The US’ Dow Chemical Company is proceeding with all three of its major projects in the region, despite rising construction and material costs and a sustained liquidity crunch.
Dow has projects planned in Saudi Arabia, Libya and Oman, in addition to an existing joint venture in Kuwait.
The largest of the three schemes is the $20bn-plus Ras Tanura refinery upgrade and integrated petrochemicals complex, which Dow is developing with Saudi Aramco. The project will upgrade the refinery to produce almost 1 million barrels a day and integrate it with a petrochemicals facility.
The size of the project has prompted fears that it could fall victim to the substantial escalation in capital costs in recent years. In addition, the tightening of the global credit markets has sparked concerns over raising the huge amount of debt required.
However, Dow is optimistic. “We are in the process of developing our procurement strategy, which will take into account the likely volatility on the EPC [engineering, procurement and construction] portion of the project,” says John Dearborn, president for the Middle East, India and Africa at Dow. “On the financing side, we are in the process of selecting a financial adviser.
“Every aspect of this project is formidable. But if you look at Aramco and Dow, we believe there are no two better companies in the world to make this happen”
Aramco and Dow are scheduled to make a final investment decision in mid-2009, following the completion of a two-year front-end engineering and design (FEED) process by the US’ KBR.
“We said we would take about two years to look at the project and do the FEED,” says Dearborn. “That is all running on track. The middle of next year is when the investment decision will come. That will also be when we will see the capital investment numbers.”
Progress is also being made on Dow’s two other projects in the region. In Libya, where the firm has an initial agreement with the National Oil Corporation (NOC) to expand and operate plastics manufacturing facilities at Ras Lanuf, it is also hoping to agree a final investment deal soon.
“We are still in discussion with NOC,” says Mike Gambrell, executive vice-president, basic plastics and chemicals manufacturing and engineering at Dow.
“We are through 90 per cent of agreements right now. The expec-tation is we will close in the near future.”
In Oman, where Dow is a partner on the Sohar olefins complex planned by Oman Petrochemical Industries Company (Opic), the hope is that the project can be revived after it was put on hold last year following the submission of EPC bids that were well over budget (MEED 22:6:07).
“The Opic board has asked the shareholders to go back and look at the scope of the project in light of the up-turn in material and labour costs,” says Gambrell. “So each partner is looking at the scope right now to see what really makes sense. We still expect the project to progress.”