Saudi Aramco and Dow Chemicals Save 40% in Relocation of $17 Billion Petrochemical Project from Ras Tanura to Jubail

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Researched by Industrial Info Resources (Sugar Land, Texas)--Saudi Arabian Oil Company (Saudi Aramco) (Dhahran, Saudi Arabia), which is the state-owned oil company of Saudi Arabia, and its partner, Dow Chemical Company Limited (NYSE:DOW) (Midland, Michigan), have decided to relocate a proposed petrochemical complex from the Ras Tanura facilities to Jubail.

The $17 billion complex, with a planned production capacity of 8 million tons per year and Saudi Aramco's largest-ever project, originally was to be on reclaimed land at Ras Tanura, the world's largest offshore oil facility.

However, the cost of reclaiming the land and increased congestion at Ras Tanura have forced the companies to rethink the plan. By moving to Jubail, Saudi Aramco and Dow will be able to achieve cost savings of up to 40%, as the Royal Commission for Jubail and Yanbu (RCJY) (Riyadh, Saudi Arabia) will provide the basic infrastructure, in terms of power and water, required for the project.

The complex was planned to be integrated with a 400,000-barrel-per-day (BBL/d) expansion at the 550,000-BBL/d Ras Tanura refinery and linked to the gas processing plant at Ju'aymah. This expansion has been on hold since last year, and the $8 billion project will now be terminated. In addition, other schemes with a total value up to $17 million are likely to face major changes.

In conjunction with the relocation of the plant, the specifications will be radically changed and the project downsized to provide a decreased diversity in the range of products. Rather than use a mixture of gas and naphtha as feedstock, the complex will be designed to use an ethane gas feed.

The ethane will be supplied from the Saudi Aramco Total Refining and Petrochemical Company (Satorp) refinery at Jubail, a joint venture between Saudi Aramco and energy company Total S.A. (NYSE:TOT) (Paris, France). Contracts for the latter refinery were signed last year, and production is expected to begin by the end of 2013.

The front-end engineering and design (FEED) contract for the original complex was shared among engineering, construction and service company KBR Incorporated (NYSE:KBR) (Houston, Texas), Foster Wheeler Limited (NASDAQ:FWLT) (Clinton, New Jersey) and the Jacobs Engineering Group Incorporated (NYSE:JEC) (Pasadena, California), with the work to have been completed by the middle of this year.

However, because of the revision in the scope and feedstock of the project, it is expected that the FEED work will need to be revised according to a schedule under which FEED work is to be completed by the end of 2010 and tendering for the engineering, construction and procurement contracts will be in 2011.

Saudi Aramco already has a large petrochemical complex on the west coast, through the joint venture company Rabigh Refining and Petrochemical Company (SAU:2380) (Petro Rabigh) (Rabigh, Saudi Arabia), which it formed in 2005 with Sumitomo Chemical Company Limited (TYO:4005) (Tokyo, Japan). The $10.1 billion Petro Rabigh complex has a production capacity of 18 million tons of refined products and a petrochemical production capacity of 2.4 million tons each year.

In addition to the Satorp refinery, Saudi Aramco operates a 305,000-BBL/d refinery at Jubail in a joint venture with Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands).

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