JEDDAH, 22 May 2006 — Saudi Aramco yesterday signed a landmark agreement with France’s Total to build a world-class oil refinery in the Eastern Province city of Jubail at an estimated cost of nearly SR22.5 billion ($6 billion.) The project is scheduled to begin operating in 2011, the Saudi Press Agency reported, quoting an Aramco statement.
“Saudi Aramco and Total signed Sunday a comprehensive Memorandum of Understanding (MOU) related to the planned development of a 400,000 barrel per day world-class, full-conversion refinery in Jubail,” the statement said.
Saudi Aramco will supply the project with 400,000 barrels per day of Arabian heavy crude oil while the two companies will share the marketing of the refinery production.
The two oil giants have agreed to form a joint venture company, with each having an ownership stake of 35 percent, to implement the project; the remaining 30 percent will be offered for public subscription by Saudi nationals. “Subject to required regulatory approvals, the parties are planning to offer up to 30 percent interest in the project to the Saudi public,” the statement said.
The Jubail refinery will be designed to process Arabian heavy crude and will produce high–quality refined products that meet current and future product specifications. “This project represents an excellent opportunity to build on the Kingdom’s strategy of addressing global energy demand while attracting foreign investment to expand its economy,” said Abdallah S. Jum’ah, Saudi Aramco’s president and chief executive officer.
Total’s Chairman Thierry Desmarest was happy with the deal. “Total is proud to have been chosen by Saudi Aramco to build an efficient and full conversion refinery that will provide the country with an increased capacity to meet different market needs in refined petroleum products,” he said.
“This agreement reinforces our presence in Saudi Arabia and, through this long-term project, strengthens our close cooperation with Saudi Aramco,” he added.
The MOU sets forth the agreement between Saudi Aramco and Total regarding the key parameters of the project, the project configuration, and a broad range of major technical, commercial, legal, and financial terms. The two sides have agreed to undertake a comprehensive joint front-end engineering and design (FEED) study immediately. The definitive documents to implement the project will be negotiated in parallel with the joint FEED study.
Total is one of the world’s major oil and gas groups, having activities in more than 130 countries. Its 95,000 employees put their expertise to work in every area of the industry — exploration and production of oil and natural gas, refining and marketing, gas trading and electricity.
The Jubail project is one of two joint venture export refineries which Saudi Arabia wants to build in the Kingdom. Aramco officials have said they hope to sign a memorandum of understanding with ConocoPhillips for a 400,000 bpd refinery in Yanbu by the end of May. ConocoPhillips Chief Executive Jim Mulva said earlier this month he was pleased with the ongoing negotiations.
The deals are part of Aramco’s plans to spend, together with its partners, $50 billion over the next five years to boost refining capacity at home and abroad.
Aramco chief Jum’ah said the global energy industry was now less flexible, partly due to chronic underinvestment in facilities and infrastructure, especially in refining. “Perhaps nowhere along the value chain do we see capacities as tight as they are in the refining sector. Crude oil is of little use to the average end-user until it is refined into useful products, and at the moment, our industry’s ability to do that is being stretched,” Jum’ah said.
— Additional input from agencies