Question

discussing a possible partnership between Exxon Mobil and the government of Qatar.

Please discuss the strategic considerations behind this move.How would it be best financed ?

Answer 1

Strategic pertnership between Exxon Mobil and Government of Qatar

Exxon Mobil is an world's largest international firm dealing in oil and gas exploration and production. Qatar's economy is one of the richest in terms of GDP with major contribution from Oil and Gas production. It accounts for more than 70% of Government's revenue.

Exxon mobil and Government of Qatar can enter into a strategic partnership for oil exploration and production. Exxon Mobil has tehnical know-how in this industry and new oil sites can be identified at a lower cost. Also, the cost of production will be reduced due to fomal tie-ups of Exxon mobil with various vendors supplying equipments.

Key consideration points for the partnership:-

a. Technical know-how = High due to expertise of Exxon Mobil in this field

b. Project Cost = Low due to tie-ups with company vendors

c. Employment generation = High for Qatar local with top management guidance from Exxon Mobil team

d. Viability = High, due to big opportunity for Oil and Gas exploration in Qatar

e. Socio-political considerations = Medium, as Qatar is a stable country with good economy

Project financing

Qatar's financial industry has conventional banks and Islamic banks to finance big deals. A strategic parternership on this front, is a public-private sponsorship. For such big deals, a consoritum of banks is formed (generally 3-5 banks), which share parts of finance for the deal.

Bonds will be issued to the banks which will be standard instruments for deriving finance for the deal. Project financing, including capital expenditure and operational expenses will be calculated and financed accordingly.