It is important for decision-makers to clearly understand the reasons that make it difficult to attract financial resources for the development of the oil and gas sector and use them effectively. These reasons are directly related to the internal mechanisms of corporate finance and capital markets. Our financial team will provide professional support and advice to customers at any stage of your requirements for refineries financing and loans and other investment project.

n order to obtain financial resources for the development of oil production, transportation and refining, it is extremely important for management to understand the principles of the capital market, financial mechanisms and available options applicable to the hydrocarbon industry.

Currently, refineries financing and loans for equipment modernization play an important role in the development of oil and gas industry around the world.

The economic recovery after the crisis requires significant supplies from the oil and gas industry.

This provides a powerful impetus for financing the construction and expansion of oil refineries (downstream), as well as for investing additional capital in the exploration and operation of oil fields (upstream) to ensure stable growth.

These are capital-intensive projects that start with the development of oil fields and end with high-tech oil refining and large-scale logistics projects.

The time interval between the initial investment in the oil and gas industry and the achievement of stable cash flows in some cases takes up to 10 years. Tightening environmental standards complicate the development of the industry, requiring companies to make new costly solutions to minimize harmful emissions. All of the above indicates that choosing the right sources for long-term project financing is critical to success.

Money is a valuable resource in times of high liquidity when interest rates are low.

Exporters of oil and petroleum products are in dire need of investment to maintain high productivity in the sector, provide national economies with fuel and prevent imports of petroleum products.

The lack of available funding sources in this situation can adversely affect the results of not only individual companies, but also entire sectors.

CP Finance UK is ready to provides refineries financing and loans including long-term loans for the construction and modernization of oil refineries anywhere in the world.

Over the years, our company has supported financing large investment projects in USA, Germany, France, Saudi Arabia, China, Mexico, Brazil, Argentina, South Africa and other countries.

We are always open to cooperation with large companies offering promising investment projects.

Long-term financing and loans for the construction of an oil refinery

Long-term financing of large investment projects in the oil and gas industry is based on the issue of shares and long-term bank loans against the future cash flows of the projects.

While the former financing instruments are more typical for private companies, the latter are widely attracting both state-owned oil refineries and private capital.

Many companies use this financial instrument by issuing shares of various types to raise part of the funds for a capital-intensive investment project.

A company’s decision to go public can have serious long-term consequences for the current owners of the business. Therefore, in some cases, lending is considered a preferable, albeit expensive, instrument.

Ordinary shares have no priority for dividend payments or debt collection in the event of bankruptcy.

Shares, in fact, are parts of the capital of an oil and gas company, which are transferred to the hands of shareholders and give them certain rights.

In corporate finance practice, there are different classes of shares that differ in voting rights. Shares provide shareholders with rights that depend on the share of a particular shareholder in the company (project).

In turn, preferred shares have priority when distributing dividends or obtaining a share in the company’s assets in the event of bankruptcy. Shares of this type give the holder the right to receive a fixed dividend per share, which is why they are sometimes mistaken for debt securities.

Unlike bonds, this financial instrument does not oblige the company to pay off the debt on time, without regard to the financial condition of the company. If the company has not made a profit for the reporting period, the board of directors may decide not to pay dividends to shareholders (including privileged ones). Sometimes dividends on preferred shares accumulate. That is, if during one year the shareholders do not receive dividends even if there is a profit, the balance may be increased the next year.

In addition, dividends on preferred shares cannot be deducted by the company from the income tax base, as in the case of servicing loans.

Also, the holder of preferred shares cannot claim bankruptcy of the company for non-payment of dividends, unlike a traditional creditor.

Be it as it may, the most popular means of securing refineries financing and loans is long-term bank loans.

When it comes to large projects requiring investments of the order of hundreds of millions of dollars or even several billions, it is most appropriate to consider a syndicated loan. This is a loan provided by a group of banks joining financing efforts to minimize risk.

An example of such financing is a syndicated loan approved by the International Finance Corporation (IFC) in the 1990s for the construction of the Star Petroleum Refining in Thailand in the amount of US $ 350 million.

The total cost of this project exceeded $ 1.86 billion.

Project finance (PF) for the construction of oil refineries

In typical project finance, the collateral (security or guarantee of the lender against default by the borrower) is the project assets, but not the initiator’s assets. A distinctive feature of project finance in comparison with direct financing (traditional loan) is that in the first case, the lender provides financing to the special-purpose vehicle, but not to the originator. The SPV / SPE institution financially separates the project from its originators.

The concept of project finance refers to targeted financing of large refinery projects and other facilities, which is based on the ability of the project itself to generate sufficient cash flows to service debt.

This is a kind of off-balance sheet financing, when the project debt is separated from the financial statements of the originator and does not affect its creditworthiness.

Traditional corporate finance often does not specify the purpose of the loan or other borrowed funds.

Project finance allows lenders to better manage credit risk than if they lend money directly to the company for multidirectional business activities.

Usually, financing of the construction of an oil refinery is carried out using 70-80% of borrowed funds and, accordingly, 20-30% of the internal financial resources of the project initiators. Arranging project finance requires multilateral negotiations with stakeholders and the formation of a complex contractual structure. The cash flow of a specific project is seen as a guarantee of the return of funding.

Structured finance methods are part of project finance and help banks minimize their risks through securitization.

Basically, project participants are restructuring their loans into bonds (negotiable obligations) that they offer in the capital markets, pegged to the project’s cash flows.

In the oil and gas industry, project finance has always been in great demand in the implementation of large projects. Its explosive growth began in the 1970s with the financing of oil production in the North Sea and Australia. Today, the PF gives petroleum producers access to affordable and flexible financing for large-scale refinery construction and modernization projects.

CP Finance UK offers project finance for the oil and gas industry in Europe, the United States, Latin America, East Asia, the Middle East and North Africa.

Contact us to find out more.

Loans and financing for the modernization of refineries

In the modern sense, the modernization of refineries, first of all, consists in the organization of investment measures aimed at improving production through consistent constructive and organizational changes. These changes must be comprehensive to ensure that the enterprise fully complies with the organizational, technical and environmental standards of the industry.

In other words, the attention of management is shifted to the implementation of sequential investment operations aimed at the practical use of new scientific and technological knowledge in order to achieve commercial success.

In this context, the priority of refinery modernization should be focusing on the future, sustainable development through comprehensive transformations.

Such modernization should be based on the latest technologies in close relationship with the strategic goals of the company’s development, given its current state (depression, relative stability or rapid growth).

It is important to emphasize that such activities cover not only production, but also facility management.

A whole range of innovations should be directed towards the rational use of crude oil, increased use of by-products and environmentally friendly production. Modernization can also be considered as a purposeful replacement of outdated elements of production and management activities.

Thus, the current view of modernization should cover the full range of interconnected links in improving production, the management system as a whole, the state of the environment, work with personnel, and expanding the range of products.

Long-term bank loans provide an oil and gas company with the following advantages:

• Long term financing.
• Possibility to revise the terms of the loan through negotiations with the bank.
• Loans on better terms when purchasing equipment from a specific supplier.
• Relatively simple and fast process of obtaining borrowed funds.
• Simple contract structure with a minimum of participants.
• Possibility of obtaining large loans within the consortium.

CPUK offers large refineries financing and loans including long-term loans from 10 million euros for up to 20 years.

Please contact our finance team for details.

Financing oil and gas projects on the best terms: The main service of CP Finance UK

The mission of the company’s management is to make every investment decision as effective as possible and to find a way to implement an investment project that will bring the company a higher value. The subsequent operational phase of the project will require new solutions for financing working capital to ensure the operation of the refinery complex.

Traditional corporate finance can come from a variety of sources, such as equity increases, bond issues, leasing, lending, or various combinations of debt and equity financing. The finance department of the company must recommend the best alternative for the most acceptable investment solution (for example, the development of an offshore field or the construction of a refinery). Correctly selected financial models and sources determine the value of the future project.

The oil and gas industry today uses a variety of financing instruments to realize growing investment opportunities, increase profitability and reduce risks.

However, it can be challenging to obtain financing that is appropriate for a specific investment opportunity.

The presence of vast deposits and a growing market demanding more petroleum products are not the only factors for prosperity.

It is important for oil and gas companies to find a source of long-term financing with flexible terms, since the long construction time of refineries and high initial investment costs increase the risk and uncertainty for potential investors. Detailed study of all aspects of the project, professional financial modeling and negotiations with a wide range of stakeholders are important in this context.

At all stages of the project, companies need reliable financial partners and professional consultants who are ready to attract the resources on favorable terms and support the company’s efforts.

Solar photovoltaic power plant remains the reasons for investors’ interest in renewable energy sources are growing concerns about climate change, the effects of air pollution on health, the issue of energy security and affordability, as well as fluctuations in hydrocarbon prices.

Currently, the total installed capacity of PV power stations in the world exceeds 600 GW, excluding concentrating solar systems.

It is the second largest renewable energy source after wind farms.

Since the late 2010s, this technology has been a leader in the pace of construction of new power plants.

These figures are twice as much as that of wind farms.

They are even higher than those of fossil fuel plants and nuclear power plants together.

In the past four years, the installed Solar photovoltaic power plant capacity is planned to be increased by 140 GW.

According to experts from the International Renewable Energy Agency (IRENA), the development of solar energy is driven by cost savings, technological advances and the creation of the necessary associations to support the sector.

Solar photovoltaic power plant construction

According to IRENA forecasts, the number of new solar photovoltaic stations can increase 5 times over the next 10 years, reaching a total capacity of 2840 GW by 2030 and 8500 GW by 2050.

This means that the installed PV capacity in 2050 will be 18 times more than in 2018. According to European experts, in 2050, 60% of the installed capacity will come from large-scale photovoltaic installations, and the remaining 40% from in-roof PV systems.

Asia dominates the global solar energy market today, accounting for more than half of the world’s new photovoltaic capacities.

In 2019, China added over 30 GW of installed capacity, while the European Union added 16 GW and the United States 13.3 GW.

Asian countries, led by China, are currently leading in the production of photovoltaic energy.

Europe is in second place and North America in third.

Projections show that Asia will continue to lead in installed PV capacity with a share of about 65% of total capacity in 2030. The most significant growth is expected in China, where the installed PV capacity will exceed 1,400 GW in 2030.

North America will take second place with 430 GW by 2030, with 90% of the facilities being built in the United States. Europe will occupy third place with an installed capacity of about 300 GW.

In 2050, Asia will still dominate with almost half of the installed photovoltaic power in the world. According to the estimates, this figure will be 4,800 GW, of which 2,800 GW will be concentrated in China. By then, Chinese solar power will show CAGR of about 9%.

Europe will retain third place with a total installed Solar photovoltaic power plant capacity of 890 GW in 2050. About 22% of European PV installations will be concentrated in Germany.

At the same time, market growth is likely to shift to other, less saturated markets. In the future, the rapid development of solar energy is expected in South America and Africa.

The future growth of solar energy depends largely on a balanced energy policy and a reduction in the cost of PV technology. The ways to achieve this are to use cheaper materials for solar cells, reduce the cost of manufacturing equipment and increase its efficiency.

Construction of solar PV power plants: economic feasibility and cost

Solar energy has been controversial in past decades, but today it is clear that solar power plants will soon replace traditional energy sources.

The widespread use of the technology depends on its current cost-effectiveness. Solar energy today cannot always compete with traditional sources. But the long-term trend is that fossil fuels will rise in price, and solar cells and ancillary electrical equipment will become cheaper.

According to BloombergNEF, in 2020 the cost of renewable energy has dropped significantly around the world.

The levelized cost of energy (LCOE) for large-scale photovoltaic systems has decreased by 4% compared to the second half of 2019 – to € 46 per MWh. Meanwhile, the base LCOE for batteries fell to € 138 / MWh, having fallen in price by 2 times over the past year.

In China, the largest solar market, solar LCOE has dropped to € 35 / MWh thanks to the introduction of more efficient PV cells. This is almost 9% less than in the second half of 2019. The cost of operating new solar power plants in the country is now almost equal to the cost of operating coal-fired power plants, at around € 32 / MWh.

According to BNEF reports, the cheapest Solar photovoltaic power plant projects financed in the first six months of 2020 should reach LCOE in the range of 21-27 € / MWh.

These projects in Australia, China, Chile and the United States will compete with the remaining fossil fuel power plants.

Meanwhile, Abu Dhabi-based EWEC has unveiled the results of the latest solar energy tender in the UAE for a 2 GW solar photovoltaic project. The operator plans to supply energy at a price of only € 12.46 / Mwh.

Solar power plants have a number of advantages over coal-fired TPPs and nuclear power plants:

• The construction of a solar power plant is much faster as the photovoltaic modules are easy to install and connect.

• It is easier for engineering companies to choose the location of the solar power plant in accordance with the infrastructure and terrain features.

• The construction of solar power plants in remote areas reduces the energy losses associated with long-distance transmission.

• Unlike traditional power plants, modular solar energy production can be smoothly expanded as consumption increases.

Solar power plants do not pollute air and water, maintaining an ecological balance. For this reason, solar energy production is stimulated by government initiatives in most developed countries.

Today, there is no longer any doubt about the economic feasibility of building solar power plants.

The time will come when solar energy will completely displace coal and gas from the energy sector.

Construction of solar power plants for industrial enterprises

Industrial enterprises are among the largest consumers of electricity in the world energy market. 

The huge number of equipment and machines requiring power, as well as the accompanying office premises of industrial companies determine the need for an uninterrupted and reliable power supply.

With the awareness of the negative impact of traditional energy sources on the environment, more and more enterprises are switching to renewable energy sources. The challenge is to reduce the carbon footprint at every stage of the manufacturing process.

Many companies, especially in the automotive and electronics sectors, are choosing solar power plants as the optimal technology for generating clean energy.

Industrial facilities use large amounts of energy in a wide variety of processes, which are usually designed for maximum intensity.

The annual electricity consumption for the average US enterprise, for example, is 95.1 kWh per 0.09 m², which is at least 10 times the annual consumption of a typical household. Most of the energy consumed in factories is used in the form of heat, with the remaining about 20% in the form of electricity.

According to the latest research, this ratio is changing. In the 1980s, factories used 25-50% less electricity than they do now. Experts predict that by 2030 the share of electricity in the energy consumption of industrial enterprises will reach 30%.

The electrification of industry not only opens up many opportunities, but also poses new challenges for business. An example is companies that make full use of the electricity generated by coal-fired power plants.

These producers contribute to the problem of greenhouse gas emissions, which, in turn, leads to increased energy costs due to additional environmental taxes. Renewable energy sources minimize these problems. Several studies have shown that the use of solar energy can lead to significant savings in energy costs for manufacturers.

As with many other technologies, the efficiency of solar power plants increases as the scale of construction increases. In 2019, the cost of building a solar PV system for small consumers was US $ 3 per watt. However, this figure drops to $ 1 per watt when it comes to systems with an installed capacity of more than 1 MW.

Compared to coal, solar power is a clear winner because modern technology makes it possible to produce energy cheaper every year.

EPC contracting in solar energy