In the first quarter of the year Saudi Aramco was close to pulling off a major coup in the project finance community. It had managed to secure around $20bn of project finance commitments for two refinery projects, almost simultaneously.

More than anything else, it seemed to show the Saudi Arabia project market was back after a tough 2009. But Aramco’s stellar achievement is now encountering serious difficulties. The first of these deals, the Jubail project, now looks set to be completed by the end of June, about seven months behind schedule. This is still impressive considering the $10bn size of the deal, but the numerous delays have been a frustration for the project sponsors. The second refinery at Yanbu, is unlikely to be financed until early 2011, while Aramco determines how to respond to its partner, the US’ ConocoPhillips, walking out on the deal.

Unless a decision is made quickly, the Yanbu financing may not come until even later in 2011

At present there seems to be no clear answer to the question. While Aramco is keen to capitalise on the low bids from contractors to develop the Yanbu project by pushing on without ConocoPhillips, making up the space left by the the US energy company is not easy. Aramco has the resources to proceed on its own, but given its other development plans, it may decide to find a new partner. Sources say the decision about how to proceed is now being lifted to the highest levels of the government.

Meanwhile, banks which offered to fund the deal could have to redo some of their internal procedures to take account of the changes in the project sponsors. Project documentation could also have to be reworked. With plans to also issue a sukuk (Islamic bond) to fund the deal, the new documents may also need approval from a Shariah scholar. All this will weigh on the timeline for the project.

Unless a decision is made quickly, the Yanbu financing may not come until even later in 2011.