Piercing the sovereign ceiling: Issues in oil and gas project financing
- Moody`s Investors Service, New York, NY (United States)
In the oil and gas sector, corporations and governments face huge capital spending requirements in order to transform large resource discoveries into producing, cash-generating assets. A significant portion of this funding is expected to be done on a project finance basis, where bank lenders or bond investors take a secured position in financing a discrete project, with the expectation of being paid back by the cash flows from that project after completion. This trend is increasing demand for crediting rating services to provide credit ratings for these project financings. A key challenge is to analyze and rate credit-worthy projects in countries that have relatively low foreign currency sovereign ceilings due to economic, political, and financial risks. In most cases, the credit ratings for projects financed in currencies outside the host country are capped at the country`s foreign currency ceiling. However, in a few instances, mainly in the oil and gas sector, Moody`s has pierced the foreign currency ceiling or rated certain projects above the sovereign ratings of the countries where they are domiciled. The purpose of this article is to briefly explain some of the qualitative factors and considerations that have allowed Moody`s to pierce the ceiling in the oil and gas sector, with a focus on two recent and noteworthy projects: Ras Laffan Liquefied Natural Gas in Qatar and Petrozuata in Venezuela.
- OSTI ID:
- 580817
- Journal Information:
- Oil and Gas Journal, Journal Name: Oil and Gas Journal Journal Issue: 8 Vol. 96; ISSN 0030-1388; ISSN OIGJAV
- Country of Publication:
- United States
- Language:
- English
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