Contax Project Snapshot: Jubail Grassroot Export Refinery

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Kathleen Bury, project manager, Contax.

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Located at Jubail 2, Saudi Aramco and Total are planning to build a 400,000 bpd fully integrated export refinery.

Contax project manager, Kathleen Bury, provides an insight into the project status of the Jubail Grassroot Export Refinery project.

The planned GCC energy Capex landscape for 2008 to 2010 continues to show signs of growth over the period 2005 - 2007, with around US $377 billion worth of investments already on the table.

From a sector perspective, standing alongside the power sector, the refining and petrochemical sectors continue to dominate the energy Capex landscape with circa US $94 billion and US $73 billion respectively already planned for award by the end of 2010.

Saudi Arabia maintains its position as the Capex king with around 40% worth of the investment already planned within the GCC energy space.

However, following Contax's recent analysis of project delays and cancellations within the region, it is anticipated that a number of these projects will not be realised in line with their original and intended timeframes.

Nevertheless, with these figures and growth rates, it is evident that the GCC, and in particular Saudi Arabia, is well on its way to solidifying its global ‘petrochemical and refining hub' position and playing a pivotal role in bridging the global demand and supply gap.

A major project that is expected to help Saudi Arabia achieve this goal is the Jubail Grassroot Export Refinery (JER).

Background and strategic importance

Located within Jubail 2, an extension of Jubail Industrial City in the Eastern Province of Saudi Arabia, a Saudi Aramco led JV is planning to build a flagship 400,000 barrel per day (bpd) fully integrated grassroot export refinery.

In an effort to successfully develop and execute this project, Saudi Aramco has joined forces with France's Total under a current 67.5:37.5 JV partnership.

Contax understands that upon operational start up, Aramco plans to offer 25% of the company to the Saudi public through an Initial Public Offering (IPO) on the Saudi stock exchange, thus resulting in a 3 party ownership structure; Aramco 37.5% : Total 37.5% : and Public Ownership 25%.

Since the project's announcement and with the continuous escalation in project costs, there has been much discussion around the project economics, viability and partner commitment.

However, on 6 May Saudi Aramco and Total gave their final investment decision to go ahead with the project and are now awaiting approval from the Saudi Oil Ministry.

Following the approval, Contax understands that financing for the project will be sought during the second half of 2008 and lenders selected by early 2009.

With a currently estimated investment cost of US $12 billion, a 100% increase over its original budget of US $6 billion, the refinery will utilise heavy crude oil as feedstock.

The majority feedstock will be sourced from the nearby Manifa Offshore Oil Field, which is currently undergoing an 800-900 000 bpd redevelopment programme, and processed to produce diesel and jet fuels for domestic and export use.

The main export markets for the processed products will be fast growing markets in the Far East, Europe and North America.

Development of the JER project enables all involved stakeholders to satisfy a number of key strategic objectives. It can significantly increase Saudi Arabia's contribution to global refining capacity through the conversion of its abundant heavy crude oil reserves into refined oil products for export.

Heavy crude oil is generally not preferred by global refiners due to the high cost of processing and poor extraction rate.

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