Market Updates

Japan Saudi Methanol Partners with SABIC

March, 2019

Japan Saudi Methanol Co. (JSMC) is a subsidiary of Mitsubishi Gas Chemical, which is headquartered in Japan, announced its continued partnership with SABIC in Saudi Methanol Co (Ar Razi). The duration of the partnership is 20 years. In December, SABIC announced about buying 50% stakes of Japan Saudi Methanol Co. for $150 million, which will increase SABIC’s stake to 75%.

According to the new arrangements, JSMC has to pay $1,350 million to SABIC for continued partnership. Further, JSMC has agreed for the new arrangements and will pay SABIC in equal installments annually for three years. JSMC has continued to be a partner agreeing to considerations such as risk factor and profitability among many others.

“According to Mitsubishi Gas Chemical, parent company of JSMC, it will discuss with SABIC about the commercialization of new methanol technology within Ar Razi as part of the new deal and to reduce energy costs.”

The new arrangements within Ar Razi may be considered to be the part of SABIC’s plan to increase its methanol business. The company is in discussion to build a plant in the US. Also, it is likely that the company is planning to acquire OCI’s methanol business. But, SABIC itself is in the process of being acquired by Saudi Aramco.

According to the available data, Ar-Razi operates 5 methanol plants at Jubail, Saudi Arabia with a combined capacity of 4.85 million metric tons annually.

About Saudi Methanol Co:  It was one of the first joint ventures by SABIC and foreign partners. The firm came into existence in 1979 with the Japanese consortium. The move is one in a series of asset consolidations by SABIC. The company recently bought Shell out of Sadaf, another long-standing joint venture that produces caustic soda, ethylene, styrene, ethylene dichloride, and methyl tert-butyl ether and has since decided to merge with another SABIC subsidiary named, Petrokemya.

— Vasundhra Singh,
Assistant Research Executive,
Infoholic Research