Saudi Arabia to lead $300bn regional funding drive says S&P

Saudi Arabia accounts for half of the likely debt requirement of regional sovereign borrowers over the next three years, according to S&P. (Supplied)
Updated 08 November 2018
0

Saudi Arabia to lead $300bn regional funding drive says S&P

  • GCC states have $300bn requirement
  • Bahrain and Qatar expected to rely on debt to plug deficits

LONDON: Gulf states will need to raise as much as $300 billion in funding over the next three years with the lion’s share going to Saudi Arabia, according to a new report.
High oil prices mean that the funding needs of Gulf borrowers are accumulating at a slower pace, S&P Global Ratings said in a report.
Still, GCC government net debt positions have significantly deteriorated since 2015 and now account for a much bigger proportion of fiscal revenue, the ratings agency said.
Saudi Arabia’s deficit alone accounts for about half of the Gulf states’ expected $300 billion financing needs — but as a proportion of overall GDP it is broadly in line with Abu Dhabi and Oman.
Rising interest rates and tighter financing conditions may present a challenge to some regional boomers according to S&P.
“Changes in domestic and international liquidity conditions could present challenges for sovereign issuance and tilt the financing balance toward assets from debt, or increase debt-servicing costs, as is particularly the case in Bahrain (where interest payments account for 23 percent of government revenue),” said S&P.
“We note that global liquidity is becoming scarcer and more expensive, while regional banking sector liquidity remains adequate.”
The rising cost of debt may mean that some regional governments will increasingly focus on asset sales.
Perceived regional geopoitical risk, most notably surrounding tensiions between Iran and Saudi Arabia along with its Gulf allies as well as the standoff between Qatar and some of its neighbors, could make some international investors wary of the region and demand a higher risk premium.
S&P expects debt issuance to account for some 70 percent of the $300 billion financing requirement of the Gulf states.
The ratings agency estimates that gross debt in the region has increased from an average of 14 percent of GDP at the end of 2014 to an estimated 38 percent of GDP by the end of 2018.
Bahrain and Qatar are expected to finance the vast majority of their deficits through debt, while Dubai and Abu Dhabi are likely to rely more on their assets.
S&P expects Bahrain’s net debt to have nearly tripled between 2015 and 2021 while Oman would slip into a net debt position in 2019.
Saudi Arabia’s net assets are forecast to have nearly halved to 65 percent of GDP by 2021.


Adnoc signs deal with Eni on Ghasha concession

Updated 13 November 2018
0

Adnoc signs deal with Eni on Ghasha concession

  • ADNOC grants Eni 25 percent stake in ultra sour gas project
  • Follows Adnoc award to France's Total

LONDON: The Abu Dhabi National Oil Company (ADNOC) has granted the Italian oil company Eni a 25 percent stake in an off-shore gas mega-project, in a move that will support the emirate’s efforts to become self-sufficient in gas.
The energy company is now in discussions with other potential partners for the remaining 15 percent of the available 40 percent stake in the concession earmarked for foreign companies.
The award covers the Ghasha ultra-sour gas concession just off the coast of the UAE, including the Hail and Dalma and other offshore fields. Eni will contribute 25 percent of the development cost of the project which is likely to cost billions of dollars.
The deal comes just days after ADNOC awarded a 40 percent stake to French oil firm Total on Nov. 11 to explore and develop its Ruwais Diyab unconventional gas concession.
The Ghasha gas fields are estimated to hold trillions of standard cubic feet of recoverable gas, according to a company statement.
Once on stream, the project is expected to produce more than 1.5 billion cubic feet of gas per day. This could provide enough gas to supply electricity to more than 2 million homes, said ADNOC.
The project is set to produce 120,000 barrels of oil and high-value condensate per day once complete, the company said.
“ADNOC is committed to ensuring a stable and economic gas supply to the UAE, which is a core component of our 2030 strategy,” said Sultan Ahmed Al-Jaber, UAE minister of state and ADNOC group CEO.
“Development of our Hail, Ghasha and Dalma ultra-sour gas offshore resources, at commercial rates, will make a significant contribution towards delivering that strategic imperative and bringing forward the day when the UAE will not only be self-sufficient in gas but also transitions to net exporter of gas,” he said.
Eni won its first concession rights in the emirate’s oil and gas sector earlier this year, with Adnoc granting the Italian firm a 10 percent interest in its Umm Shaif and Nasr concession and a 5 percent stake in the Lower Zakum concession in March.
“We are pursuing a strategy of growing in the Middle East and today’s signature is further confirmation of our willingness to root our presence in Abu Dhabi,
following the agreements signed last March, with Adnoc,” said Eni CEO, Claudio Descalzi, in a statement.
ADNOC is exploring opportunities beyond Abu Dhabi, having also signed a framework agreement with the Uzbek energy company, Uzbekneftegaz on Tuesday.
The agreement will see the Gulf company provide advice on Uzbekistan’s upstream and downstream operations.