RIYADH: Saudi Arabia may commission the construction of a petrochemical plant with the planned new Jazan oil refinery in the Kingdom, industry sources said.
At least one bidder in a tender for the refinery has submitted a proposal that would include building a petrochemical plant, one source said.
The project would cost at least $10 billion, the source said. The Ministry of Petroleum and Mineral Resources received two bids to build, own and operate the refinery in a tender that expired on Nov. 7.
The Jazan refinery, which would have a capacity of 250,000 to 400,000 barrels per day, would be the first Saudi oil refinery to be 100 percent privately-owned.
Refineries elsewhere in the Kingdom are fully owned by state oil firm Saudi Aramco, or by joint ventures between Aramco and international energy firms.
“The ministry’s permit is to build a refinery, but the economic feasibility studies of the project suggest that it would be better to include a petrochemical plant,” a source familiar with the bidding process said. “But they must choose well which products they are going to produce.”
The best option for a feedstock for the plant would be naphtha produced at the oil refinery, he said.
The bidding process for the Jazan refinery project has been delayed several times. The Kingdom has struggled to attract foreign interest in the project as the refinery is so far from Saudi oil and gas fields that some industry observers have questioned whether the plant could be profitable.
Minister of Petroleum and Mineral Resources Ali Al-Naimi said last month he expected the winning bid to be announced soon. Al-Naimi said then that there were opportunities at the plant for petrochemical production.
A combined refinery and petrochemical plant would make more profit than a simple refinery, a second source said.
Saudi Arabia is developing its petrochemical industry and aims to make it one of the world’s largest. But the Kingdom is struggling to meet rapidly rising domestic gas demand, so it aims to boost its petrochemical production by adding new plants which will rely less on gas and more on oil products for feedstock.
Aramco plans to develop major integrated refinery-based chemical complexes through joint ventures with US Dow Chemical in Ras Tanura, with France Total in Jubail, and US ConocoPhillips in Yanbu.
The Kingdom aims to boost petrochemical output to 80 million tons per year in 2015 from 60 million tons.
Saudi industrial group Tasnee, Saudi Nama Chemicals Group and Saudi Advanced Refineries and Petrochemicals Co. (ARPC) formed one of the consortiums that bid for Jazan.
Corral Petroleum Holdings AB teamed up with Jeddah-based Arabian Peninsula Co. for Industrialization and Oil Services in a second consortium, sources aware of the matter said.
Corral, a Swedish-registered firm, and Arabian Peninsula are both owned by Saudi businessman Mohammed Al-Amoudi.
In 2007, the ministry said 45 foreign firms and eight Saudi companies had been prequalified for the tender. Saudi Aramco was listed as one of the prequalified companies.
“If the government fails to reach an agreement with bidders, its last resort would be the state oil company Aramco? This could be an option,” one source said.
The government was looking at tax breaks for companies participating in the project.
