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Aramco, Total eye $1.2 Billion Cost Cut on New Refinery | ASHARQ AL-AWSAT English Archive 2005 -2017
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DUBAI, (Reuters) – Saudi Aramco and France’s Total want bidders for a new joint venture refinery to chop at least $1.2 billion from costs due to the global economic downturn, a spokesman for the venture said on Sunday.

Top oil exporter Saudi Aramco has sent bidders back to the drawing table on several mega-projects to expand energy capacity as it looks to take advantage of the slide in prices for commodities and to drive down costs.

The tight credit market may also encourage contractors to lower bids, as they look for access to Aramco’s cash. The Saudi state company funds the majority of projects from its balance sheet, rather than through credit.

“I think we will be saving more than 10 percent on the cost,” Khalifa al-Lahdan, public relations head for the Saudi Aramco Total Refining and Petrochemical Co (Satorp), told Reuters by telephone. “It will save a lot of money.”

When commodity prices were near their peak last year, the 400,000 barrels-per-day refinery to be built on the Saudi east coast at Jubail had an estimated cost of around $12 billion.

Satorp has delayed the bid round for refinery construction contracts by another month to March to give bidders time to rewrite proposals to reflect cheaper prices for commodities and raw materials, Lahdan said. The bid round has already been delayed from November as Satorp looked to force down costs.

Aramco and ConocoPhillips have also delayed bidding on a 400,000 bpd joint venture refinery to be located at Yanbu.

Aramco has also put contracts for its 900,000 bpd Moneefa field under review. Moneefa will pump heavy crude to feed the two joint venture refineries.


Satorp has divided the construction of the Jubail plant into 14 contract packages. It awarded the second contract, worth around $200 million to Saudi company Abdul-Rahman M. Al-Shalawi Est, Satorp said in a statement on Sunday.

Shalawi will lay roads and connect water, power and sewage at the construction site for the 30,000 workers that will build the refinery.

The first contract was awarded late last month to develop the land and accommodations for the workers. The remaining 12 contracts are for construction of the refinery itself.

Satorp held a meeting with contractors interested in the construction packages last week in Rome, Lahdan said. The companies asked for the bidding round to be delayed another month to allow them time to rewrite bids, he added.

Turmoil in credit markets and a slump in oil prices have prompted energy companies around the world to reconsider expensive projects or cut back on spending to preserve liquidity.

Aramco has committed to go ahead with projects it has already approved.