Dow Chemical Co. and the Saudi Arabian Oil Co. pushed forward Monday with plans to build a $20 billion chemical complex in the desert kingdom that they say will rank among the world's biggest.
The decision by both companies' boards to create a new joint venture, dubbed the Sadara Chemical Co., formalizes a project that has been in the works since 2007. It promises to create the largest integrated chemical facility ever built in one go.
The complex will be located in Jubail Industrial City, which sits about 60 miles (100 kilometers) northwest of the eastern Saudi city of Dammam. It will include 26 manufacturing units producing chemical products and plastics for use in the energy, transportation, infrastructure and consumer products industries.
"This premier partnership is the right economic ownership model with the right partner," Dow Chairman and CEO Andrew N. Liveris said in a statement announcing the joint venture Monday.
Once completed in the second half of this decade, the facility will have the capacity to churn out 3.3 million tons (3 million metric tons) of chemical products annually for use in everything from car parts to food packages. The companies hope to target fast-growing emerging markets such as China, the Middle East, Eastern Europe and Africa.
Midland, Michigan-based Dow stands to gain from access to Saudi Arabia's relatively cheap-to-produce hydrocarbons, which will be used to make the chemicals Sadara produces.
Saudi Aramco, as the oil company is known, is owned by the kingdom's government. It manages the OPEC kingpin's vast oil reserves, which it estimates at just over 260 billion barrels, and the world's fourth-largest supplies of natural gas.
Setting up the Sadara venture will cost $20 billion, the companies say. Dow and Saudi Aramco will have equal stakes in the venture, with additional funding being provided by export credit agencies and financial institutions.
A portion of the company will be sold to shareholders through an initial public offering in Saudi Arabia in 2013 or 2014, said Bill Weideman, executive vice president and chief financial officer.
Initial production is expected to begin in 2015. The plant should be finished the following year.
The companies hope it will generate $10 billion in revenue annually and generate thousands of jobs within a few years of opening. It will also expand Saudi Arabia's industrial base, helping offset the kingdom's longtime reliance on fossil-fuel production.
"This enterprise will play a key role in the kingdom's industrial and economic diversification while ... supporting Saudi Arabia's ambition to be a magnet for downstream manufacturing investments that add significant value to the kingdom's hydrocarbon resources," said Khalid al-Falih, president and CEO of Saudi Aramco.