Page 10 - MEOG Week 46

MEOG FINANCE & INVESTMENT MEOG

Aramco to return to debt

markets with bonds

SAUDI ARABIA SAUDI Aramco is set to tap global debt mar- increased scrutiny, though, and despite the chal-
kets for multi-tranche US dollar-denominated lenges, the company can ill afford the public loss
bonds to fulfil funding needs arising from lower of face of failing to make dividend payments.
oil prices brought about by the shuttering of the The company’s total borrowing stood at
global economy in an attempt to stop the spread $135.55bn at the end of September, up from
of the coronavirus (COVID-19) outbreak. $46.82bn at the end of 2019. The surge in bor-
Sources with knowledge of the deal told rowing is mostly due to the $69.1bn acquisition
Bloomberg this week that Aramco could look to of a 70% stake in petrochemicals giant Saudi
raise around $6bn. Basic Industries Corp. (SABIC) from the Pub-
With free cash flow (FCF) having dropped by lic Investment Fund (PIF), completed in June
more than $20bn during the first nine months of 2020. While Aramco has benefited from greater
2020 compared to a year earlier, the company is economies of scale as it became one of the world’s
left with a shortfall to fulfil its commitment to largest chemicals producers overnight, the move
pay a $75bn per year dividend. was widely seen as an accounting trick, moving
One of the key promises ahead of the com- money from one government pocket to another.
pany’s initial public offering (IPO) in Decem- In addition to existing debts, Aramco has sev-
ber last year was the dividend to shareholders eral lines of credit with local and international
– $18.75bn per quarter. However, with 98.5% banks running into the billions. It took a $10bn
of the company remaining under state control, loan in May and has an $8bn revolving credit
only $1.125bn is due to leave Saudi coffers. FCF facility that it obtained in 2015.
during the first three quarters has amounted to In addition, while Aramco reeled in its
a total of $33.5bn compared with the dividend spending plans for the full year, first-half capital
over the same period of $56.25bn, a deficit of expenditure amounted to $13.6bn. Middle East
$22.75bn. Oil & Gas (MEOG) understands that the full year
Aramco’s concession for the entirety of Saudi capital programme has been reduced by $10-
Arabia’s oil and gas resources has come under 15bn in reaction to the crisis.™

POLICY

GECF members hint at OPEC-style pact

GECF RUSSIA’S new energy minister, Nikolay Shulg- the importance of rebalancing the market.
inov, has urged members of the Gas Exporting Shulginov, who replaced long-serving Rus-
Countries’ Forum (GECF) to “deepen” their sian Energy Minister Alexander Novak on
co-ordination, amid rising calls for gas suppliers November 9, said in opening comments at the
to consider joint action to support prices. meeting that he intended to attach the “utmost
Unlike their counterparts in OPEC, GECF’s importance” to co-operation in the GECF.
11 members have never imposed co-ordinated “It is up to us to jointly come up with solutions
cuts to supply. But there are growing concerns that will further improve the efficiency of our
among leading gas producers that such a step organisation in order to strengthen its position
may be necessary to rebalance the market more globally,” Shulginov said. “Co-operation in the
quickly. GECF is among the priorities of Russian foreign
Russia, the world’s biggest gas supplier, has energy policy. We hope that in the coming years,
shunned such a move during previous down- the GECF will continue to play an important role
turns. But with the International Energy Agency in shaping new trends in the development of the
(IEA) forecasting an unprecedented 3% decline gas industry.”
in global gas demand this year, it might be Shulginov said more efficient and “active
rethinking its position. actions” would be needed to overcome chal-
GECF, whose members also include major lenges in the current market. He called for mem-
gas producers Qatar and Iran, held its 22nd bers to make proposals on “new mechanisms of
ministerial online meeting on November 11-12. co-operation” before the next heads of state sum-
While the talks did not end with a public plan to mit of GECF members, which will take place in
co-ordinate output cuts, many members stressed Qatar in November 2021.

P10 www. NEWSBASE .com Week 46 18•November•2020