CDB provides $10 billion loan to Transneft for East Siberia-Pacific Ocean Oil Pipeline Project (Linked to Project ID#43069)

In February 2009, China Development Bank and OAO AK Transneft — a Russian state-owned oil pipeline company — signed a $10 billion loan facility agreement for the East Siberia-Pacific Ocean Oil Pipeline Project. The loan carried the following terms: a 20 year maturity, a 5 year grace period (during which only interest payments are due), and an annual interest rate of 6-month LIBOR plus a 3.25% margin. The proceeds of the loan were to be used by the borrower (a) to support the construction of a 64 km crude oil pipeline from Scovorodino to the Amur River on Russia-China border, and (b) for general corporate purposes. As collateral for the loan, Transneft signed an oil supply contract (effective on January 1, 2011) with China National Petroleum Corporation (CNPC) and agreed to sell it 120,000 barrels of crude oil per day (or 6 million tons of crude oil each year) for 20 years. CNPC agreed to pay market prices for the oil and deposit payments for the oil into an account at CDB opened on behalf of Transneft by OJSC Bank VTB (a Russian state-owned bank that acted as an agent for Transneft). CDB had the right to directly debit cash funds from the account to secure repayment of principal, interest and other amounts payable under the loan agreement. In the event of a default, CDB had the right to debit the entire cash balance of the account. The CDB loan disbursed in two tranches: a $9 billion tranche in 2009 and a $1 billion tranche in 2010. Transneft repaid the CDB loan in full in July 2018, ahead of schedule. CDB also provided a $15 billion loan to Rosneft for the East Siberia-Pacific Ocean Oil Pipeline Project (as captured via Project ID#43069). OAO AK Transneft was responsible for the implementation of the East Siberia-Pacific Ocean Oil Pipeline Project. Construction began in the Russian territory on April 27, 2008 and in Chinese territory on May 18, 2009. The 64 km section from Skovorodino to the Amur River on Russia-China border was built by Transneft and the 992 km section from Russia-China border to Daqing was built by the China National Petroleum Corporation. It was completed in September 2010. On January 1, 2011, Russia announced that it had begun scheduled oil shipments to China.

Additional details

1. This project is also known as the Russia-China Oil Pipeline Project or ESPO Pipeline Project. The Russian project title is Нефтепровод "Восточная Сибирь - Тихий океан”. 2. Most of China’s oil-backed loan agreements involve a bank, an oil company, and a trading firm. An oil company in the borrower country must sell a certain number of barrels during a specific period, and payments for the oil are sent directly to the bank. Therefore, the borrower uses the proceeds of oil sales to meet its loan repayment obligations. 3. Under Transeft’s oil supply contract with China National Petroleum Corporation (CNPC), the price of the crude oil was set each month based on the market quotes for Russia’s new ESPO blend crude at the Pacific port of Kozmino. 4. The collateral arrangement that underpins this loan agreement is described in detail at https://www.transneft.ru/u/section_file/37761/tn_ifrs_12m2018_eng.pdf. 5. AidData has estimated the all-in interest rate by adding 3.25% to average 6-month LIBOR rate in February 2009 (1.757%).

Number of official sources

10

Number of total sources

37