The energy companies in the GCC region have issued record debt in 2017 as producers opted to exploit lower borrowing costs to fund expansion plans, according to a report.
Oil and gas producers, pipeline operators and refiners in Kuwait, the UAE, Saudi Arabia, Oman, Bahrain and Qatar borrowed $28.7 billion through bonds and syndicated loans last year, eclipsing the previous high set two years earlier, according to data compiled by Bloomberg.
Those companies borrowed about $71.4 billion in the past three years, more than twice the amount in the previous period.
Oil and gas producers in Saudi Arabia, Kuwait and the UAE plan to spend more than $600 billion on energy projects over the next five to 10 years, officials from the countries have announced.
Global energy investment was $1.7 trillion in 2016, according to the International Energy Agency.
The annual average of the JP Morgan Middle East Composite Index’s debt yield, an indication of borrowing rates in the region, declined 12 basis points to 4.58 percent in 2017, a two-year low.
As per Opec estimates, global energy demand will jump 35 per cent by 2040 from 2015. The oil investment is needed now to meet that growth and to make up for declining production at older fields, stated its secretary-general Mohammad Barkindo.
State-owned companies in the Middle East have leaned on debt since 2014 as revenue fell with energy prices. Benchmark oil prices in the region tumbled as much as 60 per cent 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 lag behind that of publicly traded companies, he added.