BlackRock, First Reserve invest $900m in Mexican pipelines

The joint acquisition of a 45% stake in the Los Ramones II projects marks the first foreign investment in a PEMEX midstream asset.

BlackRock and First Reserve will be acquiring an approximate 45 percent equity stake in two natural gas pipelines belonging to a subsidiary of PEMEX, Mexico’s state-owned oil and gas company, the two investment management firms said in a statement.

The two firms, which are to pay about $900 million for their combined holding in the assets, did not disclose the equity split between them. Both declined to comment further on the structure of the transaction.

The acquisition, which is subject to anti-trust and other regulatory approvals, is expected to close in the second or third quarter of this year. Upon closing, these pipelines will be the first major PEMEX-sponsored midstream assets to be built in partnership with foreign capital since Mexico approved its Constitutional Energy Reform in 2013.

The two projects – Los Ramones Phase II North and Los Ramones Phase II South – involve the construction and operation of 744 kilometres of natural gas pipelines that will carry natural gas from the Eagle Ford shale play in Texas to central Mexico. Construction of the two pipelines has already begun and commercial operations are expected to commence in mid-2016.

According to the statement, both projects will benefit from a 25-year take-or-pay contract with Pemex Gas y Petroquímica Básica.

The transaction marks the first investment in Mexico’s infrastructure sector for New York-based BlackRock.

“BlackRock intends to establish a local infrastructure investment platform in Mexico, leveraging its global infrastructure investing capabilities and its existing Latin American business,” the firm said in the statement.

The asset manager’s infrastructure investment group, BlackRock Infrastructure, currently manages over $6 billion of invested and committed assets globally.

For First Reserve, a private equity firm exclusively focused on energy, the investment will enable the firm to expand its existing footprint in Mexico’s infrastructure sector.

The Greenwich, Connecticut-based fund manager has over $4 billion dedicated to energy infrastructure opportunities worldwide.