Iraq may have twice as much oil as previously thought, says minister

Jabar Al-Luaibi said Iraq’s oil reserves may be double their current estimated level. (REUTERS)
Updated 29 March 2018
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Iraq may have twice as much oil as previously thought, says minister

LONDON: Iraq’s oil reserves may be double their current estimated level, according to the country’s oil minister, as OPEC’s second-largest producer invited tenders for the exploration of 11 oil and gas blocks in the country’s south and east.
Jabar Al-Luaibi made the prediction at an energy conference in Baghdad on Wednesday, Reuters reported, with his comments subsequently echoed by Adnan Al-Janabi, head of the Iraqi parliament’s oil and gas commission.
The doubling of the country’s proven reserves would see Iraq overtake Saudi Arabia to contend with Venezuela for the title of the country with the largest proven reserves.
The South American nation says it has just over 300 billion barrels worth of proven reserves, a claim met with skepticism by some market analysts, with much of its reserves consisting of hard-to-access heavy oil in the country’s Orinoco belt.
Iraq last year upgraded its reserve estimates to 153 billion barrels from their previous level of 143 billion.
The oil minister’s statement is more likely to relate to future possible increases in resources, rather than an immediate upgrade to current reserves, said Robin Mills, CEO of UAE-based Qamar Energy.
“I don’t think it has any impact on the short- or medium-term output from Iraq, but it does emphasize the tension between OPEC restraint and Iraq’s plans for production growth,” he said.
The country plans to boost crude production to more than 5 million barrels per day from the current level of 4.35 billion.
However Al-Luaibi insisted that it “definitely will not deviate from the overall decision of OPEC” when it comes to the possible extension of a deal between OPEC and other producers to cut production, due to expire at the end of the year, Reuters reported.
Speaking at the same event, OPEC Secretary-General Moham-med Barkindo told the conference that the bloc was seeking “very long-term” cooperation with non-OPEC producers.
His remarks follow comments earlier this week by Saudi Arabia’s Crown Prince Mohammed bin Salman that the Kingdom is in discussions with Russia to forge an unprecedented 10-20 year cooperation agreement, building on the success of 2016’s agreement between OPEC and non-OPEC producers to cut output to support oil prices.
Brent crude futures, which slumped below $30 a barrel in early 2016, have recovered as a result of the production cut agreement, trading at about $70 a barrel this week.
Barkindo told conference delegates in Baghdad that OPEC was evaluating the impact of the deal to determine the “appropriate action” when it expired at the end of this year.
“In addition to the 24 countries that came to sign the declaration of cooperation in November, we have six more producing countries who came to show solidarity,” he said.
Al-Luaibi said that several oil exporters have suggested a six-month extension to the deal, declining to name them.
Barkindo said that investment in the industry was increasing following the recovery in prices, but had yet to reach levels witnessed before prices began falling in late 2014.


Gulf companies challenged by debt and rising interest rates

Updated 22 April 2018
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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.”

FACTOID

Four

The number of interest rate rises in the UAE since March 2017.