Russia-Ukraine conflict benefits GCC hydrocarbon companies: Moody's

The ongoing Russia-Ukraine conflict brings benefit for the Gulf Co-operation Council or GCC oil and gas companies, mainly on account of higher commodity prices, according to Moody's, a global credit rating agency.The oil and gas and chemicals sectors in the GCC countries, Africa and Turkey are likely benefiting from the conflict as commodity prices soar, be it for oil, gas, refined oil products or commodity chemicals and fertilisers, Moody's said in its analytical note.Otherwise, the conflict would have little direct impact on the majority of the issuers it rates in the region because of their limited exposure."We expect the GCC corporates to be able to weather negative impacts from the conflict, particularly if oil prices remain above $100 a barrel. We expect the region’s banking sector liquidity to improve and the region's economies to benefit from the increase in oil prices as governments work to decrease their domestic economies’ reliance on the hydrocarbon sector," it said.In the longer term, the GCC oil and gas producers would have a bigger role to play in providing much-needed supply to Europe as European countries seek ways to reduce their energy dependence on Russia, the rating agency said.The national oil companies (NOCs) in the GCC have been increasing their oil and gas production levels, the rating agency noted.Saudi Aramco is planning to hike production capacity to 13mn barrels of oil a day by 2027 from the current level of 12mn. QatarEnergy will increase its liquid natural gas (LNG) production by 60% by 2027 versus 2020 levels. They have also been stepping up their downstream activities by investing in greenfield and brownfield projects in both the refinery and chemicals sectors, it highlighted.At the same time, these companies and their governments have been looking at ways to reduce their carbon transition risk by investing in renewables and reducing emissions from their own operations. This is in line with their governments’ commitments to reach net-zero in the next three to four decades.Most of the non-financial companies Moody's rates in the GCC countries; Africa and Turkey have limited direct economic and financial links with Russia and Ukraine. As a result, they are "relatively well insulated" from the spillover effects of the Russia-Ukraine conflict, according to Moody's.However, they will be affected through higher food and commodity prices and through financial market disruptions that will limit their capital market access.The credit implications for individual companies depend on their direct exposure to these channels and their capacity to offset these shocks, as well as how the conflict develops. The oil and gas and chemicals sectors in the GCC countries, Africa and Turkey are likely benefiting from the conflict as commodity prices soar, be it for oil, gas, refined oil products or commodity chemicals and fertilisers, Moody's said in its analytical note.Otherwise, the conflict would have little direct impact on the majority of the issuers it rates in the region because of their limited exposure."We expect the GCC corporates to be able to weather negative impacts from the conflict, particularly if oil prices remain above $100 a barrel. We expect the region’s banking sector liquidity to improve and the region's economies to benefit from the increase in oil prices as governments work to decrease their domestic economies’ reliance on the hydrocarbon sector," it said.In the longer term, the GCC oil and gas producers would have a bigger role to play in providing much-needed supply to Europe as European countries seek ways to reduce their energy dependence on Russia, the rating agency said.The national oil companies (NOCs) in the GCC have been increasing their oil and gas production levels, the rating agency noted.Saudi Aramco is planning to hike production capacity to 13mn barrels of oil a day by 2027 from the current level of 12mn. QatarEnergy will increase its liquid natural gas (LNG) production by 60% by 2027 versus 2020 levels. They have also been stepping up their downstream activities by investing in greenfield and brownfield projects in both the refinery and chemicals sectors, it highlighted.At the same time, these companies and their governments have been looking at ways to reduce their carbon transition risk by investing in renewables and reducing emissions from their own operations. This is in line with their governments’ commitments to reach net-zero in the next three to four decades.Most of the non-financial companies Moody's rates in the GCC countries; Africa and Turkey have limited direct economic and financial links with Russia and Ukraine. As a result, they are "relatively well insulated" from the spillover effects of the Russia-Ukraine conflict, according to Moody's.However, they will be affected through higher food and commodity prices and through financial market disruptions that will limit their capital market access.The credit implications for individual companies depend on their direct exposure to these channels and their capacity to offset these shocks, as well as how the conflict develops.