BP has struck a deal with Apollo Global Management which will see the US investment giant pay one $1billion for a stake in a major natural gas pipeline in southern Europe.
Apollo is set to become a vested partner in BP's subsidiary that boasts a 20% interest in the Trans Adriatic Pipeline (TAP), which funnels gas from the Greek-Turkish frontier to Italy. This artery is a segment of the sprawling Southern Gas Corridor pipeline network, a massive 3,500-kilometre chain stretching from the Caspian Sea all the way to European territories.
The agreement hands Apollo a share of TAP's earnings while BP keeps its hand on the helm. As BP sharpens its focus on monetary prudence, aiming to generate between $2bn-$3bn via divestitures and other means, this transaction plays a contributing role to those ends.
The backdrop sees energy giants facing a fall in oil prices amid weak demand, putting their capacity to deliver shareholder returns through buybacks at risk. Earlier this year BP announced it was steering ahead with a $3.5bn buyback scheme for the ongoing year, having already undertaken $1.75 billion of it by May.
BP's executive vice president of gas and low-carbon energy, William Lin, stated: "We are very pleased to come together with Apollo on this key piece of Europe's energy infrastructure. Importantly, while bringing in a new investor, this does not diminish BP's role in a strategic asset for our Azerbaijan gas business."
"We see great potential in building innovative arrangements such as this and look forward to continuing to explore further opportunities with Apollo through growing this collaborative relationship."
Leslie Mapondera, an Apollo partner, added: "We are pleased to partner with BP on an agreement that will provide our investors with long-term exposure to an industry-leading infrastructure asset with a stable cash-flow profile, while allowing BP to meet its objectives of retaining control and executing on its capital efficiency strategy."
