Chinese export credit agency Sinosure has opened a $1.3 billion line of credit for the upgrade of an Iranian oil refinery.
The money will fund the development of Abadan Oil Refinery, Iran’s oldest, and the borrower is the National Iranian Oil Refining and Distribution Company (NIORDC).
The aim of the renovation is to improve the quality of Iran’s oil exports.
Abbas Kazemi, the CEO of NIORDC, says that when work is projected to finish in four years, 20% of Abadan’s produce will be mazut, a heavy, low-quality fuel oil often used to make diesel.
Currently, mazut accounts for 40% of produce.
Iran as a whole requires investment of $14 billion in order to replicate this process across its ageing refineries.
The country was effectively banned from international credit markets for much of the past 10 years, owing to U.S. and EU-led sanctions.
As a result, its energy infrastructure is crumbling.
The country’s energy utility has signed a number of agreements with Asian firms with a view to upgrading, including the Korean engineering firm Daelim and JGC Corporation, a Japanese energy giant.
Iran’s oil industry has been coming back online since the sanctions began to be repealed a year ago.
The oil minister Bijan Namdar Zanganeh estimates that in the fiscal year to March 2017, the country will earn $41 billion from oil revenues.
That is a big increase on the $25 billion in the previous fiscal year, with the rising oil price and OPEC’s pledge to cut production helping to bolster Tehran’s coffers.
As part of the OPEC deal in October 2016, Iran was the only country allowed to increase its oil production, given the fact that it had only recently been permitted re-admission to international markets.
Despite the easing of sanctions, there was still reluctance from U.S. firms to handle Iranian goods, due to the often complex detail of international trade policy.
However, Reuters have this week reported that global shipping insurers have found a way to offer almost full coverage for Iranian oil exports from February.
By not involving any U.S.-domiciled reinsurers, policies can be issued without any confusion.
It remains to be seen whether the U.S. will continue along the program of sanctions relaxation under a Trump presidency.
The incoming U.S. leader often used bellicose rhetoric when speaking of Iran on the campaign trail, and this has continued since his election victory in November.
The terms of the Sinosure loan have not been disclosed.