Fitch expects Tengizchevroil expansion to lower future dividend stream to KMG
The International Ratings Agency Fitch Ratings says that the Tengizchevroil (TCO) expansion announced by Chevron Corporation on July 5, 2016 will result in a lower dividend stream to the Kazakh state-owned National Company KazMunaiGas (NC KMG, BBB-/Stable), which owns a 20-percent stake in TCO, over the medium term.
“We have already incorporated this scenario in our rating case for NC KMG,” says the agency. “Although we view the TCO expansion as positive for Kazakhstan's oil production in the longer term, it will slow down NC KMG's deleveraging.”
The decision to approve the TCO expansion is a good news for the global oil sector, which has been plagued by low oil prices over the past two years that resulted in massive capital investment cuts in exploration and production, estimated at as much as $1 trillion globally between 2015 and 2020, said Fitch experts.
Tengizchevroil LLP (TCO) announced this week it has received approval from its partners on the final investment decision for the Future Growth Project and Wellhead Pressure Management Project (FGP-WPMP), the next expansion of the Tengiz oil field in western Kazakhstan. FGP-WPMP is currently estimated to cost $36.8 billion, which includes contingency and escalation.
The shareholders of Tengizchevroil are KazMunaiGas national oil and gas company of Kazakhstan (20 percent), Chevron Overseas (50 percent), ExxonMobil (25 percent) and LukArco (5 percent).
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