Saudi Arabia’s PetroRabigh expects its revenues to rise by almost 1 billion riyals ($267 million) this year after its parent companies agreed to cut international marketing fees by a third, it said on Sunday.
The petrochemical company is a joint venture between oil giant Saudi Aramco and Sumitomo Chemical, which market PetroRabigh’s production.
“Saudi Aramco and Sumitomo Chemical…are committed to reducing the marketing commission of all petrochemicals products of PetroRabigh by around a third of current levels and commissions to market petroleum products of PetroRabigh in the domestic market have been cancelled,” PetroRabigh said.
The start of the five-year agreement will be backdated to April 1, 2013 and the deal will have a positive impact on the company’s revenues by around 1 billion riyals this year, increasing to 1.3 billion riyals annually in subsequent years based on current price expectations and production levels, the company said.
PetroRabigh’s earnings have been hit hard this year by maintenance at some of its facilities, pressure on profit margins, power cuts and an outage of its ethane cracker due to a water leak. For the first nine months of this year, it reported a net loss of 880.7 million riyals against a net profit of 420.8 million riyals a year earlier.
In the second quarter of 2013, its sales totalled 14.20 billion riyals, according to its website.
Under the new deal, the two parent companies will market PetroRabigh’s products equally, the company said. Previously, Saudi Aramco marketed refined products for PetroRabigh while Sumitomo Chemical handled chemicals.
As part of the deal, Saudi Aramco also agreed to supply PetroRabigh with 50 million cubic feet a day of gas or its equivalent at current domestic Saudi prices.
PetroRabigh has annual output capacity of 18 million tonnes of refined products and 2.4 million tonnes of petrochemicals. Sumitomo’s president said in November that he expected to obtain project finance approval in the first half of 2014 for a $7 billion expansion of the facility.