The next frontier: project sukuk

Although the sukuk market can be considered to be in its infancy, one area that has been largely untapped, especially in the MENA region, is the issuance of project sukuk. To date, there has only been one regional issuance, that of the SAR 3.75 billion (USD 1 billion) SATORP sukuk in September 2011 to partly finance the USD 14 billion Jubail refinery project. The issuance was over-subscribed almost 3.5 times.

Another interesting facet of the SATORP sukuk was its 14-year tenor, which is in the typical range of project finance transactions. However, this tenor is longer than those of recently issued sukuk, which usually tend to be between five and seven years. Although it can be argued that investors found the 14-year tenor acceptable because it is a "project finance" sukuk, it also signals growing investor confidence and comfort in longer tenor sukuk.