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Saudi Arabia's liquidity bounce
14 June 2011
The Arab Spring is unlikely to dent the progress of Saudi Arabia’s vast project pipeline. But with constrained international bank liquidity and immature capital markets, access to private capital is a continuing obstacle for project financings. By Paul Smith.
Saudi Arabia is one of the largest project finance markets in the world, and probably the largest energy project finance market globally. And no other market comes close to the steady stream of consistently large projects. Saudi Arabia wants to increase its gross domestic product (GDP) and diversify its economy. It plans to do this by leveraging its vast oil and gas reserves in developing the so-called three pillars: oil and gas, petrochemicals and mining and minerals. State and quasi-state incumbents Aramco, Sabic and Ma’aden dominate their respective industries.
Up the value chain
The unlisted national oil company Aramco is a relatively rare user of project finance, restricting its use to projects where it co-sponsors with a foreign partner. Though infrequent, its projects are huge. But Aramco can squeeze banks both on structuring and pricing. When the $8.5 billion Jubail refinery project financing was first pitched to banks in the...
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