JBIC Supports Japanese Firm's Plant Export to Oman First Project Financing by JBIC for a Fertilizer Plant Project
NR/2005-13
April 28, 2005
April 28, 2005
- Japan Bank for International Cooperation (JBIC; Governor: Kyosuke Shinozawa) signed a loan agreement totaling up to US$398 million with Sohar International Urea & Chemical Industries (SIUCI), an Omani corporation established by Suhail Bahwan Group, the largest conglomerate in Oman, on April 27. The loan is co-financed with the Tokyo Branch of Hongkong and Shanghai Banking Corporation.
- Under the project financed by this loan, SIUCI will construct, own and operate a plant that daily produces 3,500t (around 1,200,000t yearly) of urea in the Sohar industrial estate, some 250km northwest of Muscat, Oman's capital. SIUCI will then sell urea under the long-term contract. The loan will meet the financial needs of SIUCI to purchase machinery and equipment, including compressors and turbines as well as services from Mitsubishi Heavy Industries, Ltd., for project financing.
- Reflecting the worldwide population growth in recent years, there has been a steady increase in the demand for fertilizer. On the other hand, the rising prices of gas, the primary fuel for producing fertilizer, have lead to the shutdown of existing fertilizer plants and a decline in production volume, thus giving rise to the tight supply-demand conditions of fertilizer. It is against this background that construction of large-size fertilizer plants is being planned in Oman, Saudi Arabia, Qatar, Egypt and other Middle East countries, where gas fuels can be purchased at lower cost. The fact that a Japanese firm has been awarded one of these plant construction projects is expected to serve as a stepping stone for further plant exports by Japanese companies in the coming years. In light of the high competitiveness of this project based on inexpensive fuels, JBIC has decided to provide the first project finance loan for the fertilizer plant by utilizing advanced financial schemes. Specifically, it will appropriately control the fluctuation risk of fertilizer prices by drafting a flexible repayment schedule that would deal with the ups and downs of market prices.
- The government of Oman has announced in "Oman Vision 2020," a long-term plan established in 1995, that it will pursue the diversification of its industrial structure based on natural gas, and pledged to develop LNG exports, aluminum smelting, the petrochemical industry, fertilizer and related sectors. The project that JBIC finances is part of this long-term plan. To date, JBIC has supported the Sohar Refinery Project, whose site is adjacent to this project site, in project financing. It has also provided an untied loan for the Sohar Port Construction Project, which aims to improve the Sohar port, a shipping port for urea export that is expected to be produced under this project. The comprehensive support that JBIC has offered to Oman is expected to further cement economic and business ties between Japan and Oman.
