Dow and Saudi Aramco Achieve Savings on Ras Tanura?

I was very interested to read a report this week in Reuters claiming that Dow and Saudi Aramco had achieved savings of $4BN on an estimated total investment of $20BN in the Ras Tanura petrochemical complex.

As reported previously in this blog, construction costs are down, with the CERA downstream index showing that on average, the cost of building new refineries and petrochemical plants fell 9 percent between the third quarter of 2008 and the second quarter of 2009, after several years of steady and significant increases.

If the reported savings at Ras Tanura are correct, then Dow and Saudi Aramco have been highly successful in demanding cost reductions from managing contractors. Clearly, the managing contractors will be looking to their sub-contractors and equipment suppliers to achieve substantial savings. In some cases, where order books are weaker, this will create major problems and some may not survive.

After years of very high inflation in new plant construction, it is now necessary for all parties to work smartly to achieve economies and satisfy the end clients. The days of 'just get it built' are clearly over.