China's Sinosure could provide Naftogaz with $1 bln insurance coverage
National joint-stock company Naftogaz Ukrainy and China Export and Credit Insurance Corporation (Sinosure) have concluded a memorandum of understanding regarding a $1 billion insurance quota for Naftogaz group. This will enable loans and foreign direct investments from China within the said amount.
According to a press release of Naftogaz, this insurance coverage from Sinosure does not require sovereign guarantee, which means that Naftogaz will not rely on Ukraine’s state budget while enabling the group to attract $1 billion in investment into the oil and gas industry.
During the first stage, the insurance coverage provided by Sinosure will be used to borrow about $160 million to fund Ukrgazvydobuvannia's current contracts with Chinese corporations supplying drilling equipment and turnkey drilling services.
At the second stage, another $800 million is planned for additional Naftogaz group projects that will be agreed upon with China in the near future.
Naftogaz said that this memorandum continues the cooperation of Naftogaz group with Sinosure. Thanks to Sinosure's insurance coverage in 2018, Ukrgazvydobuvannia acquired 13 drilling rigs costing nearly $140 million with a five-year payment deferral. The rigs were bought from Honghua International, which is part of China Aerospace Science and Industry Corporation.
Sinosure Corporation is China's state-owned export and credit corporation operating under the OECD model. Risks insured by the corporation totaled about $3.4 trillion as of the end of 2017 while its credit rating is equal to the sovereign rating of China.
Naftogaz Ukrainy unites the largest oil and gas producing enterprises in the country. The holding is a monopolist for transit and storage of natural gas in underground storage facilities, as well as for oil transportation through the country.