Financing plans for the Fujairah refinery project are being delayed due to concerns about the declining oil price.

The project, which is being developed by Abu Dhabi’s state-owned International Petroleum Investment Company (Ipic), was expected to be taken to the bank market at the end of last year to commence talks with potential lenders.

But due to declining oil prices, which fell below $50 a barrel in early January, the project’s viability and structure is being re-examined by the sponsors.

“Given the volatility in the oil markets today, this project is taking a little more scrutiny from sponsors and shareholders,” a source tells MEED.

Calls to Ipic made by MEED remained unanswered.

Lenders looking to support new oil-related projects across the Middle East and North Africa (Mena) region may become hesitant if oil prices continue to decline.

“Banks will want to understand how much buffer there is in the structure for further decreases,” a banker says. These concerns will be mainly related to reserve-based lending structures, which are loans used to finance oil and gas assets in production or about to start production, the banker adds.

The amount banks lend through such structures is determined by the present value of future production.

Ipic received technical engineering, procurement and construction (EPC) proposals for the Fujairah refinery’s process units package on 10 July.

Firms bidding for the package are thought to include South Korean groups GS Engineering & Construction, Hyundai Engineering & Construction, Hyundai Heavy Industries, Samsung Engineering and SK Engineering & Construction.

The submission of technical bids for the main package was significantly delayed, with Ipic extending the deadline several times after issuing the tender in September 2013. Ipic had originally planned to complete the project by 2017, but the commissioning date has been pushed back to towards the end of the decade.

Ipic is planning to build a 200,000 barrel-a-day (b/d) facility to meet rising demand for fuels in the UAE and enable the export of oil products from Fujairah’s port. The EPC phase is split into two packages: process units, and offsites and utilities.

France’s Technip completed the front-end engineering and design (feed) phase of the scheme in 2013.

HSBC was appointed to advise on Fujairah refinery in early 2013.