Oil refinery to receive a $1.67b loan

Oil refinery to receive a $1.67b loan

Construction on Cambodia’s landmark oil refinery will break ground in December with funding from a $1.67 billion loan from the Export-Import Bank of China (Exim Bank), a deal that should go through today, according to a representative of local project partner Cambodian Petrochemical Company (CPC).

“After the signing for the money tomorrow [Wednesday], the groundbreaking ceremony for the construction will be held in early December,” CPC co-owner Hann Khieng said yesterday.

The development comes just a day after Cai Xiyou, the senior vice president of China-based oil giant Sinopec, met with Prime Minister Hun Sen in Phnom Penh at the Peace Palace. At the meeting, the premier asked the world’s fourth-largest oil producer to speed up the refinery’s construction, Hun Sen’s spokesman said.

“The PM encouraged the company to work on the project and asked for construction to finish as soon as possible,” Eang Sophalleth told reporters on Monday after the meeting.

Khieng, of CPC, added that Sinopec’s share in the partnership was still being negotiated, but he confirmed that the oil giant would be the major stakeholder.

Khieng added that discussions between CPC and Sinopec had been occurring prior to the meeting with Hun Sen.

The prime minister has called for refined oil – which would hypothetically first enter the country in crude oil imports or through off-shore extraction – to be flowing by 2018.

First announced in December, the $2.3 billion refinery is slated to be constructed on 80 hectares of land between the provinces of Preah Sihanouk and Kampot.

The venture is among CPC, Chinese Sinomach China Perfect Machinery Industry Corp and Sinopec.

Under the proposed arrangement, Sinopec would import crude oil to be processed at the plant.

The oil giant would also manage the export and domestic supply of the oil once refined.

After Exim Bank provides the $1.67 billion, the remaining funds will come from shareholders, according to Khieng.

Construction was initially targeted to begin earlier this year, but work was delayed due to lack of funds and so an environmental impact assessment could finish.

“The environment is very important, our earth is our earth,” Men Den, a spokesman for the Cambodia National Petroleum Authority, said last week when questioned about the delay.

But a refinery at this stage of oil industry development may be slightly premature, according to Danish oil and gas expert Tommy Christensen, chief executive officer of Go4 Bunker Cambodia.

“Before you consider a refinery, you have to consolidate your off-shore first, otherwise your economy will never work,” Christensen said in an August interview.

With offshore oil extraction still at least two years away, Christensen also said that the of the planned refinery project was too much too soon.

phnompenh post