KHOBAR, Saudi Arabia, (Reuters) – State oil giant Saudi Aramco and U.S. firm Dow Chemical are considering relocating their planned giant petrochemical complex to Jubail, industry sources said on Wednesday.
When Aramco and Dow announced plans to build the $20-billion plus plant, they initially chose Ras Tanura, home to the world’s biggest offshore oil facility, for the complex that would produce 8 million tonnes per year of petrochemicals.
But the cost of reclaiming the land at Ras Tanura and congestion at the site had led Dow and Aramco to reconsider plans, the sources said.
“They are studying their options…either in Jubail or Ras Azzour…the best option is Jubail,” one source said.
Aramco and Dow have already requested land in Jubail, said another source. “Jubail, most likely yes,” said a third source familiar with the plans.
Both Dow and Aramco spokespeople declined to comment on the possibility of changing location.
“All I can say about these reports from the Dow side is the project continues to progress through the initial development phases,” said a Dow spokesperson. “The evaluation phase of the project is on schedule and will be completed later this year.”
Aramco and Dow would need approximately two to three months to get approval for the move from Saudi authorities, said a fourth source.
The size of the project was expected to remain the same but with a slight additional cost as studies would have to be conducted again on the new area and pipelines would be laid out, one of the sources said. Still, the overall cost could fall due to the lower land expense, one source said.
“To reclaim the land in Ras Tanura is very costly while you have lots of land available nearby,” one source said.
The alternative location at Jubail, where there is already a 305,000 bpd refinery and where Aramco and France’s Total plan to build another 400,000 bpd refinery, is already a major hub for petrochemicals. It is between Ras Azzour and Ras Tanura on the Gulf coast.
The Saudi government has already completed an expansion phase of infrastructure at Jubail, where plots of land are ready for construction.
“Jubail is better for synergies and integration with other petrochemical plants, and it has everything including an export terminal,” said Sadad al-Husseini, a former top executive at Saudi Aramco.
Dow’s investment in Ras Tanura would have been the largest ever single foreign investment in the energy sector of the world’s top oil exporter and the plant would be one of the largest petrochemical facilities in the world.
Aramco and Dow have agreed to spend $1.2 billion on engineering work alone for their Ras Tanura petrochemical plant.
U.S. firm KBR Inc along with Foster Wheeler and Jacobs Engineering Group Inc are all conducting the front-end engineering and design (FEED) of the petrochemicals complex. The engineering work was due to be completed by the first or second quarter of this year.
The complex was to be integrated with the 400,000 barrels per day (bpd) expansion of the Ras Tanura refinery, already the largest plant in the Middle East with capacity of 550,000 bpd. The Ju’aymah gas processing plant would also have fed into the initial complex.
The refinery expansion has been on hold since last year, when Aramco sent letters to bidders for construction contracts at the plant telling them the project was deferred.