An Example: Outsourcing non-core infrastructure

Oil companies have traditionally been based on a vertically integrated model - for important reasons such as the need to secure a reliable route to market. This has led to major investments in midstream assets such as pipelines, terminals and storage. However, in mature markets the need to control the whole value chain is less - particularly in well-regulated markets.

In a Capital Outsourcing deal, STAR would acquire these midstream assets and contract back for the transportation service. This could be long term - to protect the oil company's route to market - while providing more flexible service than under direct ownership. STAR can also achieve synergies by using spare capacity more effectively.

The oil company liberates capital while still having access to the assets. The deal allows the company to focus on more value-added activities (e.g. exploration and development, trading) - essentially a value arbitrage switching capital from low return to higher return activities.