French oil major Total's $12-billion joint venture with Saudi Aramco could face a delay as the two firms seek to cut costs, Gulf newspaper al-Hayat reported on Saturday, quoting unidentified sources. The two firms said in June they would award all the packages for the construction of the 400,000 barrels-per-day Jubail refinery in the first quarter of 2009.
But the launch of many oil-related projects in the world's largest oil exporter could be delayed to 2009, al-Hayat quoted the sources as saying. The sources cited the global financial crisis, fears over a world economic recession and an expected drop in construction costs as reasons for the potential delays.
"The delay could affect the projected refineries of Jizan, Jubail and Yanbu," the sources said. Al-Hayat did not clarify when exactly in 2009 the launches would occur. Saudi Arabia has set a March 7 deadline for prequalified firms to present detailed proposals to build the Jizan refinery which will have a capacity of 250,000-400,000 barrels per day.
The tender for Jizan has been delayed several times from initial plans to open bidding in the second quarter of 2007. On Friday, ConocoPhillips and Aramco said they halted bidding on the construction of the 400,000 barrel per day joint-venture Yanbu refinery in Saudi Arabia, citing uncertainties in the financial and contracting markets.
The current bidding process to build the Yanbu export refinery will be delayed to the second quarter of 2009 from the fourth quarter of 2008, the companies said in a statement. Turmoil in world credit markets and tumbling crude oil prices have prompted energy companies around the world to reconsider more expensive projects or cut back on spending to preserve liquidity.
Yanbu, which had a price tag of $6 billion when it was announced in 2006, was one of four plants planned by the world's top oil exporter to boost its refining capacity. Global refining margins have been falling on weaker demand due to a slowing economy and increased supply from new export refinery capacity.