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Sat 24 Apr 2010 04:00 AM

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Safe pair of hands

One of the engines of Saudi Arabia growth, Yanbu's appeal is expanding.

Safe pair of hands
Safe pair of hands
Yanbu is a petrochemical hub.

One of the engines of Saudi Arabia growth, Yanbu's appeal is expanding.

Thirty-five years ago Yanbu was earmarked as one of the KSA's industrial cities away from a simple port town - and it is not only the panorama of the Red Sea that gives it a broad horizon.

The three large oil refineries, a hub for petrochemicals, electricity distribution, telecommunications and a large desalination plant have reinforced its crucial role to KSA's construction renaissance.

It also represents the country's attempt to diversify away from oil revenues in the last few years and tap into the petrochemical market and other sectors.

Tenders for new projects, upgrades and site extensions in the expatriate-heavy city were eagerly awaited and hotly contested over the last year - even as some material vendors felt the squeeze of recent legislation.

The breadth of the projects says something about how much the city is relied upon as a base for numerous industries and is two years into the realization of the US $43.6 billion investment by Royal Commission for Jubail and Yanbu spread over five years.

The list of international suitors to projects has also been expanding, taking advantage of declining market and prices. A new refinery being built by state oil firm Saudi Aramco and US Conoco is a case in point. At the end of March it was announced that three South Korean companies made the most competitive bids for the construction of three big units. SK Engineering and Construction Co offered the lowest proposal for a crude unit package, Daelim Industrial Co's pitched for a gasoline unit and GS Engineering and Construction threw its hat into the ring for a hydro cracker. Other parts of the refinery received bids from Spanish, Egyptian and Indian construction firms, respectively, Tecnicas Reunidas, Engineering for the Petroleum and Process Industries (ENPPI) and Punj Lloyd.

Last August, Saudi Aramco and ConocoPhillips awarded KBR the contract for implementing their joint Yanbu Export Refinery Project (YERP). The contract is for providing detailed engineering and procurement services for the utilities package and the interconnecting systems and pipe racks. KBR declined to comment on the progress of the project.

Perhaps the most eye-catching tender of the city this year was for phase 3 of the US $200 million seashore retaining wall, dredging and alteration project for the Waterfront in the Industrial City.

The Royal Commission of Jubail and Yanbu (RCJY) stuck with Kuwait-based China Harbour for this project - SR 223 million in itself which also provided services for the first two phases, including initial dredging process starting back in June 2008.
Wastewater is collected, treated, and recycled to irrigate landscaping, while certain organic wastes are processed into compost to enrich soil in city parks and gardens. The contract was signed by Prince Saud Thunayan, chairman of RCJY, on behalf of the employer and Chen Yangui, CHEC Saudi Arabia's general manager on behalf of the contractor.

The Prince also invited the company to participate in construction of the infrastructure in the new area of Ras Az-Zawr for the Royal Commission. It totals three development zones: Yanbu, Jubail and Ras Az-Zawr directly under the administration of the Royal Commission.

The first quarter of this year saw finalized deals for a series of substations. The first is a substation 10J based outside the city that includes the construction and procurement of 380 kV transmission circuits on lattice steel towers to interconnect with the Substation in the city. The contract includes a Satellite Substation 101 that will connect with it - with the combined project totaling $100 million. Arabia Electric won this contract in January and has been set a target of just over two years to complete.

Haif Bin Mohammed Bin Abboud Al Qahtani & Associates for Trading & Contracting Company is now half way through the engineering, procurement and construction of Substation (42) having been awarded the main contract in June 2009 and aims for a June 2011 finish.

But the city's projects have been far from plain-sailing. Last year, Marafiq, the power and water utility company for Jubail and Yanbu, put development plans for an $8 billion desalination plant on hold. The plant was planned to producing 1,700MW and 150,000 m3 a day of desalinated water.  Later there were signs that it plans to merge the plant at Yanbu with the second independent water and power plant that Saline Water Conversion Corporation (SWCC) had planned.

Further, some Yanbu-based companies have had a torrid start to the year. Saudi Arabia's Yanbu Cement Company posted a 19% fall in Q1 earnings, citing lower sales of cut-price cement following the imposition of a ban on cement exports.

Net income fell just over $8 million- standing at $32.80 million in the Q1 compared to $40.5 million in the same period in2009 - although the company stated in February it would pay its dividend.

The losses are comparable to the biggest cement companies in the country, who have all seen profits decline, following the export ban, despite a rise in sales. Recently the Southern Province Cement, the largest cement producer in the kingdom, reported a 5% fall in first-quarter profits due to the ban as sales fell.

The Yanbu National Petrochemical company (Yansab) also closed the year in difficult circumstances. Chairman Mutlaq Al-Morished and executive vice president of finance reported a realized net loss of SR 29.2 million for the fourth quarter 2009, a 14% increase of to the SR 25.6 million loss over the same period in 2008.

"Realizing loss is the norm for such a stage as all the gains or loss during this stage are classified as none operational", he stated. First quarter 2010 results are yet to be announced.

Yanbu statistics

Population:

250,000 (2004 Yanbu Municipality estimate)

RCJY investment (2004-2009): US $43.6 billion

Biggest companies:

Yanbu Cement Petromin Mobil Refinery Co

SAFRA Co.

Yanbu National Petrochemical Company

Saudi Yanbu Petrochemical Company