Aramco, Sumitomo to expand Petro Rabigh facility

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 23 -- Saudi Aramco reported it plans to sign an agreement with Sumitomo Chemical Co. to develop Phase 2 of its refinery and chemicals complex in the port city of Rabigh on the Red Sea.

Aramco Pres. and Chief Executive Khalid A. Al-Falih said his firm would "soon" sign a memorandum of understanding with Sumitomo to further develop the $10 billion Petro Rabigh complex.

Al-Falih's statement confirmed an earlier press report saying Sumitomo Chemical planned to build another large petrochemical complex in Saudi Arabia adjacent to one scheduled to come online at the end of this month.

That first phase of the project involved upgrading the 400,000 b/d Rabigh refinery to produce higher-quality products, including petrochemical units to produce 900,000 tonnes/year of polyethylene, 700,000 tpy of polypropylene, 600,000 tpy of monoethylene glycol, and 200,000 tpy of propylene oxide.

To implement the project's first phase, Aramco and Sumitomo Chemical formed the joint venture Rabigh Refining & Petrochemical (Petro Rabigh).

Investment
The Saudi government recently approved investment plans for the second project, and the Nikkei Business Daily (NBD) on Mar. 12 reported that Petro Rabigh would soon conduct a feasibility study to identify investment amounts, output, and other details.

Construction could start as early as yearend, with the complex targeted to come online sometime in 2013-14.

Although yet to be determined, total investments are forecast at ¥300-500 billion. Both Sumitomo Chemical and Aramco will inject additional funds into the joint venture, and they plan to request financing from a banking consortium.

"The facility will be positioned as a second-phase project, but will be a huge…complex with cracking furnaces for naphtha and ethane gas," NBD said.

Despite the ongoing slump in the world economy, Sumitomo Chemical sees demand for petrochemical products rising over the long term in emerging markets and plans to market value-added products from the second complex to China and India as well as to Europe, NBD said.

The complex will mass-produce 20-30 high-function products such as autoparts-grade plastics and materials for LCD televisions.

A total investment of ¥500 billion was planned when Petro Rabigh was formed in 2004, but ballooning prices for resources and other factors swelled outlays for the first complex to ¥1 trillion.

"This time around," NBD said, "the downward trend in materials prices and construction costs due to the weak economy spurred the decision to make an additional investment."

Prior to this week's announcement, Sumitomo Chemical chose to have its petrochemicals business in Tokyo manage the Rabigh project, considered one of the world's largest integrated complexes for petroleum refining and petrochemical manufacture.

Petro Rabigh will independently operate the complex, while Sumitomo Chemical will be responsible for the sale of produced petrochemical derivatives.

Contact Eric Watkins at hippalus@yahoo.com.

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