Saudi Aramco Awards Yanbu Refinery Works to Tecnicas, Daelim Industrial

Saudi Aramco, the biggest state- owned oil company, awarded contracts at the planned 400,000 barrel-a-day Yanbu refinery in Saudi Arabia to companies including Tecnicas Reunidas SA and Daelim Industrial Co.

Tecnicas Reunidas will do work on the coker unit, Daelim will build the gasoline and hydrocracker units and SK Engineering & Construction Co. will work on the crude unit, Saudi Arabia’s state oil company said today in a statement. Tecnicas said separately it got $700 million contract.

“Signing these contracts represents a critical milestone,” Motassim Al-Ma’ashouq, Aramco’s executive director of new business development, said in the statement.

Aramco is boosting refining capacity to meet demand at home even as returns from processing crude oil have narrowed, Chief Executive Officer Khalid al-Falih said in January. The plant will cost $10 billion to $12 billion, John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi said in April.

Punj Lloyd Ltd. also won a contract to work on offsite facilities while local contractors will install electrical lines, pipelines and storage tanks, Aramco said. More contracts may be awarded over the next few months, it said.

Export Flexibility

Saudi Arabia is seeking the flexibility to export fuels or crude. Refiners worldwide have postponed projects and idled plants as the global recession eroded demand and squeezed profit margins. While the country holds the world’s largest oil reserves and is the biggest producer in the Organization of Petroleum Exporting Countries, it imports fuels such as gasoline and diesel because its processing capacity is insufficient to meet domestic consumption.

Saudi Aramco and Total SA have cut construction costs for a similar joint venture refinery on Saudi Arabia’s east coast to less than $10 billion as contracting costs fell and said last month they had raised $8.5 billion in financing for the project.

The Saudi company also plans a 400,000-barrel-a-day refinery at Jazan. ConocoPhillips pulled out of the Yanbu project in April, saying it was focusing more on production.

To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.

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