UK export credit agency Export Credits Guarantee Department (ECGD) has put in place two innovative and complex supplier credit finance (SCF) facilities to support UK exports linked to Iran’s huge South Pars gasfield, part of the world’s largest single gas reservoir.

The agency’s support for two SCFs provided by a Deutsche Bank-led banking consortium has underpinned goods, equipment and services supplies worth a combined US$75.7mn coordinated by two UK exporters, Man Ltd and Salzgitter Trading UK, to the US$1.6bn phase 9-10 downstream development of the South Pars gasfield.

The transaction has been acclaimed as the first gas-processing development associated with the South Pars field to be financed on a structured finance basis. Whereas previous developments have been financed via the “buy-back “system native to Iran, the South Pars 9-10 project is secured against National Iranian Oil Company’s (NIOC) revenue streams. This structured finance model should be used again for a lengthy series of further integrated gas projects planned by the developer, NIOC.

Some US$1.2bn of finance is backed by ECAs: in addition to ECGD, the Export-Import Bank of Korea (Kexim), Euler Hermes (Germany), Sace (Italy) and Atradius (Netherlands) are also providing support, in case of Kexim by direct lending and in case of the European ECAs by guaranteeing lending from a syndicate of seventeen crediting banks, led by Deutsche Bank.

The project comprises four onshore gas-processing trains and 100km of offshore pipeline, which will produce lean gas, condensate and liquefied petroleum gas (LPG) from the gas feedstock, and help Iran with the vital process of monetising its tremendous gas assets.

The UK element of the sourcing involves the supply of US$54.5mn-worth of mechanical, piping and electrical equipment by the London-based MAN Ltd, and US$21mn-worth of steel and steel-related products by Harrogate-based Salzgitter Trading UK.

ECGD underwriters involved with the transaction are hoping that UK contractors will benefit in future projects from the experience that ECGD has gained from South Pars 9-10. “The lessons learned on the current project should help provide a framework that we hope will prove invaluable for forthcoming deals related to the South Pars gasfield,” says James Williams, an underwriter in ECGD’s oil, gas and petrochemicals branch.

Williams underlines that the project “could be argued to be one of the most important deals in the world today, involving as it does European and Far Eastern relations with one of the Middle East’s most important markets, where the combination of future business prospects and natural and human resources is unparalleled.”