Angola’s state oil company, Sonangol, is seeking a $4.8 billion loan from Chinese financial institutions. This loan will be used to accelerate construction of the new Lobito Refinery. This is a move that could mark its first major borrowing from China in seven years.

Additionally, the CEO of Sonangol Sebastiao Gaspar Martins revealed to reporters on Wednesday that the financing push targets the next phase of the $6.2 billion refinery project. This refinery project has been designated a national strategic priority.

“Also, the next phase is estimated at $4.8 billion, and we are contacting Chinese institutions with the support of the contractor, who is also Chinese, in order to obtain this financing,” Martins said, according to Reuters.

Lenders

However, he did not disclose specific lenders. Angola’s finance ministry revealed in the previous month that the China Development Bank could be a potential financier. Additionally, Sonangol confirmed that a delegation will travel to Beijing in April for negotiations.

Also, for Luanda, the structure of the proposed loan is just as important as the amount. Also, the company stressed that no oil-backed collateral is envisaged, a significant departure from the borrowing model Angola relied on for nearly two decades.

Timeline

Furthermore, the upcoming refinery is expected to commence production of refined products by December 2027. This refinery will join others such as the Cabinda Oil Refinery in reducing Angola’s dependence on imported fuels.

Lastly, even though Beijing was Africa’s dominant creditor until 2019, Chinese lending has declined sharply. This is a trend that has been accelerated by the COVID-19 shock. Furthermore, the shift has left a number of megaprojects incomplet. These projects include modern rail infrastructure in Kenya.

Lobito Refinery Factsheet

Project Name: Lobito Refinery (SONAREF)

Location: Lobito Port, Benguela Province, Angola

Total Estimated Cost: $6.2 Billion-$6.6 Billion

Loan Amount: $4.8 Billion

Refining Capacity: 200,000 barrels per day (bpd)

Primary Owner: Sonangol (State-owned oil company)

Main Contractor: China National Chemical Engineering Co. (CNCEC)

Project Manager: KBR (Kellogg Brown & Root)

Project Team

Principal Owner & Promoter: Sonangol E.P. (Sociedade Nacional de Combustíveis de Angola)

Engineering & Construction (EPC)

• China National Chemical Engineering Co. (CNCEC): The lead EPC Contractor. Also, they are responsible for the actual construction, procurement of materials, and engineering execution. They are also playing a key role in facilitating the $4.8 billion credit line from Chinese lenders.
• KBR (Kellogg Brown & Root): An American firm serving as the Project Management Consultant (PMC). Furthermore, KBR completed the Front-End Engineering Design (FEED) and is now overseeing the construction phase to ensure it meets international safety and emission standards.
• DAR (Dar Al-Handasah): An Angolan/International consultancy providing Technical Support and Consulting Services to Sonangol.

Financial Institutions

• China Development Bank (CDB): Identified by the Angolan Ministry of Finance as the primary institution in negotiations for the $4.8 billion loan.
• Industrial and Commercial Bank of China (ICBC): Involved in preliminary discussions regarding the financing syndicate.
• Standard Chartered & Afreximbank: Have previously expressed interest or provided advisory support for Angola’s large-scale energy infrastructure debt structuring.