Design costs for Aramco, Dow petrochemicals complex top $700m

01 July 2010

Senior Aramco executives want designs finalised by end of July

Saudi Aramco and the US’ Dow Chemical have spent $700-800m on planning for a new petrochemicals complex in the kingdom despite not having awarded any construction contracts on the scheme.

Sources close to the energy giant and the US major tell MEED that costs for feasibility studies, front end engineering and design (Feed) studies, and other consultancy work on the project, which may eventually cost more than $15bn in total, have reached such a high level that Aramco’s senior management has demanded a final plan for the scheme by the end of July.

“If they keep on spending on design, which they have to, design costs will hit almost $1bn,” says one engineering executive with intimate knowledge of the project. “That is a lot of money for a project where there has been no construction work, and I think Aramco is concerned.”

The project was originally known as the Ras Tanura Integrated Refinery and Petrochemicals (RTIP) project. Earlier in 2010, however, Dow and Aramco started planning to move the scheme to the Jubail Industrial City, further north along the Gulf Coast. The partners are currently working on an altering the scope of the project.

The pair signed a memorandum of understanding to develop the petrochemicals complex in May 2007 and appointed the US’ KBR as the project management consultant on the scheme in June of the same year. KBR firm was later appointed the main Feed contractor on the scheme.

In June 2009, MEED reported that the project faced delays of up to 12 months as the partners were struggling to complete studies and designs for the project and had brought in the US’ Foster Wheeler (FWC) to help with the Feed for the project.

At the time, engineering executives told MEED that the design of the project alone would take 3-4 million man hours of work, far in excess of what the partners had planned for.

The partners are in the process of negotiating a contract for the use of land at Jubail Industrial City 2, and hope to tender a contract covering site preparation in October with tenders for the main engineering, procurement and construction (EPC) contracts on the scheme scheduled for 2011.

Aramco and Dow declined to comment.

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