CPFHK provides oil prepayment facility to Sudan National Petroleum Corporation (SUDAPET) for unspecified purposes

In November 2009, China National Petroleum Corporation (CNPC) and Sudan’s Ministry of Energy and Minerals signed a memorandum on advance payments for crude oil trade. No further details were provided at that time. Then, on January 15, 2012, in the presence of Li Yuanchao (a member of the Politburo of the Chinese Communist Party) and Sudanese President Bashir, PetroChina and the Sudan’s Ministry of Finance and National Economy signed a framework agreement on an advance payment contract for crude oil trade. CNPC Finance (HK) Limited (CPFHK)— a wholly-owned subsidiary of CNPC — and Sudan National Petroleum Corporation (SUDAPET) subsequently signed one or more oil prepayment agreements (also known as oil advances, forward oil-swaps, PXF facilities, and pre-sales oil contracts) worth an estimated $1,982,629,971. In August 2017, CNPC Vice President Zhang Jianhua acknowledged that SUDAPET was in arrears to CNPC and that CNPC was ‘ready to resolve’ this issue. Then, in December 2020, Sudan’s Deputy Minister of Energy and Mines, Hamid Suleiman, disclosed that SUDAPET’s outstanding debt to CPFHK was $2.5 billion and the country was finding it hard to clear the arrears from oil advance contracts that it previously signed with Chinese, Indian, and Malaysian firms.

Additional details

1. The Chinese project title is 苏丹原油贸易项目 or 于原油贸易预付. 2. For the time being, AidData uses SUDAPET’s total outstanding debt to CNPC ($1,982,629,971) as of 2016 as a proxy for total financial commitments from CNPC via oil prepayment agreements. This is an imperfect proxy as it likely includes principal and interest. According to an audit conducted by the Republic of Sudan's National Audit Chamber (entitled 'Performance Audit Report on Control of Petroleum Products by Sudanese Petroleum Corporation'), SUDAPET’s total outstanding debt to CNPC as of 2016 was $1,982,629,971: $1,605,285,049 for ‘Al-Fula Crude’ and $377,344,922 for ‘Quantities above the need of refineries’. 3. The audit conducted by the Republic of Sudan's National Audit Chamber identified ‘inconsistencies and [a] lack of coordination between the Sudanese Petroleum Corporation and the relevant authorities (the Ministry of Finance and the Bank of Sudan)’ and the need for more accurate debt data ‘so as to establish the principal of the debt and then efficiently manage and structure the debt and set plans to pay it.' 4. In 1996, CNPC and Sudanese Petroleum Corporation (SPC) jointly built the Khartoum Refinery Co. Ltd (KRC) to produce fuel products domestically. The KRC also built the world first delayed coking unit (DCU) to process heavy Fula oil (maximum refining capacity of 40,000 bpd), which is highly acid crude oil (measured by the total acid number, or TAN) and needs special methods to reduce the risks of corrosion. 5. CNPC Finance (HK) Limited is identified as the financier by two official sources (https://wenku.baidu.com/view/7397f9c387c24028905fc30e.html and http://cpf.cnpc.com.cn/cpf/gsnbxx/201912/c178c0d0cab9494b9fb6a00055e8d4e3/files/4d88cf3dfadf480cbdc63482782ede6b.pdf). 6. SUDAPET is also known as Sudan Petroleum Corporation and Sudanese Petroleum Corporation. It is a state-owned oil company in Sudan that is 100% owned by the Ministry for Energy and Mining (also known as the Ministry of Petroleum and Gas). 7. A pre-export finance (PXF) facility is an arrangement in which a commodity (e.g. oil) producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed. 8. The precise financial commitment date is unknown. For the time being, AidData relies on the date of signature of the framework agreement on an advance payment contract for crude oil trade (January 15, 2012). This issue warrants further investigation. 9. Evidence that arrears to CNPC still existed in early 2022 can be found at https://web.archive.org/web/20230208195131/https://cbos.gov.sd/sites/default/files/Quarter%201%20Report%20%202022%20.pdf

Number of official sources

5

Number of total sources

19