Qatar Petroleum Sells $12.5 Billion of Bonds For Gas Push

(Bloomberg) -- The state energy company of Qatar wrapped up the biggest emerging-market bond sale this year, selling $12.5 billion of dollar bonds as it seeks to raise output of liquefied natural gas and cement its domination of the market.

The producer sold a four-part deal with tranches maturing in five, 10, 20 and 30 years, with the longest portion yielding 3.3%. The company's last dollar sale was in 2006, when it raised $650 million, according to data compiled by Bloomberg.

Investors placed around $40 billion of orders, according to a person familiar with the matter.

The debt will help the Persian Gulf state pump more gas from the giant North Field that extends into Iran's waters. Qatar -- one of the world's richest countries per capita -- is planning to spend $29 billion to lift production of LNG to 110 million tons per annum by 2027 from 77 million tons today.

Read: Qatar Sees Gas Demand Peaking Around 2040, Much Later Than IEA

QP has received offers from firms including Royal Dutch Shell Plc, TotalEnergies SE and Exxon Mobil Corp. to co-fund the expansion. The company has already started the work and Chief Executive Officer Saad Al-Kaabi has said it may still finance the project on its own.

The bond comes just as natural gas prices in Europe -- home to some of Qatar's biggest buyers -- have jumped to the highest level in nearly 13 years amid a global supply crunch. Qatar is banking on demand for the fuel growing amid efforts in Europe and Asia to reduce dependence on coal. Utilities are turning to cleaner-burning natural gas in a bid to lower their carbon footprint.

The five-year note will yield 50 basis points over U.S. Treasuries and the 10-year about 90 basis points. Both tranches sold at tighter levels than initial price discussions.

QP has capital expenditure needs of around $59 billion in the next five years, according to a prospectus seen by Bloomberg. It made an after-tax profit of almost $5 billion in the first quarter. That was an increase from $3.6 billion a year earlier as a reopening of major economies from the coronavirus pandemic lifted energy prices.

Read: Qatar Says Big Oil Keen to Invest in $29 Billion Gas Expansion

The Qatari government itself doesn't need to return to the debt market any time soon, Ali Al Kuwari, the acting finance minister, told Bloomberg last week. Still, it may choose to take advantage of low interest rates in the U.S. and Europe, which make it cheaper to issue in dollars and euros. The country has sold $34 billion worth of sovereign bonds since 2018.

QP is rated AA- or its equivalent by Moody's Investors Service, S&P Global Ratings and Fitch Ratings. That's the same as the government, whose dollar bonds have an average yield of 2.3%, according to Bloomberg Barclays indexes.

Citigroup Inc. and JPMorgan Chase & Co. were global coordinators for the transaction. Bank of America Corp., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, Mitsubishi UFJ Financial Group Inc. and Qatar National Bank also managed the sale.