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Islamic finance makes headway in the energy sector

Sharia-compliant financing structures are becoming increasingly prominent in oil and gas transactions, explains James Gavin

AFTER a lengthy gestation period and a few false starts, Islamic financial instruments are set to play a growing role in energy finance – in the Muslim world and beyond. Sharia-compliant instruments, traditionally confined to the retail banking market, have broken out of that niche over the past five years, migrating towards infrastructure sectors including energy.

Islamically structured tranches in Middle Eastern project-finance deals are now commonplace. The use of Islamic project financing in the energy sector took a big step forwards with the $3.45bn Dolphin Energy project financing, in September 2005. This included a $1bn Islamic tranche to fund construction of a 370 km pipeline delivering Qatari natural gas to the United Arab Emirates (UAE).

Signed between Dolphin Energy and 14 financing institutions, it was the oil and gas sector's largest Sharia-compliant deal, organised ...Click here to continue reading Islamic finance makes headway in the energy sector