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From there on it has been a tale of post global financial crisis woes with the market strugglingto show any semblance of a recovery and most of the growth coming from non-OECD jurisdictions. In 2009, three projects valued at US$4.79 billion reached financial close,followed by two projects including Jubail valued at US$15.04 billion in 2010, and another twoprojects valued at US$1.49 billion in 2011. By contrast, the pre-crisis years of 2005, 2006and 2007 averaged US$6.71 billion in terms of transaction valuations.
Top five refinery project finance transactions 2005-2011 (Source: Infrastructure Journal 2012)
A general market trend in favour of non-OECD project finance investment in refineries isobviously mirrored in the table of the top deals between 2005 and 2011 (above). Of the five,four are in non-OECD countries
led by Jubail Refinery (Saudi Arabia) valued at US$14.04billion which closed in 2010, followed by Guru Gobind Singh Bhatinda Refinery, India (valuedat US$4.69 billion, financial close
Only one deal from an OECD nation, which is a very recent member of the club, made it to
the top five, namely Poland‟s
billion which reached financial close in 2008.Switching from project finance to corporate finance for refinery projects does not make theinvestment scenario any better. In fact, the situation gets worse as the corporate financemarket unlike the project finance market is or rather was heavily reliant on transactions inNorth America and Europe which have steadily declined.
The year 2008, saw refinery projects‟ corporate finance valuation at US$3.09 billion followed
by a valuation of US$3.49 billion in 2009. The bulk of the investment over both years wenttowards corporate financed refinery (and ancillary) asset acquisitions. While not particularlyhealthy, the market performance for both years was acceptable to say the least
somethingwhich cannot be attributed to the two years that followed.In 2010, corporate finance valuation came in over a third lower on an annualised basis atUS$963 million followed by a massive dip to US$325 million in 2011; the latter being on theback of a solitary refinancing deal in the US
the Western Refining Refinancing whichreached financial close in March 2011.
Western capacity ‘non’ utilisation and crude margins
What haunts European and North American refinery project financiers, and has done so for awhile now, barring a brief period between 2005 and 2007, is refining overcapacity and
uncertain margins. Starting with the former, oil giant BP‟s 2011 Statistical Review of World