FINANCING OFFSHORE PROJECTS

Abstract

Project financing is entering a new phase with the forthcoming petroleum developments in difficult areas such as Papua New Guinea.

Added to the usual project financing risks, such as oil price, reserves and completion considerations, are new risks associated with the country. These are collectively termed 'political risk', and encompass expropriation, wars and currency controls.

Four ways of mitigating political risk are individual banks increasing country limits, developer self- insurance, political risk insurance and the use of export credit finance. None of the above is a single solution, but all can be used in solving the problems associated with political risk.