Optimism for project funding in 2018

17 December 2017
For many project owners, the preferred solution is to raise finance to bridge the funding gap, and in 2017 this trend has gathered pace

There has been a fundamental shift in the way the region finances projects over the past three years. With low oil prices, governments can no longer afford to directly fund all the projects they want to develop, and since 2014 many schemes have stalled.

Public-private partnerships have been widely touted as a way of delivering projects in the future, but for many project owners, the preferred solution is to raise finance to bridge the funding gap, and in 2017 this trend has gathered pace. One recent example is the Trade Bank of Iraq receiving the mandate to raise a $2bn loan for the Karbala refinery along with Bahrain-based Ahli United Bank and Germany’s Deutsche Bank.

The under-construction refinery, which has a budget of $6.04bn, is Iraq’s first new refinery in three decades and has struggled to move forward since South Korea’s Hyundai was awarded the construction deal in January 2014.

Another favoured option comes from the supply chain. Over the past three years, a growing number of schemes are being funded with export credit support brought in by contractors and suppliers from overseas. One of the largest projects in the region to tap this source of finance is Aluminium Bahrain (Alba) for its line 6 expansion scheme.

With Brent crude forecast to remain at $55-$65 a barrel in 2018, securing finance for projects will remain a key issue. The good news is that traction has been gained, and if more schemes secure funding, it could be the start of the recovery the market desperately needs.

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