Dow, Aramco continue Ras Tanura project talks

04 April 2007 09:44  [Source: ICIS news]

By Matt Kovac

SINGAPORE (ICIS news)--Protracted negotiations between Saudi Aramco and Dow Chemical over a world scale petrochemical project are progressing, easing speculation that talks were stalling.

"Negotiations between Saudi Aramco and Dow Chemical are going well, a Dubai-based spokeswoman for the US chemical giant said on Monday.

"Both companies are very enthusiastic about the project, which will be one of the largest plastics and chemicals production complexes in the world."

Both Saudi Arabia-based Aramco and Dow were expected to make a detailed announcement about the size of the project, timing and costs in April.

But a delay had fuelled speculation that spiralling construction costs may have blunted talks between both sets of management and suppliers who are bidding for project management services contracts.

Research by consultants Nexant ChemSystems showed that a world scale ethylene cracker now costs $4bn to build, compared with around $1.5bn in 2000 highlighting the challenging economics.

"It’s a fact that the amount of cash needed for capital expenditure across all industries is increasing," said Walid Amri, manager of project finance at United Arab Emirates-based Mashreqbank.

The Dow spokeswoman said more details of the project would be forthcoming as decisions are finalised and was confident that talks would progress.

"Once a memorandum of understanding is signed and approved by the two companies’ boards of directors, the next phase will be the feasibility study, front-end engineering and design," the spokeswoman added.

No further details were disclosed and no schedule was given for further announcements on the project, which will be integrated with the existing eastern Saudi-based Ras Tanura 550,000 bbl/day refinery complex.

Saudi Aramco announced in July 2006 that it had selected Dow as a potential partner to engage in exclusive negotiations concerning the joint venture.

By: Matt Kovac
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