ARAMCO, PETRONAS TAPPING BANKS FOR LONG-TERM FINANCING?

DUBAI: Saudi Aramco and Petroliam Nasional Bhd (Petronas) have approached banks to replace a short-term US$8 billion (RM32.6 billion) loan raised earlier this year for a joint venture with long-term financing of approximately the same size, said banking sources familiar with the matter.

The two state energy companies borrowed US$8 billion from a large consortium of international banks in March for a refinery and petrochemical joint venture in Johor.

The Refinery and Petrochemical Integrated Development (Rapid) project is a US$27 billion complex located between the Straits of Malacca and the South China Sea, conduits for Middle East oil and gas bound for China, Japan and South Korea.

The two firms issued a request for proposals to banks last month and were now in preliminary discussions for a self-arranged loan with a maturity of more than 10 years that would replace the existing bridge borrowing, said the sources.

Aramco declined to comment and Petronas did not immediately respond to a request for comment.

A group of 19 banks participated in the bridge loan, including Asian lenders and BNP Paribas, HSBC, JPMorgan, Standard Chartered, Citibank, First Abu Dhabi Bank and ING Bank.

That loan, which had a 364-day tenor and an extension option of six months, offered a margin interest rate of around 40 basis points over the London interbank offered rate, Thomson Reuters’ LPC reported in March.

Aramco and Petronas finalised the deal to invest in the project in March saying at the time that Aramco would supply 50 per cent of the refinery’s crude oil with an option of increasing it to 70 per cent.

Refinery operations are set to begin next year, with petrochemical operations to follow six to 12 months afterwards.

Aramco plans to boost investments in refining and petrochemicals to secure new markets and sees growth in chemicals as central to its downstream strategy to cut the risk of an oil demand slowdown.

It was also expected to tap banks for a huge financing that would back the potential acquisition of a controlling stake in petrochemical maker Saudi Basic Industries Corporation, said sources separately.