Energy: Riyadh pays price for going private

31 July 2008
Amid speculation that there is little interest in the Jizan refinery, Riyadh is offering sweeteners to oil majors.

Almost two years after Saudi Arabia’s Petroleum & Mineral Resources Ministry announced plans for a new export refinery at Jizan, the industry remains largely in the dark about the progress of the venture.

Riyadh’s decision to make the private sector handle the funding, construction and operation of a world-scale refinery without the assistance of its own national oil company, Saudi Aramco, marked a first for the kingdom.

But after missing three deadlines to reveal the basic scope of the refinery to oil majors, the ministry, which has little history of executing projects on its own, has begun to lose some of its own credibility.

The most recent hold-up has been attributed to the kingdom’s highest oil body, the Supreme Petroleum Council, which has to agree to the details of the venture before it can proceed.

The delays are expected to push back the start date until 2014, while major questions over who will be responsible for the construction of a pipeline to feed the refinery remain unanswered.

Now, amid speculation that there has been little interest from international oil companies (IOCs) in the project, Riyadh has finally taken action, offering a set of sweeteners to attract investors. While the precise nature of the incentives has yet to be made public, the fact they are being considered at all is an unusual step for an energy-rich country, in which oil majors are supposedly desperate to be involved.

Any further delays or doubt over the economics of the scheme following the release of project details in September could prove terminal for a refinery that is stuttering in comparison with Aramco-led ventures in the kingdom.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications