Aramco signs agreement to own majority stake in Petro Rabigh

Logo of Saudi Aramco

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

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

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Upon completion of the deal, priced at SAR 7 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 deal, which is subject to customary closing conditions including regulatory and third-party approvals, is part of financial measures aimed at strengthening Petro Rabigh’s financial position.

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.

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.

Aramco Senior Vice President of Fuels Hussain AlQahtani said: “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.”

Sumitomo Chemical Senior Managing Executive Officer Seiji Takeuchi said: “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.”