July 4, 2017 / 1:14 PM / in 3 years

Saudi Aramco, France's Total study mixed feed cracker - sources

* Cracker seen having capacity of 1.5 mta mixed feedstock

* Project seen costing between $3 billion and $5 billion

* Refining JV SATORP seen providing some of the feedstock

By Reem Shamseddine

KHOBAR, Saudi Arabia, July 4(Reuters) - Saudi Aramco and France’s Total are considering building a mixed-feed cracker and derivatives in Jubail, near their joint refining complex, industry sources said.

The cracker is expected to have a capacity of 1,500 kilotonnes per year (KTA) (1.5 million tonnes per year), said a source familiar with the plans, who described them as at an initial stage.

The feedstock would partially come from SATORP, the existing Aramco-Total joint refining venture, and from Sadara, a joint venture between Aramco and Dow Chemical, also in Jubail.

Sadara operates a mixed-feed cracker, the first in Saudi Arabia.

The idea of the cracker has been raised before. In 2010, an executive from Total Petrochemicals, a unit of Total, said it could be the largest possible, typically 1,500 KTA of ethylene and 500 KTA of propylene, plus derivatives.

“It is a greenfield project, they have launched the bidding for the feasibility study,” said one of the sources, adding the study did not include a refinery expansion.

He estimated the cost of the project known as Amiral to be around $3 billion, while another source said the cost of the cracker and other downstream units was expected to be around $5 billion.

Despite having massive natural gas reserves, Saudi Arabia is short of gas supplies as the majority of its gas reserves are associated with oil, said energy consultant Sadad al-Husseini, a former senior executive at Aramco. Saudi Arabia is currently restricting oil output as part of an international agreement.

“There remains of course the potential for more gas discoveries as the kingdom’s shale gas exploration programme gathers momentum,” he said, adding the availability of ethane would be key to the overall economics of the project.

Saudi Aramco plans to double its gas production in a decade, including shale that will add around 2-3 billion standard cubic feet to the mix.

But the kingdom is encouraging the petrochemicals industry to include more liquid feedstock to diversify and become less vulnerable to price fluctuations.

For instance, Aramco plans to develop a project with Saudi Basic Industries Corp (SABIC) with a new technology that converts crude oil to chemicals by limiting extensive refining.

A second source said SATORP had issued a tender for pre-feed engineering and design to upgrade its production of aromatics, with an award of that contract seen by the second quarter of 2019.

Saudi Aramco declined to comment, while a spokeswoman for Total said the company was still interested in developing petrochemicals units downstream of SATORP’s refinery, which already produces some petrochemicals products: paraxylene, benzene and propylene.

“It is consistent with our strategy of investing in our major integrated refining and chemicals platform and capitalizing on advantaged feedstock,” the Total spokeswoman said, adding: “the main issue is the gas feedstock allocation.”

The two companies have already been operating the 400,000 barrels per day SATORP refinery integrated with petrochemical production and have considered expanding petrochemicals output for several years.

In 2015, Total said partners would need to solve the issue of obtaining natural gas supplies before moving on to detailed studies of the project.

In February last year, a Total executive said the two companies were considering expanding the refining capacity of the project by 10 percent.

Saudi Aramco owns 62.5 percent of SATORP and Total 37.5 percent. (Additional reporting by Bate Felix in Paris; Editing by Rania El Gamal and Mark Potter)

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