Saudi Basic Industries Corporation (SABIC) signed on Wednesday an agreement to extend its joint venture with the Japan Saudi Arabia Methanol Company (JSMC), renewing its partnership with the Saudi Methanol Company (Ar-Razi) for another 20 years.
Under the agreement, SABIC will raise its stake in Ar-Razi to 75 percent by buying half of JSMC’s share in the company – which makes up 25 percent of all Ar-Razi shares.
The previous agreement, which expired on November 29, 2018, gave SABIC the right to buy JSMC’s share in Ar-Razi after the end of the partnership contract.
The agreement stipulates that the Japanese company will pay more than five billion Saudi riyals ($1.3 billion) to SABIC for the extension of the partnership.
SABIC, for its part, will use this amount or part of it to maintain and upgrade the operational efficiency of existing Ar-Razi plants or to build a new plant.
It will become an equal co-owner in a new more efficient methanol production technology to be commercialized.
JSMC is also entitled to sell its remaining 25 percent stake in Ar-Razi to SABIC, worth more than SR562 million ($149.8 million) before the end of March. If this happens, it will become all owned by SABIC.
Subject to regulatory approvals, the transaction is expected to be completed in 2019 where the financial impact will start, SABIC said, adding that it will announce that accordingly.
Notably, Ar-Razi was established in November 24, 1979, jointly by SABIC and JSMC. It is focused on the development, establishment, ownership and operation of a methanol complex.
