* Saudi, Total targets end-2012 to commission Jubail
* Partners could issue $500 million sukuk in 2010
(Adds details, background)
By Stanley Carvalho
ABU DHABI, Oct 12 (Reuters) - Saudi Aramco and France's Total are expected to pay more than $12 billion to build the Jubail oil refinery, a senior company executive said on Monday.
The 400,000 barrels per day (bpd) refinery will be commissioned end-2012 and is expected to come online in March 2013, Daniel Lacombe, the Jubail Refinery's project director said on the sidelines of a World Refining Association conference.
"The EPC (engineering, procurement and construction) cost is $9.6 billion and on top of that there are other costs... owners' costs, in our case - cost of financing, which is about 25 percent more, that works out to around $12 billion plus," he said.
Funding for the refinery, which also includes a 700,000 tonnes per year (tpy) petrochemical plant, will come from commercial banks in Europe, the Middle East and Asia, export credit agencies, Saudi funds as well as Islamic instruments including a sukuk issue, Lacombe said.
"The sukuk could be over $500 million and chances are high that we will issue a sukuk for which there is quite an appetite in the kingdom," Lacombe said, adding that investors in the sukuk, or Islamic bond, could include Saudi state-owned pension funds and private investors.
The benchmark sized sukuk could be launched in 2010, Lacombe said.
The project will be funded through a 65 percent debt and 35 percent equity ratio, while the financial close is expected to be achieved by December this year or January 2010, he said.
A public offering could also be floated within two years of the project start-up, he said.
"The intention for the IPO is in Riyadh and 25 percent of Saudi Aramco's stake will be for the IPO," he said, adding that it would then bring down Aramco's stake to 37.5 percent.
Currently, Saudi Aramco has a 62.5 percent stake in the project while Total has 37.5 percent.
COMPETITION
Giant Indian refiner Reliance Industries', which has doubled the size of its refining complex at Jamnagar to 1.24 million bpd, could have a headstart over Saudi and Total's Jubail plant. It has already lifted sales to the Middle East and Europe and started fuel sales to the United States.
But Lacombe said the global economic slowdown had had a major impact on refinery operations and the launch of the Jubail refinery would benefit from the market cycle.
"It won't be much of a competition because in 2009 we are in the middle of one of the world's worst crises that has hit refining. As an investor, for us it is an opportunity," he said.
"When we start, the market situation will be better, we will be on the other side of the cycle. It is the right decision for us."
The integration of the petrochemicals plant into the project estimated to cost about 10 percent of the total cost which would lead to synergies and savings, he said.
"It will result in savings of at least 15 percent in petrochemicals, and in infrastructure and utilities," he said.
"In manpower savings it would be about 50 percent."
Once the Jubail refinery is operational, products from the plant will go into the domestic market as well as exports markets, he said.
About 100,000 tonnes annually of liquefied petroleum gas will be exported into Asia, while two-thirds of the gasoline production will be diverted into the domestic market with the rest sold into either Asia or the U.S. markets.
Aviation and diesel fuels will be targeted at the Asian and European markets, Lacombe said.
Benzene and polypropylene will be consumed by the local market. Paraxylene will initially be exported to Asia while the long-term plan is to keep it for sale into the domestic market, he said. (Editing by Anthony Barker)