Export insurer offers US$1 bln in financial aid to Saudi oil project

South Korea's state-run export insurer will offer the equivalent of US$1 billion in financial support to a Saudi Arabian oil refinery project being built by local companies.

The Korea Export Insurance Corp. (KEIC) said it will give support in the form of so-called buyer credits involving coverage of loans that will go to the "project company" responsible for the construction of the Jubail refinery project.

The project company has been set up by Saudi's Aramco, the state-owned national oil company, and France's Total oil company that is in overall charge of development and footing 45 percent of all building costs. The remainder will come from companies that secured building contracts last year including three South Korean contractors.

"Buyer credit is a form of payment guarantee that can facilitate loans by commercial banks to a project," a KEIC official said. By getting export insurance coverage, commercial banks can lend money to a project without worrying about not getting paid down the road.

The Jubail refinery is being built to process 400,000 barrels of oil per day and with total construction to cost $12.8 billion, it is one of the largest refinery building projects in recent years.

Daelim Industrial Co., SK Engineering & Construction Co. and Samsung Engineering Co. won the right to take part in the project last June along with companies from Japan, Spain and France.

"South Korean engineering, procurement and construction companies won the deal because they are competitive, but Aramco has made clear that ability to secure financial support is a key criteria for winning bids," he said.

In addition to the Jubail project, KEIC plans to offer similar payment guarantee coverage for future projects that South Korean companies want to take part in.

Saudi Arabia said it will hold bids for the building of the Yanbu refinery in May, and two plants in Ras Tanura and Rabigh in the coming months.