State-owned Oman Oil Refineries and Petrochemical Companies (Orpic) is in talks with two local banks to raise $2.5 billion to expand its Sohar refinery and refinance a previous loan, a government official said on Monday.

"We are talking to National Bank of Oman and HSBC Oman to raise a $2.5 billion loan to extend the Sohar refinery and refinance," a government official involved in the project said.

The banks declined to comment.

The official said $1.5 billion of any loan agreed would be used to upgrade a crude oil processing unit at Sohar refinery to produce 180,000 barrels per day (bpd) from the current 116,000 bpd. The remaining $1 billion would refinance an old loan taken out in 2007 for a previous expansion of the refinery.

Oman has another refinery in the capital Muscat that produces 106,000 bpd and plans to build another refinery at the central eastern town of Duqm. – Reuters