The project sponsors on the $9.6bn Jubail refinery in Saudi Arabia have appointed Deutsche Bank and local banks Samba and Banque Saudi Fransi to arrange a  $1bn sukuk (Islamic bond) to help finance the facility.

Bankers in the kingdom tell MEED that the sponsors – state-owned oil firm Saudi Aramco and French oil company Total – plan to issue the riyal-denominated sukuk through their joint venture company, Saudi Aramco & Total Refining & Petrochemical Company (Satorp), in the first quarter of 2010.

The company is understood to be making the move to diversify the project’s investor base, which should make it easier to raise additional finance if needed, say bankers.

“The sukuk proceeds will be an additional liquidity source for the project and may be used to reduce in size the other tranches of the financing package,” one Saudi-based source close to the project tells MEED.

Satorp has also appointed the UK’s HSBC to arrange an international bond issue, although the joint venture will not proceed with this if it manages to raise the rest of the money it needs through bank loans.

Under Satorp’s original plans, the $8.3bn debt for the project was split into a $1.4bn international bank tranche, a $1.4bn Saudi bank tranche, and a $2.2bn loan guaranteed by several export credit agencies.

Satorp also planned to borrow $3.3bn from the Saudi Industrial Development Fund, the Public Investment Fund and directly from the credit agencies.

Satorp will use $1.3bn of its own money to complete the financing. It has offered the Saudi banks a margin of less than 100 basis points over the London interbank offered rate (Libor) for the first three years, and 150 basis points after that. The international banks have been offered 150-200 basis points above Libor.

Satorp had aimed to finish the financing for the project before the end of the year, but now looks unlikely to achieve this.