The main facilities at the Rabigh Oil Refinery and Petrochemical Complex in Saudi Arabia, one of the world's largest such plants, went into operation in April 2009. Rabigh Refining and Petrochemical Company (Petro Rabigh) developed and constructed the facility. Sumitomo Chemical Co., Ltd., and the world's largest petroleum company, Saudi Aramco, have equal equity stakes in Petro Rabigh, and JBIC is providing support through project financing.

Two Superlatives: First and Largest

In May 2004, the front pages of Japanese newspapers featured headlines like this: "Sumitomo Chemical to Invest Hundreds of Billions of Yen in One of the World's Biggest Oil Refinery and Petrochemical Complexes in Saudi Arabia." Soon thereafter, JBIC received a request from Sumitomo Chemical for project financing for the oil refinery and petrochemical project planned for Rabigh on the west coast of Saudi Arabia.

Naoki Tamaki at JBIC recalls, "The project included development of one of the world's largest petroleum facilities, capable of refining 400,000 barrels of crude oil per day. It became JBIC's largest project financing scheme, and its first in Saudi Arabia. As soon as we received Sumitomo Chemical's request we began gathering information on the circumstances surrounding the proposed project."

Saudi Arabia is important for Japan, supplying 30% of its crude oil imports. Its national project envisioned establishing a petroleum complex that would send crude oil extracted from the Persian Gulf off the country's east coast via pipeline to the Red Sea in the west. One key part of the project was the plant. The venture was the first petrochemical-related project for Saudi Aramco.

Project Spurs Greater JBIC-Saudi Interaction

JBIC then began looking into financing measures. At the negotiation table were Saudi Aramco, Sumitomo Chemical and Japanese banks acting as financial advisors.

Tamaki says, "Under project financing, the borrower pays back the loan using profits from the project. The proposed project was especially promising because of its high cost-competitive nature--Saudi Aramco was willing to price its supply of resources quite reasonably. The challenge was to secure the credit guarantees. Rather than conduct the preliminary investigation solely on our own, we dispatched outside specialists as well, to assist us in a detailed risk assessment. This helped us develop a reliable security package."

Naoki Tamaki Advisor, Europe, Middle East and Africa Finance Department, JBIC

Finalization of the financing conditions came after tough negotiations that included lawyers, in London, Dubai and Tokyo, and in Dhahran in Saudi Arabia where Saudi Aramco's headquarters are located.

These steps led to final approval of the huge project, and to JBIC's signing a loan agreement with Petro Rabigh in March 2006. In the spring of 2007, then-Japanese Prime Minister Shinzo Abe visited Gulf countries, where he stated Japan's intention to establish multifaceted relationships with oil producing countries that would involve more than just crude oil purchases. The Rabigh plant project took the lead in representing this new direction.

Tamaki concludes, "Thanks to the financing project, JBIC was able to establish solid teamwork with the Public Investment Fund of Saudi Arabia (PIF), and with the Islamic Development Bank (IDB). This gave us an opportunity to broaden our experience with the Islamic finance system. Saudi Aramco was attracted to the advantages of the project financing scheme, which had been judged by international financial institutions to be commercially viable. The company established a project finance department within its organization, and sent staff to take training courses at JBIC."

Infrastructure at the Rabigh plant is now operating almost as originally planned. Petro Rabigh intends to expand its operations, and neighboring countries are regarding the project with much interest. JBIC will continue supporting such long-term development projects promoted by Japanese corporations overseas.

The Rabigh Oil Refinery and Petrochemical Complex

Sumitomo Chemical Co., Ltd., and Saudi Aramco have equal equity stakes in Petro Rabigh, which rehabilitated and upgraded an oil refinery that was established in the 1980s in the Rabigh region on Saudi Arabia's west coast, and constructed a new oil refinery and petrochemical complex. The total cost of the project was US$9.8 billion dollars (approx. 1 trillion yen). To support the project, in March 2006 JBIC signed a loan agreement providing for cofinancing with 17 financial institutions, including the PIF, the IDB, and Japanese banks. The agreement provides for a maximum total of US$2.5 billion.