Aramco, a prominent global integrated energy and chemicals corporation, has finalized an agreement to purchase an additional stake of about 22.5% in Rabigh Refining and Petrochemical Co. ("Petro Rabigh"), the refining and petrochemical complex situated on the west coast of Saudi Arabia, from Sumitomo Chemical for $702 million.

Source: Aramco

Currently, Aramco and Sumitomo Chemical, based in Tokyo, each hold 37.5% of shares in Petro Rabigh, a company that went public on the Saudi Exchange in 2008. After the transaction, priced at SAR7 per share, Aramco will become the major shareholder of Petro Rabigh with a 60% equity stake, while Sumitomo Chemical will retain 15%. The completion of the deal, contingent on standard closing conditions and necessary approvals, is part of financial actions to fortify Petro Rabigh's financial standing.

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.

As per the terms of the agreement, Sumitomo Chemical will inject all proceeds from the sale into Petro Rabigh, following an agreed-upon mechanism. Additionally, Aramco will provide matching funds of $702 million to bolster Petro Rabigh's financial standing and strategy, totaling an injection of US$1.4 billion.

Furthermore, Aramco and Sumitomo Chemical have arranged a phased waiver of $750 million in shareholder loans each, which will lead to a direct $1.5 billion reduction in Petro Rabigh's liabilities.

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 future 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.

These actions are set to enhance Petro Rabigh's financial position and liquidity, forming part of a corrective plan that Aramco and Sumitomo Chemical plan to implement with Petro Rabigh. The plan includes upgrading the refinery to boost business profitability. This agreement also aligns with Aramco's downstream expansion and Sumitomo Chemical's shift from commodity chemicals to specialized chemicals.