Impact on Dolphin, Nakilat & RasGas From Strait of Hormuz Potential Closure

Fitch Ratings-London-16 January 2012: Fitch Ratings notes the increase in tensions in the Persian Gulf and the Iranian threat to close the Strait of Hormuz, a crucial transit route for global hydrocarbon trade. Whilst Fitch considers that this is a low probability scenario, a closure, if protracted, would have a significant impact on the operations of Fitch-rated energy issuers in Qatar and Abu Dhabi. Debt service would not be affected in the short term due to significant debt service reserves.

Ras Laffan Liquefied Natural Gas Company Limited (II) and Ras Laffan Liquefied Natural Gas Company Limited (3) (together, RasGas) and Dolphin Energy Limited (Dolphin) are reliant on access to the Strait of Hormuz to export condensate, liquefied petroleum gas (LPG) and, in the case of RasGas, liquefied natural gas (LNG), A large portion of Qatari LNG is shipped through vessels owned by Nakilat Inc (Nakilat) and hired by RasGas and the other Qatari LNG producers (the charterers) under long-term time charter agreements.

The severity of the impact of a closure of the Strait of Hormuz on RasGas, Dolphin and Nakilat would depend on its duration. While RasGas and Dolphin have storage facilities available at Ras Laffan to cope with normal requirements for operational flexibility, these are not sized to cope with low probability-high impact events, such as the closure of export routes. Therefore, the projects’ production would need to be curtailed. Production of gas and liquids is integrated and so, for Dolphin, an inability to export condensate and LPG would also affect gas production and hence piped gas sales to the UAE and Oman.

A closure of the Strait of Hormuz would likely be classified as a force majeure event under Nakilat’s time charters. In this case, the charterers would be obliged to continue paying hire for at least 24 months, at which point the time charter may be eventually terminated.

While operations would be affected quickly after closure, debt service for all project companies should be secure for at least six months, as all transactions benefit from debt service reserves sized at an amount equivalent to the senior debt service due in the following six months. Insurance coverage may provide additional protection depending on policies’ wording and events.

Should the Strait of Hormuz be closed, Fitch is likely to place RasGas, Dolphin and Nakilat’s bonds’ ratings on Rating Watch Negative pending developments. The ratings may come under downwards pressure should the closure persist for several months or events escalate.

The ratings of the three transactions are as follows:


USD1,250m 5.888% senior secured bonds due 2019: ‘A+’; Outlook Stable


USD850m Series A senior secured bonds due 2033: ‘A+’; Outlook Stable

USD300m Series A Subordinated Second Priority Secured Bonds due 2033: ‘A-’, Outlook Stable


Ras Gas (II) USD1,400m Series A senior secured bonds due 2020: ‘A+’; Outlook Stable

RasGas (3) USD850m Series B senior secured bonds due 2027: ‘A+’; Outlook Stable

RasGas (3) USD750m Series C senior secured bonds due 2016: ‘A+’; Outlook Stable

RasGas (3) USD800m Series D senior secured bonds due 2027: ‘A+’; Outlook Stable

RasGas (3) USD500m Series E senior secured bonds due 2012: ‘A+’; Outlook Stable

RasGas (3) USD1,115m Series F senior secured bonds due 2014: ‘A+’; Outlook Stable

RasGas (3) USD615m Series G senior secured bonds due 2019: ‘A+’; Outlook Stable



Federico Gronda

Senior Director

+39 02 8790 87287

Fitch Italia S.p.A.

V.lo Santa Maria alla Porta, 1

20123 Milan

Jelena Babajeva


+44 203 530 1375

Media Relations: Peter Fitzpatrick, London,

Tel: +44 20 3530 1103,


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