Chevron Phillips, Saudi Industrial Seek $1.8 Billion

Sept. 27 (Bloomberg) -- Chevron Phillips Chemical Co. LLC and Saudi Industrial Investment Group plan to borrow $1.8 billion to help finance a $5 billion petrochemical plant they will build at al-Jubail, eastern Saudi Arabia.

The companies invited a group of local and international banks to underwrite 15-year loans for the National Chevron Phillips project and asked for responses by the end of next month, said three people familiar with the plan, who asked not to be identified as the borrowing is private.

National Chevron is the third project with Saudi Industrial for Chevron Phillips Chemical, a venture between Chevron Corp. and ConocoPhillips based in The Woodlands, Texas. The companies opened their first al-Jubail plant in 1999 to produce chemicals including benzene, used to make detergents and insecticides, and in 2001 agreed to build a second plant due to open in the first quarter of 2008.

Banks are being asked to contribute between $125 million and $250 million each to the transaction, according to the people. The rest of the funding will come from the companies, Saudi government funds and the Export-Import Bank of the United States, they said.

National Chevron will produce chemicals including ethylene, propylene and polyethylene, Chevron Phillips spokesman Brian Cain said in an e-mailed statement today. He declined to comment on the project's financing or construction schedule, and calls to Saudi Industrial's Riyadh headquarters went unanswered.

Feedstock Reserves

Ready access to the world's biggest reserves of oil and gas feedstock has helped Saudi chemicals companies expand, while European and North American rivals struggle with rising prices for the same raw materials.

Saudi Basic Industries Corp., or Sabic, the world's biggest chemicals maker by market value, started the Saudi Kayan Petrochemical Co. last year to build the world's largest ethylene-glycol plant at al-Jubail.

Saudi Kayan raised $1.8 billion from an initial share sale earlier this year, and agreed to borrow another $1.8 billion through 15-year loans from ABN Amro Holding NV, Arab Banking Corp., BNP Paribas, HSBC Holdings Plc and Samba Financial Group, two people familiar with the deal said Sept. 24.

Persian Gulf petrochemicals projects worth as much as $90 billion may be delayed as banks hold back from lending until global debt markets stabilize, Abdullah al-Hagbani, secretary general of the Gulf Petrochemicals and Chemicals Association, said in an interview in Dubai today.

Banks are less likely to lend to infrastructure projects after being saddled with as much as $332 billion of unsold leveraged loans, Standard & Poor's said earlier this month. Between 2002 and 2010 petrochemical investment in Persian Gulf states will total about $90 billion, according to the GPCA, which represents 100 chemicals companies in the region.