Dow, Saudi oil company sign accord for $20B plant

October 8, 2011 - 5:50 PM
Dow Chemical Saudi Plant

FILE - In this Sept. 22, 2011 photo, Andrew Liveris, Chairman and CEO of Dow Chemical, speaks at the Clinton Global Initiative, in New York. Dow Chemical Co. and the Saudi Arabian Oil Co. said Saturday, Oct. 8, 2011, that they signed an agreement that advances their plan to build one of the world's biggest chemical plants in Saudi Arabia. The $20 billion complex is expected to begin production in 2015. (AP Photo/Mark Lennihan, File)

Dow Chemical Co. and the Saudi Arabian Oil Co. said Saturday that they signed an agreement that advances their plan to build one of the world's biggest chemical plants in Saudi Arabia. The $20 billion complex is expected to begin production in 2015.

The two companies agreed to a joint venture for Sadara Chemical Co., which will own the plant being built in the desert kingdom. The companies estimate it will generate about $10 billion in revenue annually within a few years of operation.

Dow and Saudi Aramco together are investing about $12 billion, and a portion of Sadara will be sold to shareholders in a public offering in 2013 or 2014. The complex, with 26 manufacturing units, will be the largest integrated chemical facility ever built in one go, the companies said.

It will make chemicals and plastics for the energy, transportation and consumer products industries. The companies are looking to sell the products in fast-growing markets such as China, the Middle East, Eastern Europe and Africa. Once completed, the complex will have capacity to produce 3.3 million tons a year of chemical products for use in an array of items including auto parts and food packaging.

Dow and Saudi Aramco, which is owned by the kingdom's government, announced in July that their boards had authorized them to set up the joint venture for the plant in Jubail Industrial City. The site is 60 miles (100 kilometers) northwest of the eastern Saudi city of Dammam.

Dow, based in Midland, Mich., will have access to Saudi Arabia's relatively cheap hydrocarbons, which will be used to make chemicals at the plant. The company has adopted a strategy of moving away from its basic plastics business and toward specialty materials used in consumer electronics and other products.

For Saudi Arabia, the plant will bolster its push to diversify its industrial base, reducing reliance on oil production, the companies said. The Sadara project and related investments are expected to produce thousands of new jobs, they said.