Dow to sign record $20bn Aramco deal

Dow Chemical of the US and Saudi Aramco are close to signing a deal to build a petrochemical plant worth about $20bn in the biggest foreign investment in Saudi Arabia’s energy sector.

The agreement, which could be announced as early as Saturday, would give Dow access to low-cost oil for its plastic products and provide it with a foothold in the Saudi market, while enabling the kingdom to bring foreign expertise into its chemical industry.

The deal could help Dow, the largest chemical group in the US, to shift the focus of attention away from the bitter legal battle with two senior employees fired for allegedly plotting a buy-out of the company.

People familiar with the situation said the talks between Dow and state-
controlled Saudi Aramco had been going on since last July and were very advanced but warned they could still collapse.

Dow Chemical declined to comment and Saudi Aramco could not be reached.

The plant, to be built in Ras Tanura on Saudi Arabia’s east coast, is part of the country’s strategy to harness its position as a large oil producer to become a major manufacturer of petrochemical products.

It is unclear how Dow and Saudi Aramco will split the total $20bn cost of the project, which is expected to be completed over the next five years.

People close to the situation said the US company usually controls 50 per cent of foreign joint ventures but in this case, Dow’s holding could be lower because Saudi Aramco could decide to list a stake in the project on the stock market.

Last month, Dow struck a deal with Libya’s National Oil Corp to expand and run a plastics factory there.

Dow faces competition from rivals in oil-rich countries, whose plastics and chemical products can be produced at a lower cost due to the availability of cheap crude and natural gas.

Separately, Dow on Thursday severed its last links with Pedro Reinhard, one of the two senior employees accused of holding talks with Middle Eastern investors over a buy-out.

Mr Reinhard, who denies the allegations and is suing Dow and chief executive Andrew Liveris, stepped down from the board at the annual shareholder meeting, putting an end to a 37-year career with Dow.

Neither Mr Reinhard, nor Romeo Kreinberg, an executive vice-president also fired in connection with the allegations and now suing, were present at the meeting.