- Region: The Middle East
- Manufacturing and Services
- Overseas Investment Loans
- Project Finance
March 3, 2006
- Japan Bank for International Cooperation (JBIC; Governor: Kyosuke Shinozawa) signed a loan agreement on March 2 (GMT) totaling US$2.5 billion with Rabigh Refining and Petrochemical Company (PETRORabigh) for the Rabigh Oil Refinery and Petrochemical Project, one of the world's largest integrated oil refinery and petrochemical projects undertaken in Rabigh on the country's west coast. This loan is the first loan JBIC has provided in project financing to Saudi Arabia.*1
- Under the project PETRORabigh, set up by Sumitomo Chemical Co., Ltd. (Sumitomo Chemical) and Saudi Arabian Oil Company (Saudi Aramco),*2 the world's largest oil company, and in which both companies have an equal equity stake, will acquire and upgrade the existing refinery owned by Saudi Aramco and produce refined petroleum products such as gasoline. At the same time, the newly constructed petrochemical plant will produce polyethylene and other petrochemical products.*3
- Saudi Arabia is Japan's main crude oil import source country, and accounts for more than one quarter of the total crude oil imports to Japan. As Japan's official financial institution, JBIC supports this joint venture project between Saudi Aramco, Saudi Arabia's state-owned oil company, and a Japanese company. This will also help diversify the country's petrochemical industry which is in line with the national policy, while generating employment and foreign currency earnings. The project will therefore serve to further deepen bilateral relations between Japan and Saudi Arabia based on mutual understanding.
- JBIC also supports global business development of Japan's diversified chemical industry with this project. In return for providing accumulated technology and knowhow, the industry has been seeking to increase profitability by locating their plants close to where resources and raw materials are and thereby take advantage of low-cost competitiveness and scale merit. JBIC's support will contribute toward ensuring international competitiveness for the Japanese chemical industry amid surging crude oil prices.
- Furthermore, as Japan's official financial institution, JBIC's support for this project will serve as an advantage in negotiations with the Saudi Arabian government and government agencies for mitigating the political risk events. Japanese financial institutions and Sumitomo Chemical have high expectations in this regard. JBIC is committed to promoting the Japanese economy to secure strategic natural resources and maintain international competitiveness through efficient project structuring and risk-taking by making the most of its capacity as Japan's official financial institution.
- *1 Project financing is a lending scheme usually secured on cash flows generated by the project.
- *2 Saudi Aramco is an oil company wholly owned by the Saudi Arabian government. It boasts of the world's largest proven oil reserves and crude oil production.
- *3 The plant is expected to produce petrochemical products, such as 1.3 million tons of ethylene and 900 thousand tons of propylene annually and, as derivatives it will produce 900 thousand tons of polyethylene, 700 thousand tons of polypropylene and 600 thousand tons of ethylene glycol.