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State oil giant Saudi Aramco and petrochemical producer Saudi Basic Industries Corp signed a memorandum of understanding on Sunday to build a $20 billion complex converting crude oil to chemicals in the kingdom.
The project, which the partners said would be the largest crude-to-chemicals facility in the world, is a sign that the Saudi government plans to spend heavily on diversifying the economy beyond crude oil exports.
Private sector investment has slowed in the last few years because of low oil prices and government austerity policies, so Riyadh aims to invest billions of dollars on developing value-added manufacturing industries such as chemicals, as well as service industries like tourism.
Aramco Chief Executive Amin Nasser told reporters that a final decision on whether to go ahead with the crude-to-chemicals project would be made by the end of 2019. His company was tentatively looking at the Red Sea port city of Yanbu, already an industrial centre, as the location for the project, he added.
The complex would start operations in 2025, processing about 400,000 barrels per day of Arabian Light crude oil to produce about 9 million tonnes of chemicals and base oils annually, plus 200,000 bpd of diesel for domestic consumption.
SABIC's chief executive Yousef al-Benyan said the project was the first time that Saudi Arabia's two biggest companies were cooperating on a joint industrial project using a new technology. Investment costs would be shared equally.
Aramco, the world's largest oil company, has been developing its downstream business as it prepares for the government to sell off about 5 percent of its shares next year, a privatisation exercise which Riyadh says could raise around $100 billion.
The new complex would create an estimated 30,000 jobs directly and indirectly and add 1.5 percent to Saudi Arabia's gross domestic product by 2030, the companies said.