Total Chief Executive Christophe de Margerie on Friday estimated that a project to build a new 400,000 barrels per day refinery in Saudi Arabia will cost more than $10 billion. Total had originally pegged the cost of the plant, in which the French oil major will have a 37.5 percent stake and Saudi Aramco the rest, at $6 billion. “Jubail is a project at over $10 billion,” de Margerie told a shareholders meeting in response to a question on Total's investment plans. He later declined to give journalists a more precise estimate. “We are about to start a bidding period and we do not want to send signals to contractors that would make prices surge in an environment where prices are already sharply higher. “We don't want to give them a target, but you know this is a project of more than $10 billion.” Saudi Aramco said on Wednesday that it and Total would go ahead with plans to build the Jubail refinery, which it expects to start up at the end of 2012. Equipment and labor shortages have pushed costs up globally in the energy sector, raising industry concerns about whether the new Saudi plants would be built. Aramco will own 62.5 percent of the plant but will later offer 25 percent to the Saudi public, leaving both Aramco and Total with an equal 37.5 percent share in the plant. The companies are due to invite companies to bid for the plant's construction in June, with all packages for construction set to be awarded in the first quarter of 2009. Saudi Aramco and Total have both confirmed their decision to invest in a 400,000 barrel per day world-class, full-conversion refinery in Jubail. The refinery will process Arabian Heavy crude to high-quality refined products that will meet the most stringent global product specifications and is expected to begin operations at the end of 2012. The refinery will benefit from the proximity to the Arabian Heavy crude supply system and from the excellent facilities of the Jubail industrial city such as King Fahad Industrial Port, power and water grids and residential area. “At Saudi Aramco we are pleased to announce our commitment to strengthen our strategic partnership with Total by moving forward with the Jubail export refinery project. Our vision of this world-class refinery is to further expand the Kingdom's refining and petrochemical infrastructure and create job opportunities here at home. This facility will provide our customers, both domestic and international, with high quality fuels and petrochemicals”, Khalid G. Al-Buainain, Saudi Aramco senior vice president of Refining Marketing and International said. “Launching this project is a major achievement, enabling Total and Saudi Aramco to build a strong strategic partnership. By developing this world-class project in Jubail, Saudi Aramco and Total will contribute to supply growing demand for transportation fuels and petrochemicals, especially in Asia and the Middle-East, but also in Europe where the deficit of diesel is growing”, said Michel Bénézit, president of Total Refining and Marketing. In a comprehensive, joint Front-End Engineering and Design (FEED) study launched in May 2006, Saudi Aramco and Total have selected state- of- the- art proven technologies for a full conversion refinery scheme geared to maximizing the production of diesel and jet fuels. In addition, the project will produce 700,000 tons per year (t/y) of paraxylene, 140,000 t/y of benzene and 200,000 t/y of polymer grade propylene. A joint venture company for the refinery will be formed during the third quarter of 2008. Saudi Aramco will initially own 62.5 percent of the company and Total will own the remaining 37.5 percent. Subject to required regulatory approvals, the parties are planning to offer 25 percent of the company to the Saudi public while the two founding shareholders each intend to retain a 37.5 ownership interest. Saudi and Total will share the marketing of the refinery's production. Aramco and Total are planning to release invitations-to-bid for the project's construction in June 2008 with a view to awarding all packages during the first quarter of 2009. Orders for long-lead items will be placed as soon as the third quarter of 2008. The project will be introduced to the lending community in the second part of 2008 with a targeted financial close in early 2009.
