Petronas, Saudi Aramco Said Seeking Pitches for $7 Billion Loan

Malaysia’s state-owned oil corporation and Saudi Arabian Oil Co. are asking banks for proposals to finance about $7 billion for a planned refinery and a petrochemical complex in the Southeast Asian nation, according to people familiar with the matter.

The lenders would provide financing for the two projects worth a total of $12 billion to be constructed by Petroliam Nasional Bhd. and Saudi Aramco under a memorandum of understanding that the two firms have signed, according to the people, who asked not to be identified as the process is private. The banks are expected to submit proposals by later this month, the people said.

A Petronas’s spokesman couldn’t immediately be reached for comments by phone. Saudi Aramco’s media officials at its headquarter in Dhahran, Saudi Arabia, declined to comment.

Long-Term Projects

While Petronas announced in January that it would cut its capital and operating expenditures by 50 billion ringgit ($12.2 billion) over four years, it also gave commitment to invest in long-term projects. The planned projects with Saudi Aramco are part of the $27 billion Refinery And Petrochemicals Integrated Development that it is building for future growth and will come onstream in 2019.

Petronas reported a 71 percent decline in net income of 2.7 billion ringgit in the first quarter from 9.3 billion ringgit a year earlier due to lower product prices and reduced sales volume, according to May 18 statement. Its total assets decreased to 567.6 billion ringgit as at end March compared to RM591.9 billion as at Dec. 31. The company raised $5 billion by selling dollar bonds and Islamic debt in March last year.

Saudi Aramco, the world’s biggest oil exporter,already has refining and petrochemical partnerships in the U.S., China, South Korea and Japan, as well as in Saudi Arabia, giving it a share in plants capable of processing 5.4 million barrels a day. It is also looking to develop more joint ventures in countries including the U.S., China, Indonesia, India, Vietnam and South Africa, Chief Executive Officer Amin Nasser told reporters on May 10.

Saudi Arabia is seeking to reduce its reliance on oil sales amid lower prices for its most lucrative export. As part of that effort, the Middle Eastern nation wants to sell stock in Saudi Aramco for the first time, creating what could be the world’s largest listed company.