DUBAI (Reuters) -Saudi Aramco said on Thursday it had completed the acquisition of a 22.5% stake in its refining and petrochemicals joint venture Petro Rabigh from Japan’s Sumitomo Chemical for 2.63 billion riyals ($701.8 million), part of a turnaround plan for the loss-making venture.
The agreement raises Aramco’s stake in Petro Rabigh to about 60% and is part of a drive to improve performance at the joint venture, which has posted significant losses in recent years amid a challenging global market for petrochemicals.
Petro Rabigh last turned a full-year profit in 2021 and has accumulated net losses of 12.4 billion riyals between 2022 and the first half of this year, according to Reuters calculations.
The turnaround plan for Petro Rabigh comes as Aramco, Saudi Arabia’s long-time cash cow, navigates a period of reduced profits due to lower oil prices. The company in August reported a 22% drop in second-quarter profit, and flagged cost-cutting measures across the company as well as its intention to divest non-core assets to unlock capital for higher-return investments.
Petro Rabigh’s turnaround plan also includes the waiver of $1.5 billion in shareholder loans and a future joint capital injection of 5.26 billion riyals, split equally between Aramco and Sumitomo.
“The board welcomes the steps and measures agreed to be taken by Saudi Aramco, which highlight its support, as a substantial shareholder, for the long-term prospects of Petro Rabigh,” the joint venture said in a filing.
The deal reduces Sumitomo’s stake to 15%.
Aramco said the move allowed it to strengthen its downstream value chain, securing the placement of its crude oil and converting more of it into high-value products.
As part of the agreement, Aramco and its affiliates will take over the marketing rights for Petro Rabigh’s products.
(Reporting by Yousef SabaEditing by Mark Potter)
