China Eximbank provides $102 million seller's credit to CPECC for White Oil Pipeline Project

In 2002, China Petroleum Engineering and Construction Company (CPECC) provided a $102 million supplier's credit to Pak-Arab Pipeline Company Ltd. (PAPCO) — a special purpose vehicle — for the White Oil Pipeline Project. In order to provide this supplier credit to PAPCO, China Petroleum Engineering and Construction Company (CPECC) secured a $102 million export seller's credit facility with a 10-year maturity from China Eximbank. Pak-Arab Pipeline Company (PARCO/PAPCO) and China Petroleum Engineering Construction Corporation (CPECC) signed an agreement, under which the Chinese firm would supply equipment and materials for the construction of white oil pipeline from Port Qasim, Karachi to Mahmud Kot, Multan. This project involved the construction of a 786 km, 26-inch diameter, high-speed diesel oil pipeline that runs from Karachi to Mahmoodkot. A joint venture company (special purpose vehicle) called Pak-Arab Pipeline Company Ltd. (PAPCO) was created to finance, design, implement, and maintain this project. Pak-Arab Refinery Ltd. (PARCO ) -- a joint venture company between the Government of Pakistan and the Emirate of Abu Dhabi -- holds a 51% majority share in PAPCO, while Shell, PSO and TOTAL PARCO Marketing Limited hold 26%, 12% and 11% equity shares, respectively. On August 7, 2001, Pak-Arab Pipeline Company Ltd. (PAPCO) signed an EPC contract with the China Petroleum Engineering & Construction Corporation – Techno (Pvt) Ltd. Consortium. The total cost of the project was $481 million and it was financed according to a 75:25 debt-to-equity ratio ($120 million of equity and $360 million of debt financing). The project reached a financial close in 2002, with China Petroleum Engineering and Construction Company (CPECC) providing a $102 supplier's credit and local banks providing additional debt financing to PAPCO. A group of local banks provided additional debt financing. The $481 million project sought to provide a more comprehensive, safer, cost-effective, demand-responsive and eco-friendly pipeline network to meet the country’s growing needs for energy. It involved the construction of an 817 km-long and 26-inch diameter pipeline with an initial capacity to transport eight million tons of refined petroleum products, and 12 million tons white oil per annum. The National Bank of Pakistan will issue a bank guarantee of $102 million for China Exim Bank to the suppliers’ credit from CPECC. The project groundbreaking ceremony was on May 31, 2001. The project reached its commercial operations date (COD) on March 1, 2005. It was officially inaugurated on August 26, 2005. A more detailed set of project milestones is provided below: August 17, 2000 Formation and incorporation of Pak-Arab Pipeline Company Ltd. (PAPCO) May 11, 2001 Signing of Project Facilitation Agreement (PFA) between CPECC and PARCO. May 31, 2001 Ground Breaking Ceremony for Construction of White Oil Pipeline Project. June 16, 2001 Award of EPC Contract to CPECC. July 19, 2001 Signing of Implementation Agreement (IA) between Government of Pakistan and PARCO, PAPCO & Emirate of Abu Dhabi. August 7, 2001 Signing of EPC Contract Agreements (Supply / Construction) with CPECC. August 10, 2002 Signing of Shareholders Participation Agreement between PARCO, Shell, PSO and Caltex. September 2001 Start of Mobilization by CPECC. April 27, 2002 Signing of Memorandum of Understanding between PAPCO and a Consortium of leading local banks for financing of Rs.12.5 billion (LC) and providing guarantees for US$ 102 million (FC) loan. August 20, 2002 and March 25, 2003 Approval from Sindh & Punjab Environmental Protection Agencies. October 23, 2002 Contract Award of Non-EPC Works: PQM-Jun 21, 2002, SKP-Nov 15, 2002 and MKT. December 9, 2002 Start of Line pipe manufacturing in China at First Machinery Works North China, China. December 16, 2002 Start of EPC Works at Stations. February 15, 2003, March 1, 2003 & July 31, 2003 Start of Production of line pipe at Crescent Steel, Shashi Steel and Data Steel. April 15, 2003 Commencement of Construction works for 132 kv Transmission Line from KESC Grid to Port Qasim Station. August 20, 2003 Start of Piling Work at Indus River Crossing. November 24, 2003 Signing of Project Management, Operation & Maintenance, Project Facilities and Throughput Agreements between PAPCO and PARCO. October 6, 2004 Receiving of first oil tanker at Port Qasim October 6, 2004 Commencement of commissioning and start-up activities. October 14, 2004 Start-up of HSD pumping into Mainline. March 01, 2005 Commencement of commercial operations. August 26, 2005 Formal inauguration of the project July 01, 2006 Commencement of Korangi – Port Qasim Link Pipeline (KPLP).

Additional details

1. The Chinese project title is 在巴基斯坦成品油管线项目. 2. Note that China Eximbank offers export seller’s credits to Chinese companies that are implementing overseas projects. These companies may, in turn, use the proceeds of an export seller's credit to make equity investments or provide loans to the host government or other entities in the host country. In this case, China Eximbank provided a $102 million export seller's credit to China Petroleum Engineering and Construction Company (CPECC), and CPECC then used the proceeds of the export seller's credit to lend to PAPCO. As a result, AidData identifies China Eximbank as the funding organization and CPECC as a receiving organization. 3. One source identifies the face value of the export seller's credit facility as $120 million.

Number of official sources

6

Number of total sources

18