Saudi Aramco and Sumitomo at variance over IPO

07-Mar-06

State-owned oil giant Saudi Aramco wishes to float 25-30% stake in the US$9.8 bln Petrorabigh complex this year, but faces resistance from Japanese partner Sumitomo Chemicals, that believes an IPO of their joint project will be premature. Earlier this year, Aramco had expressed that the joint venture would float a 25-30% stake once the complex started operations in 2008. However, rising material and construction costs have more than doubled the project's cost from an initial estimate of US$4.3 billion, and an early float could help offset rising project costs. Petrorabigh has secured $5.8 billion in financing deals with Japan Bank for International Cooperation (JBIC), Public Investment Fund of Saudi Arabia (PIF) and 17 financial institutions. Sumitomo and Aramco agreed in May last year to develop the petrochemical complex through a 50-50 joint venture that would upgrade a refinery at Rabigh on the Red Sea. Under the pact, Saudi Aramco will supply the project with 400,000 bpd of crude, 95 million cubic feet a day of ethane and about 15,000 bpd of butane. The new complex will produce 18.4 million ton of oil products, 1.3 million tons of ethylene and 900,000 tons of propylene a year.