JEDDAH, 9 June 2005 — BP PLC’s petrochemicals and refining subsidiary, Innovene, signed in Riyadh on Tuesday a Memorandum of Understanding with Delta International Group, a Saudi-owned independent development group, for a major investment in Saudi Arabia’s petrochemical sector. The agreement’s long-term goal is for the joint venture to construct two world-scale crackers in the Kingdom on a phased basis. Each cracker is expected to cost in excess of $2 billion. BP/Innovene, Delta and other principal parties are now in detailed negotiations to progress the contractual arrangements for the project with site locations being explored in Jubail.
Commercial agreements for the project will be signed before the end of the year, with construction scheduled to commence mid-2006 and commissioning of the first plant expected in late-2008. BP/Innovene and Delta will be equal partners in the joint venture.
The agreement was signed at a ceremony in Riyadh by Badr Al-Aiban, chairman and chief executive officer of Delta and Ralph Alexander, chairman and chief executive officer of Innovene in the presence of Prince Saud ibn Abdullah ibn Thunayan, chairman of the Royal Commission for Jubail and Yanbu.
Commerce Minister Dr. Hashim Yamani, expressed the government’s support for the new venture and foreign investment. “The Kingdom has always been keen to encourage foreign investment, and we are extremely pleased to be welcoming BP as an investor into the Kingdom. We look forward to providing every support required to ensure the success of this venture,” said Yamani.
“This is a major investment from Britain and the project is mutually beneficial to both countries,” Peter Millman, head of trade and investment at the British Embassy in Riyadh told Arab News, adding that there are some 150 joint ventures in the Kingdom that are valued at $ 4 billion.
Al-Aiban was pleased with the agreement. “We are delighted to be partnering with BP/Innovene, one of the largest petrochemical companies in the world, and look forward to a successful venture. Delta has a long reputation for its ability to forge highly successful long-term strategic alliances with both major companies and the countries in which we operate. As a Saudi company with domestic and global activities, we are pleased to be able to play such an important part in the continuing development of Saudi Arabia’s petrochemicals industry,” he commented.
Delta Group, a private Saudi-owned development company, was founded by its chairman and chief executive officer, Badr Al-Aiban, in 1978, and its activities have expanded significantly since its inception. Its headquarters is in Jeddah. Delta played an important role in the conception of the “Contract of the Century”; as a founding member of the consortium for the supergiant Azeri, Chirag, Gunashli field (with over 4.5 billion barrels of recoverable reserves), offshore Azerbaijan, and during that time identified and participated in a number of other major projects within the Caspian region, Central Asia and the Middle East. Delta’s activities in the oil and gas sector are currently focused primarily on North and West Africa.
The new project is expected to provide thousands of jobs for Saudis directly and indirectly. Al-Aiban said that it aims to establish and operate the plants using Saudi hands and they will provide training facilities for Saudis on the latest technologies in their fields of work. He also said that the next step for this project is to establish a stock company for it with a capital of SR5000 million.
Ralph Alexander of Innovene considered the agreement a first step in a long partnership. “We see this joint venture as the first chapter in a long and fruitful partnership between Innovene and the Kingdom of Saudi Arabia. It confirms Innovene’s position as a truly global petrochemicals player, including Delta on the list of highly respected companies with whom we have partnerships around the world and adding a major Middle East position to our existing portfolio of assets in North America, Asia and Europe.”
Innovene was created as a wholly owned subsidiary of BP on April 1, 2005. BP may sell part of its stake in Innovene via an initial public offering (IPO) later in 2005, subject to necessary approvals and market conditions. Innovene will be one of the five largest independent petrochemical companies in the world, with more than $15 billion of revenues, 15 million tons of petrochemical production volumes and $9 billion in total assets. It has manufacturing sites in Scotland, France, Germany and the US. It also has joint ventures in China. Innovene manufacturers petrochemicals, including olefins (ethylene and propylene) and their derivatives such as polyethylene, polypropylene, acrylonitrile, linear alpha olefins, polyalphaolefins, and solvents, as well as gasoline, diesel and other refined products made in the Grangemouth and Lavéra refineries. These chemicals are used to make a wide variety of plastic goods, including food and drink containers and wrappings, pipe work, automotive parts and mouldings of all kinds.