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  • State Oil Company of Kuwait to cover Funding Shortfall by planning Multi-Billion Loans

State Oil Company of Kuwait to cover Funding Shortfall by planning Multi-Billion Loans
Oil & Gas | 25 March 2021

The state oil company of Kuwait intends to borrow as much as $20 billion over the course of the following five years to compensate for an expected shortfall in funding, an individual acquainted with the matter said.

Kuwait Petroleum Corp. will require the money to maintain the petrostate's crude-production levels, said the individual, who requested not to be named in light of the fact that the information is private.

The borrowing plan underscores how severely Persian Gulf nations were affected by the drop in crude prices last year as the Covid pandemic spread and energy demand plunged.

The company remits nearly all that it generates from crude sales to the OPEC member’s government. It at that point gets reimbursed in installments to fund capital expenditure, essentially for operations and investments in oil fields. The firm may confront a deficiency of 6 billion dinars ($19.9 billion) more than five years, however, it desires to limit the gap by turning out to be more effective, the individual said.

KPC is planning to cover the shortfall by issuing debt, including on international markets. The circumstance will be reviewed every six months to evaluate the company's necessities and borrowing costs, the individual said.

Like almost all major oil producers, Kuwait’s financial position took a hit a year ago, when the virus had grounded planes and had shut down businesses across the world. The government had to face a cash flow crisis and it instructed KPC to transfer more than 7.5 billion dinars in dividends to the Treasury, yet which the Supreme Petroleum Council had previously said could be retained.

KPC has since reached a preliminary agreement to repay the sum over 15 years. That helps however will not tackle the company's concern, the individual said. The company's media office couldn't be reached for remark.

Oil represents around 90% of Kuwait's revenue. The country pumps around 2.4 million barrels of crude a day, making it the fourth-greatest member of the Organization of Petroleum Exporting Countries.

Kuwait is attempting to cut spending to contain its economic droop. KPC has sliced capital- expenditure projections for the following five years by over 30%. The organization has employed a consultant to help merge eight subsidiaries into four to streamline operations. That is required to be completed by the end of 2022, the individual said.

A month ago, the government sought permission from parliament to withdraw money from the sovereign wealth fund for the first time since the consequence of the Gulf War in 1990.

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