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Oman's OQ expects delays in Liwa petchem, LPG projects on pandemic

Highlights

OQ issues $750 million bond

Divestments planned to raise cash

Expects oil revenue to fall 26% in 2021

Dubai — Oman's OQ has delayed several downstream projects because of the pandemic, the state-owned integrated hydrocarbon firm said in a bond prospectus and obtained by S&P Global Platts.

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"The group's major projects experienced issues both in accessing the specialized resources support required on the ground at project sites, given the travel restrictions and quarantine procedures in place, and in terms of materials availability," it said in the prospectus. "OQ believes that this will result in delays (typically of several months) in the completion of these projects, including, for example, the petrochemical plant project at Liwa, its ammonia plant expansion and an LPG extraction project at Salalah, each of which was originally due for production start-up in 2021."

Additionally, the 230,000 b/d refinery project at Duqm, southern Oman, which is a joint venture between OQ and Kuwait Petroleum International (KPI) recorded a slowdown in progress of several months in 2020. There could be further delays to the refinery in the event of a future drop in oil prices, it stated. It was reported in April that the refinery is now 80% complete.

OQ has sold its first bond, totaling $750 million with a maturity of seven years, Muscat Daily reported May 1.

OQ, wholly owned by the sultanate, was created in 2019, and integrates several upstream, midstream and downstream oil and gas entities.

The group has participating interests in four producing blocks, one non-producing block and five exploration blocks both onshore and offshore Oman. The government currently has back-in rights of stakes of 20% to 40% on 13 blocks that do not yet have declarations of commerciality in place.

Due to production limitations stipulated by the OPEC+ quotas, and weak oil prices, oil revenue decreased by 26% in 2020 to OMR 4.4 billion ($11.43 billion) and is expected to decline by a further 26% in 2021 to OMR 3.5 billion, OQ said.

To raise cash, OQ is embarking on a divestment program. This will include privatization of some operating assets through initial public offerings, partial divestments or sales to investors, according to the prospectus. Platts has previously reported on plans to sell a stake of up to 25% of OQ when suitable market conditions arise.

"[OQ] believes that it will be in a transformative phase for around the five years from and including 2021 to and including 2025 that will be characterized by growth and development throughout the business based on currently anticipated capital expenditure, which is currently expected to be in the region of $7.9 billion over the period," it said. "The financing of this anticipated capital expenditure is currently expected to be achieved both through project finance debt in relation to specific projects undertaken and the group's long-term funding plan."

The Omani government will not be contributing to this capex spend, OQ said.