Saudi Expansion

  Saudi Arabian Oil Co. (Saudi Aramco) and Sumitomo Chemical plan to spend $4.3 billion on a large petrochemical complex and oil refinery in Rabigh, Saudi Arabia. The project will be Sumitomo’s first major investment in the Middle East and its first foray into oil refining. Aramco, conversely, has limited experience in petrochemicals.

The two companies are still working on a detailed feasibility study. They expect that total investment in the project, due to go onstream in 2008, will exceed $4.3 billion after needed utilities and other infrastructure are built. Sumitomo’s planned petrochemical project with Shell in Singapore will be on hold until a final decision is made on the Saudi project, a Sumitomo spokesman says.

The Saudi project would be one of the largest integrated refinery/petrochemical complexes ever built at one time, the partners say. It would involve adding petrochemical plants to the 400,000-barrel-per-day Aramco refinery already operating in Rabigh. The refinery, to be transferred to the proposed venture, is Saudi Arabia’s largest, according to the spokesman.

The petrochemical plant would include an ethane-based cracker producing approximately 1.3 million metric tons of ethylene and 900,000 metric tons of propylene per year. There would also be two linear low-density polyethylene plants with a combined capacity of up to 900,000 metric tons, two plants producing up to 700,000 metric tons of various types of polypropylene, a propylene oxide unit implementing Sumitomo technology, an ethylene glycol plant, and a few other units.

Dow Chemical and Saudi Basic Industries Corp. (SABIC) reportedly competed against Sumitomo for the deal.