China's Sinosure Opens $1.3b Credit Line for Iranian Refinery

China has opened a line of credit, worth $1.3 billion, to finance the development of Abadan Oil Refinery, Iran's oldest refinery in the southern Khuzestan Province, the chief executive of National Iranian Oil Refining and Distribution Company said.

"China's Sinosure has opened a $1.3-billion credit line to develop and improve Abadan Oil Refinery," Abbas Kazemi also told Mehr News Agency.

The funding is part of a $3-billion deal with China Petroleum and Chemical Corporation, known as Sinopec, which has reportedly started operations on renovating the Abadan refinery, Iran's century-old refinery that was heavily damaged during the Iran-Iraq war in the 1980s.

China Export and Credit Insurance Corporation, or Sinosure, is a major state-owned export credit insurance. Its financing since its establishment in 2001 has totaled $290 billion worth of exports and investments.

The deal calls for improving the quality of oil byproducts by upgrading the refinery's production process.

"The project is aimed at cutting mazut production and raising the output of petroleum products such as gasoline and diesel that yield higher added-value," Kazemi said.

The venture is expected to be completed in four years, with mazut output to be reduced to less than 20% from over 40% at present.

The NIORDC chief added that China will bankroll 85% of the Abadan refinery project and the remainder will be provided by domestic financers.

The government of President Hassan Rouhani has earmarked $14 billion to recondition and improve some of the biggest Iranian refineries, including in Tehran, Tabriz and Isfahan.

It has also opened negotiations with foreign companies to overhaul Iran's aging refinery industry, as plans call for boosting the country's crude processing capacity from 1.8 million barrels per day to more than 3 million barrels daily.

According to reports, Iran ranks 11th in the world in terms of oil processing capacity. It is the ninth producer of gasoline and 13th diesel producer. However, it tops the list of producers pumping the unwanted and environmental-unfriendly mazut.

East Asian companies have actively sought downstream projects in Iran's emerging petroleum industry after the lifting of international sanctions last year.

Tehran has signed seven agreements with oil and gas companies from China, Japan and South Korea on the construction or development of refineries.

Most notably, South Korea's Daelim publicized a $2-billion deal this month to develop Isfahan Oil Refinery. Japanese engineering giant JGC Corporation is also in advanced talks to upgrade the Tehran refinery, according to the NIORDC chief.