Bidding process for Saudi Aramco, SABIC joint chemicals project launched

The bidding process for the engineering work on the joint crude oil-to-chemicals project by Saudi Arabian national petroleum and natural gas company Saudi Aramco and global chemicals company Saudi Basic Industries Corporation (SABIC) has been launched, marking a key step towards developing the US$20-billion-plus complex.

The project, known as COTC, the first major scheme to bring the two giants together, is expected to process Arabian Light and Extra Light crude oil, according to an industry source.

Several plants are expected to be built including a 400,000-barrel-per-day integrated crude distillation and vacuum unit, a distillate hydrotreater, a vacuum gas oil hydrocracker, a residual fluid catalytic cracking unit, a mixed feed cracker, as well as polyethylene, polypropylene, butadiene and aromatics recovery units.

The location of the chemicals site is still under consideration – either at Yanbu, near a power plant, or in Jubail, close to Sadara, which is an Aramco joint venture with US company Dow Chemical.

The closing date for bids for pre-front end engineering and design work (pre-FEED) and FEED for the COTC is September 25, one of the sources said, adding that the plant is expected to be commissioned by the end of 2024.

Another source said pre-FEED is expected to be completed by late 2018, with FEED to be finalized by late 2019. Aramco and SABIC are expected to launch bidding for construction by mid-2020.

However, when asked to comment on the matter, SABIC did not immediately respond while Aramco said it “declines to comment on rumor or speculation”.

Aramco’s chief executive has said it was a priority for the company to convert crude oil to chemicals as the state oil producer aims to diversify operations in the run-up to an initial public offering of shares next year.

Downstream, which covers refining and chemicals, will help Aramco boost value from hydrocarbons by securing revenue streams and become less vulnerable to oil price swings.

Analysts say the project will help reduce natural gas usage in petrochemicals at a time when the kingdom is trying to use more gas to generate power, rather than burning crude oil, as it seeks to diversify its energy mix.

The project is strategic for Saudi Arabia, which plans to expand further into the petrochemical chain to export more end products and grow beyond oil.

It is also crucial for Saudi Arabia’s economic reform plan and could create as many as 100,000 jobs.

SABIC’s CEO said in an interview in May that COTC could produce more than 18 million tons of materials yearly.