China Eximbank provides $880 million loan for SORAZ Oil Refinery Construction Project (Linked to Record ID#58433, #58435, #2137)

China Eximbank provides $880 million loan for SORAZ Oil Refinery Construction Project In 2008, China National Petroleum Company (CNPC) established a joint venture with the Government of Niger called Société de Raffinage de Zinder (SORAZ) to process oil from CNPC’s Agadem block in Niger (see Record ID#2137).

CNPC holds a 60% ownership stake, and the Government of Niger holds a 40% ownership take in SORAZ.

CNPC then used the proceeds of this loan to on-lend to Société de Raffinage de Zinder (SORAZ).

The Government of Niger provided a sovereign guarantee for its 40 percent share of the SORAZ loan (equivalent to $352 million) on September 2, 2008. As of 2021, the loan had achieved a 93.1% disbursement rate ($819,587,514 out of $880,000,000).

The project involved the construction of the Soraz oil refinery in the village and rural commune of Ollelewa within Tanout Department and Zinder Region.

The refinery was designed to have a 20,000 barrel-per-day production capacity and to be fed entirely by oil from the newly-launched Agadem oilfield a further 700 km east. The refinery draws crude from three Agadem wells with reserves totaling 480 million barrels. China Petroleum Engineering Co., Ltd.

SARL was the EPC contractor responsible for project implementation. The SORAZ oil refinery was officially inaugurated on November 28, 2011.

Also, in November 2011, the Nigerien Government commissioned the first of several audits of the upstream and downstream costs of the project.

These audits, according to the IMF, revealed 'inflated and undocumented costs' in the case of the oil fields, and 'reasonable costs but significant space to improve efficiency' for the SORAZ refinery.

The Nigerien authorities also kept the price of gasoline in Niger artificially low, which hurt the refinery’s bottom line.

An IMF report concluded that the 'audit findings [were] critical to give leverage to the Nigerien authorities in the negotiations for the refinancing of the $880 million SORAZ loan, an essential step to ensuring the viability of the refinery.' There are multiple indications that the China Eximbank loan for the SORAZ Oil Refinery Construction Project financially underperformed vis-a-vis the original expectations of the lender.

The Nigerien authorities announced in 2011 that China Eximbank had agreed to reschedule the loan for the SORAZ Oil Refinery Construction Project by reducing the interest rate from 6-month LIBOR plus 350 basis points (approximately 6.56% in the year that the loan was contracted) to 6-month LIBOR plus 304 basis points.

Then, in July 2012, the Nigerien authorities announced that China Eximbank had again agreed to reschedule the loan by ensuring that 'the interest rate will not exceed 2 percent.' However, according to SAIS-CARI, despite this announcement and the leverage provided by the audit report, the refinancing plan still had to be approved in Beijing.

CNPC still needed to get the approval of China Eximbank, and this reportedly did not happen.

Then, in February 2017, an IMF report noted that 'negotiations [for the refinancing] have stalled over the last two years' but that SORAZ now appeared able to service the debt 'normally'.

Of the $352 million share guaranteed by the Nigerien government, $161 million was still included in the debt stock as of 2018, one year before the loan was due to reach maturity.

One year later, in 2018, the China Eximbank reportedly agreed to reschedule the loan through a maturity extension from 2019 to 2021.

Then, in 2021, the Government of Niger publicly acknowledged in its 'Rapport General Public 2021' that SORAZ was facing the possibility of insolvency and bankruptcy and had fallen behind on repayments to China Eximbank. It also acknowledged that the new, final maturity date of the loan (after the rescheduling) was August 8, 2021.

The 2008 China Eximbank loan for the SORAZ Oil Refinery Construction Project is captured via Record ID#73319.

The 2011 rescheduling of the loan that supported the SORAZ Oil Refinery Construction Project is captured via Record ID#58433.