Saudi Aramco, Dow to sign new plant MOU soon

DAMMAM, Saudi Arabia (Reuters) - Saudi Aramco expects to sign an agreement with U.S. company Dow Chemical Co (DOW.N) for a $15 billion petrochemical plant at Ras Tanura in early 2007, an Aramco official said on Sunday.

Aramco also expects to raise debt of upwards of $10 billion for the project, in which it plans to float 30 percent to the public, said project official Fayez al-Sharef.

In July the state oil firm chose Dow Chemical to discuss a partnership to set up, own and operate a plant for chemicals and plastics near the 550,000-barrels per day Ras Tanura oil refinery.

"We are in the middle of negotiations for the memorandum of understanding with Dow Chemical," Sharef told an energy forum in the eastern city of Dammam. "Early next year we will finalize that and then the joint venture agreement will follow."

He later told reporters the initial public offering for 30 percent of the project would only take place after the completion of front end engineering design (FEED) for the project as well as the financing.

He said the FEED contract would be awarded early next year and that construction would not start before 2009.

Sharef said the project, slated for startup in the second quarter of 2012, was expected to cost in excess of $15 billion.

"A substantial project financing effort will be required to support the large investment requirement. The expectation is we will raise debt upwards of $10 billion," he said.

The core units of the project are an ethane/naphtha-based cracker, a high olefin fluid catalytic cracking complex, an aromatics complex and a chlor-alkali complex. It involves around 30 downstream process units producing more than 300 different products, he said.

Saudi Arabia, the world's top oil exporter, is expanding its industrial sector in a bid to diversify its oil-based economy.

Aramco is also engaged in a $10-billion refining and petrochemicals joint venture project with Japan's Sumitomo Chemical (4005.T).

Saad al-Dosari, CEO of the PetroRabigh project, told the forum that the first phase of the complex was scheduled to start up in the third quarter of 2008. He said an IPO for the project would take place "hopefully soon".

Saudi Arabia's oil minister had said in March an IPO for at least 25 percent of the project would take place before the end of 2006.

PetroRabigh will increase gasoline production capacity at the 400,000 bpd Rabigh refinery by 60,000 bpd alongside an ethane-fed petrochemical cracker with 1.3 million tonnes a year of ethylene capacity.