BP And Totalfinaelf Gain Foothold in Massive Saudi Petrochemicals Projects
BP AND TOTALFINAELF for the first time will gain a presence in Saudi Arabia's petrochemicals sector as part of their participation in three new giant projects in natural gas exploration and downstream products in the country.
Around $20 billion will be invested in the short-term in the projects which will integrate Saudi Arabia's first upstream and downstream activities into single operations. Total cost of the plan could exceed $50 billion, according to Saudi officials.
Each project will extend from the exploration, processing and transportation of gas to its deployment into electricity, desalination, petrochemicals and other industrial plans. The biggest of the petrochemicals projects will include the building of two 1-million-- metric-ton-per-year ethylene crackers.
In addition to BP and TotalFinaElf, the other oil and gas companies involved are ExxonMobil and Shell, which are both already active in Saudi petrochemicals projects, as well as Phillips Petroleum, Marathon Oil Canada, Occidental Petroleum and Conoco. ExxonMobil has been appointed as the operator of two of the projects and Shell the third.
BP expects to spend $4 billion on its participation in the largest of the three projects for the development of gas reserves in a 65,000-square kilometer area in the eastern part of Saudi Arabia, known as the Empty Quarter.
The consortium running the project, led by ExxonMobil and including Shell and Phillips, will provide feedstocks for two new crackers and petrochemicals complexes at Jubail and Yanbu on the eastern and western coasts of the country.
BP's only current activities in Saudi Arabia are the supply of aircraft fuel and lubes and a joint venture in solar energy panels. "This project is in line with our strategy of becoming much more involved in the Middle East, where we have some oil and gas schemes but nothing in petrochemicals," says a BP official.
TotalFinaElf also has operations in oil and gas, as well as gas liquefaction in the Middle East but no major activity in petrochemicals.
"We have at the moment no presence in Saudi Arabia, despite our long-standing involvement elsewhere in the Middle East," says a TotalFinaElf spokesperson. "We intend to be an active member of our consortium in the country, because of our extensive experience in both the upstream and downstream sectors."
TotalFinaElf was bidding to become leader of the three-strong consortium of itself, Shell and Conoco, which will be building a petrochemicals complex on the Arabian Gulf Coast. But the Saudis appointed as operator Shell, which has been present in the country in petrochemicals, refining and other downstream activities since the 1940s.
Basell, the Shell/BASF partnership in polypropylene, finalized a deal last week with the Saudi National Petrochemical Industrialization Company (NIPC) on a PP joint venture in the country. The venture, in which Basell will have a 25 percent stake and NIPC the remainder, will build a 450,000-ton-per-year PP plant at Jubail, using propane feedstock.
The natural gas projects, details of which have still to be negotiated between the participants and the Saudi government, bring for the first time foreign oil and gas companies into the Saudi upstream sector.
"The companies will invest their expertise and capital, while the kingdom [of Saudi Arabia] will provide resources, a stable environment for investment and its own development skills," Prince Saud Al-Faisal, Saudi foreign minister and head of the Saudi negotiating team on the projects, told a press conference in Jeddah last week.
"Many of the companies are well known to us, having done business within the kingdom for many years," he explained. "With others, we have had more limited relationships and are looking forward to building stronger ties."