JEDDAH: Saudi Aramco has been entrusted with the task of building and financing the $10 billion Jazan refinery, which will have a capacity of 250,000 to 400,000 barrels per day, Minister of Petroleum and Mineral Resources Ali Al-Naimi announced Tuesday.
He said the Saudi oil giant would carry out the project quickly, adding that Custodian of the Two Holy Mosques King Abdullah had approved the plan to commission the state-owned company to build the refinery, one of the major projects to be undertaken at Jazan Economic City.
Al-Naimi’s announcement came after eight Saudi firms and 42 international oil companies were short-listed for the tender.
“The Ministry of Petroleum and Mineral Resources appreciates and values the companies that made a serious attempt to compete vigorously for the project’s license,” Al-Naimi said.
“But the government, considering its current capacity and ability to ensure the establishment of this important development project in Jazan, has commissioned Saudi Aramco to implement and finance the project wholly,” the minister said.
The bidding process for the Jazan refinery project was delayed several times. The Kingdom has struggled to attract foreign interest in the project as the refinery is far from Saudi oil and gas fields.
Tuesday’s surprise announcement came after Al-Naimi said last month he expected the winner of the contract would be declared soon. King Abdullah approved the project in 2006 as part of a wider development plan for the southern province.
Saudi Arabia had hoped the refinery would be built and owned entirely by the private sector, a first in the Kingdom. But the plan failed to generate interest from foreign investors, who were concerned the cost of supplying crude to the plant could make it unprofitable in the future. Refineries elsewhere in the Kingdom are fully owned by Aramco, or by joint ventures between Aramco and international energy firms.
“Despite their industrial experience and strong interest, none of the Saudi companies is in a position to execute such a vast program,” said Sadad Al-Husseini, a former top executive at Aramco.
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, said sources. “The project is not simple, it requires technology, special techniques,” Saleh Al-Nazha, president of Tasnee, told Reuters. The bidders made some proposals to make the project more profitable, such as building it with an integrated petrochemical plant.
— With input from agencies
