Oman LNG proposes to refinance its debt

Sep 16, 2001 02:00 AM

In a bid to improve the net present value (NPV) of its future cash flow, Oman LNG (OLNG) proposes to refinance its $ 1.25 bn debt. Oman LNG is understood to have invited top banks in Europe and the Gulf to participate in the debt refinance arrangement. In addition to a few major European and Middle East banks, the prospective lead arrangers for the $ 1.245 bn debt may comprise local banks such as Bankmuscat, Oman Arab Bank, National Bank of Oman (NBO) and Oman International Bank (OIB), sources told.
In fact, Oman LNG is now looking for an 18-year arrangement from the present nine-year arrangement. Major local lenders to Oman LNG consist of Bankmuscat, NBO and Oman Arab Bank. Meanwhile, shipments of LNG to its third long-term customer -- Dabhol Power Company -- will be delayed further or put off as the $ 64 mm payment dispute between the United States energy major Enron and India's Maharashtra state continues to remain unsettled.
It is also learnt that the US major may pull out of the power project in Maharashtra because of the deepening dispute over the $ 64 mm unpaid bills owed by the state government. Informal sources said this might put off the proposed LNG shipment to Dabhol Power Company at least for the time being. In fact, the first shipment had been scheduled between November 2001 and February 2002.

It was in December 1998 Oman LNG signed a 20-year sale and purchase agreement (SPA) to sell 1.6 mm tpy (mm tpy) of LNG to Dabhol Power Company. Enron has a 65 % stake in India's Dabhol Power Company. There are possibilities that the delay may also push back Oman LNG's plans for a third LNG production line, sources added.
However, the company is in the process of signing a series of deals with world's major energy companies to export and market LNG and natural gas liquids. As Oman LNG is exploring the possibilities signing long-term contracts with leading energy companies in the world, the putting off or delay in shipments to Dabhol Power Company will not affect its profitability or operations. As of today, more than 80 cargoes of LNG have been delivered to its customers in Korea, Japan, the USA and Spain.
Lately, the company signed a master supply deal with Enron, and by July, three shipments had been made to make a total of six cargoes by the end of this year. In October 2000, Shell International (India) had reportedly agreed in principle to buy 2 mm tpy of LNG. It was also reported that the company had held fruitful talks with India's Reliance Industries.

The first shipment of LNG was made to South Korea on April 6, 2000. It delivered the first cargo of gas to its second customer, Osaka Gas of Japan in November 2000. It was in October 1996, the SPA for two-thirds of the plant output -- i.e. 4.1 mm tpy --was concluded with the Koga for a period of 25 years. The agreement with Osaka Gas to buy 0.7 mm tpy for 25 years was signed in October 1998. According the agreements Kogas will lift 63 cargoes in a year and Osaka 11.
At present, the company's operations are focussed on a two-train liquefaction plant with a capacity of 6.6 mm tpy. After the proposed expansion, the plant capacity will go up to 10 mm tpy. The upstream part of the multi-billion project, managed by PDO on behalf of the government is taking care of gas production and transport to the LNG plant, while the downstream part, which is the responsibility of Oman LNG, comprises liquefaction complex, besides supporting infrastructure, shipping and marketing.

The government of Oman has a 51 % stake in the company while Royal Dutch/Shell, French Total, Partex, Mitsui and Mitsubishi, Itochu, and Korea's LNG are other major shareholders holding 30 %, 5.54 %, 2 %, 2.77 %, 0.92 % and 5 %, respectively.

Source: Times of Oman
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