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Aramco to acquire majority stake in Petro Rabigh

7 August 2024

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Saudi Aramco has announced signing an agreement with Japan’s Sumitomo Chemical Company to acquire an additional 22.5% stake in Rabigh Refining & Petrochemical Company (Petro Rabigh) in Saudi Arabia.

The transaction, which is subject to regulatory approvals and other third-party approvals, is valued at $702m, Aramco said in a statement on 7 August.

Aramco and Sumitomo Chemical presently own 37.5% shares each in Petro Rabigh, with the remaining 25% shares trading on the Saudi Exchange (Tadawul) since 2008.

Following the completion of the transaction, which is priced at SR7 ($1.86) a share, Aramco will become the majority shareholder in Petro Rabigh, with a 60% stake, and Sumitomo Chemical will retain a 15% stake.

ALSO READ: Petro Rabigh starts operations at carbon capture plant

Petro Rabigh was originally established as a basic topping refinery, with crude oil processing facilities, at Rabigh on the kingdom’s Red Sea coast to the north of Jeddah. However, in 2005, Aramco and Sumitomo Chemical formed an equal joint venture to transform the business into an integrated refinery and petrochemicals complex.

Petro Rabigh phase 1 was launched in 2009 to expand Saudi Arabia’s annual production capacity of refined products and petrochemicals. The Petro Rabigh downstream complex consists of a topping refinery that has a 340,000 barrel-a-day (b/d) crude distillation unit, a 47,000 b/d hydrotreater, a 12 million cubic-feet-a-day (cf/d) hydrogen plant, a 75,000 b/d naphtha merox unit and a 60,000 b/d kerosene merox unit, along with supporting utilities, product tankage and a marine terminal.

The phase 2 expansion project, which was commissioned in 2018, added 15 chemical plants to the Petro Rabigh complex, increasing the facility’s capacity to process an additional 30 million cf/y of ethane and 3 million tonnes a year (t/y) of naphtha.

Expansion of the main existing chemical plant and establishing a clean fuels complex comprising polyether polyols, naphtha treating and sulphur recovery units were also part of the phase 2 project.

Boosting Petro Rabigh financials

The transaction to acquire a majority stake “is part of a package of financial measures intended to reinforce Petro Rabigh’s financial position”, Aramco said in its statement.

Under the terms of the share sale and purchase agreement, all proceeds received by Sumitomo Chemical from the sale will be injected into Petro Rabigh, through a mechanism to be agreed with Petro Rabigh.

Aramco will also provide additional funds to Petro Rabigh, via a mechanism also to be agreed, matching the $702m from Sumitomo Chemical to improve Petro Rabigh’s financial position and support its future strategy, bringing the aggregate injection amount to $1.4bn. 

In addition, Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans of $750m each, which will result in a $1.5bn direct reduction in Petro Rabigh’s liabilities.

“These measures are expected to improve Petro Rabigh’s balance sheet and cash liquidity as part of a remedial plan that Aramco and Sumitomo Chemical intend to explore with Petro Rabigh, which also includes initiatives to upgrade the refinery with the aim of helping improve the profitability of the business,” Aramco said.

“The agreement also aligns with Aramco’s downstream expansion and Sumitomo Chemical’s move away from commodity chemicals toward specialty chemicals,” Aramco added in its statement.

In a separate statement, Aramco said: “In addition to helping improve Petro Rabigh’s financial position, the share transaction is expected to pave the way for discussions around further possible structural investments, in accordance with applicable governance, intended to improve Petro Rabigh’s performance and support its turnaround strategy, with a view to identifying potential opportunities to elevate its financial performance through upgrading its product mix, enhancing its asset reliability and optimising its operations.

“Petro Rabigh is also expected to benefit from greater efficiency achieved through economies of scale.”

ALSO READ: Petro Rabigh awards KBR maintenance contract

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Indrajit Sen

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