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 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.
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.
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.
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.
•Project finance servicesfor the oil and gas industry.
• Advanced investment engineering, financial modeling and consulting.
• Services in the field of engineering, construction and project management.
• Loan guarantees and much more.
We support the financing of large projects in the field of oil production and refining, develop advanced financial models for our clients and offer professional services of asset managers, technical consultants and economists.
CPUK Finance Limited is supported by numerous reputable partners and high net worth angel investors, including large investment funds, banks and other financial institutions, engineering companies, research institutes as well as renowned manufacturers and suppliers of oil refining equipment.
If you are interested in refineries financing and loans or looking for a long-term loan for the modernization of equipment, please contact us at any time.