consortium led by Blackstone, KKR and Brookfield.

Under the $16 billion “Project Peregrine” deal, Kuwait Oil Company (KOC), a KPC subsidiary, will set up a joint venture with the consortium and grant it exclusive rights to use, operate and maintain the pipeline assets for 20 years, in return for a volume-based tariff.

KOC will hold a 51 percent stake in the joint venture, while the consortium will collectively own the remaining 49 percent in equal shares, KPC said in a statement.

The deal is expected to generate $7.9 billion in upfront proceeds for KOC, supporting its parent company’s capital expenditure plans, including a target of 4 million barrels per day of crude oil production capacity by 2035 as Kuwait seeks to diversify its capital base.

The agreement is among the first major inward investments in the Gulf since the onset of the Iran war in February, KPC said. It described the commitment as “the largest foreign direct investment in Kuwait’s history”.

“This transaction sends a powerful signal that Kuwait continues to rise as an attractive destination for global capital, even amid a challenging regional environment,” said KPC CEO Sheikh Nawaf Al-Sabah.

The transaction is subject to regulatory approvals.

Last week analysts said Kuwait’s oil production could drop by as much as a quarter in July after an escalation in the US-Iran war effectively re-shut the Strait of Hormuz.

Two of its refineries, Mina Al-Ahmadi and Mina Abdullah, were severely damaged in the first stage of the conflict and could take years to recover.

In March Al-Sabah said the company expects to restore production to full capacity in three to four months once the Iran war ends.

Oil prices dropped 5 percent in early Monday trading after the US and Iran suspended strikes over the weekend, following two weeks of attacks, raising hopes of de-escalation and a diplomatic solution.

Iran had targeted Kuwait and Bahrain after the US began attacks on Tehran earlier this month.