Bloomberg News

Aramco Partner Sumitomo Misses Rabigh Chemical Decision Deadline

January 12, 2012

Jan. 12 (Bloomberg) -- Saudi Arabian Oil Co.’s partner in a petrochemical joint venture, Sumitomo Chemical Co., missed the Persian Gulf company’s year-end target deadline for deciding on whether to invest $6 billion to $8 billion to enlarge the plant.

Sumitomo Chemical hasn’t yet decided whether to go ahead with the project to expand output at Rabigh Refining & Petrochemicals Co., Mika Sasaki, a spokeswoman for the Japanese company, said today.

Petro Rabigh, as the venture is known, plans to add units to boost production capacity to 3.7 million tons of petrochemicals a year. Khalid Al-Falih, head of the state-owned oil producer known as Saudi Aramco, said in December 2010 he was expecting to “soon be announcing further progress” in developing chemical plants with partners. Saudi Aramco and Sumitomo were expected to make a final investment decision on the plan by the end of last year, Petro Rabigh CEO Ziad al- Labban said in an Oct. 2 interview.

Persian Gulf oil producers such as Saudi Arabia and the United Arab Emirates are diversifying their economies to include industries such as petrochemicals to help add jobs. Saudi Aramco aims to expand petrochemical production alongside its refineries to create more high-value products from its crude.

Petro Rabigh, in which Aramco and Sumitomo each own 37.5 percent stakes, produces 1.3 million tons of ethylene a year. The venture received engineering and construction bids for the project last year and was set to award work contracts this year.

Feasibility Study

Sumitomo spokesman Hironori Mizushima said Dec. 15 that the company was still conducting a feasibility study on the project. The study was delayed due to financial constraints from its originally scheduled completion date of the third quarter 2010, he said. Sumitomo aims to complete the review “soon,” Mizushima said, without providing a new target date for the completion.

Prince Faisal bin Turki, an adviser at the Saudi oil ministry, called on his nation’s petrochemical producers to speed the implementation of new projects and the creation of jobs in a speech to a regional industry forum in December.

Saudi Arabia must make “quantum leaps in both the size and the quality of the kingdom’s chemicals industry” by expanding into new products, Abdullatif Al-Othman, Saudi Aramco’s vice president of finance, said in a speech in Al Khobar June 14.

--With assistance from Yuji Okada in Tokyo. Editors: Andrew Noel, Tom Lavell

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net; Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net.


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