China Construction Bank contributes to EUR 3.4 billion syndicated loan for Amur Gas Processing Plant Construction Project (Linked to Project ID#66306 and #92611)

In November 2016, China Development Bank (CDB) and Gazprom signed a preliminary agreement for the financing of the Amur Gas Processing Plant Construction Project. The amount of the loan was not specified, but a Gazprom official stated that CDB would fund the majority of the $20 billion investment. CDB later withdrew from the agreement due to an unidentified set of project risks. In late 2018, media sources reported that Gazprom secured a loan worth EUR 350 million from an unspecified foreign bank. Then, on December 23, 2019, Gazprom Pererabotka Blagoveshchensk (or OOO Gazprom Pererabotka Blagoveshchensk) — a wholly-owned subsidiary of Gazprom (a Russian majority state-owned multinational energy corporation) — completed the signing of project finance documentation for the Amur Gas Processing Plant Construction Project, including EUR 11.4 billion from a syndicate of 22 European, Asian, and Russian banks and financial institutions. Participants in the syndicate included Crédit Agricole Corporate and Investment Bank, ING Bank N.V., ING Bank, a branch of ING-DIBA AG, Société Générale S.A., Unicredit S.P.A., Unicredit Bank AG, Banca IMI S.P.A. London Branch, Intesa Sanpaolo S.P.A. London Branch, Banca IMI S.P.A., Intesa Sanpaolo S.P.A., Intesa Sanpaolo Bank Luxembourg SA, MUFG Bank, LTD. (London Branch), MUFG Bank, LTD., Sumitomo Mitsui Financial Group (SMFG), Mizuho Bank, LTD., Mizuho Bank, LTD., London Branch, Natixis, Natixis, London Branch, Credit Suisse AG, DZ Bank AG, London Branch, UBI Banca S.P.A., Landesbank Hessen-Thueringen Girozentral, Cassa Depositi e Prestiti S.P.A., Sberbank (Switzerland) AG, Sberbank PJSC, GPB BANK (AO), Gazprombank (Switzerland) LTD, VTB Bank (PAO), VTB Bank (Europe) SE, State Development Corporation VEB.RF, PJSC Bank FC Otkritie, China Development Bank, Bank of China, Bank of China Limited, London Branch, Bank of China Limited, Luxembourg Branch, Bank of China Limited (Luxembourg) S.A., Rotterdam Branch, Bank of China Limited, Hungarian Branch, JSBB Bank of China (AO), China Construction Bank, China Construction Bank Corporation, Beijing Branch, Euler Hermes Deutschland AG, SACE S.P.A., and the Russian Agency for Export Credit and Investment Insurance (EXIAR) Joint Stock Company. 14 banks from Europe and Japan provided up to EUR 3.66 billion under insurance coverage provided by Western export credit agencies for a maturity of 17 years. The financing from Chinese banks was arranged by Bank of China, China Construction Bank, and China Development Bank. These financing institutions provided a syndicated loan facility of EUR 3.4 billion with a 15-year maturity in March-April 2020. Project ID#66306 captures CDB's contribution. Project ID#92611 captures BOC's contribution. Project ID#92612 captures CCB's contribution. Russian banks—Gazprombank, Sberbank, VTB Bank, Otkritie Bank, and VEB.RF—provided multi-currency credit lines of EUR 1.08 billion and 170 billion rubles. EXIAR Joint Stock Company will cover about one third of the total amount. An additional EUR 1 billion for 15 years also will be provided on an uncovered basis. China Development Bank is reportedly the largest lender overall, committing EUR 2.5 billion. Crédit Agricole Corporate and Investment Bank is the security agent. The proceeds of the syndicated loan from Bank of China, China Construction Bank, and China Development Bank were to be used by the borrower to, among other things, finance a $2.52 billion commercial contract with China Petroleum Engineering & Construction (CPECC), which was signed on April 11, 2017. NIPIGAZ (part of the SIBUR Group) is the general contractor responsible for project implementation. CPECC is a subcontractor. A crucial part of the China-Russia east route natural gas pipeline, the Amur Gas Processing Plant (AGPP) will be the largest gas processing plant in Russia and one of the biggest in the world. The construction site of the Amur gas processing plant is located near the town of Svobodny in the Amur Region. Upon completion, the plant will have a design capacity of 42 billion cubic meters of gas per year. The gas processing plant will include the world's largest helium production facilities. The plant comprises six production lines, with the first two lines slated for commissioning in 2021. The remaining lines will be consecutively put in operation before the end of 2024. The GPP is expected to reach its design capacity by 2025. In addition to sales gas and helium, the GPP will produce ethane, propane, butane, and pentane-hexane fraction. NIPIgazpererabotka (Nipigaz) — part of the SIBUR Group — is the general contractor responsible for project implementation. China Petroleum Engineering & Construction (CPECC) is a subcontractor involved in project implementation. The sinking of the first test pile in the foundation of Amur GPP took place on August 18, 2020. This event marked the start of project implementation. The first of AGPP’s six production trains officially began operating on June 9, 2021, processing multicomponent gas it receives via the Power of Siberia gas pipeline from the Gazprom Eastern Gas Program’s (EGP) Yakutia gas production center at eastern Russia’s Chayandinskoye field. The second production train was put into operation in July 12, 2021. Commissioning of the AGPP’s remaining four trains—one of which remains scheduled for startup by the end of 2021—will be synchronized with increased gas volumes delivered by Power of Siberia from the Irkutsk gas production center at EGP’s Kovyktinskoye field, where work currently is underway to prepare for full-scale production. Originally slated to reach full-design capacity in 2025 and equipped with cryogenic gas separation technology licensed by Linde AG, the AGPP forms part of Gazprom’s implementation of its EGP to integrate field developments, pipeline, and natural gas production centers in East Siberia and Russia’s Far East to support the company’s commitment to supply 38 billion cu m/year of Russian natural gas into China over 30 years. Once fully online, the AGPP—which receives process steam and electricity generated by Gazprom’s Svobodny thermal power plant commissioned in April 2021—is expected produce about 2.4 million tonnes/year (tpy) of ethane, 1 million tpy of propane, 500,000 tpy of butane, 200,000 tpy of pentane-hexane fraction, and as much as 60 million-cu m/year of helium. The bulk of ethane produced at the complex is expected to be delivered as feedstock to the PJSC Sibur Holding (60%)-China Petroleum & Chemical Corp. (Sinopec, 40%) joint venture Amur GCC LLC’s nearby 2.7-million tpy integrated Amur gas chemical complex (AGCC) under construction near Svobodny. Originally scheduled for commissioning in 2024, AGCC was expected produce 2.3 million tpy of polyethylene and 400,000 tpy of polypropylene. As of 2021, the project had achieved a 54% completion rate and one production line was completed and operational. At the end of February 2022, the project had achieve a 73.3% completion rate. However, on February 25, 2022, as a consequence of Russia's military invasion of Ukraine, all project activities stopped. There are also some indications that the Amur Gas Processing Plant Construction Project has financially underperformed vis-a-vis the original expectations of its lenders. In February 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Directive 3 Under Executive Order 14024, which prohibited U.S. persons from engaging in all transactions in, provision of financing for, and other dealings in new debt of greater than 14 days maturity and new equity issued by 13 Russian state-owned enterprises and entities, as well as their subsidiaries, on or after March 26, 2022. The entities included Transneft, Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways. Then, on March 5, 2022, the Russian Government issued Presidential Decree No. 95, which required that Russian borrowers make payments to foreign creditors from ‘unfriendly states’—including most countries that imposed sanctions on Russia for its invasion of Ukraine—in Russian rubles (irrespective of the currency of the loan), unless a permission to make direct payments in the contractual currency was granted by either the Central Bank of the Russian Federation (CBR) or Russia’s Ministry of Finance. This measure made it substantially more difficult for Russian borrowers to make timely payments on foreign- and local-currency debt to certain international creditors in their original currencies of denomination. Then, in June 2022, the Russian Government defaulted on some of its dollar-denominated and euro-denominated debt. The fact that two of Gazprom Pererabotka Blagoveshchensk's lenders (Sberbank and Gazprombank) faced international sanctions in 2022 and 2023 also reportedly complicated the implementation of the Amur Gas Processing Plant Construction Project.

Additional details

1. This project is also known as the Amurskiy Gas Processing Plant Project, the Amur Natural Gas Plant Project, Amur GPP Project, and the Amur Gas Processing Plant (GPP) Project. The Chinese project title is 阿穆尔天然气处理厂项目 or AGPP项目 or 阿穆尔天然气处理厂项目. The Russian project title is Строительство Амурского газоперерабатывающего завода. 2. Gazprom financial reporting (https://www.gazprom.com/f/posts/72/802627/consolidated-fs-gazprom-2019-en.pdf) suggests that the syndicated loan from Bank of China, China Construction Bank, and China Development Bank carries an interest rate between EURIBOR + a 1.00% margin and EURIBOR + a 4.25% margin. To err on the side of caution, AidData estimates the all-in interest rate by adding 4.25% to the 6-month EURIBOR rate in March 2020 (-0.366%). 3. The individual contributions of CDB, CCB, and BOC to the EUR 3.4 billion syndicated loan are unknown. For now, AidData has estimated each bank's contribution by assuming each bank contributed an equal portion (EUR 1,133,333,333.33) to the syndicate. 4. PJSC Gazprom (Russian: Газпром, IPA: [ɡɐsˈprom]) is a Russian majority state-owned multinational energy corporation headquartered in the Lakhta Center in Saint Petersburg. Gazprom is held largely by two entities, the Russian Federation and the Bank of New York Mellon, which accounted for 50.23 percent and 16.7 percent, respectively. In 1989, the Soviet Ministry of Gas Industry was converted into Gazprom, a corporation.

Number of official sources

33

Number of total sources

55