SABIC has signed an agreement with the Japan Saudi Arabia Methanol Co. (JSMC) today, renewing the partnership in the Saudi Methanol Co. (Ar-Razi) for another 20 years.
Under the agreement, SABIC will raise its stake in Ar-Razi to 75% by purchasing 50% of JSMC share – that is, 25% of all Ar-Razi shares – reducing JSMC’s shareholding in Ar-Razi to 25%.
Under the previous arrangement, SABIC had the right to buy the 50% share held by JSMC in Ar-Razi on the agreement’s expiry – which was on 29 November.
As per the new agreement, JSMC will pay more than SR5 billion to SABIC for renewing the joint venture (JV) partnership, which SABIC will use, in part or whole, to refurbish Ar-Razi’s existing methanol plants or set up new ones.
Under the agreement, SABIC will become an equal co-owner with JSMC in a new methanol production technology, which will be commercialised.
JSMC has the right to sell its remaining 25 percent stake in Ar-Razi to SABIC for more than SR562 million before the end of March 2019, in the event of which Ar-Razi will become wholly owned by SABIC.
The financial impact of the partnership renewal is expected to be seen with the completion of the transaction next year.
Ar-Razi was established on 24 November 1979, as a 50/50 JV between SABIC and JSMC with the aim of developing, establishing, owning and operating a methanol complex.