Saudi Arabian Oil Co. and its partner Dow Chemical Co. (DOW) plan to close financing this year on their $20 billion Sadara chemicals joint venture, the treasurer of the state-owned Middle Eastern crude producer said.
Saudi Arabian Oil, known as Saudi Aramco, is weighing options including loans, sukuk, or Islamic bonds, and public funds to pay for its large joint-venture projects, Jamal Al Rammah, said today in Dubai.
Sadara Chemical Co., the joint venture, will borrow $5 billion in loans from the U.S. Export-Import Bank, the Washington-based institution said in September, and future Saudi Aramco ventures will also seek sukuk funding, Al Rammah said at the MEED project finance conference.
Saudi Arabia, the world’s largest crude exporter, is boosting capacity to refine oil and produce chemicals, to meet domestic fuel demand and make materials used to manufacture consumer goods. The kingdom plans to build refineries and chemical plants to help diversify the economy and reduce dependence on crude exports.
The Sadara Chemical venture planned for the Saudi port of Jubail on the Persian Gulf is one of Aramco’s biggest projects, along with a refinery and chemical plant built with France’s Total SA (FP) at the same location, Al Rammah said. The project with Total raised $8.5 billion in debt, including Saudi Arabia’s first Sukuk for a new facility, he said.
Saudi Arabia needs to develop a more active secondary market for sukuk, he said. The European financial crisis creates opportunities for an expansion of the sukuk market by regional lenders, and export credit agencies will also play a bigger role in funding Middle Eastern projects, he said.