Oman’s EDO secures debut $2.5bn financing deal

State-owned Energy Development Oman (EDO) has raised $2.5bn in its first ever financing transaction — a key milestone in the sultanate's journey to permanently reduce the state's budgetary commitments to Oman's biggest oil and gas producer PDO.

The bond was oversubscribe, which EDO said was "testament to investors' confidence" in both the company and the Omani economy.

"The strong participation from local, regional and international banks is another sign of Oman's attractiveness for global investors and paves the way for fruitful and sustainable collaboration with international partners", said EDO interim chief executive Haifa Al Khaifi.

EDO was set up by Muscat in December to take over some of the government's 60pc stake in PDO, which operates the giant block 6 licence responsible for the bulk of Oman's hydrocarbons output.

But unlike PDO, EDO was set up to function as a purely commercial body, thereby removing the financing burden from the cash-strapped Omani state, which was hard hit by the impact of Covid-19 and last year's oil price downturn. An energy ministry source said at the time that PDO operations were costing the state in the region of $5bn-6bn annually.

EDO is therefore responsible for financing its own activities, either through borrowing or bond issues, and will own the oil and gas produced in block 6. But the revenues generated from these resources will go to the government after the deduction of operating and capital expenditure.

The company's ability to secure its own funds will be critical to meet PDO's ambitions of lifting crude output to 700,000 b/d by 2024 from 616,000 b/d in 2019.

EDO will also help Oman transition from hydrocarbons to renewable energy. PDO already uses 1GW of solar power to generate steam for enhanced oil recovery at its Amal heavy oil field. It launched its first utility-scale solar project, a 100MW plant at block 6, IN 2019, and is looking for further renewable projects in which to invest.