Petro Rabigh’s turnaround hinges on Aramco’s support

Saudi Aramco and Japanese company Sumitomo Chemical will inject new funds into Rabigh Refining and Petrochemical Company (Petro Rabigh), as well as waive loans, in a bid to support the Saudi refinery’s turnaround strategy.

As part of its plan to strengthen Petro Rabigh’s financial position, Aramco will acquire a 22.5 percent stake in the company from Sumitomo Chemical for $702 million.

Each company currently owns 37.5 percent of Petro Rabigh’s shares listed on the Saudi Exchange in 2008.

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On completion of the transaction, Aramco will become Petro Rabigh’s largest shareholder, with a 60 percent equity stake. Sumitomo Chemical will retain a 15 percent equity stake.  

Under the agreement, Sumitomo Chemical will invest all the proceeds from its stake into Petro Rabigh.

Aramco will also provide additional funds to Petro Rabigh, matching the $702 million from Sumitomo Chemical to improve Petro Rabigh’s financial position and support future strategy.

The combined funding will reach $1.4 billion. 

In addition, Aramco and Sumitomo Chemical agreed to phased loan waivers of $750 million each, resulting in a $1.5 billion 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, which includes initiatives to upgrade the refinery. 

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“By increasing our shareholding, we expect to achieve even closer integration with Petro Rabigh and facilitate its turnaround strategy,” said Hussain Al Qahtani, senior vice president of fuels, Aramco.

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, Seiji Takeuchi, senior managing executive officer, Sumitomo Chemical, said.

He added that the two companies have identified an appropriate framework to facilitate Petro Rabigh’s future plans

Petro Rabigh narrowed its loss to SAR 1.1 billion ($293 million) in the second quarter of 2024 from SAR1.19 billion a year ago. H1 losses widened to SAR2.5 billion.

Revenues fell 6 percent and 17 percent respectively in the second quarter and first half of 2024.