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HOUSTON — ConocoPhillips signed a $6-billion agreement with Saudi Arabian Oil Co. to build a 400,000 barrel-per-day oil refinery in the Saudi kingdom's Red Sea city of Yanbu.
Under the deal, the Saudi company also known as Aramco and Houston-based ConocoPhillips may offer up to a 30 percent interest in an initial public offering to Saudi nationals, according to an Associated Press report.
The project, forecast to come online in 2011, follows a similar deal signed Sunday between Aramco and French oil company Total SA for a 400,000 barrel-per-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 percent stake, according to the memorandum of understanding signed by the two companies. The two will each be responsible for marketing half of the refinery's production.
This week's deals between Aramco and the two western oil majors come amid a severe global shortage of refining capacity to process crude oil into gasoline, diesel and other products.
Tight refining capacity worldwide has been one of the key reasons for the jump in global crude oil prices, which have doubled from $35 a barrel two years ago to around $70 at present.
Many of the plans that have been announced the past 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 when they begin service.
Many of the proposed projects will not begin production for another three to five years, according to the AP report.
The Aramco projects are part of a big investment program to refine more Saudi crude oil at home and at refineries built jointly by the company in other countries.
Aramco plans to spend $50 billion over the next five years to boost refining capacity in Saudi Arabia and other parts of the world and boost the kingdom's refining capacity by as much as 60 percent over this period.
Aramco is planning to build new refineries or expand existing ones in China, Indonesia, South Korea and the United States.