Jubail refinery to launch in 2013, Saudi-French JV says

Saudi Aramco Total Refinery & Petrochemicals Co. (Satorp) expects its $14 billion refinery at Jubail in Saudi Arabia to be fully operational by yearend 2013.

“Overall engineering, procurement, and construction work at the refinery is 68% complete,” said Satorp Chief Executive Officer Fawwaz Nawwab, adding that Aramco expects to supply the facility with as much as 440,000 b/d of oil for 30 years.

The refinery will process Saudi heavy crude into a range of fuels for domestic consumption as well as for export, with diesel and jet fuel representing 54% of the project’s output at 11.4 million tons/year.

Nawwab estimated that production of gasoline and petcoke will reach 2.8 million tpy and 2.1 million tpy, with the amount available for export dependant on depend on seasonal demand within the kingdom.

“Demand fluctuates with the season how much of the production goes to local versus international market depends on demand,” Nawwab said.

Although Saudi Arabia subsidizes fuel, Nawwab said Satorp will sell its products to Aramco at international prices, and that Aramco would then bear the costs of reselling to the domestic market at discounted rates.

“For Satorp, we sell at international price both to Total and Aramco that is the case by the way for other joint venture refineries in Saudi Arabia,” Nawwab said.

To help finance the refinery project, the venture partners are poised to issue up to $1 billion in Islamic bonds, or sukuk, with final pricing expected by the end of the month.

Final pricing for the sukuk, which will be calculated on the basis of 6-month Saudi interbank offered rate, is expected on Sept. 28 and final allocations are due for completion on Oct. 3, with settlement expected on Oct. 8.

Usman Sikandar, director and co-head of investment banking at Saudi Fransi Capital, said the sukuk would mature about 11 years after completion of the refinery in December 2013.

“This is a very good project, it’s a secure project, the sponsors are guaranteeing this, so the risk factor is very low,” said Nawwab, adding, “The sponsors are committed to maintain their combined equity ownership of 75% in the project.”

Contact Eric Watkins at hippalus@yahoo.com.

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