KUALA LUMPUR: Moody's Investors Service'' expects continued Asian interest in developing unconventional hydrocarbons -- primarily in oil sands and shale gas ' while credit risks are manageable for now as crude oil prices extend their gains.
"These investments, primarily in oil sands and shale gas, add to diversification benefits, but entail much higher development risks than conventional assets,", a Moody's vice president and senior analyst Renee Lam said on Monday, April 11.
She said in her report such projects require larger investment capital, longer development periods, and higher operating costs than conventional oil-and-gas production.
U.S. crude oil futures hovered around $113 a barrel on Monday, April 11 for the first time since September 2008 on supply concerns, according to Reuters.
As motivation for these investments, the report notes the investing companies' ability to diversify sources of supply. It assesses the credit implications and risks of what typically amount to joint ventures between Asian and North American oil-and-gas producers.
'Unconventional hydrocarbon investments entail higher development risks because they are more prone to cost overruns, delays, and technological challenges," she said.
However, she said credit risks remain manageable for most issuers invested in this sector. They have generally been prudent in structuring their overall composition of assets and in funding these acquisitions.
Lam said the impact of buying unconventional assets on Asian purchasers' operational and financial profiles has been minimal because the companies have relied on internally generated resources to fund most of these investments, while risk-sharing with foreign partners in joint ventures limits their exposure.
The report notes that oil-and-gas firms have known of such unconventional sources for decades, but technological advancements and high oil prices have only recently made them commercially viable, thus boosting levels of production.
"These investments, primarily in oil sands and shale gas, add to diversification benefits, but entail much higher development risks than conventional assets,", a Moody's vice president and senior analyst Renee Lam said on Monday, April 11.
She said in her report such projects require larger investment capital, longer development periods, and higher operating costs than conventional oil-and-gas production.
U.S. crude oil futures hovered around $113 a barrel on Monday, April 11 for the first time since September 2008 on supply concerns, according to Reuters.
As motivation for these investments, the report notes the investing companies' ability to diversify sources of supply. It assesses the credit implications and risks of what typically amount to joint ventures between Asian and North American oil-and-gas producers.
'Unconventional hydrocarbon investments entail higher development risks because they are more prone to cost overruns, delays, and technological challenges," she said.
However, she said credit risks remain manageable for most issuers invested in this sector. They have generally been prudent in structuring their overall composition of assets and in funding these acquisitions.
Lam said the impact of buying unconventional assets on Asian purchasers' operational and financial profiles has been minimal because the companies have relied on internally generated resources to fund most of these investments, while risk-sharing with foreign partners in joint ventures limits their exposure.
The report notes that oil-and-gas firms have known of such unconventional sources for decades, but technological advancements and high oil prices have only recently made them commercially viable, thus boosting levels of production.
No comments:
Post a Comment