It seems the oil producing countries are beginning to sweat. It finally dawned upon them that their oil revenues are in trouble, and turbulent, if not perilous, financial times are ahead.
Venezuela is in shambles, Nigeria is thrashing to keep its head above water, Mexico is desperately trying to hedge its oil on the forward markets and the others are scratching their heads for bright ideas. It could still get a lot worse, and a few years ago, we warned that wars could be triggered.
As for the Middle East oil producing countries, their vast and growing welfare spending which has sustained their economies and polities has suddenly had the rug pulled from underneath it, and oil revenues have collapsed. And, after a period of denial, these countries are now scrambling to try change the direction of the oncoming hurricane.
One must admit, that their approach is innovative, but also risky. Most of the Middle East oil producers have drawn up ambitious restructuring plans to diversify their economies and wean their citizens off the welfare teat. And, as an extra measure, they coupled those plans with economic reform plans, which in essence, are austerity measures. Nevertheless, they remain plans and need to be continuously reassessed and amended. Rigid plans do not guarantee success.
To fund their diversification strategy away from oil, most of these countries have opted to sell assets. Not any assets, but their oil assets!
Abu Dhabi recently announced that it will be selling minority stakes in its downstream oil businesses, such as oil services, refineries, oil trading subsidiaries, tank farms, pipelines…etc. It will not, however sell any of its upstream, oil production operation. They justify this sale as a method to generate capital to fund its economic diversification plan, as well as boost its oil sales by incentivizing its customers, with a direct ownership interest, and hence buy more products and services.
Earlier, Oman had announced a, more or…