Bloomberg News

Aramco-Dow Sadara Chemical Joint Venture May Tap Debt Market

October 08, 2011

(Updates to add Aramco, Dow CEO comments in third and fifth paragraphs.)

Oct. 8 (Bloomberg) -- The Sadara chemical joint venture being built by Saudi Arabian Oil Co. and Dow Chemical Co. may tap debt markets to help finance the project.

The venture will look at all sources of funding as “it’s a big project that needs a lot of debt,” said Khalid Al-Falih, chief executive of the state oil company also known as Saudi Aramco. The project will examine bond and sukuk markets.

Financing costs will be low because the two companies have a good reputation and “we will make sure it will stay low,” Al-Falih said at a ceremony in Dhahran, Saudi Arabia, today.

The plant will make 3 million tons of chemical products a year, generating about $10 billion worth of sales per annum, within a few years, he said earlier today in a speech. The multi-billion dollar joint venture will be the largest in Saudi Arabia and will make chemical products new to the Middle East.

Dow Chemical Chief Executive Officer Andrew Liveris said the project will create 14,000 new jobs in Saudi Arabia, 4,000 of which are from direct employment and the rest indirectly. Liveris said in Dhahran that he was not concerned about the possibility of cheap U.S. shale gas reserves affecting the profitability or competitiveness of products that Sadara will make. Sadara will use ethane gas for one-third of its feedstock and liquids for the rest, according to Al-Falih.

Aramco owns 65 percent of the Sadara venture and Dow Chemical the rest. Aramco plans to sell part of its stake in an initial public offering though not before late 2013, Al-Falih said. After the IPO, Aramco and Dow will hold each hold 35 percent of the project.

The Aramco chief executive said the Sadara venture has no plans to acquire small- or medium-sized chemical producers in Saudi Arabia and will “not crush existing producers.” The global market for petrochemicals and special chemical products is about $3 trillion a year, he said.

All 26 units of the Sadara project will be built in one phase and work is already underway preparing the ground. The overall cost will be less than $20 billion, Al-Falih said today.

--Editors: Stephen Voss, Claudia Maedler

To contact the reporter on this story: Wael Mahdi in Dhahran at wmahdi@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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