Qatar Petroleum kicks-off first dollar bond sale in 15 years

The state energy company of Qatar has started the sale of what could be the biggest emerging-market debt offering so far this year.

Qatar Petroleum is issuing dollar bonds for the first time in 15 years as it seeks to boost output of liquefied natural gas. The company may aim to raise around $10bn, Bloomberg has reported.

The producer is selling a four-part deal with tranches maturing in five, 10-, 20- and 30- years, according to a person familiar with the matter. The company’s last dollar bond sale was in 2006, when it raised $650m, according to data compiled by Bloomberg.

The debt will help the Gulf state pump more gas from the giant North Field that extends into Iran’s waters. Qatar – one of the world’s richest countries per capita – is planning to spend $29bn to lift its output of liquefied natural gas to 110 million tons per annum by 2027 from 77 million tons today.

The bond offering comes just as natural gas prices in Europe – home to some of Qatar’s biggest buyers – have jumped to the highest level in nearly 13 years amid a global supply crunch. Qatar is embarking on an expansion to one of the world’s biggest LNG export facilities amid efforts in Europe and Asia to reduce dependence on coal.

Utilities are turning to cleaner-burning natural gas in a bid to lower their carbon footprint.

• The initial price talk is about 80 basis points over US Treasuries for the five-year note and about 120 basis points for the 10-year portion
• IPT for the 20-year tranche is about 145 basis points, and about 155 basis points for the longest portion — which will be marketed to investors in Taiwan and known as a Formosa bond

QP has capital expenditure needs of around $59bn in the next five years, according to a prospectus seen by Bloomberg. It made an after-tax profit of almost $5bn in the first quarter. That was an increase from $3.6bn a year earlier as a reopening of major economies from the coronavirus pandemic lifted energy prices.

The Qatari government itself doesn’t need to return to the debt market any time soon, Ali Al Kuwari, the acting finance minister, told Bloomberg last week. Still, it may choose to take advantage of low interest rates in the US and Europe, which make it cheaper to issue in dollars and euros. The country has sold $34bn worth of sovereign bonds since 2018.

QP is rated AA- or its equivalent by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings. That’s the same as the government, whose dollar bonds have an average yield of 2.3 per cent, according to Bloomberg Barclays indexes.

Citigroup and JPMorgan Chase & Co. are global coordinators for the transaction. Bank of America Corp., Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, HSBC Holdings, Mitsubishi UFJ Financial Group and Qatar National Bank are also managing the sale.