Decommissioning provision is made for the refinery closure, reclamation and dismantling obligation of the refineries. These obligations are expected to be incurred in the year in which the respective refinery is expected to be closed. Management estimates the provision based on management’s understanding of the current legal requirements in the Kingdom of Saudi Arabia, terms of the lease agreements as disclosed in note 6, engineering estimates and discount rates ranging from 2.4% to 6.01%.
The provision for decommissioning obligation represents the present value of full amount of the estimated future closure and reclamation costs, based on information currently available including closure plans and applicable regulations. Future changes, if any, in regulations and cost assumptions may be significant and will be recognised when determined.
Considering the broader economics of the Yanbu lease agreement, the Company is reasonably certain that the Company will exercise extension options given in the land lease agreement. As a consequence of this change in assessment, the decommissioning on the Yanbu land has been recognised at the expected end of the lease term. The Company is also maintaining a provision for decommissioning of the Jeddah facility closure.
Movement in provision for decommissioning is as follows:
| Description | 2025 | 2024 |
|---|---|---|
| Opening balance | 46,078 | 45,179 |
| Unwinding of discount (Note 30) | 981 | 899 |
| Closing balance | 47,059 | 46,078 |