A planned domestic sukuk issue by oil giant Saudi Aramco is likely to be in the region of 3 to 6 billion riyals ($800 million to $1.6 billion), Saudi Arabia-based debt capital market bankers said on Tuesday.

It would be the first sukuk issue by the state entity, which plans to approach the local investor base first and offer US dollar-denominated sukuk to international investors at a later stage, the bankers said, declining to be named because the matter is not yet public.

The sukuk are expected to be issued over the next two to three months, said the sources, adding however that the company and the banks arranging the transaction had not yet issued any official communication on the timeline.

Saudi Aramco declined to comment.

The bond proceeds will be used to finance “new expansion projects”, said a banker familiar with the matter. Early last year, Aramco’s board approved the creation of a programme to issue sukuk, according to the company’s official magazine, Arabian Sun.

The company is considering expanding its oil and gas production facilities at the Berri oilfield, a project which could cost approximately $1.7 billion, sources told Reuters this month.

Among other projects, it is developing with partners a huge ship repair and shipbuilding complex at Ras Al-Khair on the east coast. Officials have said that project will cost over 20 billion riyals.

Alinma Investment, HSBC Saudi Arabia, NCB Capital and Riyad Capital have been appointed lead managers for the planned sukuk issue, said one of the sources.

Saudi Aramco plans to sell up to 5 per cent of its shares in next year in what would be the world’s biggest initial public offer. The international sukuk issue is unlikely to happen before the IPO, the sources said.

“An international bond would require a lot of disclosure in the bond prospectus,” said one of them, adding that domestic bonds would be bought by the local investor base without much questioning.

The Saudi government has suspended its own issues of domestic bonds since last October, reducing pressure on liquidity in the banking system and leaving more room in the local debt market for an issue by Aramco.

After years of reliance on oil income, low oil prices have pushed Gulf Arab governments and companies to issue debt. The Saudi government sold a mammoth debut international bond of $17.5 billion last October and plans to make an international sukuk issue this year, according to several bankers.