Merger Talks between 2 Saudi Petrochemical Firms Resume after 10 Years

Part of the Saudi Petrochem projects that are engaged in merger talks with the Saudi Industrial Investment Group. Asharq Al-Awsat
Part of the Saudi Petrochem projects that are engaged in merger talks with the Saudi Industrial Investment Group. Asharq Al-Awsat
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Merger Talks between 2 Saudi Petrochemical Firms Resume after 10 Years

Part of the Saudi Petrochem projects that are engaged in merger talks with the Saudi Industrial Investment Group. Asharq Al-Awsat
Part of the Saudi Petrochem projects that are engaged in merger talks with the Saudi Industrial Investment Group. Asharq Al-Awsat

Talks to merge two Saudi petrochemical companies, which had been frozen for nearly 10 years, have resumed.

Saudi Industrial Investment Group (SIIG) and the National Petrochemical Company (Petrochem) announced Sunday that they have begun talks over a potential merger.

The SIIG and Petrochem boards have approved initial discussions to study the feasibility of a merger but no agreement has been reached on any final structure of a merged entity, the companies said in separate statements.

They pointed out that if a deal is reached, it will be subject to the conditions and approvals of competent authorities, as well as the extraordinary general assembly of both companies.

SIIG owns 50 percent of Petrochem, but the two firms are similar in size, suggesting a deal would be a merger of near equals.

The two companies previously held merger discussions in 2011, with the talks eventually postponed to allow Petrochem’s facility at Jubail to reach production capacity and provide better valuations of the companies, SIIG said back then.

The Riyadh-based Petrochem has paid-up capital of SAR4.8bn riyals. It owns 65 percent of the Saudi Polymer Co, which permanently closed down its polystyrene (PS) manufacturing plant at the Jubail petchems complex in July and produced petrochemical products.

Arabian Chevron Phillips Petrochemical Co., wholly owned by CPChem, owns the remainder of Saudi Polymers Co.



Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
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Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 

Insurance prices for ships travelling through the Strait of Hormuz have jumped more than 60% since the start of the war between Israel and Iran as the conflict threatens shipping in a key chokepoint for crude oil, the Financial Times newspaper wrote on Wednesday.

As of this week, the cost of hull and machinery insurance for ships passing through the strait — a narrow waterway between Iran and Oman, connecting the Gulf to the Arabian Sea — as well as the wider Gulf area had risen from 0.125% of the value of the ship to about 0.2%, according to the world’s largest insurance broker Marsh McLennan.

This pushes the cost of cover for a $100 million ship from $125,000 to $200,000.

Hull and machinery insurance covers damage to the ship itself, as opposed to cargo or third-party liability.

“We’ve not yet seen a missile fired at a ship in the Arabian Gulf, so what it represents is the market saying, look, there’s definitely a heightened level of concern about the safety of shipping in the region,” Marcus Baker, global head of marine and cargo insurance at Marsh McLennan, told the Financial Times.

Prices could rise further, he added.

Ships trying to pass through the strait face a range of dangers, from electronic interference to attacks by the Iran-backed Houthi group and the threat of further escalation by Israel and Iran, said brokers and insurers.

On Monday there was a collision between two oil tankers near the Strait of Hormuz.

While the cause of the crash has not yet been publicized, one ship had transmitted atypical signals about its position, raising concerns about electronic interference.

Baker said insurers were also worried that Houthi militants could widen their attacks, damaging more ships than the US, UK and Israeli-flagged vessels they have generally been targeting.

The market is “concerned about every vessel” travelling through the area because of Houthi attacks, Baker said.

Some insurers could stop offering cover because of the risks, he added, but others might see any pullback as an opportunity.

“War itself, as an insurance product, tends to be...either you lose everything or make a fortune. And many fortunes have been made by underwriters prepared to take a risk,” he said.

Insurance rates for cargo, including oil, were also likely to rise because of the conflict, multiple brokers said, but had been slower to respond.