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Saudi Aramco, Malaysia's Petronas tap banks for jumbo financing

August 09/2018

MOSCOW (MRC) - Saudi Aramco and Malaysia's Petronas have approached banks to replace a short-term USD8 billion loan raised earlier this year for a joint venture with long-term financing of approximately the same size, banking sources familiar with the matter said, as per Reuters.

The two state energy companies borrowed $8 billion from a large consortium of international banks in March for a refinery and petrochemical joint venture in the southern Malaysian state of Johor.

The project, Refinery and Petrochemical Integrated Development (RAPID), is a USD27 billion complex located between the Malacca Strait and the South China Sea, conduits for Middle East oil and gas bound for China, Japan and South Korea.

The two firms issued a request for proposals to banks last month and are now in preliminary discussions for a self-arranged loan with a maturity of more than 10 years which would replace the existing bridge borrowing, said the sources.

A group of 19 banks participated in the bridge loan, including Asian lenders and BNP Paribas, HSBC, JPMorgan, Standard Chartered, Citibank, First Abu Dhabi Bank and ING Bank.

That loan, which had a 364-day tenor and an extension option of six months, offered a margin interest rate of around 40 basis points over the London interbank offered rate (Libor), Thomson Reuters LPC reported in March.

Aramco and Petronas finalised the deal to invest in the project in March saying at the time that Aramco would supply 50 percent of the refinerys crude oil with an option of increasing it to 70 percent.

Refinery operations are set to begin in 2019, with petrochemical operations to follow 6-12 months afterwards.

Aramco plans to boost investments in refining and petrochemicals to secure new markets and sees growth in chemicals as central to its downstream strategy to cut the risk of an oil demand slowdown.

Aramco is also expected to tap banks for a huge financing that would back the potential acquisition of a controlling stake in petrochemical maker SABIC, banking sources said separately.

Aramco could possibly take the entire 70 percent holding owned by Saudi Arabia's sovereign wealth fund in SABIC, sources told Reuters last month.

Bankers are weighing a number of options for the potential deal, which could go up to USD70 billion, but there has been so far no formal request from Aramco, several sources familiar with the matter said.

As MRC wrote before, in March 2018, Wood was selected to develop the world's largest fully integrated crude oil to chemicals (COTC) complex in the Kingdom of Saudi Arabia, on behalf of Saudi Aramco and SABIC as the first PMC contractor.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Crude oil, Saudi Aramco.
Category:General News
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