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Vitter questions Ex-Im Bank loans to Petrobras, Ecopetrol

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OGJ Washington Pulse Blog 
by Nick Snow

NICK SNOW has covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He began writing about energy in 1975 at the Deseret News in Salt Lake City, where he worked for seven years. He was a Professional Journalism Fellow specializing in energy at Stanford University in 1977, and earned a bachelor’s degree in journalism from the University of Utah in 1971.

Posted on 4/29/2011

US Sen. David Vitter (R-La.) has raised questions about the Export-Import Bank of the United States making loans totaling billions of dollars to Brazil and Colombia’s national oil companies while the Obama administration seemingly discourages access to and development of domestic resources.

Domestic energy policy cannot be based on crippling access, stifling permitting, and increasing taxes on production – as [US President Barack] Obama has recently proposed – while at the same time loaning billions to foreign government-owned entities to produce abroad,” Vitter said on Apr. 30. “These loans may well create numerous jobs domestically for US businesses to sell product overseas. However, there is no doubt that domestic production creates domestic jobs that cannot be shipped overseas.”

Vitter first mentioned this to Ex-Im Bank President Fred Hochberg in a Mar. 17 letter when he referred to an August 2009 letter he wrote Obama about a $2 billion loan to Petrobras which produced a response from the Ex-Im Bank suggesting there would be a significant return on the investment from interest on the loan as well as an increase in the growth of US manufactured products used by Brazil’s offshore industry.

Noting in his Apr. 29 letter to Hochberg that the bank subsequently approved a $1 billion loan to Ecopetrol, Colombia’s national oil company, Vitter said: “I was very specific about the information I requested from Ex-Im more than a month ago. I requested the particulars of the return on investment the American taxpayer can expect from these loans as well as the US businesses intended to benefit from the financing arrangements. Is it safe to assume that Ex-Im does preliminary analysis before issuing loans that evaluates the return on these loans to the US government and US businesses? Is it also safe to assume that Ex-Im should readily be able to provide that information to Congress upon request?”

The senator noted that while the Ex-Im Bank is an independent federal agency, it also is congressionally authorized and responsible to the US taxpayer. “I would appreciate a full accounting of the return on these ‘investments’ Ex-Im has been making as we develop domestic energy policy in a period when [gasoline] prices are above $4/gal and American families and businesses suffer,” he said. “These loans may well create numerous jobs domestically for US businesses to sell product overseas. However, there is no doubt that domestic production creates domestic jobs that cannot be shipped overseas.”

Original Article

Ex-Im Bank Financing for Papua New Guinea LNG Project to Generate Significant Revenue for Island Nation, While Employing Workers at Dozens of American Companies

December 14, 2009

WASHINGTON, D.C. The Export-Import Bank of the United States (Ex-Im Bank) has approved the largest financing transaction in its 75-year history — $3 billion to support U.S. exports for a liquefied natural gas (LNG) project in Papua New Guinea. Workers at over 55 U.S. companies will provide goods and services for the project.

Ex-Im Bank, the official export credit agency of the United States (ECA), five other ECAs and 17 commercial banks will provide financing for the project. Total project costs are estimated to be $18.3 billion.

The project has the potential to double the gross domestic product of Papua New Guinea.

“Our approval of this project is yet another demonstration of how Ex-Im Bank is achieving its mission to provide financing for U.S. exports, and supporting U.S. export-related jobs, by supplementing what commercial lenders are able or willing to provide” said Ex-Im Bank Chairman and President Fred P. Hochberg.

The ECAs and commercial lenders involved in financing the project conducted extensive research into the potential impacts of the project. The resulting study found that the production and export of LNG from this project will represent a net reduction in global greenhouse gas emissions compared to the case where customers were to meet their energy requirements by coal, fuel oil or diesel commonly used in the regional market, even though the project will add to Papua New Guinea’s total emissions of greenhouse gasses.

At the ceremony announcing the investment, Papua New Guinea Prime Minister Sir Michael Somare said, “ExxonMobil and our other private sector development partners have shown significant confidence in our nation. Cooperation between the public and private sectors will create value for the Papua New Guinea society as a whole and grow our economy in the future.”

The project will involve development of upstream natural gas fields, a 692-kilometer onshore and offshore pipeline, a 6.3 million metric-tons-per-year liquefaction plant near Port Moresby, the capital of Papua New Guinea, and marine facilities from which the LNG will be shipped to foreign buyers. The project will sell the LNG in the large Asia-Pacific market.

In fiscal year 2009, Ex-Im Bank authorized more than $21 billion in support of U.S. exports overall, the highest level in the Bank’s 75-year history, to help ease tightened liquidity during the economic crisis. Ex-Im Bank also set a record for financing of small business exports at $4.36 billion in fiscal 2009.

The Bank, an independent, self-sustaining federal agency, helps to create and maintain U.S. jobs by financing the sale of U.S. exports, primarily to emerging markets throughout the world, by providing loan guarantees, export-credit insurance and direct loans. More information is available on the Bank’s web site at www.exim.gov.

Original Article

U.S. Gov’t Agency Plans $2.84 Billion Loan for Oil Refinery—In Colombia

Monday, April 18, 2011
By Terence P. Jeffrey

(CNSNews.com) – The U.S. Export-Import Bank, an independent agency of the federal government, is now planning a $2.84-billion loan for a massive project to expand and upgrade an oil refinery–in Cartagena, Colombia.

The money would go to Reficar, a wholly owned subsidiary of Ecopetrol, the Colombian national oil company.

“This is part of a $5.18 billion refinery and upgrade project in Cartagena, Colombia supplying petroleum products to the domestic and export markets,” the Export-Import Bank said in a statement.

The U.S. government-controlled bank says the $2.84-billion in financing it plans to undertake will be the second largest project it has ever done. The largest was $3 billion in financing for a liquid natural gas project in Papua New Guinea.

The statement released by the bank said that on April 7 the bank’s presidentially-appointed board of directors had “voted to grant preliminary approval for a $2.84 billion direct loan/loan guarantee” for the Colombian refinery project.

Export-Import Bank Spokesman Phil Cogan told CNSNews.com that the bank could not say at this time how much of the $2.84 billion would be directly loaned to the Colombian refinery company and how much would be in loans guaranteed by the bank–although he expected it to be a combination.

“It is conceivable it could be all a direct loan,” said Cogan. “Right now it is set up so that the board could do either a complete direct loan or a combination of direct loan and guarantee. That hasn’t been determined yet.”

Since December, the bank has also approved almost $880 million in other loans and loan guarantees to Reficar’s parent company, Ecopetrol. So, in total, if the new $2.84 billion in loans is finalized, the Columbian national oil company and its wholly owned subsidiaries will have received $3.72 billion in financing backed by a U.S.-government-controlled entity within a span of five months.

“Just last February and December the Bank approved nearly $880 million in export financing to help finance the sale of goods and services from various U.S. exporters to Ecopetrol S.A., Colombia’s national oil company,” Export-Import Bank President Fred P. Hochberg said in the bank’s statement announcing preliminary approval of the refinery loan.

Export-Import Bank Spokesman Cogan stressed in an interview that although Reficar is wholly owned by Ecopetrol it remains a separate entity, and is considered as such for Export-Import Bank financing purposes

In its 2009 annual report, Ecopetrol says “we became 100% owners of Reficar, the company in charge of carrying out the Cartagena Refinery modernization plan.”

In its ordinary procedure for financing projects of this magnitude, the board of the Export-Import Bank votes its preliminary approval, notifies Congress of that preliminary approval, then waits five weeks before voting final approval of the deal. This allows members of Congress to comment on the planned financing project.

“The Reficar transaction is subject to congressional notification, with a final vote anticipated approximately 35 days following the expiration of the notification period,” says the bank’s press release on the loan.

When asked if Congress can veto the loan, Ex-Im Spokesman Cogan said, “No.”

The public-policy rationale for the $2.84 billion loan for the Colombian oil refinery project is the same as the rationale for all Export-Import Bank loans to foreign interests: to create jobs in the United States.

“The transaction will help create or sustain over 15,000 American jobs for a total of four years,” says the bank’s statement about the loan.

Spokesman Cogan says the bank calculates the jobs created or sustained by a loan or loan guarantee by using a formula that estimates how much money spent buying U.S. exports in a particular industry it takes to create a job.

If the $2.84 billion loan to Reficar to expand and upgrade its Colombian refinery creates or sustains the 15,000 jobs in the United States that the bank believes it will create or sustain that would work out to $189,333 per job.

According to the National Petrochemical & Refiners Association (NPRA), 95 percent of the gasoline purchased by U.S. consumers is refined inside the United States, meaning that expanding the gasoline refining capacity of Colombia is unlikely to have a significant impact on the supply of refined gasoline in the Untied States.

Also according to NPRA, the last time a new oil refinery was built in the United States was 1993, when a small facility was built in Valdez, Alaska.  The last time a new large oil refinery was built in the United States was 1976, says NPRA. Older U.S. refineries, however, have been upgraded and expanded in recent years.

Original Article

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