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Aramco May Have To Buy Out $1 Billion Refinery Partner

Saudi Aramco may have to buy out its 30-percent partner in Saudi Aramco Base Oil Co, Jadwa Investment Co., as the latter is seeking to exit the venture, sources close to the matter told Bloomberg. Alternatively, the state Saudi oil company might try to find another partner for the refining business.

Jadwa Investment is a Riyadh-based private equity company, and its interest in the refining business, commonly known as Luberef, could be worth about US$1 billion, the sources said. The company bought the 30 percent in the refinery operator from Exxon ten years ago.

Still, no final decision has been made yet and Jadwa Investment may keep its stake. At the same time, there are reports that the private equity firm is looking to sell its Global Environmental Management Services business for up to US$500 million.

Luberef’s refineries have an annual capacity of 500,000-600,000 metric tons of oil lubricants, which is set to double after an expansion at one of the refineries, in Yanbu. The expansion should be completed by the fourth quarter of this year and will expand the capacity of the facility from 300,000 tons at the moment to 900,000 tons of base oil.

Luberef’s production is shipped to the Middle East, India, other Asian countries, and Europe, with the bulk going to Saudi Arabia’s neighbors in the Middle East and to India.

The price of the Yanbu refinery expansion, according to the president of the company, Salahaddin Dardeer, is about US$1 billion, the same as the value of Jadwa’s stake in it.

Jadwa Investment recently reported a 17-percent increase in revenues for 2016 on an annual basis, to US$77.5 million (290.37 million riyals), and an equal rise in profits, to US$29.27 million (109.78 million riyals). The firm’s chief executive commented that Jadwa also hit a record-high in the amount of assets under management in 2016, despite the challenging market environment brought on by the oil price crash.

By Irina Slav for Oilprice.com

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