Kuwait May Issue Bonds Amid $100 Billion Oil-Investment Push

  • State-run KPC says investment needed to meet future oil demand
  • Kuwait echoes Saudi spending plans amid market share battle

Kuwait Petroleum Corp. is considering selling bonds to help pay for a planned investment of $100 billion over the next five years to boost oil output, echoing plans by Saudi Arabia to maintain spending on energy projects as global producers compete for market share.

State-run KPC is looking at issuing bonds and Islamic securities known as sukuk, the company’s chief executive officer Nizar Al-Adsani said at a conference in Kuwait City. KPC had announced plans earlier this month to arrange a $10 billion loan to expand refineries to make cleaner-burning fuels. Kuwait, OPEC’s fourth-biggest producer, plans to expand its crude-production capacity to 4 million barrels a day by 2020, he said Tuesday.

Al-Adsani’s remarks came a day after Khalid Al-Falih, chairman of state-owned Saudi Arabian Oil Co., said his company, the world’s biggest producer, has formulated a new strategy in response to cheaper crude and is keeping up its investments. Together, the comments of both officials suggest that at least two of OPEC’s core Arab producers are doubling down in long-term bets on their energy assets.

“The world market will need around 5 to 6 million barrels a day of new crude annually,” Al-Adsani said. “This shows the importance of continuity in investments in upstream globally for the sake of stable market supply and to avoid volatility and spikes in oil prices.” 

OPEC Production

Kuwait, with fellow Arab producers in the Persian Gulf including Saudi Arabia, led the Organization of Petroleum Exporting Countries to abandon output limits on Dec. 4 amid efforts to squeeze higher-cost producers such as Russia and U.S. shale drillers from the market. The small nation of 3.7 million people holds 101.5 billion barrels in crude reserves. Its production rose by 50,000 barrels a day to 2.9 million barrels a day in December, according to data compiled by Bloomberg.

Kuwait will study other means of financing its oil-investment push, including bonds, sukuk, and project bonds, KPC’s Al-Adsani said. “This will open up the possibility for KPC to be rated by international credit agencies,” he said.

“KPC will continue in its role in the market as set in its strategy to 2030 which requires launching many mega-projects and investments in refining and petrochemicals outside of Kuwait, beside raising the daily crude production capacity,” Al-Adsani said.

Saudi Aramco

Oil producers in the Gulf region shouldn’t reduce output and risk losing buyers, Ali al-Jarwan, chief executive officer of state-run Abu Dhabi Marine Operating Co., said at the same conference. Crude prices will remain low for a long period, he said, without specifying prices or the length of time.

“We should not be surprised that OPEC countries are defending their market share because oil is a main source of revenues for their economies,” Kuwait’s OPEC Governor Nawal Al-Fezaia told reporters in Kuwait on Tuesday.

Benchmark Brent crude tumbled 35 percent last year and a further 15 percent this month as volatility in global markets compounds concern over brimming U.S. stockpiles, unfettered production from Saudi Arabia and Russia and an expected revival in Iranian shipments after the end of sanctions. Brent was trading at $31.56 a barrel Wednesday at 1:47 p.m. in London.

Saudi Arabian Oil, known also as Aramco, pumped more than 10 million barrels a day in each of the last 10 months as it sought to assert its role as the world’s lowest-cost producer. The company’s output was 10.25 million barrels a day in December, adding to a global supply glut. Aramco is studying options to sell shares in its parent company and downstream refining and chemical operations, Al-Falih said.

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