Qatar pushes Gulf Arab energy company borrowing to record high

Gulf Arab energy firms borrowed $30.5bn in 2021, the highest level in at least 25 years, as the region’s national oil companies sought to inject foreign investment into their balance sheets.

Qatar Energy led the region in issuing debt, according to Bloomberg calculations. The company sold $12.5bn of bonds in July to fund an expansion of its liquefied natural gas output capacity and cement its position as the world’s biggest exporter.

Energy companies in the UAE raised $7.7bn in new debt, a four-year high for the country. Saudi Aramco, which dominated the region’s energy corporate debt market in the previous two years, was its third-largest borrower in 2021, with $6.5bn.

The Middle East’s petrostates borrowed more and even sought to sell some energy assets in 2021, in a series of moves that would have been unthinkable a few years ago.

Multi-billion-dollar deals for oil and gas pipeline networks in Saudi Arabia were struck this year, after Abu Dhabi agreed a similar transaction with foreign investors in 2020. Shares in the operating units of some oil companies are being offered in a string of initial public offerings in the UAE.

The global energy transition away from oil and gas in favor of cleaner alternatives is spurring net exporters to leverage or sell their traditional energy assets, said Jon Fitzpatrick, managing director of Gneiss Energy. “You don’t want 100 per cent of something that’s becoming unloved, or you can try and get your friends to join you in the balance sheet,” he said.

Gulf Arab energy companies also sought to raise more debt while weathering the impact of the pandemic on the oil market, according to Carole Nakhle, chief executive officer of consultant Crystol Energy.

“They were already struggling from the repercussions of the collapse in prices in 2014 only to be hit by this triple whammy of low oil prices, coronavirus and decline in volumes,” she said.

Since oil prices are on course to finish the year more than 50 per cent higher than the start, the pressure to raise debt is lessened for energy companies going into 2022. “In terms of corporate debt, we might see that number shrinking next year simply because prices have recovered and the economies are progressing,” said Nakhle.

Saudi Arabia expects to deliver a budget surplus in 2022 – a reasonable expectation if oil trades at around mid-$70 a barrel, according to Bloomberg Intelligence.