The Japan Bank for International Cooperation (JBIC) has signed a loan agreement totalling US$311mn with the Bahrain Petroleum Company (Bapco). The loan is co-financed with HSBC as lead bank, BNP Paribas and Mizuho Corporate Bank.

Bapco, an oil development and refinery enterprise which lies in the Sitrah region of eastern Bahrain, is wholly owned by the government.

The proceeds of the buyer’s credit will be used to purchase diesel desulphurisation equipment for the oil refinery from JGC Corporation, a Japanese exporting company. The loan will thus support exports of advanced environmental conservation and improvement equipment from Japan.

The oil and gas-related sector in Bahrain, which in 2003 accounted for a 75% share of total exports, is not only the largest industry, but is also the main source of foreign currency revenue. There is a general trend in the oil and gas sector worldwide towards tighter environmental regulations, as reflected in a call from the EU to lower the sulphur content of diesel to below the 10ppm level by 2009.

Facing such changing international circumstances, the loan will enable Bapco to install the desulphurisation equipment, which will reduce the sulphur contents of diesel from the current 500ppm to 10ppm.

The buyer’s credit, the first direct loan commitment that JBIC has provided for Bahrain, has been set up without government guarantee. Instead, revenues from the sale of oil products are set aside for the purpose of repayment, thereby meeting the needs of the government. The loan will also enhance foreign currency revenue for Bahrain by strengthening the export competitiveness of oil products and expanding the sales market, thus contributing to the country’s sustainable economic growth.