Engineering and construction firms in Saudi Arabia are waiting for signals that the second-stage expansion of the massive PetroRabigh petrochemicals complex is still moving ahead.
Saudi Aramco and Japan’s Sumitomo Chemical Company, the partners behind the project, have still not yet made a final investment decision on the project and a second feasibility study on the project is understood to be ongoing.
Bids for seven engineering, procurement and construction (EPC) packages were submitted at the end of October 2011 and are still being evaluated. “We should get a little more clarity in the next few weeks,” says one source in the kingdom. “The deadline for EPC bids is coming up, so it will be interesting to see if Aramco extends the bid bonds or if they decide to retender, inviting lower-cost engineering firms.”
In a research report published by the UK’s HSBC on 17 February, the bank raised concerns about the project. “We believe the Rabigh 2 chemical expansion project is unlikely to be operational before 2016 and may even be shelved,” says the report. It particularly questioned the ability of Sumitomo to fund its equity commitments to the expansion saying that “Sumitomo may be hard-pressed to make another heavy commitment to an asset that has generated a cumulative net loss of SR1.2bn ($320m) since the first quarter of 2009”.
“There is not yet any suggestion of cancellation, but the configuration is still under consideration,” says one source close to the project.
The project is already behind schedule after the joint-venture partners decided to reconfigure the project and launch a new feasibility study. Financing for the project is also unlikely to be put in place over the next 12 months as Aramco’s current focus is the $20bn Sadara Chemical Company project, a joint venture with the US’ Dow Chemical. Aramco has already started the process of trying to raise project finance for the Sadara scheme, which is expected to take up most of the next 12 months.
Saudi Aramco said in a statement that it, “emains committed to the realisation of the PetroRabigh expansion project and is engaged with Sumitomo Chemical to optimise project execution in a manner that will ensure the project will achieve the aspirations of all of PetroRabigh’s shareholders and other stakeholders.”