Saudi Aramco to manage Jizan refinery project construction

09 February 2010

State oil firm abandons plans to attract foreign investor to $7bn project

Saudi Aramco will take responsibility for the construction of a $7bn refinery at Jizan in the south of the country after plans to attract a foreign investor on the scheme were shelved, according to sources close to the project.

Only two consortiums, led by local firms National Industrialisation Company (Tasnee) and the Arabian Peninsula Company for Industrialization & Oil Services, submitted proposals to build, own and operate the 400,000-barrel-a-day (b/d) facility to the country’s Petroleum & Mineral Resources Ministry during a 7 November bid round.

The ministry decided in January that the proposals were too costly and the contractors too inexperienced, according to a senior executive with close ties to Aramco. The state oil firm has subsequently been asked to oversee the construction and operation of the plant.

Riyadh may also have had concerns over the bidding companies’ ability to finance the plant, adds Sadad al-Husseini, a local industry analyst and former Aramco executive.

“It is a very expensive proposition and financing is not very easy to get at the moment,” he says. “There are also issues relating to building the plant, as Jizan is very remote and there is no built-up infrastructure.”

No timeline has been set for the construction of the refinery, which was originally due to start production in 2013. Al-Husseini says it could be 2015 before it comes on stream.

Tasnee and Arabian Peninsula Company declined to comment.

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