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UPDATE: Dow Chemical, Aramco To Build $20B Saudi Chemicals Complex

Monday, Jul 25, 2011

(Recasts. Adds Aramco CEO comment in paragraph 8; details and background throughout.)

DUBAI (Zawya Dow Jones)--Saudi Arabian Oil Co. and Dow Chemical Co. (DOW) said Monday they had approved a joint venture to build an estimated $20 billion chemicals complex in Saudi Arabia, strengthening the country's role as a leading petrochemical export hub.

Construction on the project, to be located at Jubail on Saudi Arabia's Persian Gulf coast and to be named Sadara Chemical Co ., is scheduled to begin immediately, with first output due to come on line in the second half of 2015, Aramco and Dow said in a joint emailed statement. All 26 manufacturing units in the complex are expected to be fully operational in 2016, they said.

The complex was first planned in 2007 for the port of Ras Tanura, also on Saudi's Gulf coast, but the companies said last year they were relocating the project to Jubail Industrial City. Front-end engineering and design, or FEED, works, which were initiated in 2007, have been completed, the companies said.

"This premier partnership is ... designed to capture growth in the rapidly growing sectors of energy, transportation and infrastructure, and consumer products," Dow Chief Executive Officer Andrew N. Liveris said in the statement.

The two companies said they estimated that Sadara would generate annual revenue of roughly $10 billion within a few years of operation. Sadara will become an equal joint venture between Aramco and Dow after an initial public offering. The $20 billion investment for the project includes third-party contributions in the form of project finance, according to today's statement.

Saudi Arabia, the Middle East's biggest economy, has one of the world's largest petrochemical industries, based on the ready availability of low-priced ethane feedstock derived from natural gas.

State-owned Aramco is the world's largest energy company, with the capacity to produce 12.5 million barrels a day of crude oil. The Sadara project represents Aramco 's second major investment in a large-scale petrochemical complex in the kingdom, where it is already involved in a joint venture with Sumitomo Chemical Co. (4005.TO) at Rabigh on the Red Sea.

Aramco 's Chief Executive Officer Khaled Al Falih said the joint venture with Dow would "enable significant development in the country's conversion industry, thereby supporting Saudi Arabia's ambition to be a magnet for downstream manufacturing investments that add significant value to the kingdom's hydrocarbon resources."

Sadara will produce polyeurethanes, propylene oxide, propylene glycol, elastomers, linear low-density polyethylene, low density polyethylene, glycol ethers and amines.

Dow, the largest U.S. chemical producer by revenue, has been placing greater emphasis on specialty chemicals and materials. The company, which reports its second-quarter results later this week, has shown an improvement in earnings lately due to stronger demand and price increases.

Dow shares closed Friday at $35.58 and were inactive premarket. The stock is up 4.2% since the start of the year.

-By Mia Lamar and Angus McDowall of Dow Jones; +971-4-446-1685, angus.mcdowall@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

25-07-11 1310GMT