DUBAI Feb 16 The government of Oman is
considering financing structures that let it get advance
payments from oil traders, reducing the government's need to
borrow more money from banks, sources familiar with the matter
Under the proposed structures, Oman's national oil company
might get paid as much as two years before oil was delivered, in
exchange for price discounts on the oil, the banking sources
said, declining to be named because the matter is not public.
The government, which is running a large budget deficit
because of low oil prices, is considering such a step because it
wants to limit its new borrowing. One reason for this is that it
feels any rapid increase in government debt could in the long
term hurt Oman's credit ratings, the sources said.
Oman Oil Co, the finance ministry and the central bank did
not respond to emails seeking comment. Advance payment deals
have been made by other oil producers, including Russia's
The sources said the Omani government had made no decision
on whether to use such a structure. Sources at several oil
trading companies which deal with the region said they had not
been approached by Omani officials to discuss the matter.
State-owned Oman Oil Co originally considered raising debt
via a pre-export financing (PXF) loan for its upstream unit,
Oman Oil Company Exploration & Production, banking sources told
Reuters last October.
The loan would have had a structure similar to a $4 billion
syndicated loan raised last June by Petroleum Development Oman,
another Omani state-linked firm. In PXF loans, which are often
used by commodity producers, the borrower obtains money based on
confirmed orders for its production.
But as oil prices have crept up over the past several
months, with Brent crude rising to around $55 a barrel from last
year's average of $45, "the tone of the discussions has changed
slightly, from 'we need money' to 'let's find other avenues',"
one of the sources said.
The finances of all six wealthy oil exporting countries in
the Gulf have been hurt by the plunge of oil prices since
mid-2014. But Oman, which lacks the huge oil and financial
reserves of its neighbours, has been hit particularly hard.
The government posted a budget deficit of 4.94 billion rials
($12.8 billion) in the first 11 months of 2016 compared with a
deficit of 4.07 billion rials a year earlier, Finance Ministry
In November, Standard & Poor's cut its outlook for Oman's
BBB- sovereign credit rating to negative from stable, saying
Oman's efforts to stabilise its finances might take longer than
expected and the economy's external debt could exceed its liquid
external assets by more than anticipated.
For 2017, the government has projected a budget deficit of 3
billion rials, which it plans to finance partly with 400 million
rials of domestic borrowing and 2.1 billion rials of
Oman has appointed banks for a new U.S. dollar-denominated
bond issue, which is likely to take place in March, bankers
Last month, an Oman-based source and a Qatari official told
Reuters that Oman was negotiating with other Gulf Arab states to
secure a multi-billion dollar deposit in its central bank that
would increase its foreign exchange reserves. Oman's finance
ministry denied the report.
(Editing by Andrew Torchia, Larry King)