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JBICJBIC’’ss Role in the Petrochemical SectorRole in the Petrochemical Sector

Aya YAMAZAKIDirector General

International Finance Department II Japan Bank for International Cooperation (JBIC)

2 May 2004

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JBICJBIC’’ss Role in theRole in the Petrochemical SectorPetrochemical Sector

I. Past Operations

II. Prospective for the Future

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I. Past Operations1. Bilateral Cooperation Projects

Need for energy security in Japan and need for development of economy in oil-producing countries led to the following projects;

i. IJPC project in Iran

ii. SHARQ project in Saudi Arabia

2. Projects Targeting Local or Regional Market

i. Chandra Asri project in Indonesia

ii. Ethylene plant project in Singapore

3. JBIC also supported numerous petrochemical projects in the Middle East, Asia and Europe by Export Credit Facility with sovereign guarantees.

4. However these projects were implemented at the time when the market was segmented, and not yet globalized, so there was no connection among the individual projects with each other.

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II. Prospective for the Future

1. Background

Structural Change in the Market

i. Globalization and consequent increased competition

ii. Tendency of high oil and gas prices due to growth of emerging economies, represented by China

iii. Increasing geopolitical risks

Increasing competitiveness of gas-based low cost projects especially in the Middle East

Diversification of Japanese companies’ approaches

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Diversification of Japanese companies’ approaches are:

i. To support constructing petrochemical plants as an EPC contractor (engineering companies);

ii. To offer their licensed technology as a licensor (chemical companies);

iii. Offtake of competitive petrochemical products (trading companies and chemical companies);

iv. To invest in petrochemical projects in Asia (and subsequently in the Middle East) (trading companies and chemical companies).

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2. JBIC’s RoleJBIC is ready to cope with such a background by using:

i. Instruments:

Export Credit Facility

Overseas Investment Credit Facility

Import Credit Facility

ii. Security:

Corprate Basis

Structured Finance Basis

Project Finance Basis

iii. Interaction between JBIC’s role and Japanese companies’approaches: e.g. using offtake contracts as a collateral

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<Export Credit Facility>

Trading Company

EngineeringCompany

Buyer(Petrochemical

Company)JBIC

Chemical Company

Licensed Technology

EngineeringProcurementConstruction

PetrochemicalProducts

Export Credit Facility

<Japanese Companies>

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<Overseas Investment Credit Facility>

Trading Company

Joint Venture JBIC

Chemical Company

Licensed Technology

PetrochemicalProducts

Joint Venture Partner(Petrochemical

Company)

Overseas Investment

Credit Facility

Equity Participation

<Japanese Companies>

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<References><References>

JBIC Facility to NPCJBIC Facility to NPC

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JBIC ProfileJBIC ProfileJapan Bank for International Cooperation (JBIC) is:

A Governmental Financial InstitutionEstablished on 1 October 1999 through a merger of1. JEXIM (The Export-Import Bank of Japan) and2. OECF (The Overseas Economic Cooperation Fund)Total Assets: Over 200 billion USD

JBIC’s missions are: To promote Japanese trade and economic activities overseasTo contribute to stability of international financial orderTo assist economic and social development in developing countries

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JBICJBIC’’ss Role in IranRole in IranTotal Commitment Amount as of 31 March 2004：

8,446 million USD

Outstanding Amount as of 31 March 2004：3,986 million USD

Recent Transactions：Ammonia & Urea Plant Project (Bank Mellat, March 2002)Advance Facility for Crude Oil Import (NIOC/NICO, March 2004)Ammonia & Urea Plant Project No.2 (NPC, March 2004)

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History of JBIC Facility to NPCHistory of JBIC Facility to NPCIJPC Project:

In 1976, JEXIM (former JBIC) committed a direct facility to NPC totaling 60 billion JPY (166 million USD at that time) for the BIPC (former IJPC) project in Bandar Imam.

Since then, NPC and JBIC have been building up a good relationship.

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JBIC Facility to Iranian BanksJBIC Facility to Iranian BanksSince 2000, JBIC Facilities have been provided to Iranian banks (Bank Mellat, Bank Melli, Bank Sepah) with sovereign guarantees.

The Facilities have also been provided to the following NPC projects:

4th Aromatics Plant Project in Bandar AssaluyehPTA II Plant Project in Bandar ImamAmmonia and Urea Plant Project in Bandar Assaluyeh

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JBIC Facility to NPCJBIC Facility to NPC

NPC and JBIC signed the Memorandum of Understanding (MOU) on 9 February 2004.

Based upon the MOU, NPC and JBIC have signed the first facility agreement on 9 April 2004 for the 2nd Ammonia and Urea Plant Project.

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MOU between NPC and JBICMOU between NPC and JBICAim

To support exports of Japanese goods and services on time

To support NPC’s investments in the petrochemical sector

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Outline of MOUOutline of MOUThe MOU stipulates the following issues:

The template of legal documents including the structure of collaterals

Procedure of application

This MOU enhances the number of opportunities offered to Japanese exporters and shortens the time taken to complete the financing for the individual NPC projects.

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Who Can Use This Facility?Who Can Use This Facility?

Japanese Exporters & Foreign ExportersIf the Japanese exporters are a main contractor, and Japanese goods & services make up more than 30% of the foreign portion, the JBIC Facility can cover up to 85% of the foreign portion.

If the Japanese exporters are a subcontractor, the JBIC Facilitycan cover 85% of the contract price.

Iranian FirmsFor the local portion, the JBIC Facility can also cover up to 15% of the foreign portion.