State-owned Saudi Basic Industries Corporation (Sabic) is diversifying its sources of finance and expects export credit agencies (ECAs), Islamic finance and capital markets to play a larger role in its plans for the future.

The move is due to constraints on liquidity in the banking sector since late 2015, Alwalid al-Moaither, general manager of the Saudi treasury at Sabic, told delegates at MEED’s Financing Projects in New Oil Era conference in Dubai on 23 March.

“It will be a challenge to finance new projects, but does that mean they won’t find finance?” asked Al-Moaither. “There will be an increased cost, so you have to find the best mix, and the best source of financing. We are more focused on ECAs, they will play a big role. People have to think in the way they procure project machinery, from where can they find finance?”

Sabic pioneered the use of sukuk (Islamic bonds) in Saudi Arabia, issuing three tranches of corporate sukuk. It will consider project sukuk in the future.

“[Sukuk] are always on our list of sources of funding, and in future capital markets will play a stronger role,” said Al-Moaither. “From a shareholder perspective they prefer Islamic finance, and there is more supply from that side. Project sponsors should not ignore it.”

However, the tightening liquidity may have positive effects.

“Before in Saudi Arabia, there was a liquidity issue; there was more than there should have been,” said Al-Moaither. “This put pressure on the way the banking system evaluated and priced risk. This reduction in liquidity will lead to more sensible evaluation of risk.”

This means they will evaluate projects more closely.

Sabic is not planning to cancel schemes outright due to low oil prices, but may prioritise them.

“The petrochemicals sector follows cyclical oil price patterns, but we don’t do projects based on whether oil prices are up or down,” said Al-Moaither. “When we do feasibility studies, we take it into consideration. If we are investing billions of dollars, we do feasibility studies based on long-term projections, based on long term prices.

“It doesn’t mean that because we are at low oil prices companies should drop projects; they just prioritise. Projects in our industry are megaprojects and when we do feasibility the oil price is a long-term view. It is a factor, but not a factor that will stop a project.”