Sumitomo Chemical and Saudi Aramco have issued a loan of $2 billion to their joint venture (JV) company Petro Rabigh (Rabigh, Saudi Arabia) after revealing the business faced a shortfall in working capital due to the rapid deterioration in market conditions since the turn of the year.
“The market environment has rapidly deteriorated since the end of last year. Coupled with other factors including periodic shutdown maintenance, Petro Rabigh faced the shortfall of working capital,” Sumitomo says. To cover the shortfall, Sumitomo and Aramco have loaned the cash, with the companies contributing $750 million each, equivalent to their equal 37.5% ownership stakes in the JV, Sumitomo says. “Sumitomo Chemical continues to provide necessary support so that Petro Rabigh can continue stable operation to achieve sustained growth,” it adds.
The remaining 25% of publicly listed Petro Rabigh is owned by Saudi private investors.
Sumitomo and Aramco have also now terminated their financial completion guarantees related to the Petro Rabigh Phase II construction project. The companies had each provided a financial guarantee in 2015 for 50% of the $5.2 billion borrowed to help pay for the $9.1-billion Phase II expansion of the integrated refinery and petrochemicals complex. Petro Rabigh has been making the scheduled debt repayments since June last year, with about $4.6 billion outstanding as of September, Sumitomo says. Petro Rabigh “will continue to repay the balance of the loan out of cash flow generated from its operating activities,” it says.
Petro Rabigh carried out a 60-day maintenance turnaround starting on 1 March, suspending operations at all its production units. It operates a 400,000 b/d oil refinery supplying feedstock to the downstream derivative plants. These include monoethylene glycol (MEG), propylene oxide (PO), high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), and polypropylene (PP). The Phase II expansion added new products including low-density polyethylene (LDPE), ethylene–vinyl acetate (EVA), ethylene-propylene diene monomer (EPDM), thermoplastic olefins, methyl methacrylate (MMA), polymethyl methacrylate (PMMA), nylon-6, phenol, acetone, para-xylene (p-xylene), and benzene.
The Phase II upgrade included raising the existing steam cracker’s capacity to process an additional 30 million cubic feet/year of ethane and 3 million metric tons/year of naphtha feedstock.
In April Petro Rabigh reported a first-quarter net loss of 1.797 billion Saudi riyals ($479.2 million), compared with a net profit of SR257 million in the year-earlier period, on sales down 52% to SR4.062 billion.
By: Mark Thomas
Source: Chemical Week
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