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PETRORabigh Project Formally Launched

Source: www.gulfoilandgas.com 3/19/2006, Location: Middle East

Representatives of Saudi Aramco and Sumitomo Chemical today broke ground on the PETRORabigh project and signed the final project financing documents to develop a large, integrated refining and petrochemical complex in the Red Sea town of Rabigh, on the Kingdom's west coast. In August, 2005, Saudi Aramco and Sumitomo Chemical signed an agreement to form PETRORabigh as a joint venture, following the successful completion of a joint feasibility study, during which both companies performed front-end engineering design and verified the viability of the project.

The joint feasibility study began on May 9, 2004, when Saudi Aramco and Sumitomo Chemical signed a memorandum of understanding to launch the effort. Subsequently, the joint venture was formed in September 2005. Concurrent with the feasibility work and early engineering activities, long-lead equipment and materials were identified and procurement efforts begun. At the same time, the major engineering, procurement and construction (EPC) contracts have been signed and awarded. Work on all the EPC contracts has started, including the construction work on site for the major units.

More recently, at a signing ceremony on March 2 in London, PETRORabigh signed financing agreements with Japan Bank for International Cooperation (JBIC), Public Investment Fund of Saudi Arabia (PIF) and 17 financial institutions in respect of facilities totaling US$5.8 billion. The facilities have been raised for the Rabigh Refinery and Petrochemical Project to be developed. When completed in late 2008, the PETRORabigh project will be one of the largest integrated refining and petrochemical projects ever built at one time. A total of 2.4 million tons of petrochemical solids and liquids, along with large volumes of gasoline and other refined products, will be produced. The project has also created third-party investment opportunities in Saudi Arabia's private sector for utilities and other related infrastructure. It presents an opportunity for increased industrialization in Saudi Arabia and a platform for more diversified downstream conversion industry development in the Kingdom. The project represents a concrete example of the Kingdom's strategy of attracting foreign investment to expand its economy and provide increased job opportunities for Saudi nationals. It is also consistent with the objective of creating opportunities for private local investment in service and other related industries.

Through this joint venture, Sumitomo Chemical, a major producer of polyolefins, will secure a reliable and stable supply of feedstock to strengthen its medium- and long-term competitiveness. The project constitutes an important step forward in enhancing the global competitiveness of the company's petrochemical operations. Although Sumitomo Chemical has been operating a large-scale complex in a petroleum-refining center, Singapore, since 1984, the Rabigh project is the company's first step to establish a foothold in an oil and gas-producing country, thereby assuring stable feedstock supply for its operations. The project will, therefore, open a new stage in Sumitomo Chemical's worldwide business strategy.

Background
Saudi Aramco currently owns and operates a topping refinery at Rabigh with a nominal crude distillation capacity of 400,000 barrels per day. The existing site and infrastructure will serve as the base platform for the development of the Rabigh Project. Saudi Aramco studied various upgrade alternatives for the refinery since the company became its owner in June, 1995. These studies led to the conclusion that the best alternative to capture the synergies of the existing large crude capacity, together with significant investment in site and infrastructure, would be to expand the site into a large, fully-integrated refinery and petrochemical complex.

The Project
In addition to contributing its world-class capabilities in hydrocarbon production and refining, and its decades-long experience of collaboration with the Kingdom's petrochemicals industry, Saudi Aramco will supply the Rabigh Project with crude oil, ethane and butane and will market the refined products produced by PETRORabigh. Sumitomo Chemical will provide its extensive and proprietary petrochemical technology and marketing base to the venture. The plans for the project include, as the centerpiece of the expanded site, a high olefins yield fluid catalytic cracker complex integrated with a world scale, ethane based cracker, producing approximately 1.3 million tons per year of ethylene, 900,000 tons per year of propylene, and 60,000 barrels per day of gasoline as well as other refined products.

Downstream petrochemical units are to be included to convert all of the olefin production to downstream products. The following olefin derivative units are included in the project configuration:

  • Sumitomo's proprietary Easy Processing Polyethylene (EPPE) unit.
  • An LLDPE unit.
  • An HDPE unit.
  • Two polypropylene units, producing a full range of polypropylene polymers - homopolymer, block copolymer, random and terpolymer.
  • A propylene oxide unit utilizing Sumitomo's proprietary technology.
  • A Mono-Ethylene Glycol (MEG) unit.
  • A Butene-1 unit.


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