Aramco Acquires 22.5% Stake in Petro Rabigh

Saudi Aramco has signed an agreement to acquire an additional stake of approximately 22.5% in Rabigh Refining and Petrochemical Co (Petro Rabigh), which is located on the western coast of the Kingdom, from Sumitomo Chemical Co for $702 million.

This agreement is in line with Saudi Aramco’s efforts to expand in the refining, chemicals, and marketing segments, and Sumitomo Chemical’s move towards specialty chemicals rather than commodity chemicals.

Sumitomo Chemical, headquartered in Tokyo, currently owns about 37.5% of Petro Rabigh’s shares, which are listed on the Saudi main Exchange (Tadawul) since 2008.

Upon completion of the deal, priced at $1.86 per share, Saudi Aramco will become the majority shareholder in Petro Rabigh, with nearly 60% stake. In comparison, Sumitomo Chemical will own 15% of Petro Rabigh’s capital.

The acquisition, which is subject to customary closing conditions including regulatory and third-party approvals, is part of the financial measures aimed at strengthening Petro Rabigh’s financial position, the company said.

Accordingly, Sumitomo Chemical will pump all proceeds from the sale of shares, amounting to $702 million, into Petro Rabigh through an agreed mechanism between the two parties.

In addition, Saudi Aramco will also pump a similar additional amount into Petro Rabigh through an agreed mechanism between the two parties, to improve Petro Rabigh’s financial position and support its future strategy, bringing the total amount to $1.4 billion.

Saudi Aramco and Sumitomo Chemical agreed to gradually forgive Petro Rabigh’s revolving shareholder loans, amounting to $750 million each, which will result in a direct reduction of $1.5 billion in Petro Rabigh’s liabilities.

These measures are expected to improve Petro Rabigh’s cash liquidity and financial position, as part of a corrective plan that Saudi Aramco and Sumitomo Chemical intend to discuss with Petro Rabigh. The plan also includes initiatives aimed at developing the refinery.

Closer Integration

Aramco Senior Vice President of Fuels Hussain AlQahtani said that Aramco continues to identify opportunities to strengthen its downstream value chain, secure placement of its upstream crude oil with affiliated refineries and convert more of its hydrocarbons into high-value materials.

“By increasing our shareholding, we expect to achieve even closer integration with Petro Rabigh and facilitate its turnaround strategy. We look forward to building on our existing relationship with Petro Rabigh, in alignment with our strategic goals,” AlQahtani added.

Sumitomo Chemical Senior Managing Executive Officer Seiji Takeuchi said that amid the evolving business landscape in both the refining and petrochemical sectors, Aramco and Sumitomo Chemical have considered options to find an appropriate turnaround strategy for Petro Rabigh and identify an appropriate framework to facilitate Petro Rabigh’s plans.

We believe this transaction, which aligns with the strategic directions Aramco and Sumitomo Chemical are respectively pursuing, will significantly enhance Petro Rabigh’s financial position, Takeuchi said.

Petro Rabigh welcomed the steps announced by Saudi Aramco and Sumitomo, which echoed both companies’ commitment -as key shareholders and creditors- to the company’s long-term prospects.

The announcement by both companies will significantly compliment the measures and initiatives highlighted by Petro Rabigh when the accumulated losses reached 35% of capital. Petro Rabigh will disclose the impact of the announced transaction and its turnaround strategy as appropriate.