Completion of PetroRabigh's Phase II expansion to be delayed by 9 months-costs to escalate

02-Jan-16

The completion of PetroRabigh's Phase II expansion will be delayed by nine months, raising the cost and forcing the Saudi Arabian petrochemical producer and refiner to seek more cash from shareholders, as per Reuters. The delay to September 2016 is the latest issue to hit the project, which will let the company manufacture higher margin products but has faced a number of uncertainties since it was proposed in 2009, mostly over the cost of the huge expansion. The total cost will now be SR31 billion (US$8.3 bln), SR1 bln more than the previous figure, according to a bourse filing from the firm, which is a joint venture between Saudi Aramco and Sumitomo Chemical. PetroRabigh blamed the increase on "the failure of the key contractors of the project to meet the planned implementation schedule", without elaborating. The delay also means that a planned rights issue to support the funding costs will need to rise to SR9.26 bln, SR2.24 bln more than initially announced in April, the company said in a separate bourse filing. PetroRabigh has already signed loans worth SR19.4 bln to finance the project, with a significant chunk coming from the Japan Bank for International Cooperation and the state-owned Public Investment Fund. Under the project, known Rabigh II, an existing ethane cracker will be expanded and a new aromatics complex will be built which will process more than 2.7 million tonnes of naphtha a year to make higher-value petrochemical products. The ethane cracker expansion is now due to be completed in Q1-2016. PetroRabigh's existing plant can produce an annual 18 mln tons of refined products and 2.4 mln tons of petrochemicals. The company said it will start gradually operating units of the expansion from the beginning of the H2-2016. In March, it was announced the expanded facility was expected to start production in H1-2016. Meanwhile, PetroRabigh will restart gradually its high-olefin fluid catalytic cracker (HOFCC) and subordinate units after an extended maintenance period. Earlier this month, PetroRabigh said it has restarted most operations at its refining and petrochemical complex after a 50-day planned maintenance period, but some units would remain offline as they needed further work