Saudi Arabia, Total Sign
Deal for $5-Billion Refinery
May 21, 2006 6:55 a.m.
Saudi Arabia and French energy giant Total SA on Sunday signed a tentative deal to build a 400,000 barrel-a-day export-oriented refinery in the Persian Gulf city of Jubail, the kingdom's state-run oil company Saudi Aramco said.
Saudi Aramco and Total agreed to form a joint-venture company, with each company holding a 35% ownership stake, according to the memorandum of understanding signed by the companies.
The companies plan to offer up to a 30% stake in the project — scheduled to begin service in 2011 — to the Saudi public, Aramco said.
The refinery is expected to cost at least $5 billion, analysts familiar with the deal have said.
Aramco will supply the refinery with all of the 400,000 barrels a day of Arabian Heavy crude. Both Aramco and Total, France's biggest oil company, will share in the marketing of the refined production, Aramco said.
An agreement for a 400,000 barrel-a-day refinery in the Red Sea coastal city of Yanbu is expected to be signed in the coming weeks between Aramco and U.S. major ConocoPhillips, Saudi officials have said recently. In March, Saudi Oil Minister Ali al-Naimi told reporters in Vienna that ConocoPhillips had submitted the best bid for the proposed Yanbu refinery.
The announcement Sunday is part of a big investment program being undertaken by Aramco and follows other recent announcements by the kingdom to build new or expand existing refineries in different parts of the world.
Aramco is planning to spend $50 billion over the next five years to boost refining capacity in Saudi Arabia and other parts of the world. Tight refining capacity in many countries has been a key driver behind high gasoline and oil prices.
At the end of April, Aramco and Royal Dutch Shell PLC announced that their U.S. oil refining joint venture Motiva will add 325,000 barrels-a-day of capacity to their existing facility in Port Arthur, Texas. The expansion would add to an existing 285,000 barrels a day of capacity and make the Port Arthur refinery the biggest in the U.S.
Aramco is also planning to build new refineries or expand existing ones in China, Indonesia and the Philippines.
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