April 13, 2009 / 6:35 PM / 10 years ago

UPDATE 1-Aramco delays Ras Tanura refinery expansion-sources

(Updates throughout, adds detail on Dow joint venture)

DUBAI, April 13 (Reuters) - State oil giant Saudi Aramco has delayed plans to expand capacity by 400,000 barrels per day at its Ras Tanura refinery, industry sources said on Monday.

The $8-billion project is one of five planned in the kingdom to boost domestic refinery capacity by up to 1.7 million barrels per day from 2.096 million bpd. Aramco has already delayed two of those projects as it looks to drive down costs.

“Aramco has sent out an official letter to potential bidders saying the project was deferred,” one industry source told Reuters.

A source from another company planning to bid for construction contracts for the Ras Tanura expansion project said it had also received notification of the delay.

An Aramco spokesman declined to comment.

The refinery’s expansion is to help meet both rising domestic demand and to supply feedstock to a giant petrochemical joint venture between Dow Chemical Co DOW.N and Aramco to be built nearby.

That plant, expected to cost more than $20 billion, would be one of the largest single petrochemical plants to be built in the world.

A third source on Monday said the petrochemical project had also been delayed. Completion of preliminary design and engineering for the petrochemical plant would take until the first or second quarter of 2010, from the initial target of end 2009.

DELAYS

Aramco gave no reason for the delay to the Ras Tanura refinery expansion in the letter to potential bidders, nor a new timeline, the sources said. Last year, Aramco said the refinery would start production at the end of 2012.

Aramco has delayed two other 400,000 bpd refinery projects at Jubail and Yanbu as it wants contractors to revise prices to reflect the slump in the cost of raw materials since the global economic slowdown took hold.

Potential bidders had expected to receive invitations to bid for the Ras Tanura construction packages in May.

The expansion would be broken down into five packages. They would be for a crude unit and a vacuum distillation unit, a diesel hydrotreater, a continuous catalyst regenerator, a sulphur recovery unit and for utilities and tanks.

The project would take refining capacity at Ras Tanura to 950,000 bpd. The existing plant has capacity of 550,000 bpd and is already the largest refining complex in the Middle East. For a FACTBOX on Saudi refining plans double click on [ID:nLD631332] (Reporting by Dubai newsroom)

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