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Saudi Aramco’s $27b Petrochem Plant on Track

DUBAI - Saudi Aramco will invest 100 billion riyals ($27 billion) in building the Ras Tanura petrochemical project with Dow Chemical Co. as the world’s biggest state oil company maintains spending to expand production amid the global credit crunch.

Saudi Arabia, the world’s largest oil supplier, “still holds on to its long-term investments in expanding its oil and gas sectors,” Aramco’s Chief Executive Officer Khalid Al Falih said in an e-mailed statement received late on Monday.

The kingdom plans to increase crude output capacity to 12.5 million barrels a day, a move that it says will help allay market volatility and concern about adequate supply.

Aramco plans to implement 144 projects in the next five years, of which eight are “giant”, to help reach its output targets.

The Ras Tanura petrochemical complex with the Midland, Michigan-based Dow will make products including ethylene and polyethylene, used to make food packaging, chlorine, caustic soda, epoxy resins and polyurethane once production begins in the second quarter of 2012.

Aramco, like other major oil producers in the Gulf, is concerned the worst recession since the 1930s may curb demand for energy after oil prices plummeted from a record high of $147.27 a barrel in July.

Al Falih warned in December that falling oil prices will hurt investments in the new oil fields.

Oil producing countries should use the economic crisis to “formulate future investment strategies and prepare for the coming economic expansion periods,” Al Falih said in the statement.

Saudi Arbaia is funneling about $90 billion of its oil wealth back into production and refining in the next five years in an effort to retain its status as the world’s largest oil exporter.

Aramco reduced its oil and gas investments for the next five years to $60 billion, Al Watan, the Abha, Saudi Arabia-based newspaper, reported this month.

Aramco also announced on Monday it plans to sign a memorandum of understanding with Sumitomo Chemical Co. soon to expand the second phase of their Rabigh Refining and Petrochemicals Co. joint venture.