Friday, May 25, 2012

-- Sumitomo Chemical will proceed with its Rabigh Phase 2 petrochemical joint venture with its partner, Saudi Aramco

-- The partners estimate a total investment of about $7 billion

-- The second phase of the project will use 30 million standard cubic feet a day of ethane, and about 3 million tons a year of naphtha as feedstock

(Recasts, adds comments from Sumitomo Chemical spokesman in 6th paragraph, background) 


 
   By Mari Iwata 
   Of Dow Jones Newswires

TOKYO (Dow Jones)--Sumitomo Chemical Corp. (4005.TO) and Saudi Arabian Oil Co., or Saudi Aramco--the main partners in the Rabigh petrochemical project--have decided to proceed with the second phase of the project, with an estimated investment of about $7 billion.

Sumitomo Chemical said Friday it will move ahead with the project based on the findings of a feasibility study. The partners expect continued economic growth in China to absorb output from the additional production capacity.

Sumitomo Chemical and Saudi Aramco each hold 37.5% in Rabigh Refining and Petrochemical Co., the project company. The remainder is owned by general investors.

The announcement is the latest example of cooperation between Japan and its largest crude oil supplier, Saudi Arabia. Tokyo worries about a possible halt of crude oil supply from Iran, while Riyadh seeks to diversify its businesses.

Sumitomo Chemical said the second phase of the project involves expanding an existing ethane cracker and building a new aromatics complex. The project will use 30 million standard cubic feet a day of ethane and about 3 million tons a year of naphtha as feedstock to produce a variety of high-value-added petrochemical products.

The new facilities are slated to gradually come on line from the first half of 2016. A Sumitomo Chemical spokesman said it plans to sell the products in China and other Asian countries.

In addition to projects such as Rabigh 2, a growing number of Japanese-Saudi joint-venture factories--from automobiles to power cables--have begun commercial operations in recent months.

In March this year, Japan's Mitsui Chemicals Inc. (4183.TO) said it planned to produce urethane materials in Saudi Arabia with Saudi Basic Industries Corp., the Middle East's largest materials maker. Last year, Japanese steel maker Yamato Kogyo Co. (5444.TO) bought Saudi Arabia's United Gulf Steel Mill Co.

Japan and Saudi Arabia are in engaged in talks toward an investment treaty.

-By Mari Iwata, Dow Jones Newswires; 813-6269-2798; mari.iwata@dowjones.com

(END) Dow Jones Newswires

25-05-12 0918GMT