SABIC increases stake in Ar-Razi to 75%, renews partnership with JSMC for 20 years

SABIC signed an agreement with Japan Saudi Arabia Methanol Company (JSMC), renewing the partnership in Saudi Methanol Company (Ar-Razi) for another 20 years.

Ar-Razi was established on 24 November 1979, as a 50/50 joint venture between SABIC and JSMC with the aim of developing, establishing, owning and operating a methanol complex.
Ar-Razi was established on 24 November 1979, as a 50/50 joint venture between SABIC and JSMC with the aim of developing, establishing, owning and operating a methanol complex.

The agreement comes after a long and fruitful partnership between the two companies, marked by the successful transfer of technology from the Japanese side. It demonstrates SABIC’s strategy to strengthen relationships with its global partners and reflects its leading position in the petrochemicals industry, including methanol production.

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 2018.

As per the new agreement, JSMC will pay more than $1.33bn to SABIC for renewing the joint venture 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, highly efficient methanol production technology, which will be commercialised. JSMC has the right to sell its remaining 25% stake in Ar-Razi to SABIC for more than $150mn 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.

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