KHOBAR - Saudi Aramco and France's Total said on Thursday they will invest $9.6 billion to build the Jubail oil refinery, and picked Technip and Tecnicas Reunidas among the main contractors. Aramco and Total delayed the bidding process for the joint venture refinery by seven months, sending contractors back to the drawing board to revise bids and chop costs. The price tag for the 400,000 barrels per day refinery was over $2 billion below the highest estimate last year of around $12 billion. “The target has been achieved, whereby the overall project cost now stands at $9.6 billion,” the joint venture Satorp said in a statement, confirming the project cost reported earlier by Reuters. The cost of the refinery had doubled from an initial $6 billion, as commodity and raw material prices soared and contractors strained to deal with backlogs on order books for energy projects. Prices for steel and labor then fell with the global economic downturn, and contractors were forced to compete for a smaller number of projects. “We are really happy that we were able to keep the overall amount below the $10 billion threshold,” said a Total source. Spain's Tecnicas Reunidas won a a contract to build crude and hydrotreating units, and France's Technip won two separate contracts for refining unit work and utilities, Satorp said in the statement. The Tecnicas Reunidas package was worth about $1 billion, a company director told Reuters in early June. Industry sources have said these three contracts were the biggest of the 15 packages that were up for bidding. Satorp did not detail the final value of each package. Technip had already carried out engineering and design work on the refinery. Other winners included South Korea's Daelim Industrial Company, Samsung, SK Engineering & Construction, and Japan's Chiyoda Corporation. Aramco and Total will send letters of intent to contractors next week, two contractor sources said on Thursday. The refinery would be operational in the second half of 2013, Satorp said. Aramco would offer 25 percent of the JV to the Saudi public in the fourth quarter of 2010, leaving both Aramco and Total with an equal 37.5 percent share in the plant. At present, Aramco holds 62.5 percent of Satorp, while Total has 37.5 percent. The refinery is one of four that the world's top oil exporter is planning, which together would boost domestic capacity by as much as 1.6 million bpd from 2.1 million bpd. The Jubail refinery is tied to development of the giant 900,000 bpd Moneefa oilfield. The plant will process Moneefa's heavy oil, although Saudi officials have said they would only develop Moneefa if global oil demand warrants a rise in output. Global oil demand has fallen this year at the fastest rate since 1981 due to the recession, forcing Saudi Arabia to cut supply and leaving it sitting on 4.5 million bpd of spare capacity that is expensive to maintain. Aramco is developing a second 400,000 bpd export refinery in a joint venture with ConocoPhillips to process more crude from Moneefa. That plant was due to start later than Jubail, in 2014. Saudi Aramco and France's Total S.A. said Thursday they had finalized contracts for their 400,000 barrel per day joint venture Jubail export refinery, pushing ahead with a project that had seen investment delays as the two companies sought to lower costs below $10 billion. “Our commitment to fund a project of this scale demonstrates our confidence that energy markets will grow in the years to come,” Khalid Al-Falih, chief executive of Saudi Aramco, said in an e-mailed statement. The statement did not break down the project's cost or name the companies that had been awarded contracts. But an Aramco official said the value of the contracts was over $9.5 billion. The official requested anonymity because he was not authorized to speak to the media. The companies had originally planned to award the contracts by the end of 2009, but that deadline was pushed back in an attempt to take advantage of falling global construction costs. The plant had initially been projected to cost around $12 billion, but Aramco officials said they wanted to see costs lowered to below $10 billion.
