RIYADH, 12 April 2005 — Saudi Arabia will start work in August on a Gulf coast industrial zone where it plans to build major aluminum and fertilizer export plants, in what officials call the biggest step yet to diversify the oil-driven economy.
The head of the state-owned mining firm Maaden, Abdallah Dabbagh, said the site at Ras Al-Zour will be leveled ahead of construction of the 640,000 tons a year aluminum smelter and 3 million tons a year di-ammonium phosphate plant.
“This industrial city, with these two projects, is the largest diversification which has ever happened in Saudi Arabia,” Dabbagh told Reuters in an interview yesterday.
The site, which will process bauxite and phosphate from mines in northern Saudi Arabia, will be powered by a 1,800 megawatt station. An ammonia plant, alumina refinery and six plants producing sulfuric and phosphoric acid will be built.
Dabbagh estimated the total cost of the fertilizer project, from mining to production, at $1.9 billion. The aluminum project will need investment of $4.4 billion. Both depend on construction of a $2 billion rail link from the northern phosphate and bauxite mines to Ras Al-Zour.
Ras Al-Zour, about 60 km (40 miles) north of the existing Gulf coast industrial zone of Jubail, was likely to attract further investment beyond aluminum and phosphates.
“There will be huge potential for downstream industries,” Dabbagh said, including tie-ups with petrochemical products from Jubail. Ras Al-Zour could also process minerals such as silica, magnesite, dolomite and calcium carbonates.
Dabbagh said the combination of local feedstock, cheap energy from state oil firm Saudi Aramco and proximity to export markets in India and China will make the fertilizer project highly competitive against international competitors.
“That makes us the lowest cost producer for di-ammonium phosphate in the world,” he said.
Production costs for the aluminum should also be “within the lowest quartile” of global producers, and cheaper than nearest rivals in Dubai and Bahrain, Dabbagh added.
Maaden plans to begin fertilizer exports by 2008 and aluminum shortly after that. It will seek bids for construction of the phosphate-related plants by early 2006, Dabbagh said and is talking to potential joint venture partners for the power and aluminum project.
The company is also preparing to partially sell off its gold mining unit, which produces around 300,000 ounces of gold a year.
“As far as we are concerned we are ready for privatization,” Dabbagh said.
The sale is scheduled to take place by the end of the year, subject to a Cabinet decision on timing and scale. “The government feels the public has the right to own its own resources and the best way to do it is to put it in an initial public offering and give 40-50 percent to the people. “They could privatize the whole company ultimately. At the beginning they want to put a good chunk of it into the market.”
Dabbagh said privatization of the remaining Maaden divisions “could be in three years, however there might be a desire by the government to complete the privatization earlier”.
