ICBC contributes $170.7 million to syndicated loan for Duqm Refinery Construction Project

In September 2018, Duqm Refinery and Petrochemical Industries Company LLC (DRPIC or OQ8) — a special purpose vehicle and joint venture between Omani Oil Company S.A.O.C (OOC) [an Omani state-owned enterprise (SOE)] and Kuwait Petroleum International (KPI) [a subsidiary of Kuwait Petroleum Corporation] — signed a $4.61 billion debt financing package with the Industrial and Commercial Bank of China (ICBC) and 28 other financial institutions for the Duqm Refinery and Petrochemical Industries Company (DRPIC) for the Duqm Refinery Project. The members of the lending syndicate include ICBC, National Bank of Kuwait, Kuwait Finance House, Crédit Agricole, Corporate and Investment Bank, KfW IPEX-Bank, Société Générale, Sumitomo Mitsui Banking Corporation, Bank Muscat, Boubyan Bank, Banco Santander, Bank of Tokyo-Mitsubishi UFJ, Ltd, BNP Paribas, Commercial Bank of Kuwait, Bank Dhofar, Qatar National Bank, APICORP, Natixis, Standard Chartered Bank, National Bank of Oman, Warba Bank, Korea Development Bank, Credit Suisse, HSBC, Intesa Sanpaolo, UBI Banca, Ahli United Bank Kuwait, Bank Sohar, and Ahli Bank Oman. The $4.61 billion senior debt financing package consisted of six syndicated loan facilities, including: (1) a $1.43 billion International Commercial Facility; (2) a $490 million Onshore Commercial Facility; (3) an $890 million Islamic Facility; (4) a $700 million UK Export Finance (UKEF) Covered Facility; (5) a $500 million Compañía Española de Seguros de Crédito a la Exportación (CESCE) Covered Facility; and (6) a $600 million Korea Export Import Bank (K-EXIM) Covered and K-EXIM Direct Facilities. The commercial bank facility has a scheduled final maturity date in 2034, the onshore commercial bank facility has a scheduled final maturity date in 2037, the Islamic bank facility has a scheduled final maturity date in 2034, and the ECA facilities each have scheduled final maturity dates in 2035. As of December 31, 2020, $3.261 billion (OMR 1.3 million) was outstanding (in aggregate) under the loan facilities and $1.349 billion (OMR 526 million) was available for drawing. The other borrowing terms that applied to these loan facilities are unknown. However, it is known that the loan facilities were secured by (i.e. collateralized against) (1) DRPIC's assets, (2) land, (3) offshore accounts, (4) other unspecified rights ICBC was a mandated lead arranger on at least one of these facilities and contributed $170.7 million to at least one facilities (most likely the USD-denominated $1.43 billion International Commercial Facility). The total cost of the Duqm Refinery Construction Project is $8.28 billion and it is being financed according to a debt-to-equity ratio of 55:45. The purpose of the project is to construct an oil refinery in the Duqm Special Economic Zone, which is strategically located outside the Straits of Hormuz to export refined products to Europe, Africa and the Far East. Duqm Refinery is actually located at three sites within (SEZAD), two at Duqm and one at Ras Markaz. The Duqm site will be the location of a complex refinery, on-site utilities, infrastructure, storage and a product export terminal located at the Port of Duqm. At Ras Markaz, a crude storage facility will be located at 80 kilometers from the refinery. Additionally, a pipeline will be constructed to transport crude oil from the crude storage facility to the refinery. Spain's Tecnicas Reunidas Corporation and South Korea's Daewoo Engineering and Construction Corporation are the general contractors responsible for project implementation, but multiple companies are involved as subcontractors (including China National Chemical Engineering Third Construction Co. Ltd., which is also known as CNCEC). In August 2017, OOC and KPI awarded three EPC packages for Duqm: a $2.75 billion contract for the refinery's main process unit awarded to Spanish firm Tecnicas Reunidas in consortium with Daewoo Engineering & Construction of South Korea; a contract for the construction of utilities and offsite facilities awarded to a joint venture between UK's Petrofac and South Korea's Samsung Engineering, and a contract for the construction of a product storage and export terminal to Italy's Saipem International Samsung and Petrofac. In October 2018, a $50.6 million EPC sub-contract was awarded to Galfar Engineering and Contracting. CNCEC won an RMB 567 million (USD 80.58 million) EPC contract in August 2019. Site preparation was undertaken by Galfar Contracting Co. during 2015-2016. Project implementation commenced in June 2018. As of December 2019, the project had achieved a 45% completion rate. As of December 25, 2020, the overall progress achieved on the Duqm Refinery project was 76.7 percent, while the engineering progress achieved was 99.3 percent, the procurement progress achieved was 94.7 percent, and the construction progress achieved was 62.1 percent. As of December 25, 2020, the project had achieved 93.7 million safe man-hours and was projected to reach completion in 2022. Upon completion, the refinery is expected to have capacity to process 230,000 barrels of oil per day (bpd). It is designed to process a range of blended crude oils. The refinery is configured as a full-conversion hydrocracker/coking facility. Moreover, the refinery is designed to have an operational life of at least 25 years and will produce diesel and jet/kerosene, meeting international specifications (Euro V and Jet A-1 respectively) as its primary products. The refinery will also produce naphtha and LPG. The products of the refinery will be sold to Oman Trading International Ltd (OTI) (50%) and Kuwait Petroleum Corporation (KPC) (50%) under long term off-take agreements. As of November 2022, the project reached a completion rate of 96% and is set to be complete by the end of 2023.

Additional details

1. ICBC refers to the ‘commercial loan’ as having a 16 year maturity and the ‘ECA loan’ as having a 17 year maturity. For the time being, AidData assumes that the ICBC loan has a 16 year maturity. 2. The Chinese project title is 阿曼杜库姆炼油厂项目 or 杜库姆炼油厂建项目. 3. Duqm Refinery and Petrochemical Industries Company (DRPIC) is an LLC that was established under the laws of the Sultanate of Oman to develop, construct, own, and operate an export refinery plant within the Special Economic Zone at Duqm (SEZAD). 4. UK Export Finance (UKEF), Spanish Export Credit Agency (CESCE), and the Export-Import Bank of Korea (KEXIM) provided guarantees. Oman Oil and KPE have entered into completion guarantees with the lenders which in turn are guaranteed by the Government of Oman and KPC, respectively. According to ICBC, ‘[t]he Completion Guarantee and Project completion conditions are robust mitigants to the exposure of the Secured Credit Facilities providers to completion risk; The Ministry of Finance and KPC will respectively guarantee the Completion Guarantee obligations of each of Oman Oil and KPE; Customary project finance account structure with foreign currency revenues deposited into secured offshore accounts, with withdrawals subject to a traditional cash flow waterfall; and there is a comprehensive security package.’ 5. An ICBC sources suggests that it contributed to (1) an export credit agency (ECA) loan for the purpose of constructing the refinery and (2) a commercial loan for the purpose of repaying shareholders' capital. This issue warrants further investigation. 6. OOC and KPI were advised by Crédit Agricole – financial, and Allen & Overy – legal. The lenders were advised by: Latham & Watkins – legal. The ECAs were advised by: Greengate – financial. 7. Omani Oil Company S.A.O.C (OOC) and Kuwait Petroleum International (KPI) each have a 50% ownership stake in DRPIC (OQ8). In 2012, OOC established DRPIC (OQ8) as a 50:50 joint venture with International Petroleum Investment Company PJSC of Abu Dhabi which subsequently sold its share to KPE, a wholly owned subsidiary of Kuwait Petroleum Corporation, the national oil company of Kuwait. 8. CNCEC began work on November 6, 2019 and was scheduled to complete works by September 7, 2021. 9. Under the finance documentation, OOC and KPE each committed to provide a minimum of $1.834 billion in equity contributions prior to the satisfaction of the completion conditions under the financing. This equity commitment may be satisfied through the contribution of share capital and shareholder loans to DRPIC (OQ8), or through the use of DRPIC (OQ8) pre-completion revenues to fund development costs.

Number of official sources

14

Number of total sources

23