Bahrain’s National Oil and Gas Authority turns to Islamic finance to fuel energy industry

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Thursday, March 31, 2016 3.35 PM / Islamic Finance News


Despite the lower oil prices and volatile market conditions that have shaken the oil and gas industry in recent times and cutting into the budgets of GCC nations, Bahrain continues its exploration and is seeking to power up its energy industry with Islamic finance: the investment arm of the Kingdom’s National Oil and Gas Authority, nogaholding, has secured a US$570 million Murabahah syndicated financing from as many as 10 local, regional and international banks.


The Shariah compliant five-year deal with the financiers is nogaholding’s first syndicated financing since the holding company was formed in 2007. The facility was increased by 60% from its original size due to strong demand. 


The 10 banks that participated in the Murabahah deal were: Arab Banking Corporation, Ahli United Bank, Arab Petroleum Investments Corporation, Gulf International Bank, National Bank of Bahrain, Qatar Islamic Bank, Kuwait Finance House, The Bank of Tokyo-Mitsubishi UFJ, BNP Paribas and HSBC.


The facility will allow nogaholding to invest in projects such as the modernization program of Bahrain Petroleum Company, which has a refinery capacity of 260,000 barrels per day. It will also support the LNG (liquefied natural gas) Import Terminal Project with a consortium of international investors, which consists of an offshore receiving and regasification facility, subsea gas pipelines, as well as an onshore gas receiving facility.


The financing facility will also be utilized for a new gas plant project of the Bahrain National Gas Expansion Company, allowing it to further increase gas processing capacity within Bahrain for the production of natural gas liquids. 


Shaikh Mohamed Khalifa Al Khalifa, CEO of nogaholding, commented that the syndicated financing is an investment for the future and highlights its efforts to grow Bahrain’s oil and gas assets, as well as to position the country as a significant regional and international player in the energy industry. “We are embracing the opportunity presented by the prevailing challenging market conditions and are pleased our new bank syndicate shares our enthusiasm and excitement for the robust projects that this financing will be used for,” Shaikh Mohamed said.


Besides accessing the syndicated credit markets for the first time in its eight-year history, nogaholding added that its future expansion plans include investments in excess of US$7 billion across several ventures over the next five years.


It was previously reported that nogaholding was seeking a US$350 million Shariah compliant financing, which would put the firm on the same page as other oil and gas companies, including Saudi Aramco and Abu Dhabi National Energy, which have also requested for financing from banks to manage their finances on the back of depressed oil prices.


Last month, Bahrain’s energy minister, Dr Abdul Hussain Ali Mirza said that the country was considering a pilot project to recover a huge untapped resource in the residual oil saturation in the gas cap of the Mauddud reservoir.


The decline in oil prices from over US$100 per barrel in 2011 to an average of US$38 per barrel in February this year has put a strain on industry players globally, and affected many oil-producing nations’ budget deficit.


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