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.