Dow, Saudi Aramco Ink Joint Venture

Monday, July 25, 2011 @ 06:07 PM gHale

Dow Chemical Co. and the Saudi Arabian Oil Co. are going ahead with plans to build a $20 billion chemical complex in Saudi Arabia that will be among the world’s largest.

The decision by both companies’ boards to create a new joint venture, the Sadara Chemical Co., formalizes a project in the works since 2007.

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The complex will go up in Jubail Industrial City, which sits about 60 miles (100 kilometers) northwest of the eastern Saudi city of Dammam. It will include 26 manufacturing units producing chemical products and plastics for use in the energy, transportation, infrastructure and consumer products industries.

“This premier partnership is the right economic ownership model with the right partner,” said Dow Chairman and Chief Executive Andrew N. Liveris.

Once completed in the second half of this decade, the facility will have the capacity to churn out 3.3 million tons (3 million metric tons) of chemical products annually for use in everything from car parts to food packages. The companies hope to target fast-growing emerging markets such as China, the Middle East, Eastern Europe and Africa.

Midland, MI-based Dow stands to gain from access to Saudi Arabia’s relatively cheap-to-produce hydrocarbons, which they will use to make the chemicals Sadara produces.

The kingdom’s government owns Saudi Aramco. It manages the OPEC kingpin’s vast oil reserves, which it estimates at just over 260 billion barrels, and the world’s fourth-largest supplies of natural gas.

Setting up the Sadara venture will cost $20 billion, the companies said. Dow and Saudi Aramco will have equal stakes in the venture, with additional funding coming from export credit agencies and financial institutions.

They will sell a portion of the company to shareholders through an initial public offering in Saudi Arabia in 2013 or 2014, said Bill Weideman, executive vice president and chief financial officer.

Initial production should begin in 2015. The plant should be finished the following year.

The companies hope it will generate $10 billion in revenue annually and generate thousands of jobs within a few years of opening. It will also expand Saudi Arabia’s industrial base, helping offset the kingdom’s longtime reliance on fossil-fuel production.

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