State-run Saudi Arabian Oil Co, or Saudi Aramco, and US oil giant ConocoPhillips said Friday they have approved continued funding for the development of a refinery in Saudi Arabia's Red Sea city of Yanbu, AP reported.
The project will create a 400,000 barrel-per-day refinery to process Arabian heavy crude, which will be supplied by Saudi Aramco. The refinery, targeted to start up in 2013, will produce high-quality, low sulfur refined products. Both companies will be responsible for marketing one-half of the refinery's production.
The facility will bolster Saudi Arabia's refining capacity and provide additional quantities of refined products for global and domestic markets, said Khalid G. Al-Buainain, a Saudi Aramco senior vice president, in a release.
The companies have completed the initial evaluation and front-end engineering and design. The next phase of the project includes the solicitation of bids and site preparation work.
ConocoPhillips and Saudi Aramco are planning to form a joint venture company to own and operate the new refinery. Subject to regulatory approvals, the companies plan to offer an interest in the refinery to the Saudi public.
The announcement comes as oil prices surged more than $3 Friday, hitting a new record of nearly $128 a barrel.
Oil prices could rise even higher as U.S. demand picks up during the summer months, when gasoline consumption is typically the heaviest.
Saudi Arabia - the world's largest oil producer - does not see enough demand from customers to increase oil production, the White House said Friday morning. President Bush was in the oil-rich Gulf kingdom in part to lobby for an increase in crude output.
ConocoPhillips shares rose $2.08, or 2.3 percent, to $91.39 in midday trading.