Conoco and Aramco Plan Refinery in Saudi Arabia

RIYADH, Saudi Arabia — State-run Saudi Aramco and ConocoPhillips signed a $6-billion agreement Wednesday to build a 400,000 barrel-a-day oil refinery in the kingdom’s Red Sea city of Yanbu.

Under the deal, Aramco and Houston-based ConocoPhillips may offer as much as 30% interest in an initial public offering to Saudi nationals, Aramco said.

The project, expected to come on line in 2011, follows a similar deal signed Sunday between Aramco and French oil company Total for a 400,000 barrel-a-day refinery in the eastern Saudi city of Jubail on the Persian Gulf.

Aramco and ConocoPhillips agreed to form a joint-venture company, with each side holding about a 35% stake. Each will be responsible for marketing half of the refinery’s production.

The deals between Aramco and the two Western oil majors come amid tight refining capacity worldwide, one of the key reasons for the jump in global crude oil prices, which have doubled to about $70 a barrel from $35 two years ago.

Many of the plans that were announced during the last year to build new refineries or expand existing ones follow years of reduced investment because of concerns about whether new projects -- which take years to build -- would be profitable.

Many of the proposed projects are not expected to begin production for three to five years.

The Aramco projects are part of a big investment program to refine more Saudi crude oil at home and at refineries jointly built by the company in other countries.

Aramco plans to spend $50 billion during the next five years to boost refining capacity in Saudi Arabia by as much as 60% as well as in other parts of the world.

Aramco is also planning to build new refineries or expand existing ones in China, Indonesia, South Korea and the United States.