(EnergyAsia, July 27 2011, Wednesday) — Saudi Aramco and The Dow Chemical Company said they have agreed to form an equal joint venture to build and operate a US$20-billion fully integrated chemicals complex in Jubail Industrial City in Saudi Arabia by 2016.
The companies said their boards authorised the formation of the new joint venture, Sadara Chemical Company, following the positive results of an extensive project feasibility study and front-end engineering and design effort which began in 2007.

Comprising 26 manufacturing units, the complex will be one of the world’s largest integrated chemical facilities, and the largest ever built in one single phase. The complex will produce a wide range of performance products including polyurethanes (isocyanates, polyether polyols), propylene oxide, propylene glycol, elastomers, linear low density polyethylene, low density polyethylene, glycol ethers and amines.

Using Saudi Aramco’s project management and execution expertise, and many of Dow’s industry-leading technology, it will produce over three million metric tons of high value-added chemical products and performance plastics a year to help meet the world’s growing demand for energy, transportation, infrastructure and consumer products.

Construction will begin immediately and the first production units will come on line in the second half of 2015, with all units expected to be up and running in 2016.

Sadara is expected to deliver annual revenues of approximately $10 billion within a few years of operation and generate thousands of direct and indirect employment opportunities through the complex and related investments in downstream value parks.

Sadara will become an equal joint venture between Saudi Aramco and Dow after an initial public offering. In addition to their equity, the partners expect the export credit agencies and financial institutions will provide project financing to Sadara.

Sadara will be responsible for product marketing within a local zone of eight countries while Dow will market and sell on behalf of Sadara to countries outside of the Middle East.

Jubail Industrial City, in Saudi Arabia’s Eastern Province, is located approximately 100 kilometers northwest of Dammam.

Khalid Al-Falih, president and CEO of Saudi Aramco, said:

“This project represents a key milestone in Saudi Aramco’s ambitious downstream growth strategy. We are pleased to have Dow as our partner, as they bring a fantastic record of success in the chemicals business and a top tier brand to the project. Dow also brings a superior mix of downstream product technologies, and world-class operational and marketing capabilities to the Sadara joint venture.

“These will complement the strengths of Saudi Aramco as the world’s largest integrated and most reliable supplier of energy and petroleum-based derivative products.

“Many of Sadara’s products will be produced for the very first time in Saudi Arabia. This enterprise will play a key role in the Kingdom’s industrial and economic diversification while contributing to the creation of thousands of high quality jobs. It will enable significant development in the country’s conversion industry, thereby supporting Saudi Arabia’s ambition to be a magnet for downstream manufacturing investments that add significant value to the Kingdom’s hydrocarbon resources.”

Andrew N. Liveris, Dow’s chairman and CEO, said:

“This premier partnership is the right economic ownership model with the right partner. It is designed to capture growth in the rapidly growing sectors of energy, transportation and infrastructure, and consumer products by creating a manufacturing hub that will provide a differentiated product slate and an advantaged cost position.

“We are bringing the best of Dow’s technology-differentiated and globally leading products to Sadara. Customers in emerging geographies such as China, the Middle East, Eastern Europe and Africa will benefit from a strong supplier with feedstock integration, in-market commercial and supply capabilities, advanced technologies and resources to grow with their demand. Taken together, Sadara will deliver significant new equity earnings to Dow.”