Gulf energy companies issued record debt this year

Gulf energy companies issued record debt this year as producers opted to exploit lower borrowing costs to fund expansion plans.

Oil and gas producers, pipeline operators and refiners in Kuwait, Saudi Arabia, the United Arab Emirates, Bahrain, Oman and Qatar took a record $28.7 billion via bonds and syndicated loans in 2017, eclipsing the last high set two years earlier, as per data calculated by Bloomberg.

Those companies snatched around $71.4 billion in the last three years, more than two times the amount in the last period.

The annual average of the JP Morgan Middle East Composite Index’s debt yield, a sign of borrowing rates in the region, reduced 12 basis points to 4.58 percent in 2017, a two-year low. Global energy demand will increase 35 percent by 2040, from 2015, OPEC calculates.

Its Secretary-General Mohammad Barkindo sttaes that oil investment is required now to meet that expansion and to make up for reducing production at older fields.

State-owned companies in the Middle East are dependent on loan from 2014 as revenue decreased with energy prices. Benchmark oil prices in the region collapsed as much as 60 percent in the period.

“I think we will see more debt-raising by state energy companies in 2018,” said Robin Mills, chief executive officer of Dubai-based consultant Qamar Energy. Even after record borrowing, the debt levels of Gulf energy producers lie behind that of publicly traded companies, he mentioned.

Oil and gas producers in Kuwait, Saudi Arabia and the UAE are planning to consume more than $500 billion on energy projects in the next five to 10 years, officials from the countries have reported. Global energy investment was $1.7 trillion in 2016, as per the International Energy Agency.

Abu Dhabi Crude Oil Pipeline, a unit of state-run Abu Dhabi National Oil Co, invested $3 billion in a bond offering in October to finance projects. Kuwait National Petroleum Co took $6.2 billion in May for a refinery and clean fuels projects. Saudi Arabian Oil Co sold $3 billion in Sharia-compliant contracts in April.

Adnoc’s fuel retailing unit took out a loan and revolving credit facility of total worth $2.25 billion in November before its initial public offering this month. Saudi Aramco, as the state energy producer is called, has a $2 billion loan guarantee from the UK government in the run-up to its proposed IPO next year, likely to be the greatest in history.

Further debt may be issued upcoming year to finance power plants in Saudi Arabia and petrochemicals in the region, Mills stated.

Over the next decade, Saudi Aramco will fund $300 billion to look after its spare oil-production capacity and investigate to find for natural gas, President and CEO Amin Nasser stated in July.

Adnoc has plans to invest $109 billion on petrochemical plants, refineries and gas exploration in the next five years, Abu Dhabi Crown Prince Mohamed bin Zayed Al Nahyan mentioned in November on Twitter.

And Kuwait Petroleum Corp has earmarked $112 billion on oil production, petrochemical, refinery and natural gas facilities in the next five years, the company’s managing director of planning and finance, Wafaa Al-Zaabi, stated in September 2016.

 

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