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Salalah Methanol Secures $728M Project Finance from 12 Banks

Source: Times of Oman 8/28/2017, Location: Middle East

Salalah Methanol Company (SMC), a wholly-owned subsidiary of the Oman Oil Company (OOC), said it has secured a 12-year $728 million project finance facility for funding an ammonia project from a mix of 12 international, regional and local banks.

A portion of the facility will be used to refinance SMC’s existing debt, while the remaining $443 million will be allocated for building an ammonia project, according to the Oman Oil Company.

Loan facility

The loan facility was oversubscribed by around two-and-a-half times of the required amount.

The proposed ammonia project will have a capacity of 1,000 tonnes per day (tpa) of anhydrous liquid ammonia. Construction of the proposed ammonia project is scheduled to start during the fourth quarter of this year and is expected to be ready in 2020.

The ammonia plant will be utilising the methanol plant’s hydrogen rich by-product gas as feedstock making it capable of producing ammonia with great energy saving.

By utilising purge gas from the methanol plant of SMC, the ammonia plant requires significantly less capital expenditure spend when compared with a greenfield ammonia plant of similar capacity, making it a highly competitive producer globally.

Land lease agreement

SMC has also signed sub-usufruct and easement agreements with the Salalah Free Zone, allocating around 12 hectares for the project within the zone. Also, the right of way and port facilities agreements were signed with the Port of Salalah, while another off-take agreement was signed with Oman Trading International (OTI).

“This vital project is in line with the economic diversification (strategy) of the Sultanate and part of OOC’s growth strategy, which aims to contribute value creation,” said Isam Al Zadjali, chief executive officer of Oman Oil Company, while addressing an event to celebrate the completion of financial closure here.

“Setting up the ammonia plant is an important milestone for high-value petrochemical industries and key to opening up for new further downstream industries and the creation of job opportunities,” added Al Zadjali.

“The ammonia project and all the agreements being commemorated today are the result of a wider plan to invest in the sustainable growth of the national downstream industries, and the development of existing local assets. We continuously look for opportunities to expand our industrial footprint, working with global partners to bring technical expertise and investment to help diversify Oman’s economy and create meaningful employment,” noted Najla Al Jamali, acting executive managing director of the Takamul Investment Company.

Financial institutions

The financial institutions that provided a loan to SMC are Export Development Canada, Bank Muscat, BankDhofar, Standard Chartered Bank, Societe Generale, ING Bank, Ahli Bank Oman, Europe Arab Bank, Bank Sohar, Qatar National Bank, Apicorp and National Bank of Kuwait.

“(The) Salalah ammonia project has been able to successfully secure limited recourse financing amid challenging global financial and economic conditions. This reflects the trust that financial institutions have placed in the project and the financing structure, which is demonstrated by the fact that the lending group comprises local, regional, as well as international lenders,” said Awadh Al Shanfari, managing director of SMC.

Pharmaceutical products

In fact, ammonia contributes significantly to the nutritional needs of terrestrial organisms by serving as a precursor to food and fertilisers. Ammonia is also a building block for the synthesis of many pharmaceutical products and is used in many commercial cleaning products. The ammonia output from the company will target Southeast Asian markets, such as India, Vietnam, Thailand, South Korea and Japan.

The project will also harness in-country value, with a strong focus on the development of local resources and engage the local supply chain. This project will also pave the way for future opportunities in Oman for the development of downstream industries, thus maximising their value addition.

SMC is currently managed by Takamul Investment Company, which is a core vertical of Oman Oil Company, investing in sustainable growth of the national downstream industries and driving the management of existing local assets.

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