Aramco, the world’s largest integrated oil and gas company, has signed a definitive agreement to acquire an additional stake of around 22.5 percent in Saudi Arabia’s Petro Rabigh from Sumitomo Chemical for $702 million.
Aramco and Tokyo’s Sumitomo Chemical currently own 37.5 percent shares each in Petro Rabigh. Upon completion of the transaction, which is priced at SAR7 per share, Aramco will become Petro Rabigh’s largest shareholder with an equity stake of around 60 percent. Meanwhile, Sumitomo Chemical will retain an equity stake of 15 percent. The transaction is also part of a package of financial measures that aim to reinforce Petro Rabigh’s financial position.
“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,” stated Hussain A. Al Qahtani, Aramco Senior Vice President of Fuels.
Improving Petro Rabigh’s financial position
Under the terms of the share sale and purchase agreement, Sumitomo Chemical will inject all sales proceeds into Petro Rabigh. Aramco will also provide an additional $702 million to Petro Rabigh, matching Sumitomo Chemical’s proceeds to improve Petro Rabigh’s financial position and support its future strategy, bringing the aggregate injection amount to $1.4 billion.
In addition, Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans of $750 million each. This will result in a $1.5 billion direct reduction in Petro Rabigh’s liabilities.
“By increasing our shareholding, we expect to achieve even closer integration with Petro Rabigh and facilitate its turnaround strategy,” added Al Qahtani.
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Refinery upgrades
These measures aim to improve Petro Rabigh’s balance sheet and cash liquidity as part of a remedial plan that Aramco and Sumitomo Chemical intend to explore. The plan also includes initiatives to upgrade the refinery to help improve profitability.
“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 future plans,” stated Seiji Takeuchi, Sumitomo Chemical Senior Managing Executive Officer.
Aramco’s agreement also aligns with its downstream expansion and Sumitomo Chemical’s move away from commodity chemicals toward specialty chemicals.
“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 added.
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