Saturday, Jan 14, 2012
DHAHRAN , Saudi Arabia (Dow Jones)--A joint venture refinery project planned by state-owned Saudi Arabian Oil Co., or Aramco, and China Petrochemical Corp. (SNP), or Sinopec Group, will cost $8.5 billion if the capital is provided by both partners, Saudi Aramco chief executive Khalid al-Falih said Saturday.
But the costs could be higher if the two partners decide to finance the project using debt, al-Falih said.
"The cost of the project is $8.5 billion today and that's assuming the capital is provided by both partners," al-Falih told reporters, soon after signing an agreement with Sinopec to develop a 400,000-barrel-a-day oil refinery at Yanbu, on the Saudi Red Sea coast.
"We will enter into discussions about what is the optimal capital structure. And if we choose to finance the project there will be debt and the cost of debt will be capitalized, and the cost of the project can grow above $8.5 billion," al-Falih said. If borrowing is used, total costs could rise to $10 billion, he said.
Sinopec Group will hold a 37.5% stake in the project, known as Yasref, while Saudi Aramco will own 62.5%. The refinery is due to start operations in 2014. Sinopec Group is Asia's biggest oil refiner by capacity.
U.S. oil major ConocoPhillips (COP) last year pulled out of the Yanbu project after deciding to cut back on refining and marketing activities.
The Aramco-Sinopec deal marks the latest step by China and Saudi Arabia to strengthen energy ties.
-By Summer Said, Dow Jones Newswires; +966-546-842373; summer.said@dowjones.com
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
14-01-12 1057GMT
