Aramco, Dow petchem plant to cost $22bn

REVISED COST: Tight supplies are driving up costs for energy projects worldwide. (Getty Images)

The estimated cost of Saudi Aramco and US firm Dow Chemicals' giant Ras Tanura petrochemical plant is around $22 billion and may rise further, an Aramco official working on the project said on Monday.

Dow's investment in the plant was expected to represent the largest single foreign investment in Saudi Arabia's energy sector.

Tight equipment and labour supplies are driving up costs for energy projects worldwide, causing delays and even cancellations. The plant was on schedule to begin production in 2012, the Aramco source said.

"This is still on track," the official, who declined to be named, said on the sidelines of an energy conference in Bahrain. He said Aramco estimates the cost at around $22 billion.

Aramco and Dow have never made public the estimated cost of the plant, but industry sources last year pegged the cost at above $20 billion.

Aramco will have a revised estimate for the cost of the plant in September next year when the plant's initial design should be completed, he said.

"All the projects in the Middle East are getting bids that are higher than estimates. We will have a new cost estimate in 2009," the official said.

Dow and Aramco awarded the front-end engineering and design contract to U.S.-based KBR in July last year.

Aramco officials at the conference said they were not worried about a region-wide shortage of petrochemical plant feedstock natural gas, and that an allocation had already been secured for Ras Tanura.

Saudi Arabia, like its Gulf Arab neighbours, is making major investments to capitalise on its energy reserves and diversify its economy away from oil. The kingdom holds the world's largest oil reserves and its fourth-largest gas reserves.

Oil Minister Ali al-Naimi has said Saudi Arabia aims to become the world's third-largest petrochemical producer by 2015. (Reuters)

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