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Capital Markets

Saudi Aramco returns to the project market

Saudi Arabia’s Jubail oil refinery is one of the biggest and most complex projects ever to be commercially financed. With dollar and local-currency funding, Islamic and conventional tranches, an IPO, an Islamic bond, and multiple export credit agencies, it has demanded a huge amount of work. Dominic O’Neill reports.

INVESTING IN SAUDI Arabia has become a riskier proposition over the past 12 months, but foreign creditors are being asked to finance a series of mega-infrastructure projects – for them, the key words are Saudi Aramco.

If risk management committees require further comfort, the key is again Aramco: Saudi Arabia’s national oil company and perhaps the world’s most prolific cash cow.

But that does not mean it has been easy for Aramco and its partner, French energy company Total, to get either local or international banks to commit themselves to finance the Jubail refinery, which is set to cost about $12 billion.

The building begins at Jubail, a project that will cost $12 billion

The building begins at Jubail, a project that will cost $12 billion

The nature of project financing is such that even an average-sized project financing – say, for $1 billion – could involve a vast amount of paperwork. Projects such as Jubail need banks to commit a large amount of capital for an unusually long period. They also need banks to have faith that a profitable enterprise will eventually emerge from what might be, at inception, a patch of fenced-off grass – or desert, as in the case of Jubail.

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