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Aramco, Sumitomo Face Higher Costs for Plant Expansion

Source: Reuters 5/14/2014, Location: Middle East

The expansion of a petrochemicals complex in Saudi Arabia owned by Saudi Aramco and Sumitomo Chemical is now expected to cost 32 billion riyals ($8.5 billion), higher than previously estimated, the joint-venture said.

The expansion plan, which aims to increase output from the plant as well as introduce higher-margin products, was originally estimated to cost around $7 billion.

But in a stock exchange filing on Wednesday, PetroRabigh said: "Total investment in the project is around 32 billion riyals according to current forecasts."

The statement did not give any reason for the change in price, but said the project - situated on Saudi Arabia's Red Sea coast - was still due to come online during 2016.

A company spokesman declined to provide further information.

The joint-venture, known as PetroRabigh, has had a number of setbacks because of maintenance issues in 2013 at its existing facility including power cuts and an outage at its ethane cracker.

A new marketing deal with its parent firms in December has helped alleviate the pressure on profits from the maintenance problems. Both Aramco and Sumitomo have also made firm commitments to the expansion project, known as Rabigh II, since giving it the final go-ahead in 2012.

Under the plan, an existing ethane cracker will be expanded and a new aromatics complex built that will make higher-value petrochemical products and have a capacity of 1.72 million tonnes per year.

PetroRabigh's existing plant can produce an annual 18 million tonnes of refined products and 2.4 million tonnes of petrochemical products.

Rabigh II will produce ethylene propylene rubber (EPR), thermoplastic polyolefin (TPO), methyl methacrylate (MMA) monomer, polymethyl methacrylate (PMMA) among other products.

To fund construction of Rabigh II, both Sumitomo and Aramco will put in around 100 billion yen, with the rest coming from project financing, Sumitomo Chemical President Masakazu Tokura told reporters in November.

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