Qatar Petroleum (QP) announced the successful closing on Wednesday of the financing of the US$10.4-billion Barzan Gas Project, one of the most significant projects ever undertaken in the State of Qatar to supply the country’s growing domestic energy demand.
The project will be financed with up to 30% equity and the remaining 70% by a combination of banks and export credit agencies in the form of a syndicated loan expected to total US$7.2 billion. ExxonMobil, which is QP’s partner in the project, also provided a pro rata portion of the senior debt.
HE Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy & Industry and Chairman and Managing Director of QP, described the results of the financing as ”overwhelming,” given that the project was able to raise more than US$8 billion when the third-party financing target was set at only US$6.6 billion.
“This project is of significant importance to the future development of Qatar, and this financing marks an important step in this direction and clearly reflects the strong position of the Qatari economy in the global financial markets under the wise leadership of His Highness the Emir Sheikh Hamad bin Khalifa Al-Thani,” said HE Dr. Al-Sada.
“We are extremely pleased with the market response to the Barzan financing,” said Mr. Abdulrahman Al-Shaibi, Director Finance of QP. “Despite the challenging market conditions, we were able to bring a large number of commercial banks into the deal with big ticket sizes. In addition, we had a major participation from all the Islamic banks in Qatar, which allowed us to create the largest ever Islamic tranche in QP’s financing history.”
The financing of the Barzan Gas Project is the world’s largest project financing to close in 2011 and one of the largest oil and gas project financings ever concluded. It comprises a commercial bank facility of US$3.34 billion, a US$850-million Islamic facility and US$2.55 billion of export credit agency (“ECA”) financing.
The ECA financing was arranged from Japan (US$1.2 billion facility, with US$600 million provided by the Japan Bank for International Cooperation and US$600 million funded by banks and insured by Nippon Export and Investment Insurance), Korea (US$1 billion, of which US$700 million was provided by K-Exim and US$300 million was bank-funded against a K-Exim guarantee), and Italy (US$355 million funded by banks and guaranteed by SACE). The US$1 billion K-Exim facility is the largest project financing that K-Exim has ever concluded.
Mr. Meshaal Al Mahmoud, Head of Project Finance at QP and member of the Project Executive Committee who led the financing, said, “It has taken a lot of efforts by the finance team for over a year to bring this challenging and unique financing structure to closing with such a huge success. We thank the senior management of QP and all the teams who worked closely with us as well as the Executive Committee for their support.”
RasGas, the project manager and operator, will develop and operate the Barzan Gas Project on behalf of its shareholders, Qatar Petroleum and ExxonMobil, which have a 93% and 7% stake in the project, respectively.
When finished, the Barzan Gas Project will consist of onshore and offshore gas-processing facilities with the initial gas production line, Train 1, expected to be completed in 2014 and Train 2 scheduled for completion in 2015. Barzan will eventually produce 1.4 billion cubic feet of sales gas a day. The project is designed to accommodate a maximum of six trains.
The Royal Bank of Scotland acted as the project’s financial advisor, and White & Case acted as legal advisor to the sponsors. Allen & Overy acted as counsel to the ECAs, while Skadden, Arps, Slate, Meagher & Flom served as counsel for the commercial banks.