Sokhna seeks financing for refinery

18 December 2009

Disclosure of contract awards eases contractors’ fears that the project has been put on hold

The local Sokhna Refining & Petro-chemicals Company plans to secure the necessary finance to launch its new export refinery on the Gulf of Suez in early 2010, after four years of apparent inactivity on the project.

According to Ahmed Foda, chief executive officer of Sokhna, the company plans to sell up to $1.2bn worth of shares to international investors and borrow a further $2.2bn to finance the refinery before the end of March.

The entire project, which will be built at a site on the Gulf of Suez, is likely to cost $3.7bn, with $300m of that being provided directly by Sokhna.

“Design work is at an advanced stage and we hope that construction will begin in the first quarter of 2010 once the finance for the plant has been settled,” says Foda.

Foda says Sokhna has awarded two key construction deals on the scheme this year, which the company has not disclosed until now. In May, the US’ Foster Wheeler won the engineering, procurement and construction (EPC) deal to build the offsites and utilities to support the plant. The same month, France’s Technip won the EPC deal for the hydro-stripper unit, where sulphur is removed from oil. Foda declined to say how much each deal is worth.

The developments will reassure banks and contractors that had expressed an interest in the scheme in the past, but have since feared Sokhna had stopped work on the project altogether.

Several bankers and contracting firms tell MEED they have been unaware of any progress in developing the refinery since Ger-many’s Uhde completed the design of the facility in 2005.

Sokhna is also holding negotiations with international engineering firms over two other deals to build the residual fluid catalytic cracker and hydrocracker units. The company hopes to award the EPC contracts by the end of March next year, says Foda.

Sokhna has appointed the US’ Citibank to arrange financing for the scheme. According to Foda, it has already raised $700m of the planned $1.2bn in equity finance from the local/Saudi Sumed.

Citibank will also arrange the $2.2bn in debt finance, which is likely to come from a mixture of international and local banks, as well as international export credit agencies.

When finished in late 2012 or early 2013, the refinery will process 200,000 barrels a day (b/d) of ‘heavy’ – extremely viscous – crude oil. Sokhna will increase the refinery’s capacity to about 230,000 b/d at an as yet undetermined date.

Petroleum produced at the refinery will contain no sulphur so it will meet US and European standards for clean fuel imports, says Foda.

The refiner has an agreement with the UK/Dutch Shell Group to sell the refinery’s output.

The project will boost the country’s domestic refining capacity to 1 million b/d.

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