HSBC Among Banks Lending Bahrain $570 Million for Energy

  • BNP Paribas also among 10 banks making Islamic loan to Bahrain
  • Nogaholding to fund refinery expansion, LNG-import terminal

Bahrain’s oil investment company Nogaholding is taking a $570 million Islamic loan to pay for expansion projects, including improvements to the island nation’s only refinery and construction of a liquefied natural gas import terminal.

The company arranged the five-year Murabaha facility with 10 banks including Bank of Tokyo-Mitsubishi UFJ, BNP Paribas SA and HSBC Holdings Plc, it said Wednesday in an e-mailed statement.

The investment arm of Bahrain’s National Oil & Gas Authority will use the money to help finance planned energy investments of more than $7 billion in the country, Mohamed bin Khalifa Al Khalifa, chief executive officer of Nogaholding, said in a telephone interview. The country will also tap project finance and export credit markets for future funding, he said.

Bahrain, the smallest oil producer in the Persian Gulf, pumps most of its crude from a field it shares with Saudi Arabia, the world’s largest exporter. The country is seeking to expand output capacity at its wholly owned Bahrain field, site of the Gulf’s first oil discovery in 1932, to 100,000 barrels a day by the end of the decade. The Bahrain field produced 44,000 barrels a day in 2014. 

Construction Costs

The drop in oil prices of almost 30 percent in the past year has squeezed government income for crude-exporting countries but has also driven down engineering and construction costs for new energy projects.

“We’ve seen a significant reduction that is favorable to us due to commodity prices going down and the market slowing down a bit,” Al Khalifa said of project costs. 

Nogaholding increased the amount it borrowed from the initial $350 million it sought after lenders offered more funds, he said. “With the over-subscription and the amount of projects we have in the pipeline, we thought we’ll take advantage of the response in the market,” he said. 

The company will pay a margin of 2.25 percentage points over the London interbank offered rate for the first three years of the facility and 2.75 percent over LIBOR in the last two years, Al Khalifa said.

Cleaner Fuels

State-run Bahrain Petroleum Co., which operates the country’s 260,000 barrel-a-day refinery, will boost the plant’s capacity to 360,000 barrels a day by 2020 to produce higher-quality fuels. Bapco also plans to upgrade the facility to produce cleaner-burning and more lucrative jet fuel and diesel, he said. 
Bapco plans to award engineering and construction contracts for the refinery next year and is working with advisers BNP Paribas and HSBC on the funding plan for the refinery. The project will cost less than $5 billion, Al Khalifa said.

Bahrain also plans to build an import terminal for LNG, which it needs as fuel for power plants and industries, and upgrade its capacity to process natural gas, according to the Nogaholding statement. The LNG terminal, with annual capacity to process 3 million metric tons a year of liquefied gas, will be completed in 2018, Al Khalifa said.

Other banks participating in the Murabaha facility include Arab Banking Corp. BSC, Ahli United Bank BSC, Arab Petroleum Investments Corp., Gulf International Bank BSC, National Bank of Bahrain BSC, Qatar Islamic Bank SAQ and Kuwait Finance House KSC.

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