Aramco Leads Surge in (P)GCC Energy Loans

Aramco Leads Surge in (P)GCC Energy Loans Aramco Leads Surge in (P)GCC Energy Loans

Saudi Arabian Oil Company is leading an upsurge in borrowing by energy companies in the Middle East, as they turn to banks and investors for cash after a slide in crude prices eroded their ability to pay for exploration and production.

Energy producers in the six-nation (Persian) Gulf Cooperation Council more than doubled their borrowings in the second quarter from a year earlier to $8.9 billion, the most in 15 months, data compiled by Bloomberg show.

Yanbu Aramco Sinopec Refining, a joint venture between Saudi Arabian Oil Company, known as Aramco, and China Petroleum & Chemical Corp. was the top borrower at $4.7 billion for refinancing. The figures include credits to companies involved in oil exploration, production and refining as well as natural gas services and processing.

Cheaper crude has squeezed revenue at oil companies, with the benchmark Brent contract dropping to a 12-year low of $27.10 a barrel in January from more than $100 a barrel two years ago.

Saudi energy companies have borrowed $23.1 billion in the last 18 months, almost as much as the $23.4 billion they took in all of the previous eight years.

Kuwait National Petroleum took out $4 billion in loans in the second quarter to finance clean-fuel projects and for general corporate purposes, while Emirates National Oil Company in Abu Dhabi rounded out the list of energy borrowers in the period by raising $230 million for general corporate purposes.

The $8.9 billion in Middle Eastern credit from April to June was the third-highest for any quarter in data compiled by Bloomberg since 1996, after a record $18.4 billion in the first quarter of 2015 when Aramco took $10 billion for refinancing and general corporate purposes.

Borrowing costs for companies in the Middle East have eased this year, as crude prices rallied by about 30%. Total bonds and loans issued by oil companies in the (P)GCC are $13.2 billion so far for 2016 compared with a record $23.7 billion in 2015.

It is a different story for the US energy industry. Since the start of 2015, 142 oilfield service companies and oil and gas producers have gone bankrupt, owing almost $62 billion, according to law firm Haynes & Boone.