Bank of China contributes $75 million to $1.4 billion syndicated overseas investment loan for Block 18 Oilfield Development Project (Linked to Record ID#67022, #67024, #67026, #67027, #194)

Project narrative

On July 2, 2004, Sinopec International Exploration and Production Corporation and Sonangol Asia Limited — a subsidiary of Sonangol (Angola’s state-owned oil company) — signed a framework cooperation agreement. Under the terms of the agreement, Sonangol was granted the right to (re)purchase a 50% equity stake — held by Shell Development Angola B.V. (SDAN) — in an offshore oil field known as Block 18. Sonangol and Sinopec International Exploration and Production Corporation also agreed to jointly develop Blocks 15, 17, and 18. In December 2004, Shell Development Angola B.V. (SDAN) sold its 50% equity stake in Block 18 to Sonangol, leaving the remaining 50% ownership stake with BP. Then, on January 21, 2005, Sonangol agreed to transfer its 50% equity stake in Block 18 to Sonangol Sinopec International Limited (SSI) — a special purpose vehicle that was legally incorporated in the Cayman Islands on October 15, 2004 and a joint venture of Sinopec Overseas Oil & Gas Limited (SOOGL) and China Sonangol International Holding Limited (China Sonangol) — for an acquisition price of $421.5 million. SSI reportedly secured a loan from Standard Chartered Bank (with a corporate guarantee from Sinopec) to facilitate the $421.5 million acquisition. SOOGL held 55% of the total issued share capital of SSI, and China Sonangol held 45% of the total issued share capital of SSI. China Sonangol was a joint venture of New Bright International Development Limited (70% ownership stake) — a wholly-owned subsidiary of Sinopec — and Sonangol (30% ownership stake). The 50% equity transfer agreement was approved by Angola’s Ministry of Petroleum and Ministry of Finance on February 18, 2005. Then, on February 25, 2005, both parties formally signed the 50% equity transfer agreement (during a visit to Angola by the Vice Premier of China’s State Council). Shortly thereafter, in April 2006, SSI obtained partial equity stakes in additional offshore oil fields known as Blocks 15 (06), 17 (06), and 18 (06). On May 12, 2006, China Development Bank and SSI signed a $1.4 billion syndicated facility agreement for the Block 18 Oilfield Development Project. Members of the loan syndicate included ING Bank N.V., BNP Paribas S.A., Societe Generale, Standard Chartered Bank, KBC Finance Ireland (KBC), Crédit Agricole Corporate and Investment Bank (SG CIB), NATEXIS Banques Populaires (Natixis), London Branch of Bayerische Landesbank (BayernLB), China Development Bank (CDB), Export-Import Bank of China, China Construction Bank, Bank of China Limited, and the Agricultural Bank of China. The loan carried a 7 year maturity (with a final maturity date of June 2013) and a 2 year grace period. During the construction phase, the loan carried an interest rate of LIBOR plus 40 basis points, and in the following three years, the loan carried an interest rate of LIBOR plus 140 basis points. The loan was collateralized and backed by a corporate guarantee from China Petrochemical Corporation (Sinopec). The project sponsors (SOOGL and China Sonangol) pledged their shares in the borrowing institution (SSI) as sources of collateral. The loan’s security documents (collateral package) included the Shareholders' Undertaking Agreement; each SSI Share Charge; the Deed of Assignment of Insurance Proceeds; the Deed of Assignment of Rights under the Offtake Agreement; the Deed of Charge on Accounts; and the Deed of Assignment of Rights under the Hedge Agreement. The borrower was expected to use the proceeds of the loan to finance the development Block 18, one of the largest oilfields in Angola. China Development Bank contributed $205 million to the facility agreement (as captured via Record ID#67022). China Construction Bank contributed $144 million (as captured in Record ID#67027). Agricultural Bank of China contributed $76 million (as captured in Record ID#67026). Bank of China contributed $75 million (as captured in Record ID#67025). China Eximbank contributed $200 million (as captured in Record ID#67024). Of the remaining $700 million, BNP Paribas and facility agent ING were both expected lend $115 million, while security agent Natexis was expected provide $91 million. BayernLB, Calyon, KBC, and Standard Chartered were each expected lend $76 million, and SG CIB agreed to provide $75 million. In March 2010, Sinopec announced that it would acquire a 55% equity interest in SSI from SOOGL for $2.46 billion — including a cash consideration of $1.678 billion and a debt consideration of $779 million for SSI. The acquisition was completed on September 30, 2010. Block 18 is in deep waters and is located between the Kwanza and Congo basins, where the water depth varies between 750-1,750 meters. The block contains the Greater Plutonio development, which is the first BP-operated asset in Angola, consisting of five distinct fields discovered between 1999 and 2001, in water depths of up to 1,450 meters. Upon the start of oil production, Block 18 was expected to produce around 200,000 barrels a day, with much of it intended for export to China. The Block 18 Oilfield Development Project reportedly cemented Angola’s place as the largest supplier of oil to China. It also proved to be a major financial success. By 2011, Sinopec had recouped its investment. By the end of 2014, it had earned nearly $2.6 billion from the project. Su Shulin, Sinopec’s general manager between 2007 and 2011, once referred to Block 18 as ‘Sinopec’s best overseas asset.’ An oilfield appraisal company Ryder Scott Co. said that the eastern portion of Block 18, the main production area, had proven reserves of 102 million barrels and another 67 million barrels of estimated reserves. As of 2015, the block’s western section had not been tapped and had estimated reserves of 88 million barrels.