Bank of China contributes to a $884 million USD syndicated loan for Tangguh Liquefied Natural Gas Project (Linked to Project ID#97811)

On October 29, 2007, a syndicate of banks (including Bank of China, BTMU, DNB, Intesa San Paulo, Mizuho Corporate Bank, Ltd., and Royal Bank of Scotland) signed an $884 million loan agreement with a trustee [HSBC USA (New York)] and Japan International Finance Management (Tangguh) Corporation — a special purpose vehicle (SPV) — for the Tangguh Liquefied Natural Gas (LNG) Project. The loan carried a maturity of 13.6 years and an interest rate of LIBOR (October 2007 6M LIBOR: 5.051%) plus a 0.335% margin. China National Offshore Oil Corporation (CNOOC) — a Chinese state-owned enterprise — issued a corporate guarantee in support of the loan. Mizuho Corporate Bank, Ltd., served as the facility agent for the loan. The $884 million loan, known as the ‘Fujian tranche,’ is ring-fenced from the rest of the project and the revenues to service it will be drawn from the 25-year contract to supply 2.6 million tonnes per annum (mtpa) of LNG to CNOOC, initially through the latter’s Fujian LNG-receiving terminal. Under the trustee borrowing structure, loans are repaid from an agreed portion of gross proceeds under identified offtake contracts. The buyers make payments directly to the trustee and paying agent [HSBC USA (New York)]. The trustee is also the borrower under the loan agreement with the lenders, and the debt service payments are made from the trustee accounts. Except as otherwise provided, the lenders look to this source of debt service for all loans, with no recourse to the project and no security interest in the project assets or contracts. Prior to the issuance of this loan, several other loans were issued for the same project: a $1.2 billion loan from Japan Bank for International Cooperation (JBIC), a $350 million loan from the Asian Development Bank (ADB), a $1.066 billion syndicated loan from a group of commercial banks, and an August 2006 $1.3 billion USD syndicated term loan from a syndicate of five Chinese state-owned banks — Agricultural Bank of China (ABC), China Construction Bank Corporation (CCB), China Development Bank (CB), the Export-Import Bank of China, and Industrial and Commercial Bank of China (ICBC) — as captured via Project ID#97811. The debt financing package involves a complex multi-tranche Indonesian trustee borrowing structure. Repayment of the loans is supported by revenues from long-term LNG sale and purchase agreements with K-Power in South Korea, POSCO in South Korea and Sempra Energy via a receiving terminal in Mexico. The purpose of the project is to construct an integrated greenfield liquefied natural gas (LNG) facility — with two LNG process trains (Train 1 and 2) — on the south side of Bintuni Bay in Teluk Bintuni Regency within Papua Barat Province. The LNG plant is comprised of two main components: (i) the offshore gas production facilities including 14 producing wells, 2 platforms (“trains”), and subsea pipelines to feed gas to the onshore facilities; and (ii) the onshore LNG production facilities and associated facilities, which include two identical production trains (Train 1 and 2), storage tanks for LNG (2 x 170,000 m3 ) and condensate (1 x 120,000 barrel), marine berthing facilities, utilities, offices and living facilities, off-site camp, airfield and jetty. Design optimizations together with deferral of the airfield and associated access road almost halved the site footprint. Upon completion, it was envisaged that the project would have 7.6 million tons per annum (mtpa) of production capacity to the existing Tangguh LNG facility. The Tangguh Liquefied Natural Gas Project took shape in the mid-1990s upon the discovery of substantial gas reserves in the area. Proven reserves are around 14.4 trillion cubic feet (TCF). The project was initiated in 1997 by Atlantic Richfield Company (a US oil company) and Pertamina (a state-owned oil and gas enterprise). In April 1999, BP Plc (BP) acquired Atlantic Richfield Company and took over its lead role. Its 7 gas fields, under production-sharing contracts (PSCs), are developed under a partnership between consortia of international contractors (the PSC Contractors) and BPMIGAS as the governmental counterparty. The PSC Contractors, led by BP Berau as the Operator, operate jointly in upstream development and LNG processing for export to international markets. In May 2003, BP approached multilateral and bilateral financial institutions to seek financial assistance together with a commitment to assist the project in implementing best practices following international environmental and social guidelines. The project began construction following the resettlement in July 2004 of Tanah Merah village (the LNG plant site). Engineering, procurement, and construction (EPC) contracts were entered into with a consortium of Kellogg Overseas Corporation, JGC, and PT Pertafenikki (KJP; for onshore facilities) and with PT Saipem Indonesia (for offshore facilities) in March 2005, followed by immediate issuance of the notice to proceed to start the construction. As of March 2007, the project had achieved a 70% completion rate. The offshore facilities were handed over to the project owner by May 2007. The onshore facilities were ready for start-up in January 2009 (Train 1) and June (Train 2) 2009. The first LNG production (first drop) occurred in Train 1 in June 2009. The first LNG shipment was made on July 6, 2009 using the Tangguh Foja LNG carrier. Following the project’s achievement of ready for start-up status in 2009, the start-up process continued until mid-2011 to address technical issues, perform modification works, and ensure the stable operation and higher production efficiency of the LNG plant. Over a 3-year period from first drop in June 2009 up to June 2012 the project had produced a total of 37.8 million m3 of LNG and 5.1 million barrels of condensate. Bank of China also contributed to a syndicated loan in 2016 that financed the third train of the Tangguh Liquefied Natural Gas Project (captured in Project ID#73318).

Additional details

1. The individual contribution of Bank of China to the syndicated loan is unknown. For the time being, AidData has estimated the contribution ($650,217,295) of Bank of China by assuming that the six lenders contributed equal amounts ($147,333,333.33) to the $884 million loan syndicate.

Number of official sources

5

Number of total sources

16