Lukoil not to join Iraq’s West Qurna-1 oil field

Updated 25 December 2012
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Lukoil not to join Iraq’s West Qurna-1 oil field

MOSCOW: Russia's second-largest crude producer Lukoil said yesterday it had decided not to join the development of Iraq's West Qurna-1 oil field, citing high risks, paving the way for Chinese companies to enter the project.
Lukoil oversees the largest share of oil reserves in Iraq among foreign companies and is already involved in the West Qurna-2 project, while company's from energy-China are vying for Iraqi oil.
"We have analyzed all the risks and decided that, as we have been implementing such a global project as West Qurna-2 without a partner, we would have taken great risks by entering another big project such as West Qurna-1," Andrei Kuzyayev, head of Lukoil Overseas, told Russian state TV channel Rossiya-24.
West Qurna-1 became available for Lukoil and other majors last month when ExxonMobil has informed the Iraqi government it wants to pull out of the $ 50 billion project in southern Iraq.
Iraqi and Chinese sources said CNPC unit Petrochina is negotiating for Exxon's 60 percent in West Qurna-1 project and that there are rival bidders. Royal Dutch Shell is a minority partner.
For China, a major buyer of Iraqi crude, access to reserves is a strategic imperative, and Beijing is prepared to accept tougher terms and lower profits than Western oil majors and even Russian firms which have to answer to shareholders.
Baghdad expects Exxon to complete the sale of its shares in West Qurna-1 by the end of December and the US company has told Iraq it is already in talks with other oil majors.
The US firm has riled the Iraqi central government by signing deals with the autonomous Kurdistan regional government.
Lukoil has been trying to offset production declines at its brownfields in Russia's West Siberia which accounted for some 56 percent of its total production last year by increasing its portfolio of foreign upstream assets.
Lukoil owns 75 percent in West Qurna-2 and has been looking for a partner to replace Statoil which decided to leave the project earlier this year, but declined to name any candidates.


Gulf companies challenged by debt and rising interest rates

Updated 35 min 42 sec ago
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Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.
Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”