DUBAI - Oil companies in the Gulf are increasingly looking at raising debt through trade finance structures as a way to provide extra security to lenders amid low oil prices and to serve oil buyers by guaranteeing them access to future shipments, bankers say.
Since oil prices collapsed in 2014, national oil firms in the Gulf - traditionally so cash-rich that they didn't need to borrow - have turned to new funding methods, including bond issues. Meanwhile, excess oil supply has made producers more willing to earmark future shipments for specific buyers.
"The oil market has turned into a buyers' market because of excess supply," said Emre Karter, head of treasury and trade solutions for the Middle East, North Africa, Pakistan and Turkey at Citigroup.
"This means that all oil-producing nations and majors have now to offer more for their buyers. So more and more we're engaging in forms of receivables finance and trade finance arranged by the seller, a phenomenon not seen for decades in this part of the world."
In pre-export financing, loans are secured by export contracts covering the deliveries of the underlying commodity over a certain period of time, in quantities that allow producers to meet their debt obligations.
Petroleum Development Oman raised a $4 billion, five-year PXF loan from a syndicate of banks in 2016, while Oman Oil secured a $1 billion, five-year PXF loan in September this year.
Similar deals have occurred in other Middle Eastern countries over shorter tenors and between an oil producer and a single bank, several bankers said. They declined to name the institutions.
"We are seeing a change. A lot of the national oil companies are looking at pre-export financing structures and, beyond Oman, we are working with some of our clients in the region on that," said Sunil Veetil, regional head of global trade and receivables finance at HSBC.
Commodity producers in Russia and other countries in the ex-Soviet CIS region have regularly used this type of financing. In 2017 alone, around $7.5 billion of PXF loans have been raised in that region, Thomson Reuters data shows.
While the Omani PXF loans were large, they may be dwarfed by future such deals from the Gulf, some bankers argue. That is because giants such as Abu Dhabi National Oil Co (ADNOC) and Saudi Aramco have begun borrowing large amounts this year.
ADNOC raised a $6 billion loan this month in addition to a $3 billion project bond for one of its subsidiaries in October. Aramco issued Islamic bonds worth the equivalent of $3 billion in the Saudi market this year.
Bankers said Middle East oil majors were likely to consider PXF loans as a way to cement relationships with customers as long as the global oil market faced the risk of excess supply from U.S. shale producers and other sources, threatening to destabilise long-term links between producers and customers.
"Middle Eastern oil producers are increasingly more supportive of seller-supported receivable finance or pre-export finance arrangements," said Naveed Sultan, global head of treasury and trade solutions at Citigroup.
"This is a rather new trend in the geography given the market environment, and one which helps maintain long-term, continued relationships between buyer and seller."
(Additional reporting by Tom Arnold; Editing by Andrew Torchia and Hugh Lawson) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))
