May 21 2006 |
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Saudi Arabia agrees $6bn oil refinery deal with Total
21 May 2006
Saudi Arabia has embarked on an ambitious plan to boost its oil refining capacity by joining forces with Total, the French energy company, to build a $6bn (?4.7bn GBP3.2bn) refinery on its Persian Gulf coast.
The memorandum of understanding between Total and Saudi Aramco, the state-owned oil company, is the first step of a process aimed at increasing the kingdom's refining output by as much as 60 per cent in the next five years.
Aramco is also in talks with ConocoPhillips, the US oil group, to build a large-scale refinery on Saudi Arabia's west coast.
Abdallah Jum'ah, Saudi Aramco's chief executive, said on Sunday that his company's plans would help ease the burden.
It is difficult for companies operating in the US and Europe to build new refineries because of environmental concerns. Western companies also worry about making heavy investments in a business that has fallen prey to cyclical downturns in the past.
Buoyed by the oil price, Saudi Arabia has earmarked $50bn to invest in its energy industry, including the plan to increase refining capacity from 2.1m barrels of oil per day (b/d) to 3.4m by 2011.
The joint venture with Total will create a 400,000 b/d facility at the industrial city of Jubail on the east coast.
The Conoco talks are aimed at building a plant with the same capacity at Yanbu on the Red Sea coast.
Both facilities will create petroleum and diesel products for export to the US and Europe and other markets.
Aramco and Total have formed a company to build the new plant, with both owning a 35 per cent stake.
They plan to sell the remaining 30 per cent to the Saudi public through a share offering. Saudi Arabia is keen to promote public ownership in new refining ventures.
ExxonMobil, the US oil group, and Royal Dutch Shell, its Anglo-Dutch rival, already operate joint refining ventures in the kingdom.
James Boxell in London
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