Saudi Aramco and U.S. firm Dow Chemicals have awarded the project management for the construction of the giant Ras Tanura petrochemical plant to U.S.-based KBR, Aramco and Dow said on Thursday.
The plastics and chemicals plant at Ras Tanura will be one of the largest of its kind to be built from scratch and has an estimated cost of over $20 billion. Dow’s investment in the plant is expected to be the largest foreign investment to date in the Saudi energy sector.
KBR beat U.S. competitors Fluor and Foster Wheeler to the contract. The three were competing for both the project management and the front-end engineering and design (FEED) contracts. There was no mention of the FEED contract in the statement.
Dow and Aramco signed a memorandum of understanding to build the plant in May.
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 said in May that the country aims to become the world’s third-largest petrochemical producer by 2015, up from its current ranking of tenth.
Dow is the largest U.S. chemical maker by sales. The plant gives Dow access to cheap Saudi energy feedstocks.
Dow has faced tough competitiion from Middle East chemical producers such as Saudi Arabia’s SABIC that already have access to cheap energy. SABIC is the world’s largest chemicals company by market value.
Aramco and Dow plan to float a 30% stake in Ras Tanura.
Aramco plans to supply the plant from its nearby 550,000 barrels per day Ras Tanura refinery and Ju’aymah gas processing plant. The plant was due to startup in 2012-2013.
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