ENOC planning to borrow to expand refinery, mulls sukuk

Emirates National Oil Co, the Dubai-government owned oil refiner and energy trader, plans to borrow from foreign export-credit agencies as early as this year to upgrade a refinery and may issue at least $500mn in Islamic bonds, its chief financial officer said.
The company known as ENOC will probably seek export credits to finance a 50% increase in the capacity of its oil refinery at Dubai’s Jebel Ali port, chief financial officer Petri Pentti said in an interview last week in Dubai. ENOC may also ask international credit agencies for an investment-grade rating as it tries to tap global debt markets, he said.
“Liquidity is getting tighter in the region,” Pentti said. “We have been financing from banks, so, for us, it’s an issue of diversifying our funding sources.”
Middle Eastern companies have traditionally been able to borrow locally at cheaper rates than they would pay for loans from foreign banks or to sell bonds. The 27% slide in crude prices over the past year is putting pressure on government budgets in the oil-rich Gulf and threatening to slow economic growth. Dubai is less reliant on oil revenue than neighbouring governments such as Saudi Arabia and the UAE’s biggest emirate, Abu Dhabi, but local banks have curtailed lending amid cheaper oil.
The UAE, of which Dubai is the second-largest member, holds about 6% of global oil reserves.
ENOC in June raised $1.5bn in loans maturing in 2024, mostly from UAE and regional banks. It paid about 235 basis points above the London interbank offered rate, according to data compiled by Bloomberg. ENOC was able to negotiate “great” pricing on the loans because of the ample liquidity in the market at the time, Pentti said, without confirming the interest rate.
The company plans to boost the Jebel Ali refinery’s capacity to 210,000 bpd by 2020 from about 140,000 bpd, Pentti said. ENOC will award engineering and construction contracts for the plant this year, he said.