ICBC contributes to $8 billion syndicated loan to Pemex to help it repay its outstanding debts (Linked to Project ID#92175)

On November 13, 2014, Petróleos Mexicanos (Pemex), China National Offshore Oil Corporation (CNOOC), China Development Bank, and the Industrial and Commercial Bank of China (ICBC) signed memoranda of understanding which intend to, among other things, encourage cooperation among the parties with respect to technical, human resources and financial matters. Then, on June 28, 2019, a syndicate of banks — including HSBC; J.P. Morgan; Mizuho; BBVA; BNP Paribas; MUFG; SMBC; Credit Agricole; Bank of America; Natixis; Santander; Barclays; Scotiabank; Société Générale; Citibank México; ICBC Dubai; Bank of China; Goldman Sachs; Banorte; ING; Morgan Stanley; BCI Miami; and DZ Bank — and Pemex signed a senior unsecured syndicated term loan facility agreement for an amount up to $2.5 billion and a senior unsecured syndicated revolving credit facility agreement for an amount up to $5.5 billion. ICBC and Bank of China reportedly contributed $600 million in total. Mizuho Bank, Ltd. acted as administrative agent and global coordinator. HSBC Securities (USA), Inc. and JPMorgan Chase Bank, N.A. acted as global coordinators. The two facilities reportedly carried 5-year maturities (final maturity dates: 2024) and interest rates of 4.85% (or LIBOR plus a 2.35% margin). The $2.5 billion loan was to be used by the borrower to refinance existing debt (i.e. repay its outstanding debts) and the $5.5 billion loan was to be used by the borrower to replace other pre-existing credit lines. Project ID#92173 captures ICBC's contribution while project ID#92175 captures BOC's contribution to the syndicated loan.

Additional details

1. These loans came three months after the Mexican government, led by President Andrés Manuel López Obrador, announced a $5.6 billion (107 billion pesos) federal aid package for Pemex. The state-owned oil company was also set to receive several billion dollars from Mexico’s oil revenue stabilization fund. 2. On January 13, 2020, China’s Ambassador to Mexico Zhu Qingquiao was interviewed by reporters (at a Mexican economy ministry event) about his country's participation in the Dos Bocas Refinery Project. He said that ““We participate in a certain way, Chinese banks participate in the financing, yes, along with other international banks. ICBC and Bank of China.” (“Participamos de cierta manera, bancos chinos participan del financiamiento, sí, junto con otros bancos internacionales. ICBC y Bank of China.”) However, hours later, Mexico’s Secretary of Energy, Rocío Nahle — who is responsible for the construction of the Dos Bocas refinery denied that the project was benefiting from any foreign financing. The Chinese Embassy also clarified that its Ambassador had made a mistake and ICBC and Bank of China had only contributed to an $8 billion syndicated loan to Pemex in 2019. Nevertheless, a large number of sources indicate the Bank of China and ICBC contributed $600 million (£461.4 million) to the Dos Bocas Refinery Project. It is possible that the underlying source of the confusion is that the $8 billion loan was provided to Pemex for general corporate purposes, which may have allowed the borrower to draw upon the loan for the Dos Bocas Refinery Project (even if ICBC and Bank of China did not specify ex ante their contribution was being earmarked for the Dos Bocas Refinery Project. 3. A large number of sources indicate the Bank of China and ICBC contributed $600 million, however the exact contributions from ICBC and BOC are unknown at this time. AidData estimates equal contributions (300 million USD) from both banks. ICBC's contribution is captured via project ID #92173 and BOC's via project ID#92175. 4. The Dos Bocas refinery is a 340,000 barrels per day (bpd) oil refinery under-construction in Tabasco, Mexico. Capable of producing 170,000bpd of petrol and 120,000bpd of ultra-low sulphur diesel, it will be the biggest refinery in Mexico. State-owned oil and gas company Petroleos Mexicanos (Pemex) will be the owner and operator of the refinery. The site preparation work for the £6.5bn ($8bn) refinery project started in June 2019, while Mexico’s environmental regulator ASEA granted a construction permit in August 2019. Scheduled to commence commercial production in 2022, the Dos Bocas refinery project is being developed as part of Mexico’s National Refining Plan of December 2018 that aims at reducing its reliance on fuel imports from the US. The refinery facility is being developed on a 566ha-site near Dos Bocas maritime terminal, in the Paraíso municipality of Tabasco, in southeast Mexico. The Dos Bocas refinery is proposed to include 17 processing units including a combined distillation plant, a delayed coking unit, a fluid catalytic cracker unit, a naphtha hydrotreating unit, a naphtha reforming unit, a sulphur recovery plant, a gas recovery and treatment facility, as well as a hydrogen-producing plant. The delayed coking unit will convert the residue from the combined distillation plant into higher-value products, while the fluid catalytic cracker unit will use catalysts to break large distillation fractions into lighter products. The hydrotreating unit will remove sulphur, nitrogen and some aromatic compounds from the distillation fractions.The engineering and construction work for the refinery is divided into six packages. The contractors for five work packages including packages 1-4 and package-8 with a combined value of £6bn ($7.5bn) were selected in July 2019. The contracts for package-5 which includes the building of storage facilities are expected to be awarded in 2020. The package-1 which is estimated to cost £1.37bn ($1.7bn) involves the construction distillation and coking plant facilities, while the £1.45bn ($1.79bn) package-2 includes a diesel hydro desulphurisation (DHDT) unit, a gasoil hydro desulphurisation (HDS) unit, a naphtha hydro-treating (NHT) unit and a naphtha reformer. The fluid catalytic cracking (FCC) unit is included in package-3 which involves an estimated investment of £1.14bn ($1.41bn). The £284m ($351.4m) package-4 includes the sulphur recovery plant, the gas recovery and treatment plant, and the hydrogen-producing plant, while the £1.48bn ($1.84bn) package-6 involves refinery integration services. CICAFluor, a joint venture between the Mexican engineering and construction company ICA and the US-based engineering and construction company Fluor, received the contract for work package-1 of the refinery project. Samsung Engineering in partnership with Mexico-based Asociados Constructores DBMR was awarded the contract for Packages 2 and 3. KBR and Mexico-based Constructora Hostotipaquillo jointly bagged the contracts for packages 4 and 6. Mexicana de Recipientes a Presión, which specialises in making metallic structures, is working with KBR and Constructora Hostotipaquillo, on work package-6 of the refinery project. Van Oord, a marine contractor based on the Netherlands, in consortium with Mexico-based Grupo Huerta Madre received a contract worth £207.6m ($262.5m) for land reclamation works for the Dos Bocas refinery site in June 2019. The scope of the contract included the creation of 600ha of new land, 400ha of dynamic compaction and 6 million m3 of dry earth movement. The National Refining Plan calls for the rehabilitation of six existing Pemex-operated refineries as well as a new refinery in Dos Bocas, in order to reduce Mexico’s dependency on fuel imports. The six existing refineries at Cadereyta, Madero, Minatitlán, Salamanca, Salina Cruz and Tula processed 611,900bpd of crude oil in 2018. The National Refining Plan targets a total of 1.8 million barrels per day (Mbpd) of crude processing capacity at the seven refineries including the Dos Bocas refinery, by 2022. The refineries are intended to produce a total of 781,000bpd of petrol and 560,000bpd of diesel. As of the end of 2020, 19.5% of the refinery's physical and financial work had been completed, according to Pemex's 2020 annual report. Mexico’s Secretary of Energy, Rocío Nahle, said the project was 24% complete in October 2020. President Andres Manuel Lopez Obrador's controversial strategy of making Mexico self-sufficient for fuel supply is based heavily on the construction of the financially and technically challenging refinery. He has vowed repeatedly that the refinery would not cost more than $8 billion, and ‘I will change my name’ if the refinery is not inaugurated on July 1, 2022. However, in May 2021, Pemex told its board of directors costs for the planned 340,000 b/d Dos Bocas refinery could soar by roughly 40 percent, and the business case needed to be reformulated, as payments were coming due and the timeframe established by the government would not be met. The Dos Bocas refinery could cost up to $12.4 billion, up from the latest $8.9 billion budget, which was already adjusted from an original $8 billion cost, according to Pemex's 2020 annual report.

Number of official sources

2

Number of total sources

16