Saudi Aramco and Dow
Announce the Signing of the Memorandum of Understanding to
Develop One of the Largest Grassroots Plastics and Chemicals
Production Complexes in the World
The
project will facilitate the development of downstream conversion
industries in the Kingdom of Saudi Arabia
Saudi Aramco, a fully-integrated, global petroleum enterprise and the world's leading energy supplier, and The Dow Chemical Company, the world's leading science and technology company, providing innovative chemical, plastic and agricultural products and services to consumers around the globe, today announced the signing of a detailed Memorandum of Understanding regarding the construction, ownership and operation of a world-scale chemicals and plastics production complex in Saudi Arabia, named the Ras Tanura Integrated Project. The parties will now enter the final negotiation phase for the formation of a joint venture company to build, own and operate the facility to be located near Ras Tanura in Saudi Arabia's Eastern Province. The Ras Tanura petrochemical joint venture will be operationally integrated with Saudi Aramco's Ras Tanura Refinery complex and its Ju'aymah gas processing plant, two of the largest facilities of their kind in the world. The latter two facilities will supply feedstock to the joint venture and continue to be owned and operated by Saudi Aramco.
The proposed JV partnership will bring together the world's largest oil company with the world's leading chemicals and plastics producer and marketer. The Ras Tanura integrated complex will produce an extensive and diversified slate of plastics and chemicals and introduce new value chains and performance products to the Kingdom. When fully operational, the new complex will be one of the largest grassroots plastics and chemicals production facilities in the world and will be ideally positioned to serve major world markets.
"This project will leverage our largest refining asset and enhance its profitability by capitalizing on the value addition opportunities and synergies existing between refining and petrochemicals," said Saudi Aramco President & CEO Abdallah S. Jum'ah. "The wide range of chemical materials and plastics to be produced by the joint venture will help spawn other downstream chemical conversion industries, thus strengthening the role of the chemical sector as a key enabler of many other future investments in the Kingdom of Saudi Arabia," Jum'ah added. "The downstream industries to be fed by the materials to be manufactured by the joint venture will assist in further expanding the national economic base while promoting economic diversification and capitalizing on the vast job creation potential of these industries."
"We are extremely pleased to be selected by Saudi Aramco as their joint venture partner to help build the Ras Tanura petrochemical complex. This joint venture will further strengthen Dow's presence in the Middle East and add to our already vast capabilities worldwide," said Dow Chairman and CEO Andrew Liveris. "Furthermore, the complex will have a long-term, secure and reliable feedstock position with integration to the adjacent refinery and gas processing plant, while positioning the new enterprise to grow its product sales."
The Ras Tanura petrochemical complex will produce a broad range of both basic and performance products, including ethylene, propylene, aromatic and chlorine derivatives. Initially, the project scope includes world-scale production units for polyethylene, ethylene oxide and glycol, propylene oxide and glycol, chlor-alkali, vinyl chloride monomer, polyurethane components, epoxy resins, polycarbonate, amines and glycol ethers.
Dow in Saudi chemical plant deal
Saudi Aramco and US Dow Chemical Co announced yesterday a deal to build a petrochemical plant that industry insiders expect to be the largest foreign investment in Saudi Arabia's energy sector.
The cost of the Ras Tanura plastics and chemicals complex would be "mammoth", said Saudi Aramco's President Abdullah Juma, although he declined to give details.
Last week, industry sources said the plant would have an investment cost of at least $20 billion. Costs have risen with soaring inflation in the energy industry from an Aramco estimate last year of around $15 billion.
Ras Tanura will be one of the biggest plants of its kind built from scratch, the two companies said in a joint statement from Aramco's headquarters in Dhahran. "When fully operational, the new complex will be one of the largest grassroots plastics and chemicals production facilities in the world and will be ideally positioned to serve major world markets," the statement said.
Aramco and Dow signed a memorandum of understanding and will now enter a final negotiation phase for the formation of a joint company to build, own and operate the plant, the statement said.
The companies plan to float a 30 per cent stake in Ras Tanura and raise the rest through debt, Jumah told reporters.
The investment is Dow's largest in the region and its biggest joint venture, said CEO Andrew Liveris.
"We have other investments in the Middle East... but nothing rivals the scale, size and breadth of this project. [It is] the largest proposed joint venture in our 110-year history."
Dow is the largest US chemical maker by sales and has faced tough competition from Middle East chemical producers such as Saudi Arabia's Saudi Basic Industries Corp (Sabic) that have access to cheap crude and natural gas. Sabic is the world's largest chemicals company by market value.
Sabic, along with other companies, was invited to bid for Ras Tanura but was unsuccessful, Juma said.
The world's largest oil exporter, Aramco, chose Dow last July to discuss the plant, which Aramco will supply from the nearby 550,000 barrels per day Ras Tanura oil refinery and Ju'aymah gas processing plant.
The petrochemical plant was scheduled for startup in 2012-13, Juma said. It will produce 4.5 million tonnes of basic chemicals and seven million tonnes per year of derivative plastic and chemical products, he added. The derivative plastic is mainly poly carbonate and low and high density poly-ethylene, said Isam Al Bayyat, an Aramco vice-president.
Diversification
Like its neighbours, Saudi Arabia is making major investments to diversify its economy away from oil.
Oil Minister Ali Al Naimi said last week that a $70 billion investment programme would make the kingdom the world's third largest petrochemical producer by 2015, up from its current ranking of tenth.
Saudi petrochemical output would rise to 100 million tonnes in 2015 from 60 million tonnes, and it would double the number of petrochemical products produced, Al Naimi said.
Aramco is also engaged in the PetroRabigh refining and petrochemicals joint venture project with Japan's Sumitomo Chemical. Jumah declined on Saturday to give an updated cost estimate for that project, last pegged at around $10 billion.
Aramco plans an IPO for at least 25 per cent in PetroRabigh.
At the new Ras Tanura project, the key units are an ethane and naphtha cracker, a catalytic cracking unit and an aromatics unit. The units will help convert Saudi Arabia's heavy sour crude to high value plastics. The project will feature more than 30 downstream process units, employ 4,000 workers and produce more than 300 different products.
Companies plan to float 30% stake in new unit
April 13
(Reuters)
Aramco delays Ras Tanura refinery expansion-sources
State oil giant Saudi Aramco has delayed plans to expand
capacity by 400,000 barrels per day at its Ras Tanura refinery, industry sources said on
Monday.
The $8-billion project is one of five planned in the kingdom to
boost domestic refinery capacity by up to 1.7 million barrels per
day from 2.096 million bpd. Aramco has already delayed two of
those projects as it looks to drive down costs.
"Aramco has sent out an official letter to potential bidders
saying the project was deferred," one industry source told
Reuters.
A source from another company planning to bid for construction
contracts for the Ras Tanura expansion project said it had also
received notification of the delay.
An Aramco spokesman declined to comment.
The refinery's expansion is to help meet both rising domestic
demand and to supply feedstock to a giant
petrochemical joint venture between Dow Chemical Co and Aramco to be built nearby.
That plant, expected to cost more than $20 billion, would be one
of the largest single petrochemical plants to be built in the
world.
A third source on Monday said the
petrochemical project had also been delayed. Completion of
preliminary design and engineering for the petrochemical plant
would take until the first or second quarter of 2010, from the
initial target of end 2009.
DELAYS
Aramco gave no reason for the delay to the Ras Tanura refinery
expansion in the letter to potential bidders, nor a new timeline,
the sources said. Last year, Aramco said the refinery would start
production at the end of 2012.
Aramco has delayed two other 400,000 bpd
refinery projects at Jubail and Yanbu as it wants contractors
to revise prices to reflect the slump in the cost of raw
materials since the global economic slowdown took hold.
Potential bidders had expected to receive invitations to bid for
the Ras Tanura construction packages in May.
The expansion would be broken down into five packages. They would
be for a crude unit and a vacuum distillation unit, a diesel
hydrotreater, a continuous catalyst regenerator, a sulphur
recovery unit and for utilities and tanks.
The project would take refining capacity at Ras
Tanura to 950,000 bpd. The existing plant has capacity of
550,000 bpd and is already the largest refining complex in the
Middle East.