State oil giant Saudi Aramco is looking to renegotiate contracts for equipment for new export refineries to reflect falling prices for raw materials, an Aramco executive said on Wednesday. The two 400,000 barrels per day refineries are joint ventures, one with France's Total and the other with U.S. firm ConocoPhillips. “These projects have long lead times, so purchase orders may be restructured or revalued based on the drop in prices,” Fahad Al-Aohad, a business development specialist at Aramco, told Reuters by telephone. The projects were in no danger despite uncertainty about future oil demand growth amid a global economic slowdown, Aohad said. “All of these projects have been approved and will continue,” he said. Prices for raw materials used in construction, such as steel, have fallen amid a general decline in commodity prices. They had previously increased over a long period of growing demand, leading to rises in the costs of energy projects. Total has said the cost estimate for its refinery has doubled to around $12 billion from initial estimates of around $6 billion. Conoco has given no estimate, but its plant has seen similar cost inflation, industry sources have said. The two refineries will process oil from Aramco's heavy oil producing Moneefa field, due for completion with 900,000 barrels per day of capacity in late 2011. Aramco is also looking to cut the cost of contracts for that field. “We are going back to our partners and discussing with them the new economic circumstances,” said Khaled Al-Buraik, an executive director at Saudi Aramco. “We are not talking about delays, we are talking about reviewing.” He said a decision on the projects would be made based on the re-evaluation process. Buraik said he expects other countries to conduct their own reviews in the wake of changing dynamics. “People would like to go to and re-evaluate, and maybe some projects were evaluated at $80 or $100 a barrel - now we are talking about $65 a barrel,” he said. “I think the whole oil industry, the new expansions, oil and gas, it will be re-evaluated - it will be reassessed based on the current economic circumstances.” Buraik said Aramco's short-term projects were on track and the kingdom would reach its target of increasing production capacity to 12.5m barrels a day by the end of next year. But the development of the Manifa field, which was intended to add 900,000 barrels per day of capacity by 2011, was under review, he said. A project to produce gas from the Karan field - the kingdom's first offshore free-gas field to be developed - is also being re-evaluated, he said. That field was intended to provide production of 1.5 billion cubic feet per day of gas by 2012 and help meet Saudi Arabia's soaring energy demands.
