DHAHRAN, December 20, 2003 -- Saudi Aramco signed a series of four energy conversion agreements on Saturday with a private-sector consortium comprising International Power of the United Kingdom and Saudi Oger, to implement four cogeneration projects to supply electricity and steam to Saudi Aramco.
The projects will produce over 1,000 megawatts of electricity and more than 4 million pounds of steam per hour.
The projects will be implemented under the "BOOT" (Build-Operate-Own-Transfer) business model, whereby the investors will build, own and operate the cogeneration facilities and transfer them to Saudi Aramco 20 years after commencement of commercial operations. Saudi Aramco will construct the facilities required to connect the new projects, whose total value will exceed SR 2 billion, to its existing facilities.
The deal was signed for International Power by chief executive officer Philip Cox; for Saudi Oger by senior vice president Emad Baban; and for Saudi Aramco by vice president of Project Management Isam A. Al-Bayat. Abdallah S. Jum'ah, Saudi Aramco's president and CEO, also participated in the signing ceremony, held at the Saudi Aramco Exhibit in Dhahran.
Jum'ah underscored the program's pioneering investment approach and the state-of-the-art technology that will utilized in the cogeneration plants. He said the program was aimed at providing a reliable, cost-effective source of electricity and steam for key Saudi Aramco oil and gas processing facilities and encouraging investment by the private sector in the Kingdom and internationally.
Jum'ah stressed that the program is consistent with Saudi Aramco's objectives of boosting operating efficiency, reducing costs and protecting the environment.
Execution of the agreements, he said, represents an important step in Saudi Aramco's ongoing efforts to support the national economy. It also grants a greater role in oil and gas operations to the private sector and introduces new ideas and innovative investment opportunities to leverage the Kingdom's hydrocarbon resources, Jum'ah said.
He expressed satisfaction at the interest shown by investors in this program, which signals a high level of confidence in Saudi Aramco and the Kingdom.
Philip Cox said the agreement represents International Power's first entry into the Saudi market. He was pleased that International Power was making a substantial investment in the Kingdom at a time when Saudi Arabia was gearing up to invite investors in independent water and power projects.
Emad Baban of Saudi Oger highlighted the significance of the accord not only to Saudi Aramco but also to the Kingdom, in terms of its value in encouraging private investment, both local and foreign, particularly since it is the first power generation project of its size to be implemented by the private sector in Saudi Arabia.
Under the agreement, Tihama Company, a joint venture of the International Power-Saudi Oger consortium, will build, finance and operate cogeneration facilities at four key Saudi Aramco operating sites in the Eastern Province: 'Uthmaniyah, Shedgum, and Ju'aymah Gas Plants and Ras Tanura Refinery. Ownership of the facilities will be conveyed to Saudi Aramco after 20 years.
Implementation is expected to begin in the first half of 2004 and to be completed in phases during 2006. Saudi Aramco will supply the cogeneration facilities with gas and water required for power and steam generation.
Local contractors are expected to participate in a major way in the construction activity, estimated at hundreds of millions of Saudi riyals. Furthermore, the total operation, maintenance and support services costs in which local contractors, vendors and suppliers are expected to participate, are estimated at about SR 100 million per year.