The Japan Bank for International Cooperation (JBIC) has signed a loan agreement totalling US$2.5bn with Rabigh Refining and Petrochemical Company (PetroRabigh) for the Rabigh Oil Refinery and Petrochemical Project.

Based in Rabigh, on Saudi Arabia’s west coast, this is one of the world’s largest integrated oil refinery and petrochemical projects. This is the first project finance loan that JBIC has provided to Saudi Arabia.

PetroRabigh, set up by Japan’s Sumitomo Chemical and the Saudi Arabian Oil Company (Saudi Aramco) and in which both have an equal equity stake, will acquire and upgrade the existing Saudi Aramco refinery and produce refined petroleum products such as gasoline. A newly constructed petrochemical plant will produce polyethylene and other petrochemical products.

Saudi Arabia is Japan’s main crude oil import source country, accounting for more than a quarter of the total crude oil imports to Japan. The project will help diversify the Saudi petrochemical industry, while generating employment and foreign currency earnings. It aims to strengthen bilateral relations between Japan and Saudi Arabia based on mutual understanding.

JBIC is also promoting the global business development of Japan’s diversified chemical industry with this project. In return for providing accumulated technology, the industry is seeking to increase profitability by locating plants close to resources and raw materials. JBIC’s support will help to ensure international competitiveness for the Japanese chemical industry amid surging crude oil prices.

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 political risk.