The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Lee Duk-Hoon, “Korea Eximbank”) announced on February 2 that it will commit USD 370 million in project financing for the petrochemical project in Liwa, Oman.

*PF (Project Finance) : While traditional corporate loans are secured by the creditworthiness of the project sponsor, project finance loans are secured by project assets only and repaid mostly from cash flows generated by the project.

The project financing for the Liwa Petrochemical Project is notable in that its financing conditions and project structure are much more stable compared to other PFs that the Bank has provided to the Middle East so far. It is attributable to the fact that the Omani government will underwrite Debt Service Undertaking (DSU) and guarantee the supply of natural gas, on be half of ORPIC (Oman Oil Refineries and Petroleum Industries Company SAOC), the sponsor of the project.

The DSU is a guarantee released for the completion of large-scale plant construction and the repayment of the loan granted for the project, and is provided by a third party entity with a high creditworthiness, usually the project sponsor.

For this project, however, the government of Oman decided to provide the direct guarantee at the strong request of the lenders including Korea Eximbank.

A Korea Eximbank official remarked, "Korean companies were successfully awarded the project contracts at a time when the environment of project markets has been deteriorated as Korea Eximbank took the lead in the financing negotiation utilizing its overseas network and expertise in project finance." He added, "This project financing deal is expected to act as a driving force for subsequent projects to be implemented smoothly contributing to increasing business opportunities for Korean companies to win more contracts in overseas markets.

The Liwa Petrochemical Project is the first national project in Oman, aimed at constructing a petrochemical plant processing natural gas as its raw material. The total cost of the project amounts to USD 6.3 billion.

The government of Oman has been pushing forward many projects in an attempt to sophisticate its national industry structure, focusing on the value-added oil processing and chemical industries while gradually decreasing its dependence on oil and gas exports since the early 2000.

In particular, the Liwa Petrochemical Project is the largest project that the Omani government has executed so far.

Meanwhile, it is the third time that Korea Eximbank has provided a large amount of financing for a project sponsored by the government of Oman and awarded to Korean companies.

Prior to this project, Korea Eximbank had provided financing to a hydrocarbon plant project (USD 500 million) and the Sohar Refinery Plant Improvement Project (USD 600 million), where LG C&T and Daelim Industrial Co., Ltd. participated, respectively.