One of Oman’s newly created state oil firms, Energy Development Oman (EDO), is negotiating a $1.5-billion debt financing with banks, possibly via a loan, two sources with knowledge of the plan told Reuters on Monday.
The financing EDO seeks is expected to help it to finance capital expenditures, one of the sources told Reuters. JP Morgan is working with the Omani state energy company on the financing plan, while banks from the United Arab Emirates (UAE) have also expressed strong interest in becoming involved in a financing deal, according to Reuters’ sources.
In recent months, Oman has created EDO to hold the country’s majority stake in its largest oil-producing block.
Block 6 was previously operated by state-backed Petroleum Development Oman. According to Wood Mackenzie, the Block 6 contract area is the most significant oil and gas operation in Oman and contains more than 75 percent of the country’s remaining crude oil reserves.
Oman, a non-OPEC oil producer which is part of the OPEC+ alliance, was hit very hard by the oil price and demand crash last year and is looking to raise additional funding while cutting government expenditure.
The 2020 shocks “took a heavy toll on the economy in 2020,” the International Monetary Fund (IMF) said in a brief on Oman earlier this year.
Oman’s fiscal deficit was expected to double to 18 percent of gross domestic product (GDP) in 2020, before narrowing to 7 percent of GDP by 2024, Fitch Ratings said in December, warning that Oman’s fiscal plan faced large implementation and funding risks.
In April this year, Bloomberg reported that the government of Oman was looking at several options to plug the widened budget hole, including selling a stake in state oil firm OQ via an initial public offering (IPO).
OQ is also reportedly looking to sell assets and tap the international debt market in order to fund its planned $7.9 billion expenditures over the next five years.