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Crude Oil September 23, 2019 01:30:57 AM

Trafigura Joins Others to Lend $1 bln to Independent Chinese Oil Refiner

Anil
Mathews
OilMonster Author
The deal is worth $955 million to be repaid over three years, banking sources said. The loan is backed by banks and Trafigura has put up $30 million.
Trafigura Joins Others to Lend $1 bln to Independent Chinese Oil Refiner

SEATTLE (Oil Monster): Commodities trader Trafigura has joined a group of lenders to provide a $1 billion loan backed by future oil sales to Chinese independent refiner, Shandong Qingyuan, in a deal which underscores the opening up of China to trading houses.

Chinese banks have scaled down lending due to an economic slowdown, creating an opportunity for trading houses to step in, just as they had after the 2008-2009 financial crisis when risk appetite fell as bank regulation increased.

Based in Shandong province — home to many of the non-state refineries known as teapots — Qingyuan operates a 104,000 barrel per day refinery and is one of China’s largest independently run lubricant producers.

Non-state owned refiners make up roughly a fifth of China’s total crude oil imports.

“Trafigura is using credit as a way of cementing ties with Qingyuan and positioning itself for a deeper footprint in the Chinese wholesale and retail market, given that it is now opening up,” Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies, said.

The deal is worth $955 million to be repaid over three years, banking sources said. The loan is backed by banks and Trafigura has put up $30 million. China’s state oil firm CNOOC will take base oils as part of the agreement.

CNOOC and Qingyuan did not respond to a request for comment.

“Qingyuan is a key relationship for Trafigura and one of the largest and most complex independent refineries in China,” a Trafigura spokeswoman said.

“Trafigura is pleased to have contributed as the majority crude oil supplier for Qingyuan, as well as to participate in this substantial largest prepayment transaction for an independent refinery.”

Prepayments are widely-used in commodity finance as they are considered one of the most secure forms of lending. Lenders provide upfront cash and get repaid with future physical oil sales.

 Courtesy: www.reuters.com


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