Middle Eastern oil producer Oman is looking to raise $3 billion in a debt issue next year via a new company expected to hold the country’s majority stake in its largest oil-producing block, Bloomberg reported on Monday, citing sources with knowledge of the matter
Oman, a non-OPEC oil producer which is part of the OPEC+ alliance, has been hit very hard by the oil price and demand crash earlier this year and is looking to raise additional funding while it is cutting government expenditure.
In the latest move to plug its budget shortfalls, Oman is now set to transfer its 60-percent interest in its largest oil-producing area, the so-called Block 6, to a new company, Bloomberg’s sources said.
Block 6 is currently 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’s authorities now look to transfer the stake in Block 6 to a new company. This would allow the sultanate to raise more debt via bond issues from the new company without having to book it as government debt, according to Bloomberg’s sources.
The new company could attempt to raise $3 billion from bonds in the first half of 2020 with the block as collateral, one of the sources said. If Oman does that, it would be the first known raising of money off oil reserves in a Middle Eastern oil producer, according to Bloomberg.
Oman could also become the first country in the Gulf Cooperation Council (GCC) to introduce an income tax on individuals as oil-dependent economies in the Middle East reel from the price and demand crash.
Oman heavily depends on oil income for its budget and has been one of the most affected economies in the region after prices crashed earlier this year. Oman’s new economic plan through 2024, which will include the income tax on wealthy individuals from 2022, is aimed at reducing the widening budget deficit of the country and increasing the non-oil revenues.