RIYADH, (Reuters) – Saudi Aramco and U.S. oil firm ConocoPhillips are expected to sign a deal on Wednesday for a second new refinery in the Gulf state, industry sources said on Tuesday.
Aramco said it could not confirm the news, which was also reported by Saudi newspapers.
The state oil firm on Sunday signed a deal with France’s Total to build a 400,000-barrel-per-day (bpd), export-oriented refinery in Jubail on the kingdom’s Gulf coast.
Aramco officials have said they hope to sign a memorandum of understanding with ConocoPhillips for another 400,000 bpd refinery in Yanbu on the Red Sea coast by the end of May.
Al Watan daily said the Yanbu project would be similar to that of Jubail, due for completion in 2011 and with 30 percent of the project being offered to the Saudi public in the future.
Aramco officials have said each of the refineries would cost around $6 billion.
The deals are part of plans by the state oil giant to spend, together with its partners, $50 billion over the next five years to boost refining capacity at home and abroad.
Saudi Arabia, the world’s top oil exporter, is also working to boost its crude production capacity to 12.5 million bpd by 2009. Analysts say any further capacity expansion would depend on building refineries to handle the kingdom’s heavy crude.
Saudi Arabia is the largest producer in the Organisation of the Petroleum Exporting Countries and holds the bulk of the group’s spare capacity. Most of Riyadh’s unused capacity consists of heavy sour crude that refiners find difficult to process into transport fuels.
A lack of global refining capacity to meet growing fuel demand in the United States and Asia has been a major factor behind a surge to record world oil prices.