RIYADH: Saudi Arabian Mining Co (Maaden) said yesterday a phosphate venture it is developing with Saudi Basic Industries Corp (Sabic) will cost 21bn riyals ($5.6bn), 62% more than expected in March.
“The increase in the cost of the project ... is due to a rise in prices in the international construction market,” state-owned Maaden said.
Sabic, the world’s largest chemical company by market value and the Gulf’s largest steel producer, owns 30% of the project and Maaden the rest. They said in March the project would cost 13bn riyals.
Energy projects in the Gulf Arab region face delays and cancellations due to a shortage of engineers and labourers, Anne Keller of Jacobs Consultancy told an energy conference in March.
Qatar Petroleum and Exxon Mobil Corp in February dropped plans to build a gas-to-liquids plant in Qatar due to spiralling costs, initially put at $7bn in 2004.
The phosphate project is Sabic’s first in mining and its fourth in fertilisers.
The project involves mining for phosphates and building a processing plant producing 3mn tonnes per year of di-ammonium phosphate fertiliser, the two firms said.
With the project, Sabic, the main shareholder in Saudi Fertilisers Co, would boost its fertiliser production by 900,000 tonnes per year to 8mn tonnes, chief executive officer Mohamed al-Mady said in March.
“Once the project enters the complete production phase ... it will represent more than 20% of the global trade of phosphate-based fertilisers,” Maaden said yesterday.
Meanwhile, PetroRabigh petrochemical firm, a joint venture between Saudi Aramco and Japan’s Sumitomo Chemicals, plans an initial public offering before the end of this year, a source familiar with the matter said yesterday.
“PetroRabigh plans the IPO before the end of 2007. They have already applied to the Capital Market Authority,” the source told Reuters.
State-owned oil giant Aramco said last year the $9.8bn joint venture would float a 25% stake once the complex started operations in 2008, which could make the IPO the biggest ever in Gulf Arab countries.
PetroRabigh’s spokesman Eyad al-Ajaj declined immediate comment.
The largest Gulf Arab IPO was in 2003, when the Saudi government sold a stake in Saudi Telecom Company for $2.72bn.
Aramco faced resistance from Sumitomo Chemicals over selling shares in the firm before it actually starts production in 2008, which scuppered an initial plan to launch the IPO in 2006.
“They seem to have overcome the differences,” the source said.
Aramco officials argue that an early float would help offset rising project costs. Soaring material and construction expenses have more than doubled the project’s cost from an initial estimate of $4.3bn.
PetroRabigh has secured $5.8bn in financing deals with Japan Bank for International Co-operation (JBIC), Public Investment Fund of Saudi Arabia (PIF) and 17 financial institutions.
Sumitomo and Aramco agreed in 2005 to develop the petrochemical complex through a 50-50 joint venture that would upgrade a refinery at Rabigh on the Red Sea. – Reuters |
