SABIC buys half of Japanese consortium’s stake in large methanol JV

December 5, 2018

SABIC today [Tuesday] announced a new structure to its Saudi Arabia Methanol Co. joint venture, also known as Ar-Razi. Ar-Razi until now has been equally owned by SABIC and the Japan Saudi Methanol Co. (JSMC), a Japanese group led by Mitsubishi Gas Chemical (MGC).

SABIC says that in an agreement signed on 4 December, it will buy 50% of the Japanese consortium’s share in Ar-Razi for $150 million, raising SABIC’s stake to 75%. The current JV agreement expired on 29 November and, under the terms of the original agreement, SABIC had a call option on JSMC’s Ar-Razi shares.

SABIC and JSMC have agreed a new structure for Ar-Razi, under which JSMC is obliged to pay SABIC $1.35 billion in order to continue as a 25% partner for the next 20 years. SABIC says it will use some or all of the proceeds to finance the refurbishment or replacement of Ar-Razi’s existing methanol plants. SABIC will also become an equal co-owner in a new, more efficient methanol production technology that has yet to be commercialized. The transaction is expected to be completed in 2019, subject to regulatory approvals.

JSMC has the right at any time prior to 31 March 2019 to sell its remaining 25% stake in Ar-Razi to SABIC for $150 million, which would make Ar-Razi a wholly-owned SABIC subsidiary. Ar-Razi operates five methanol plants at Jubail with a combined capacity of 4.85 million metric tons/year, according to IHS Markit data.

Ar-Razi was one of the first JVs entered into by SABIC and foreign partners. It was formed in 1971 with the Japanese consortium. SABIC recently bought Shell out of Sadaf, another long-standing JV that produces ethylene, styrene, caustic soda, ethylene dichloride, and methyl tert-butyl ether. Sadaf is now wholly owned by SABIC.

By Natasha Alperowicz

Source: Chemical Week