China Eximbank to fund EPC contract for Phase 1 of Cambodia's First Oil Refinery Project (linked to Record ID#85525, #85490)

Project narrative

On December 28, 2012, Cambodian Petrochemical Company (CPC) — a private company — formed an unnamed joint venture with China Perfect Machinery Industry Co., Ltd. (also known as China Pufa Machinery Industry Co., Ltd.- a subsidiary of Sinomach) to invest in the construction of Cambodia’s first oil refinery, which at the time was expected to cost $2.3 billion USD in total (see linked Record ID#85525). Then, during the visit of Cambodian Prime Minister Hun Sen to China on April 8, 2013, China Development Bank (CDB), Sinopec (Sinomach), China Export and Credit Insurance Corporation (Sinosure), and Cambodian Petrochemical Company (CPC or 柬埔寨石油化工有限公司) signed a Memorandum of Understanding for cooperation on the project in which CDB pledged a $1.67 billion loan for the construction of a five-million-ton oil refinery in Cambodia. The refinery would be located on 365 hectare (ha) site — in Toek Thla commune within Prey Nop district — that straddles Kampot and Preah Sihanouk provinces and it was expected to reduce petroleum imports, lower costs, and improve national energy security, particularly once ‘Block A’ begins producing oil. CDB's $1.67 billion pledge towards this project appears to have fallen through, as China Eximbank subsequently conducted due diligence on the oil refinery project, and on October 16, 2013, CPC and China Eximbank signed a $1.666 billion financing framework agreement for the Oil Refinery Project (as captured in Record ID#85490). This agreement specified that the $1.96 billion (lowered from $2.3 billion as stipulated in the 2012 construction agreement) project would be implemented in two phases. CPC and China National Petroleum Corporation (CNPC) Northeast Refining & Chemical Engineering Company signed an engineering, procurement and construction (EPC) contract for Phase 1 on May 5, 2016. However, this contract appears to have been canceled because CPC signed another EPC contract worth $620 million (RMB 4.135 billion) Lanzhou LS Heavy Equipment Co., Ltd. (兰州兰石重型装备股份有限公司) on September 20, 2016. According to the contract, China Eximbank is expected to finance 85% of the contract cost, and CPC agreed to allow the lender to disburse funds directly to the EPC contractor. Sinosure also agreed to insure the loan with buyer's credit insurance, and Lanzhou LS Heavy Equipment Co., Ltd. (兰州兰石重型装备股份有限公司) provided a guarantee.The validity of the contract is dependent on China Eximbank's provision of financing. On April 27, 2017, the EPC contract between CPC and Lanzhou LS Heavy Equipment was terminated due to inability of Lanzhou LS Heavy Equipment to secure financing and credit insurance. CPC signed another EPC+F contract (worth RMB 4,268,000,000) with Sino Great Wall International Engineering Group of the People’s Republic of China (PRC) on April 26, 2017. Sino Great Wall International Engineering Group is expected to coordinate the financing arrangement of the project. There is no mention of any financing from China Eximbank in the contract. A formal groundbreaking ceremony for Phase 1 of the project then took place on May 4, 2017; however, Sino Great Wall International Engineering Group subsequently announced that its work on the project was halted. As of 2018, Sino Great Wall International Engineering Group contributed 79,605,206.92 RMB and CPC contributed 248,272,371.05 RMB to the project. Media reports in mid-2019 indicate that the project encountered ‘financing problems’ and would likely recommence in 2022. Work is currently still paused.