Saudi-Japanese Oil Project to Cost $8 Billion

Sumitomo Chemical Company, a leading Japanese chemical manufacturer, said the total cost of the major petrochemical project in Saudi Arabia is expected to double to about $8 billion due largely to higher steel prices. Initially, total investment in the oil refinery and petrochemical plant being constructed in a joint venture with Saudi Aramco was projected at $4-3 billion, but with rising prices of steel and other materials, the costs indicated by engineering firms exceeded initial estimates.New facilities not included in the initial plans, such as power generation and desalination plants, will also be built.

Sumitomo Chemical and Saudi Aramco agreed in May of last year to establish a 50-50 joint venture. While purchasing an existing large oil refinery in Rabigh on the Red Sea coast, this venture is to refine ethane, a type of natural gas, to begin start-to-finish production of such products as ethylene and polyethylene. Starting in 2008, the unit is to output 1.3 million tons of ethylene, a basic material for petrochemical products, and 750,000 to 900,000 tons of the general-use plastic polyethylene each year.