Narrative
Full Description
Project narrative
On February 26, 2016, Petroleo Brasileiro S.A. (Petrobras) and China Development Bank (CDB) signed a term sheet for a $10 billion line of credit (as captured via Record ID#53067). The line of credit was to be disbursed in two, $5 billion tranches (with 10-year maturities and 4.2325% interest rates) and used by the borrower to address its maturing debt obligations. Petrobras and CDB signed a $5 billion agreement for the first loan tranche on December 15, 2016 (as captured via Record ID#53068). Then, on December 14, 2017, Petrobras and CDB signed a $5 billion agreement for the second loan tranche (as captured via Record ID#59384). As a source of collateral for the first loan tranche, Petrobras Global Trading B.V. (PGT), a wholly owned subsidiary of Petrobras, signed oil-supply contracts with three Chinese companies [China National United Oil Corporation (a subsidiary of CNPC), China Zhenhua Oil Co. Ltd. (a subsidiary of NORINCO), and Chemchina Petrochemical Co. Ltd (a subsidiary of ChemChina)] on December 15, 2016. Under each contract, Petrobras agreed to sell 100,000 barrels of oil per day for 10 years at market prices (i.e. 300,000 barrels of oil per day until 2026). As a source of collateral for the second loan tranche, PGT signed an oil-supply contract with UNIPEC Asia — Sinopec’s (subsidiary) trading company — and agreed to provide 100,000 barrels per day for 10 years at market prices (100,000 barrels of oil per day until 2027). The first, $5 billion loan tranche disbursed in full in 2017 in two payments: a $3.5 billion payment and a $1.5 billion payment. The second, $5 billion loan tranche was reportedly disbursed in a $3 billion payment (on December 14, 2017) and a $2 billion payment (on January 26, 2018). The total (principal) amount outstanding under the December 15, 2016 loan agreement and the December 14, 2017 loan agreement was $10.815 billion as of December 31, 2017, $10.125 billion as of March 31, 2018, $10.157 billion as of September 30, 2018, $10.02 billion as of December 31, 2018, $5.006 billion as of December 31, 2019, $5.005 billion as of December 31, 2020, $4.171 billion as of December 31, 2021, and $3.341 billion as of December 31, 2022. Petrobras reportedly repaid a small portion of its outstanding debt to CDB (across the two loan agreements) between 2016 and 2018. However, it made a $5 billion repayment to CDB on December 16, 2019.
Staff comments
1. Most of China’s oil-backed loan agreements involve a bank, a borrower, an oil seller, and an oil buyer (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. 2. The loan's interest rate (4.2325%) is recorded in the World Bank's Debtor Reporting System (DRS). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0 3. Petrobras Global Trading B.V. (PGT), a wholly owned subsidiary of Petrobras, pledged the source of collateral (future receivables from crude oil sales, originating from Petrobras exports to specific buyers) to the lender. The value of the collateral was limited to the (principal) amount outstanding under the December 15, 2016 loan agreement and the December 14, 2017 loan agreement, which was $10.815 billion as of December 31, 2017, $10.125 billion as of March 31, 2018, $10.157 billion as of September 30, 2018, $10.02 billion as of December 31, 2018, $5.006 billion as of December 31, 2019, $5.005 billion as of December 31, 2020, $4.171 billion as of December 31, 2021, and $3.341 billion as of December 31, 2022.