Angola's state oil company Sonangol is talking to Chinese financial institutions to secure a $4.8 billion loan to partly finance the construction of a new refinery in the Atlantic sea port of Lobito, it said on Wednesday.

The financing, if completed, will mark the first borrowing by the Southern African oil producer from China since 2017, when it opted to reduce its exposure to resource-backed loans.

The company was engaging with "financial institutions in China" to secure funding for one phase of the $6.2 billion, Sonangol's CEO Sebastiao Gaspar Martins told a news briefing.

"The next phase is estimated at $4.8 billion, and we are contacting Chinese institutions with the support of the contractor, who is also Chinese, in order to obtain this financing," he said.

Martins did not say which financial institutions Sonangol was talking to but the finance ministry said last month the loan could come from China Development Bank, without providing more details.

A team from Sonangol will visit Beijing for meetings with Chinese financial institutions in April. The terms of the financing do not envisage the use of oil as collateral, the company said.

Angola's government says the refinery is a "strategic" project, and it is expected to start producing refined petroleum products in December next year.

CHINESE LENDING TO AFRICA HAS FALLEN

Although China was the leading source of credit for African economies in the run-up to 2019, it subsequently started to turn off the cash tap and that trend was accelerated by the COVID pandemic the following year.

The drying up of Chinese funding left projects incomplete, such as a modern railway line in Kenya.

Debt repayments to China by African nations in recent years have outstripped the amount the region gets in new loans, a study by ONE Data, an independent initiative, found last month.

The government in Beijing has defended its partnership with African nations, saying it stands by the continent in all areas including investments and trade.

Angola's shift away from oil-backed loans from China was also informed by a more challenging external environment that has seen volatility in commodity prices, higher interest rates and changing risk perceptions.

The country's stock of oil-backed debt to China fell by almost a quarter to $7.73 billion last year, data from the finance ministry showed, from $10.146 billion at the end of 2024.

(Reuters)