China Eximbank provides $330 million buyer’s credit loan for N'Djamena Refinery and Pipeline Project (Linked to Project ID#56285, #72355, #55744, and #91918)

On September 20, 2007, China National Petroleum Corporation (CNPC) and the Chad’s Ministry of Petroleum and Energy signed an agreement in which they agreed to jointly construct the N'Djamena (Djarmaya) oil refinery. Then, on August 2, 2009, CNPC President, Jiang Jiemin, and Chad’s Oil and Mineral Resources Minister, Mahamat Hassan Nasser, signed a memorandum of understanding (MOU) to apply for a $330 million loan to support the implementation of the $1 billion project. On the same day, a Sino-Chadian joint venture agreement was signed to establish Société de Raffinage de N'Djaména (SRN) SA (恩贾梅纳炼厂有限公司 or 恩贾梅纳炼油公司), which is a special purpose vehicle that is jointly owned by CNPC (60% equity stake) and a Chadian state-owned enterprise called Société des Hydrocarbures du Tchad (SHT) (40% equity stake). Nearly two years later, in May 2011, China Eximbank and SRN SA signed a $330 million buyer's credit loan (BCL) agreement for the N'Djamena Refinery and Pipeline Project (captured via Project ID#72356). The BCL, which was reportedly the first one ever issued by China Eximbank to an overseas joint venture, carried the following borrowing terms: a 15-year maturity, a 5-year grace period, and an annual interest rate of 6-month LIBOR plus 300 basis points. CNPC provided a repayment guarantee for 60% of the face value of the China Eximbank PBC and SHT provided a repayment guarantee to cover the remaining 40% of the face value of the PBC. CNPC and SHT also pledged their respective shares in Société de Raffinage de N'Djaména (SRN) SA as sources of collateral. Sinosure refused to insure the BCL, which it deemed too risky. Additionally, CNPC Finance (HK) Limited issued a loan worth approximately $70 million to SRN SA in May 2011 (captured via Project ID#91918). The borrowing terms of the loan from CNPC Finance (HK) Limited are unknown. The proceeds of the China Eximbank BCL and the CNPC Finance (HK) Limited loan were used to fund SHT’s equity contribution (worth approximately 40% of $1 billion) to Société de Raffinage de N'Djaména (SRN) SA. The N'Djamena Refinery and Pipeline Project had two components: the construction of an oil refinery in Djarmaya that is located to the north of N'Djamena and capable of producing 20,000 to 60,000 barrels a day; and the construction of a 311 km pipeline connecting the Rônier and Mimosa oilfields in Bongor Basin (in eastern-central) Chad to the refinery in Djarmaya (Note: Block H of the Rônier oil field is fully owned by CNPC). The contractor responsible for project implementation was PetroChina Engineering Construction, which is a subsidiary of PetroChina. Project implementation commenced on October 26, 2008 and reached completion on June 29, 2011. Then, on July 10, 2011, the refinery produced its first batch of diesel fuel. In January 2012, the Government of Chad suspended the oil refinery deal with CNPC and announced that it would expel the Chinese director of the refinery and renegotiate the deal. Disagreements over fuel prices had caused the relationship between the joint venture partners to deteriorate. The refinery restarted operations in February 2012. However, in August 2013, the Government of Chad suspended CNPC’s operations in Chad, accusing CNPC of violating environmental standards at the company’s Rônier oilfield. Work resumed shortly thereafter but was halted again in May 2014, after CNPC refused to pay a $1.2 billion fine. Preparing to take the dispute to international arbitration, the Government of Chad in October 2014 threatened to revoke and re-auction CNPC’s oil exploration licenses. The dispute was settled the same month when CNPC agreed to pay a $400 million fine and concede to the Government of Chad a 10% stake in existing oil operations in the country, as well as a 25% stake in future oil operations. In exchange, the arbitration case was dropped and CNPC was permitted to export oil through the Chad-Cameroon pipeline. There are indications that the China Eximbank loan for the N'Djamena Refinery and Pipeline Project financially underperformed vis-a-vis the original expectations of the lender. After a sharp decline in oil prices in 2014-2015, Chad experienced an economic recession and a debt crisis and Société de Raffinage de N’djamena (SRN) SA sought to renegotiate the borrowing terms of the China Eximbank loan for the N'Djamena Refinery and Pipeline Project. A rescheduling agreement was finalized in April 2017: China Eximbank agreed to the lengthen the maturity of the loan and reschedule arrears that had accumulated (as captured via Project ID#55744). It appears that China Eximbank did not require the accumulated arrears to be repaid before rescheduling the maturity of the loan.

Additional details

1. N'Djamena Refinery is sometimes called the Djermaya Refinery or the Rônier Oil Refinery. Consequently. this project is also known as the Rônier Oil Refinery And Pipeline Project or Djermaya Oil Refinery And Pipeline Project. The Chinese project title is 中石油Roinier油田项目 or 于乍得恩贾梅纳炼厂项目 or 恩贾梅纳炼油厂 or 乍得炼油厂 or 恩贾梅纳炼油 or 乍得炼厂项. The Arabic project title is مصفاة جرماية. The French project title is Raffinerie de Djarmaya or projet CNPC-SRN. 2. It is unclear if the development of the oil wells in the Rônier 1, Rônier 4, Rônier C1 and Mimosa 4 oilfields – close to the village of Koud Alwa, about 20 km to the south of the small town of Bousso — occurred with support from the China Eximbank PBC or a separate investment by CNPC. 3. The all-in interest rate of the China Eximbank PBC was calculated as follows: 0.414% (average 6-month USD LIBOR rate in May 2011) + 3% (300 basis points) = 3.414%. 4. Neither the CNPC Finance (HK) Limited loan nor the China Eximbank PBC are recorded in the World Bank’s Debtor Reporting System (DRS). 5. The CNPC Finance (HK) Limited loan is not captured in the Chinese Loans to Africa Database developed by SAIS-CARI and maintained by the Global Development Policy Center at Boston University. However, its existence has been independently verified by the IMF and EITI. The face value of the CNPC Finance (HK) Limited loan is unknown. However, given that the total cost of the N'Djamena Refinery and Pipeline Project is $1 billion and Société des Hydrocarbures du Tchad (SHT) sought to finance its 40% equity stake in the project company (SRN SA) with debt, AidData assumes that the face value of the CNPC Finance (HK) Limited loan was roughly equivalent to the difference ($70 million) between $400 million and the $330 million PBC that was issued to SRN SA. This issue warrants further investigation. Further research is also needed to determine if the CNPC Finance (HK) Limited was supported by any credit enhancements. 6. Construction of the N'Djamena (Djarmaya) refinery was part of the first phase of CNPC’s upstream and downstream integrated project in Chad, which also included construction of the Rônier oilfield and a 311 km pipeline between the refinery and the oilfield. Project ID#72355 captures the surface engineering and pipeline work at the Rônier oilfied, while Project ID#56285 details the Rônier road construction, as the road was used for delivering supplies to the oil refinery construction site upon completion. 7. Several sources suggest that the $330 million loan was issued in the form of a preferential buyer's credit (PBC) rather than a BCL and that it was the first PBC ever issued by China Eximbank to an overseas joint venture. However, since the loan's interest rate was floating rather than fixed, AidData has coded the loan as a BCL for the time being. This issue warrants further investigation.

Number of official sources

26

Number of total sources

41