MOSCOW (MRC) -- Chad’s Djarmaya refinery stands to benefit following the resurrection of a deal last week between the government and oil trading house Glencore, as per Yourpetrochemicalnews.
The 20,000 bpd facility is the country’s sole refinery and is located 40 km north of the capital N’Djamena. Glencore made an oil-backed US$1.4 billion loan in 2014, under which it would offtake output from the landlocked state.
However, oil prices fell dramatically soon after, putting pressure on oil-dependent Chad and slowing down deliveries. Glencore owns stakes in the operational Mangara and Badila oilfields, giving the company a producing entitlement output of 2.52 million barrels in 2017, down 35% from 3.88 million barrels in 2016.
The slide in production reflected disagreements among the parties over how to amend the deal in the wake of substantially altered market conditions. The deal was criticised by the International Monetary Fund (IMF) in 2017 for having vague terms with regard to loan repayments.
However, it emerged again last week after protracted negotiations, and, eased by a recovery of global oil prices, that new terms have been approved. These include a lengthening of the tenor of the loan from Glencore, originally set for 2022, until 2030, and a reduction of the applicable interest rate from LIBOR plus 7.5% to a more manageable LIBOR plus 2%.
Alongside the more favourable terms for Chad, assurances have been made that secure oil supplies will be made to the Djarmaya facility, which produces diesel, gasoline and kerosene.
This amendment is designed to ensure that the refinery’s oil supplies are guaranteed and have no risk of being relegated to secondary status in competition with the export market. This will be particularly important if global crude oil prices continue to recover.
Djarmaya has a volatile history, with 60% shareholder China National Petroleum Corp. (CNPC) becoming embroiled in disputes with Chadian authorities over pricing of oil products output. The plant, which cost US$758 million to complete in 2011, provides valuable fuel supplies in the north of the country, and is connected with the southern Mimosa and Ronier oilfields via pipeline.
It was closed twice in 2011 and 2013 as a result of the disagreements. However, CNPC has remained a shareholder in the plant, and despite its problems, the refinery is to some extent regarded as a model of collaboration, with Ugandan officials paying it a visit in the process of their studies to develop a new oil refinery at Hoima.
The Chinese operator will be greatly encouraged that security of supplies to the refinery form part of the revised agreement, as this supports the predictability of the plant’s operational status.
MRC