Japan Bank for International Cooperation (JBIC) has provided loans with the aggregate amount of US$1.89bn to support the offtaking of crude oil and petroleum products by Marubeni Corporation and Mitsui & Co in Venezuela. The loans were co-financed with private banks in Japan, with JBIC providing a guarantee for the co-financed portion.
Marubeni and Mitsui have signed respectively basic agreements of 15 years with Venezuela’s PDVSA on offtaking of crude oil and petroleum products, as well as a finance contract totalling US$3.5bn to provide an advance loan for such transactions.
JBIC has decided to provide lending through financial subsidiaries that Marubeni and Mitsui respectively established in the Netherlands in support of the said finance contract, jointly with co-financing syndicates organised by Bank of Tokyo-Mitsubishi UFJ and Mizuho Corporate Bank as lead arrangers.
Aside from JBIC and the two lead arrangers, banks involved: Sumitomo Mitsui Banking Corporation; ABN AMRO Tokyo; ING; Citibank; Deutsche Bank; Soci&eaute;té Générale; BNP Paribas; and Calyon.
Under the basic agreements, the two companies will be able to purchase from PDVSA crude oil and petroleum products (such as heavy oil, jet fuels and diesel oil) for the period of 15 years.
Regarding crude oil, the agreement is predicated on exporting the whole volume to Japan. When materialised, it is expected to contribute to the easing of Japan’s heavy reliance on the Middle East for crude oil imports, as well as to greater diversification of supply sources.
Currently Venezuela is the world’s eighth largest crude oil producer. If Orinoco extra heavy oil is taken into account, Venezuela can boast of a crude oil reserve comparable in size to that of Saudi Arabia.
The medium and long-term strategic plan up to 2012 that PDVSA announced in 2005 sets forth that the current oil production volume of around 3mn barrels/day should be increased to 5.8mn barrels/day, and that refining capacity should be expanded by 25%.
Accordingly, many large-scale investment projects are being planned. JBIC will seek to strengthen relations with PDVSA, the oil producing country’s state-owned petroleum company, and will mitigate country risk by making good use of its status as a governmental financial institution.
JBIC’s support will thus help secure the supply of energy resources to Japan, and generate and boost business chances for Japanese firms in the oil and gas sectors in Venezuela.