Export-Import Bank of Korea (Korea Eximbank) reported on the 28th that it will provide US$435M ($245M loans, $190M guarantees) in financing for a gas desulfurization plant (GDP) project jointly participated by LG International Corporation and Hyundai Engineering Corporation in Turkmenistan.
The project, ordered by the Turkmenistan government-operated gas corporation Turkmengas, is the largest GDP project by scale in Turkmenistan to date, amounting to $1.29B just in engineering, procurement and construction (EPC) costs.
Newly installed GDP will have the annual capacity to process 10 billion ㎥ of gas extracted from the Southeastern Yoloten region, removing impurities such as hydrogen sulfide (H2S) to yield high-quality, marketable gas.
"The project was on rocky ground after China withdrew financial support to the Korean firms, but Korea Eximbank cleared the path by actively providing financing services," said a Korea Eximbank representative.
Turkmengas initially signed a supply contract with the LG International/Hyundai Engineering consortium in December 2009 which was contingent on financial support from China Development Bank (CDB). However, CDB made demands in October 2011 that China National Petroleum Corporation be replaced as the signing party as a precondition for financial support.
Turkmengas, in turn, requested financial support from Korea Eximbank to sustain the contract with the Korean firms. Korea Eximbank's expression of commitment to financial support over the course of a year was instrumental in enabling the Korean firms to carry out the GDP project as originally agreed.
This marks the first time that Korea Eximbank provided financial assistance to Turkmenistan, bringing optimism that this relationship will serve as a catalyst for further Korean expansion into Turkmenistan’s gas plant market.
A Korea Eximbank official noted, "Turkmenistan's gas reserves constitute 4.3% of global reserves but Turkmenistan produces only 1.3% of the world’s gas supply. There is much potential for further development."
Since Turkmenistan, a former Soviet Union nation located next to the Caspian Sea and north of Iran, is limited in its openness to the international community, it has little experience in funding in the global financial markets; thus international financial institutions are averse to providing financial assistance without guarantee from an Export Credit Agency.
Turkmenistan ranks fourth in gas reserves. Natural gas production accounts for more than 50% of its gross domestic product and 80% of total exports. In particular, gas reserves in Yoloten are estimated to total 14 trillion ㎥, or five year's worth of global gas consumption.
