Saudi Refinery Back on Track (COP, TOT)

Saudi Arabia’s state-owned oil company Saudi Aramco and ConocoPhillips Corporation (NYSE:COP) are expected to open the bidding for a Saudi-based refinery in Yanbu by the middle of 2009, according to Reuters. The bidding process was stopped last November in the face of turmoil in the financial markets.  Conoco and Aramco are also looking for ways to lower the cost of the refinery.

The companies want to avoid the sort of thing that happened to Aramco and Total SA (NYSE:TOT). The 400,000 barrel/day Jubail refinery the two firms are building has doubled in cost, to $12 billion since the project was first begun. According to Reuters, “Aramco said last month that it had met with contractors to discuss how it wanted costs cut to reflect the decline in prices of raw materials as the global economy slows.” Aramco wants the Jubail costs to fall below $10 billion.

The Conoco-Aramco project is a heavy crude refinery that is expected to begin operation in 2013. It will process crude from Saudi Arabia’s largest offshore project. The Yanbu refinery was originally expected to cost $6 billion, to process 400,000 barrels of heavy crude per day, and to begin operation in 2011.

Paul Ausick
April 6, 2009