Project Neptune rising…

Project Neptune rising…

… amid renewed liquidity concerns

Too quick to PIK?

Too quick to PIK?

The deals set to haunt European high yield

Friday, March 2, 2012

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Qatar Petroleum considers corporate sukuk for 2012

An Islamic bond could be the first corporate-level issuance in the capital markets by a leading Middle Eastern national oil company


Qatar Petroleum (QP), one of the world’s largest state-owned oil and gas companies, is considering a debut corporate-level issuance in the capital markets, according to senior management.

It would be the first corporate-level issuance by a leading Middle Eastern national oil company, and could establish a new precedent for issuance by some of the world’s most credit-worthy organizations.

Issuing a sukuk, potentially at corporate level, is one of QP’s initiatives for 2012. The company will decide whether or not to proceed in the next three weeks, depending on price and liquidity in the market.

The firm’s only outstanding debt at corporate level, rather than project level, matured in 2011. This was a syndicated loan. However, the Qatari government, which owns QP outright, has been a regular issuer in the Eurobond markets in recent years, and a portion of the proceeds have financed QP’s projects.

Part of the motivation behind issuing a sukuk would be to facilitate future issuance by Qatari government-related firms, including QP’s subsidiaries. These include one of the Middle East’s biggest petrochemical companies, Industries Qatar – the basic-industries holding company, 70%-owned by QP – which was rated AA- by Standard and Poor’s on February 15.

With Qatar’s upstream core gas developments fully online in 2011, the state is looking to build more projects in downstream oil and gas and hydrocarbon-dependent industries, including petrochemicals and steel, as it builds the infrastructure for the 2022 Fifa World Cup in Qatar.

Projects owned by QP have not issued in sukuk format before, although they have issued in the conventional bond market. Most recently, in February, the Dolphin Energy gas pipeline, partly owned by QP, issued a $1.3 billion 10-year Eurobond.

“We want to establish our brand in all markets and reach as many investors as possible in different geographic locations,” says Abdulrahman Al Shaibi, director of finance at Qatar Petroleum. “We don’t want to be exposed to a single market.”

Last year saw record issuance of sukuk, which has continued to accelerate in 2012, partly because of a shortage of available investments for Islamic banks and funds.

“Sukuk is an important avenue for us to tap as we are seeing liquidity is increasing in the Islamic finance market,” says Al Shaibi.

He also notes that the issuance would be facilitated by the abundance of assets at QP, which would allow the sukuk to meet Shariah principles. “Qatar is well placed as it has excellent assets to meet Islamic-finance criteria,” he says.