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Record Qatargas deal concludes busy 2004

The completion of financing arrangements for the Qatargas II liquefied natural gas (LNG) development - the biggest oil and gas project-financing deal ever - rounded off a busy 2004 for project-finance bankers. Signed off on 15 December, the $9.3bn deal saw Qatar top the world rankings for the country with the highest level of project financing in 2004, according to the Dealogic Project Finance Review (see Table 1).

Table 1: Project finance deals 2004, ranked by country

   

Value

Number

Value

Rank

Nationality

($m)

of deals

change (%)

1

Qatar

10,655

3

843

2

Azerbaijan

6,800

2

?

3

UK

4,928

5

1840

4

Kazakhstan

4,400

1

2833

5

Australia

3,624

11

108

6

US

2,245

6

-24

7

Nigeria

1,728

3

134

8

Canada

1,503

2

212

9

Mozambique

1,200

1

?

10

Oman

957

2

-26

11

China

896

1

124

12

Peru

865

1

?

13

Thailand

749

1

?

14

New Zealand

475

1

?

15

Brazil

457

3

-68

 

Sub total

41,483

43

 
 

Total

43,000

54

 
 

Source: Dealogic

Last year, world oil and gas project-finance deal values soared by 164% to $43bn, from $16bn in 2003. Volume was the highest since 1997, when it was $28.2bn. The total number of deals rose from 41 in 2003 to 54. Strong commodity prices were the prime reason for the surge, with companies scrambling to put lucrative oil and gas projects on to their books.

The strongest sector was LNG, accounting for $16bn, with 11 deals executed. Accounting for 37% of total volume, that compared with eight deals worth $4.5bn in 2003. While strong gas prices are part of the reason for growing interest in LNG project financing, the rapid diversification of the industry away from traditional Asian markets to new creditworthy markets - the US and Europe - has also whetted banks' appetites for LNG risk, says Alastair Whitfield, an analyst at Dealogic Project Finance.

This year, while perhaps not proving as much of a bonanza as 2004 in terms of deal value, is also expected to be busy, with, among others, LNG projects in Egypt (BG Group's Idku project) and Russia (Sakhalin-2) likely to seek financing.

Dealogic says the Middle East and North African issuers were the most active, with $11.9bn from six deals ? more than three times the $3.7bn figure for 2003. The largest volume increase came from eastern Europe and the CIS, up from $150m in 2003 to $11.2bn.

Loan volume accounted for $26.8bn, more than double the $11.6bn of 2003 and the highest volume ever within oil and gas project financing, accounting for 62% of overall financing. Bond issues also reached their highest level ever, accounting for $4.7bn, up by 117% from $2.2bn issued in 2003. Equity issuance contributed 27% of the total oil and gas volume, at $11.5bn.

Dealogic says Barclays led the global mandated arrangers in 2004, with four deals worth $3bn, followed by Royal Bank of Scotland, with 11 transactions worth $1.4bn and BNP Paribas, with 14 projects worth $1.3bn. Royal Bank of Scotland and law firm Latham & Watkins were top-ranked advisers.

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