DUBAI (Reuters) – Saudi Aramco and U.S. firm Dow Chemicals’ giant Ras Tanura petrochemical faces delays as the sheer size of the project complicates design, the Middle East Economic Survey (MEES) reported.
Dow’s investment in the plant, last estimated to cost around $22 billion, will be the largest single foreign investment in Saudi Arabia’s energy sector. The plant was due to begin production in 2012.
U.S.-based KBR won the front-end engineering and design contract for the plant in July 2007, but that contract will be split and partly awarded to another company, MEES reported, citing industry sources.
“Around 2 million man hours of work, covering utilities and offsites and some aromatics units have been taken off KBR and will be given to another firm, leading to delays,” the weekly MEES reported.
Tight equipment and labor supplies are driving up costs for energy projects worldwide, causing delays and even cancellations.
The size and complexity of some Saudi projects to boost capacity both upstream and downstream makes them vulnerable to delays, industry sources have said.
Earlier this month, Aramco announced its 500,000 barrels per day (bpd) Khursaniyah oilfield had started output, delayed from the initial schedule to start in December last year.
Aramco and Japan’s Sumitomo Chemicals joint PetroRabigh venture also said earlier this month that it would start operation in the first quarter of 2009, delayed from the last quarter of 2008.
Aramco will be involved in $129 billion of investment on new energy projects in the next five years. About $70 billion will be spent by international and domestic joint ventures, while another $59 billion will be spent on projects solely undertaken by Aramco.
The world’s top oil exporter aims to boost domestic refining capacity by around 1.6 million barrels per day and to expand its petrochemical sector as part of plans to diversify the economy away from dependence on crude oil export revenues.