Sumitomo Chemical and Aramco to form refining-petrochemical JV

Eric Watkins
Middle East Correspondent
NICOSIA, May 11 -- Sumitomo Chemical Co. of Japan and state-owned Saudi Arabian Oil Co. (Aramco) signed a Memorandum of Understanding for a 50-50 joint venture to build a $4.3 billion refining-petrochemical complex at Rabigh, Saudi Arabia.

Under the MOU, Aramco plans to supply the JV with 400,000 b/d of crude oil, 95 MMscfd of ethane, and up to 15,000 b/d of butane. Sumitomo will provide proprietary petrochemical technology and marketing expertise to the JV.

Aramco owns and operates a refinery at Rabigh, having a capacity of 400,000 b/d, which will serve as the base platform for development of the proposed complex. Rabigh is a Red Sea port.

The new complex, scheduled for start-up in late 2008, is expected to produce various refined products, including 1.3 million tonnes/year of ethylene, 900,000 tonnes/year of propylene, and 80,000 b/d of gasoline.

On Tuesday, SCC Pres. Hiromasa Yonekura, who said construction would begin in late 2005, forecast that the JV's profitability would surpass that of a JV that SCC launched in Singapore in 1984.

"The Saudi Arabian plant will supply commodity-grade products to China and other Asian countries, while the Singapore plant will deliver premium goods to Asia," Yonekura told reporters.

He said the Aramco JV would help in "securing low prices for crude oil is the most important issue, in order to ensure a competitive edge over the mid to long term." He added that the firm would "pursue benefits based on the scale of operations."

In launching the Saudi project, Yonekura conceded that "the biggest concern was country risk," but he said that SCC concluded the risk was "manageable."

Saudi officials have pledged tighter national security following a terrorist attack upon an oil and petrochemical hub of Yanbu on the Red Sea (OGJ, May 10, 2004, p. 26).