Life in the Gulf

Saudi Aramco has delayed plans to build extra capacity at its Ras Tanura refinery

Saudi Aramco has delayed plans to build extra capacity at its Ras Tanura refinery to increase output by 400,000 barrels per day (bpd), industry sources said yesterday.

The US $8 billion (SAR 30 billion) project is one of five planned in the kingdom to boost domestic refinery capacity by 1.7 million bpd to a total of 3.8 million bpd. Aramco has already delayed two of those projects as it looks to drive down costs.

"Aramco has sent out an official letter to potential bidders saying the project was deferred," one industry source told Reuters.

A source from another company planning to bid for construction contracts for the Ras Tanura expansion project said it had also received notification of the delay.

An Aramco spokesman declined to comment. Last year the company said the refinery would start production at the end of 2012.

Aramco gave no reason for the delay to the Ras Tanura refinery expansion in the letter to potential bidders, nor a new timeline, the sources said.

Potential bidders had expected to receive invitations to bid for the refinery’s construction packages in May.

The expansion was broken down into five packages: a crude unit and a vacuum distillation unit, a diesel hydrotreater, a continuous catalyst regenerator, a sulphur recovery unit and for utilities and tanks.

The refinery's expansion is to help meet both rising domestic demand and to supply feedstock to a giant petrochemical joint venture between Dow Chemical Company and Aramco to be built nearby.

That plant, expected to cost more than $20 billion, would be one of the largest single petrochemical plants to be built in the world.

A third source yesterday told Reuters that the petrochemical project had also been delayed. Completion of preliminary design and engineering for the petrochemical plant would take until the first or second quarter of 2010, from the initial target of end 2009.

Aramco has delayed two other 400,000 bpd refinery projects at Jubail and Yanbu as it wants contractors to revise prices to reflect the slump in the cost of raw materials since the global economic slowdown took hold.