ICBC participates in $2.206 billion syndicated loan for Puerto La Cruz Refinery Deep Conversion Project

Project narrative

In July 2012, Petróleos de Venezuela, S.A. (PDVSA) awarded a $2.993 billion EPC contract to Wison Engineering Ltd., Hyundai Engineering & Construction Co. Ltd. and Hyundai Engineering Co,. Ltd. for the Puerto La Cruz Refinery Deep Conversion Project. The EPC contract specified that the China-based Wison Engineering Ltd. would receive a share equivalent to approximately $927.8 million. On June 27, 2012, Credit Suisse AG and ICBC signed a $1 billion syndicated loan (credit facility) agreement with PDVSA Petróleo, S.A. for the Puerto La Cruz Refinery Deep Conversion Project. The loan had principal amortizations every six months and a grace period of 16 months. As of December 31, 2012, the loan had achieved an 47.8% disbursement rate ($478 million out of $1 billion). The proceeds of the loan were to be used by the borrower to finance Wison Engineering Ltd.’s share of the EPC contract that was signed in July 2012. Then, on September 3, 2014, PDVSA Petróleo, S.A. entered into an extension of the syndicated loan (credit facility) agreement with Credit Suisse and ICBC in June 2012 for $1.289 billion, with some of the terms and conditions of the initial agreement being modified. The new amount of the credit facility was $2.206 billion, with quarterly payments and a grace period of 14 months, earmarked for the modification and expansion of the Puerto La Cruz Refinery. The loan's amount outstanding was $1.477 billion as of December 31, 2014 and $1.95 billion as of December 31, 2015. The Puerto La Cruz Refinery Deep Conversion Project, which is located in the city of Puerto La Cruz and the state of Anzoategui, seeks to convert existing units, thereby enabling the refinery to process 210,000 barrels per day (bpd) of heavy and extra heavy crude oil from oil reserves in the Orinoco Oil Belt (FPO) instead of the 180,000 bpd of light and medium oil that it currently processes. Wison Engineering Ltd., Hyundai Engineering & Construction Co. Ltd. and Hyundai Engineering Co,. Ltd. are the general EPC contractors responsible for project implementation. Wison Engineering then subcontracted China Tiesiju Civil Engineering Group (CTCE), China Railway No.9 Group (CREC-9), China Railway Tenth Engineering Group (CREC-10) and TREVI to assist in early activities related to the site preparation works. Site preparation works for an expansion called the Deep Conversion Project began at the refinery on July 21, 2014. Module assembly commenced on March 15, 2015. Then, on November 14, 2015, a bridge was erected across the oil pipeline in the EW-02 area. The project celebrated 2 million man hours without an accident on November 16, 2015. By May 2017, the project had achieved a 79% completion rate. The commissioning of the project was originally expected to take place 2020. However, as of April 2025, AidData had not yet identified any evidence of project completion. The various stakeholders involved in this project have faced several major obstacles and controversies. In July 2014, Banco Espírito Santo — a troubled Portuguese bank — received a $835 million loan from Oak Finance Luxembourg SA (a special purpose vehicle incorporated in Luxembourg and owned by Goldman Sachs) for the Puerto La Cruz Refinery Deep Conversion Project before it was bailed out and broken up by Portugal's central bank (Bank of Portugal) in August 2014. Despite Banco Espírito Santo’s collapse, the debt was transferred to Novo Banco, a new lender (a “good bank”) that was created out of Banco Espírito Santo (the “bad bank”). The $835 million loan was supposed to be repaid. However, on December 23, 2014, Novo Banco made a surprise announcement: the Bank of Portugal had informed it that Oak Finance Luxembourg SA would remain in the “bad bank” that the central bank was winding down, virtually guaranteeing that the loan would not be be fully repaid. The reason: a Portuguese law passed in August 2014 said that anyone owning more than 2% of a bailed-out bank’s shares would have to go to the back of the line for any debt repayments. Goldman’s 2.27% shareholding in July 2014 triggered that provision retroactively, the Bank of Portugal concluded. Goldman Sachs then accused the Bank of Portugal of breaking its word and warned that the decision would hurt the pension funds that bought Oak Finance Luxembourg SA debt. Then, in August 2015, Wison Engineering Services Co Ltd was found guilty of bribery after an investigation by the Chinese government and ordered to pay a fine of RMB 30 million ($4.83 million). The firm’s controlling shareholder, Hua Bangsong, was also sentenced to 36 months in jail on the same charge (as part of a Chinese police crackdown on oil industry corruption. In 2018 workers from the project were also involved in a protest over low wages, unpaid bonuses, and lack of benefits.