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Oil & Gas Journal

Uchenna Izundu
International Editor

LONDON, May 16 -- Saudi Aramco and Total SA will construct a 400,000 b/d full-conversion refinery in Jubail city on Saudi Arabia's Persian Gulf coast. Operations are expected start in 2012.

The refinery, reported to cost over $10 billion, will convert Arabian heavy crude to diesel, jet fuels, 700,000 tonnes/year of paraxylene, 140,000 tonnes/year of benzene, and 200,000 tonnes/year of polymer grade propylene. Both companies will share the marketing of the refinery's production and export products to Asia, the Middle East, and Europe, where demand for diesel is growing.

The refinery initially was estimated to cost $6 billion but labor shortages and scarcity of resources have pushed up the cost of major oil and gas projects worldwide. Neither company gave a cost estimate. Jubail refinery, first announced in May 2006, is one of Saudi Arabia's initiatives to increase domestic refining capacity by 1.6 million b/d from 2.1 million b/d.

In the third quarter of this year, Total and Saudi Aramco will form a joint venture company in which Saudi Aramco will initially own 62.5% and Total will own the remaining 37.5%. "Subject to required regulatory approvals, the parties are planning to offer 25% of the company to the Saudi public, while the two founding shareholders each intend to retain a 37.5% ownership interest," the companies said in a joint statement.

They will invite companies to bid for the refinery's construction in June and plan to award contracts during first-quarter 2009. Orders for long-lead items will be placed as early as third-quarter 2008.

Financial closing will end in early 2009.

Contact Uchenna Izundu at uchennai@pennwell.com.