Dolphin Energy is Downgraded by Moody's on Gulf Crisis
US ratings agency Moody's has downgraded Dolphin Energy as it sees the risk of weaker inter-governmental co-operation between Qatar and the United Arab Emirates (UAE), it said July 6.
This in turn will weaken the strategic importance of the project to the government of Abu Dhabi and the likelihood of support, should it become necessary, from Dolphin Energy's 51% owner, Abu Dhabi's sovereign wealth fund-owned Mubadala Development Company (Mubadala, Aa2 stable).
Dolphin's other shareholders are French Total and US Occidental Petroleum (each with 24.5%). Its main businesses are gas production from Qatar's North Field; processing at Ras Laffan; and its subsea transport to Taweelah in the UAE and distribution within the UAE and Oman, with 2bn ft³/day running through it and capacity of 3.2bn ft³/d.
Moody's has reduced to two notches, from three, the rating uplift derived from the project's strategic importance to Abu Dhabi and the benefits, including support, of Mubadala's 51% ownership.
However, Moody's said the A2 rating remains supported by three factors: a long-term development and production-sharing agreement with Qatar; net revenues after deduction of all operating costs under long-term fixed price gas supply contracts with Abu Dhabi, Dubai and Omani government-owned entities sufficient to cover close to 100% of current senior debt service; and a strong competitive position as a low-cost producer of gas and liquids.
Current UAE dependence on gas supply from Dolphin Energy will continue for electricity production particularly during peak-demand summer months, said Moody's. Also Qatar Petroleum's CEO said that Qatar had 'decided not to cut the gas now', state broadcaster Al Jazeera reported June 18.
Nonetheless, Moody's believes that in the current geopolitical environment, if the dispute further escalates, the risk of a gas supply disruption initiated by Qatar is higher than previously assessed. The impact on Dolphin Energy's debt service capacity following a supply disruption could be very severe.
Earlier July 6 Moody's announced it had downgraded other Qatari gas projects, those related to gas liquefaction and LNG shipping.
William Powell