Saudi Aramco and Sumitomo offers Petro Rabigh the new expansion project Rabigh II

Saudi Arabian Oil Co. (Aramco) and Japan’s Sumitomo Chemical Co. have offered their joint venture Rabigh Refining & Petrochemical Co. (Petro Rabigh) to take over the under-construction Rabigh II project to boost the company’s integrated petrochemicals production, the company said in a statement to the Saudi bourse, Tadawul.

The company expects the project to cost SAR 32 billion or $8.5 billion and to come online in 2016. The initial cost of the expansion project was estimated to be $7 billion.

Saudi Aramco, the world’s largest oil company, and Sumitomo each owns a 37.5 percent stake in Rabigh.

The new project includes expanding an existing ethane cracker and building a new aromatics complex that will have a capacity of 1.72 million  tons a year.

Rabigh II will produce ethylene propylene rubber (EPR), thermoplastic polyolefin (TPO), methyl methacrylate (MMA) monomer, polymethyl methacrylate (PMMA) and other products.

PetroRabigh has been facing difficulties as some of its production units were shut down for repair several times last year.

The parent companies agreed last month to market PetroRabigh products overseas.

To shore up its revenue, Petro Rabigh  reached an agreement with its parent companies in December, 2013 under which Aramco had agreed to supply Rabigh with 50 million cubic feet a day of methane gas or its equivalent at domestic market price. Aramco also agreed to cut international marketing fees by a third and to remove commissions to market products of Petro Rabigh in the domestic market.  Under the agreement, Aramco and Sumitomo market Rabigh’s products equally.

Rabigh petrochemical complex has an annual output capacity of 2.4 million tons of petrochemicals and a refinery with a daily capacity of 400,000 barrels of oil.