Aramco and Dow Amend Sadara Agreement
Saudi Aramco and Dow have amended the shareholders agreement for their Sadara Chemical joint venture with the partners taking on direct responsibility for marketing their shares of the output.
Located at Jubail Industrial City II in Saudi Arabia, the Sadara complex consists of 26 manufacturing units that produce more than 3 million t/y of chemicals and plastics. Currently, Sadara markets its products within a geographically restricted region, while Dow and its subsidiaries market the remainder of the output elsewhere in the world.
Beginning in mid-2021, Dow and Aramco – or their subsidiaries – will market the finished products produced by Sadara in line with their equity ownerships. Aramco owns 65% of Sadara with Dow owning the remainder. Sadara will cease marketing activities and will instead pay marketing fees to Aramco and Dow under related agreements.
In a separate announcement, SABIC said it will start marketing Aramco’s allocation with effect from Jul. 1. Aramco acquired a 70% stake in SABIC in June last year.
By marketing Aramco’s share of Sadara’s products, SABIC expects to “drive further supply chain efficiencies, strengthen its brand and combined product and services offering, and help to maintain competitive preference in the global chemicals industry,” it said.
The transition of marketing rights, which will gradually increase over the next five years, is part of shareholders’ actions to improve Sadara’s operating results. Actions also include the finalization of a debt restructuring agreement that has been better aligned to match Sadara’s expected future cash flow generation. Key aspects of the agreement include a debt maturity extension from 2029 to 2038 and a principal grace period until June 2026.
Sadara will also benefit from longer-term structural operating and feedstock improvements, further enhancing its crackers’ flexibility and improving the company’s position on the global cost curve, the partners said.
In August 2017, Dow signed a non-binding Memorandum of Understanding with Aramco that initiated a process for Dow to buy an additional 15% stake in Sadara. The proposal never went any farther. In fact, a month later, Dow completed a merger with DuPont, forming DowDuPont, before restructuring and splitting into three separate companies: Dow, DuPont and agricultural business Corteva.
Author: Elaine Burridge, Freelance Journalist
