Focus On Saudi Arabia.

The fall in oil prices did not affect the economic revival in Saudi Arabia which had begun in 1996. In 1997, the kingdom saw its biggest private petrochemicals venture, Saudi Chevron Petrochemical Co., financed easily by local and international bank lender - in a unique model of Islamic collateral security (ICS).

The venture's borrowing had strong elements: extensive local equity held by the Saudi Industrial Venture Capital Group (SIVCG); international equity held by Chevron; a strong local lending base from Al Bank Al Saudi Al Fransi, Saudi British Bank and United Saudi Bank; regional lending base from Gulf International Bank; an international lending base through Chase Manhattan; soft loans from the Saudi Industrial Development Fund; limited recourse financing techniques applied by the venture's advisors; and industrial diversification in the petrochemical industry.

Saudi Chevron Petrochemical Co. is having a $650m grassroots aromatics complex under construction to produce 480,000 t/y of benzene and 220,000 t/y of cyclohexane, scheduled for completion in 1999 (see survey of Saudi Arabia in Vol. 49).

Saudi projects scheduled for financing in 1998 went ahead as planned. In May, Saudi European Petrochemical Co. (Ibn Zahr) received a $420m eight-and-half- year loan at 45 bp above Libor, arranged by Riyad Bank (RB), Al Bank Al Saudi Al Fransi, Saudi American Bank (Samba) and National Commercial Bank (NCB). The loan is towards Ibn Zahr's $500m expansions including a new 320,000 t/y polypropylene plant. (Ibn Zahr is owned 70% by SABIC and 10% by each of Apicorp, Neste of Finland and Ecofuel of Italy's ENI group).

In June Saudi Aramco Mobil Refinery Co. (Samref) got a $350m five-year loan at 35 bp arranged by Chase Manhattan, RB and Sumitomo Bank to help finance expansion at its Yanbu' export refinery including a propylene unit. Samref is owned 50-50 by Saudi Aramco and Mobil.

On Sept. 29, Al Jubail Petrochemical Co. (Kemya), a SABIC-Exxon JV, received a $720m eight-and-half-year loan at 45 bp. This was arranged by 11 regional and international banks obliged to raise most of the funds themselves. The loan was to finance Kemya's expansions, including a 700,000 t/y ethylene plant for which ABB Lummus Global was contracted.

Saudi Petrochemical Co. (Sadaf), a SABIC-Pecten (Shell US) JV, is to raise a big loan in 1999 to fund its expansions, including a $200m plant to produce 500,000 t/y of styrene monomer for which Daelim of South Korea was contracted in February 1998, and a $500m world-scale aromatics complex based on the UOP/BP Cyclar process with a capacity of 520,000 t/y for which Foster Wheeler Italiana has done basic engineering and designs.

National Industrialisation Co. (NIC) is seeking loans from individual Saudi and international banks, rather than from a consortium, to fund a 450,000 t/y propylene plant to be built in Jubail and to be on stream in 2001 at the cost of SR1 bn ($267m). NIC is getting a SR400m ($107m) soft loan from SIDF. Most of its remaining needs will be borrowed. NIC, founded in 1985 to promote industrial development in the kingdom, is owned by a group of Saudi investors led by Prince Alwaleed Ibn Talal Ibn Abdel Aziz. The group took over NIC in 1995. NIC posted a net profit of SR20m (45.3m) in the year to end-March 1998, compared to SR1m ($266,610) in the previous year and a loss of SR38.8m ($10m)

in the year to end-March 1996. The company intends to have several plants to treat propylene derivatives and other projects.

The Saudi Consolidated Electric Company for the Western Region (EWR) is to raise a syndicated loan for more than $1 bn in 1999 to fund construction of a 1,750 MW power plant at Shuaiba, in the west of the kingdom, and EWR's repayment of loans worth about SR1 bn ($267m) owed to local banks. A loan agreement would commit the ministry of finance and economy to pay on time the whole of the government subsidy to EWR, which meets the company's generation and transmission costs plus an annual 7% dividend to the EWR shareholders. The ministry's payment would go towards servicing the debt. In 1997, the Saudi Consolidated Electric Company for the Eastern Province (Sceco-East) got a loan from local and regional banks to finance a 2,400 MW plant, Ghazlan-2, based on a commitment that amounts due to the company by major clients would be allocated to service the debt. Sceco-East's clients include Saudi Aramco and SABIC.

Rabigh Project Shelved: On the other hand, the fall in oil prices compelled Saudi Aramco to shelve the proposed upgrading of the 400,000 b/d Rabigh oil refinery on the Red Sea which would have cost more than $800m. A tender for the project was cancelled in October.

The upgrade project was no longer needed urgently as modernisation of the Ras Tanura refinery this year increased the supply of premium gasoline and other products which Saudi Aramco used to import from abroad.

SABIC Profits Down 51%: The Saudi Basic Industries Corp. has reported a profit of SR1.74 bn ($464m) in the first nine months of 1998, down 51% from SR3.58 bn ($966m) in the first nine months of 1997. The drop was due to a fall in petrochemical and metal prices and an increase in feedstock costs. But the company says its expansions will continue, with total production capacity to reach 30m t/y by 2001.

Production by SABIC's subsidiaries, mostly consisting of JVs with foreign companies, rose 5% to 19m tons in the first nine months of 1998. Marketed production rose 7% to 14,500 tons. But income from sales during this period fell 26% to SR13.6 bn ($3.64 bn), compared to SR18.5 bn ($4.95 bn) in the first nine months of 1997. Sales to Asia fell 26%, to South America 32%, to North America 15%, to Europe 15%, to Africa 23%, and to the local market 15%.