Al Jubail Polypropylene Plant, Saudi Arabia

The project is located in Yanpet, near Al Jubail in Saudi Arabia, which has been the focus of significant petrochemical investment in the last five years. The new facility will be next to the Saudi European Petrochemical Company's existing production plant and close to the supplier of its feedstock. The Saudi European Petrochemical Company (also known as Ibn Zahr) is 70% owned by Sabic (Saudi Arabian Basic Industries Company). Arab Petroleum Investment Corporation (APICORP) also owns 10% of the company.

HIGH-QUALITY POLYPROPYLENE

The polypropylene plant that came online in 2000 has a capacity of 260,000t/yr, raising the company's production capacity for polypropylene at the Al Jubail site to over 640,000t/yr. The company claims that it can manufacture about 20 types of high-quality polypropylene using special technology. The new plant will use propylene from Petrokemya's nearby number three propylene plant as feedstock.

PARSONS GIVEN EPC CONTRACT

The engineering, procurement and contracting (EPC) contract was awarded to Parsons in a lump-sum contract worth $200 million. Parsons evaluated various sub-contractors to carry out the work. Binladin was awarded the contract for civil works, beating four other contractors. Marex Technology Ltd of the UK was given the contract for a process and information management system to link the new plant to the existing one.

COMPLEX FINANCING

The project is being financed by a joint loan of $400 million. The company has had difficulty in meeting interest payments on its loans, as a consequence of petrochemical prices falling lower than the company expected. The original loan from a group of 11 local and regional banks will now not be fully paid off until 2004. The banks involved in making the loan are Riyad Bank, Al Bank Al Saudi Al Fransi, National Commercial Bank, The Saudi British Bank, Saudi American Bank, Saudi Hollandi Bank, Gulf International Bank BSC, Bank Al-Jazira, The Saudi Investment Bank, Arab National Bank and Al-Bank Al-Saudi Al-Alami Limited. The rescheduling of loans by the Saudi European Petrochemical company has made it and Sabic less obviously creditworthy. This has had an effect not only on the subsidiary, but also on Sabic itself and its other ventures. Whilst the company can still obtain credit, it tends to be at a higher rate of interest. However, this may also be linked to a perceived reduction in the Saudi government's willingness to give subsidy and other support to the Sabic group in the event of difficulty in repayment.