Aramco, Total to raise $8 billion for joint venture

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 30 -- Saudi Aramco and Total SA expect to raise the $8 billion needed for their jointly owned Saudi Aramco Total Refining & Petrochemical Co. (Satorp) in the coming months.

Satorp Chief Executive Officer Salem Shaheen told delegates at the World Refining Association conference in Abu Dhabi that the 400,000-b/d refinery in Jubail will cost more than $12 billion.

Shaheen said the cost, including financing expenses, will be funded by the partners’ equity along with $1 billion to be contributed by the Saudi government. Shaheen said the $8 billion debt package also will include the sale of Islamic bonds or sukuk.

Last December, Aramco and Total appointed Deutsche Bank and local Saudi banks Samba and Banque Saudi Fransi to arrange a $1 billion Islamic bond to help finance the facility.

At the time, Saudi bankers said Aramco and Total planned to issue the riyal-denominated sukuk through Satorp in this year’s first quarter.

The company is understood to be making the move in order to diversify the project's investor base, which should make it easier to raise additional finance if needed, bankers said.

"The sukuk proceeds will be an additional liquidity source for the project and may be used to reduce in size the other tranches of the financing package," one Saudi-based source said.

Satorp has also appointed the UK's HSBC to arrange an international bond issue, although the partners will not proceed with this line of finance if it can raise the rest of the funding it needs through bank loans.

Satorp is expected to come online in mid-2013, with Aramco and Total buying most of the project’s products. Shaheen said there is a "high possibility" that most of Satorp’s products will be sold domestically.

He also said Aramco may sell part of its stake in the project in an initial public offering in 2011 or 2012. That means 25% of Satorp will be publicly traded, with Aramco and Total each holding 37.5% stakes.

In January, Satorp selected Elliott Co. of Jeannette, Pa., as the supplier of 17 compressor trains for the JV’s export refinery. The compressor trains will be assembled and tested at Elliott's production unit in Sodeguara, Japan (OGJ Online, Jan. 25, 2010).

Contact Eric Watkins at hippalus@yahoo.com.

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