State-owned Saudi Aramco and France's Total will launch a $1 billion Islamic bond, or sukuk, in the fourth quarter, for their joint venture in the kingdom, a banker at a lead arranger said on Monday.

The sukuk is related to the financing of a venture between the oil majors to build a 400,000 barrels per day (bpd) crude refinery in Jubail, on the Gulf coast.

'The long delayed $1 billion sukuk, which was part of the financing for the Jubail refinery, will launch in the fourth quarter,' Simon Eedle, global head of Islamic banking at Credit Agricole, said at a conference.

Credit Agricole, Deutsche Bank and Samba Financial Group are the lead arrangers for the sukuk.

The Jubail refinery, 62.5 per cent owned by Saudi Aramco and 37.5 per cent by Total, is scheduled to begin operating in 2013, and is among the new plants planned by Saudi Arabia, the world's top oil exporter, as it looks to boost domestic refining capacity.

Last year, it was estimated that the Jubail refinery could cost more than $12 billion and funding for the project may include an Islamic bond portion to meet demand from Saudi investors.

In June, Saudi Aramco and Total said they had completed an $8.5 billion financing for the refinery from multiple sources.

$10 billion in issuances seen

Simon Eedle, head of Credit Agricole’s Islamic finance unit, said that the larger Gulf sukuk market will likely see at least $10 billion in issuances, led by financials, in the next six months.

He said most issuances will come from high credit-quality markets such as Abu Dhabi, Qatar and Saudi Arabia.

'We know that there are plenty of deals mandated in the region and deals to be won,' he said.

Eedle added that the time is also right for sukuk issuances outside of the Gulf region and he expects more investment money from the West to tap the Islamic finance market in 2011. – Reuters