Bank of China contributes to $4 billion syndicated loan for construction of new oil and gas facilities in Oman

On June 29, 2016, Petroleum Development Oman (PDO or 阿曼石油开发公司) — an oil exploration and production company majority-owned by the Government of Oman — signed a $4 billion syndicated pre-export finance (PXF) facility agreement with Bank of China (BOC), HSBC Bank, ING Bank, Intesa Sanpaolo, JPMorgan, National Bank of Abu Dhabi, Natixis, Société Générale, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation. The loan had a 5-year maturity, 2-year grace period, and an interest rate of LIBOR plus 160 basis points (1.6% margin). The borrower is responsible or repaying the loan with the proceeds of the sale of crude oil. The proceeds from the $4 billion facility were to be used by PDO to finance the construction of major new oil and gas facilities. To organize the facility, PDO worked in cooperation with Oman’s Ministry of Finance and Ministry of Oil and Gas. The facility was structured as a secured loan backed by future oil production revenues collected by an orphan special purpose vehicle based in the Netherlands, with the fund used as upfront payment to GSO for the delivery of crude oil volumes under a forward sales agreement. The deal was closed in record time – about four weeks – with banks from outside the region joining as final participants. This allowed PDO to upsize the facility from $3.4 billion to $4 billion.

Additional details

1. The monetary values of the contributions made by individual members of the loan syndicate are unknown. For the time being, AidData estimates Bank of China's contribution by dividing the face value of the loan ($4 billion) by the number of banks (10) that participated in the syndicate. 2. The all-in interest rate that applies to the loan (2.536%) was calculated by taking the average 6-month LIBOR rate during the month (June 2016) when the loan agreement was finalized (0.936%) and adding a 1.6% margin. 3. Petroleum Development Oman is the leading exploration and production company in the Sultanate of Oman. It delivers the majority of the country's crude oil production and natural gas supply. It is jointly owned by the Government of Oman (60% equity stake), Royal Dutch Shell (34% equity stake), Total (4% equity stake), and Partex (2% equity stake). 4. A pre-export finance (PXF) facility is an arrangement in which a commodity producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed.

Number of official sources

3

Number of total sources

12