The Company leases various land, generators, buildings and other assets including motor vehicles and pipelines. Lease contracts are typically made for fixed periods of 1 to 30 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease contracts do not impose any covenants, and leased assets shall not be used as security for borrowing purposes.
At December 31, 2025, the Company did not have any lease contracts classified as right-of-use asset that are variable in nature. Some leases contain extension options exercisable by the Company before the end of the non-cancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide operational flexibility. The Company assesses at lease commencement whether it is reasonably certain to exercise the option. The Company does not provide residual value guarantees in relation to any of its leases.
(a) Right-of-use assets
| Description | Land | Generators | Buildings | Others | Total |
|---|---|---|---|---|---|
| At January 1, 2024 | 128,300 | 23,883 | 11,539 | 3,376 | 167,098 |
| Depreciation | (4,326) | (7,542) | (2,769) | (2,912) | (17,549) |
| At December 31, 2024 | 123,974 | 16,341 | 8,770 | 464 | 149,549 |
| Modification1 | (8,362) | 25,254 | - | - | 16,892 |
| Depreciation | (1,846) | (17,827) | (2,769) | (464) | (22,906) |
| At December 31, 2025 | 113,766 | 23,768 | 6,001 | - | 143,535 |
Depreciation on right-of-use assets is charged to the statement of profit or loss and other comprehensive income using the straight-line method to allocate their costs over their lease term which are as follows:
| Category | Useful life — years |
|---|---|
| Land | 30 – 99 |
| Generator | 4 |
| Buildings | 5 |
| Others | 5 – 27 |
(b) Lease liabilities
| Description | 2025 | 2024 |
|---|---|---|
| Opening balance | 169,316 | 186,270 |
| Modification1 | 16,892 | - |
| Lease payments2 | (31,379) | (24,109) |
| Interest on lease liabilities | 9,063 | 7,155 |
| Closing balance | 163,892 | 169,316 |
| Description | 2025 | 2024 |
|---|---|---|
| Lease liabilities | ||
| Current | 30,061 | 19,448 |
| Non-current | 133,831 | 149,868 |
| 163,892 | 169,316 |
As at December 31, 2025, potential future cash outflows of Saudi Riyals 452.87 million (undiscounted) have been included in the lease liability because management considers that it is reasonably certain that the lease will continue to be extended (December 31, 2024: Saudi Riyals 591.34 million) given the nature of the Company’s operations.
During the current year, the Company signed an extension to the Yanbu refinery’s land lease agreement with RCJY for 20 years. For the computation of the right-of-use assets and lease liabilities, the lease term applied has been extended to reflect the Company’s reasonable expectations of the period during which the underlying asset will be used. Considering the broader economics of the contract and recent developments, the Company is reasonably certain that parties to the contract will continue
1 The Company has reassessed certain lease contracts based on the recent developments and recognised the modification with the corresponding impact in the right-of-use assets and lease liabilities. 2 Lease payments include a payment made to Royal Commission for Jubail and Yanbu (“RCJY”), a related party, for Yanbu land lease contract amounting to Saudi Riyals 5.8 million during the year ended December 31, 2025 (December 31, 2024 Saudi Riyals 5.8 million).
to exercise extension options given in the land lease agreements. As a consequence of this change in assessment, the lease term for the Yanbu land lease contract has been extended to 99 years. The Company also had a land lease agreement with Saudi Aramco for Jeddah refinery, effective from July 1, 1996 for a term of 25 years.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. During the current financial year, there were no revisions of lease terms due to exercising extension and termination options.
Amounts recognised in the statement of profit or loss and other comprehensive income:
| Description | 2025 | 2024 |
|---|---|---|
| Depreciation of right-of-use assets (Note 26 and 28) | 22,906 | 17,549 |
| Interest expense (Note 30) | 9,062 | 7,155 |
| Tank rents (short-term leases) (Note 27) | 20,429 | 21,405 |
Depreciation of right-of-use assets has been allocated as follows: