Contractors will have made aggressive cuts to cost estimates in bids due later this month to build a new refinery for Saudi Aramco and Total, sources at contracting companies said on Thursday. Oil's slump to around $50 a barrel from a peak over $147 last year has forced cost cutting across the industry, and contractors that were turning down work a year ago now find themselves in a fierce competition for what is left, sources said. “With the current economic situation, there are not many projects,” one contractor planning to bid to build the refinery told Reuters. “Competition is much more severe. We need to sharpen our pencils.” Top oil exporter Aramco and French energy giant Total have said they want billions of dollars cut from the construction costs for the refinery to reflect the slump in the prices of raw materials since the global economic downturn took hold. Total has said it wants to see the total cost for the refinery to come in below $10 billion, down from estimates as high as $12 billion when oil rallied toward its peak over $147 a barrel last year. The two companies delayed the bidding round for the packages from November to April. Bids for some of the 12 packages on offer were due in on April 20, while the rest were due in by April 27, contractors said. It was unclear when the contracts would be awarded. “We hope as soon as possible,” a source at another contracting company said. “It might be the only job awarded in 2009.” Aramco has sent bidders back to the drawing board for several mega projects to expand capacity in the Kingdom. Meanwhile, in Boao, China, Saudi Basic Industries Corp (SABIC) is hoping for imminent Chinese approval for its $2.5 billion petrochemicals joint venture and then more expansion in China, Chief Executive Mohammed Al-Mady said on Friday. SABIC and Chinese oil refining giant Sinopec Corp unveiled the plan last year but are still awaiting approval by China's National Development and Reform Commission. “We hope it will be imminent because it's in the interest of both sides,” Al-Mady told Reuters on the sidelines of the Boao Forum in China's Hainan Island. “You have to realize that we have been discussing this for a long time, from the beginning, and these things take a lot of time.” He said the companies were in the final stage of negotiations to clear the project, which is due to be built by the end of September this year. The plant in the port city of Tianjin, close to Beijing, will produce 4 million tons of petrochemical products, including 1.2 million tons of ethylene, a year. Asked whether SABIC has any other plans to expand in China, he said: “We have a business that fits with our strategic plan. Of course, China is a very important country. We are looking for more than just one project.” Ahmed Al-Umar, the general manager of Sabic Asia Pacific, said SABIC was selling more than 320,000 tons of polymer a year to a joint venture in Fujian province which is half owned by Sinopec, with Saudi Aramco and Exxon Mobil each holding a 25 percent stake. SABIC is aiming for sales growth in China that is at least on a par with Chinese economic growth, Al-Mady said. “The company is seeing improvements for various products' demand. For example, polymer demand is increasing, fertiliser is stable at a reasonable price, even though steel is still a little bit depressed,” he said.
