Mon, Oct 10, 2011 - Page 10 News List

Dow, Aramco sign US$20bn deal

BRANCHING OUT:The new plant will allow Dow to diversify from its plastics business and Saudi Arabia to take steps to reduce its reliance on oil production


Dow Chemical Co and the Saudi Arabian Oil Co (Aramco) said on Saturday that they signed an agreement that advances their plan to build one of the world’s biggest chemical plants in Saudi Arabia. The US$20 billion complex is expected to begin production in 2015.

The two companies agreed to a joint venture for Sadara Chemical Co, which will own the plant. The companies estimate it will -generate about US$10 billion in revenue annually within a few years of operation.

Dow and Saudi Aramco together are investing about US$12 billion and a portion of Sadara will be sold to shareholders in a public offering in 2013 or 2014. The complex, with 26 manufacturing units, will be the largest integrated chemical facility ever built in one go, the companies said.

It will make chemicals and plastics for the energy, transportation and consumer products industries.

The companies are looking to sell the products in fast-growing markets such as China, the Middle East, Eastern Europe and Africa. Once completed, the complex will have the capacity to produce 3.3 million tonnes of chemical products a year for use in an array of items including auto parts and food packaging.

Dow and Saudi Aramco, which is owned by the kingdom’s government, announced in July that their boards had authorized the establishment of a joint venture for the plant in Jubail Industrial City. The site is 100km northwest of the eastern Saudi city of Dammam.

Dow, based in Michigan, will have access to Saudi Arabia’s relatively cheap hydrocarbons, which will be used to make chemicals at the plant. The company has adopted a strategy of moving away from its basic plastics business and toward specialty materials used in consumer electronics and other products.

For Saudi Arabia, the plant will bolster the nation’s push to diversify its industrial base, reducing reliance on oil production, the companies said.

The Sadara project and related investments are expected to produce thousands of new jobs, they said.

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