Aramco, Petronas tap banks

dubai/hong kong — Saudi Aramco and Malaysia’s Petronas have approached banks to replace a short-term $8 billion loan raised earlier this year for a joint venture with long-term financing of approximately the same size, banking sources familiar with the matter said.

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

The project, Refinery and Petrochemical Integrated Development (Rapid), is a $27 billion complex located between the Malacca Strait 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 are now in preliminary discussions for a self-arranged loan with a maturity of more than 10 years which would replace the existing bridge borrowing, said the sources.

Aramco declined to comment. 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 364day tenor and an extension option of six months, offered a margin interest rate of around 40 basis points over the London interbank offered rate (Libor), 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. —