Saudi Aramco has inked a contract worth $11 billion with French TotalEnergies for the construction of a new petrochemical complex in the Kingdom.
The facility will be integrated with a refinery in Jubail and will feature one of the largest steam crackers in the Gulf, Aramco said, with a capacity to produce 1,650 kilotons of ethylene and other hydrocarbon gases.
The two companies also awarded construction contracts for the project to several local and foreign companies including South Korea’s heavy industry major Hyundai Engineering & Construction, and China’s Sinopec Engineering.
South Korea’s government hailed the deal, which is worth $5 billion, with the country’s land minister noting it would expand the cooperation between South Korea and Saudi Arabia.
The Saudi state oil company has for several years now been investing heavily in petrochemical production capacity as a guarantee for long-term oil demand. Indeed, most forecasts that predict success for the energy transition note that petrochemicals will continue to be needed for decades yet.
This latest project was first conceived several years ago and in December last year the two partners made the final investment decision.
At the time, TotalEnergies said it would fund the project with $4 billion in equity, with Aramco holding 62.5% and the French company the rest. Construction should have originally started in the first quarter of this year. The first production is scheduled for 2027.
Saudi Arabia’s fellow OPEC member Iraq is also eyeing growth in petrochemicals. Earlier this year, reports emerged that the $8.5-billion Nibras petrochemical complex project had resurfaced in government plans and construction could begin shortly.
The Nibras project is a partnership with Shell, which was originally agreed upon in 2015 but got shelved due to Iraq’s internal conflicts and insufficient funds. Saudi Arabia has also been reported to be interested in taking a stake in the Nibras project.