Saudi-based Advanced Petrochemical Company said it has signed an agreement with leading South Korean group SK Gas for the construction and operation of two major petrochemical facilities - a propane dehydrogenation (PDH) and a polypropylene unit - in the kingdom at an investment of $1.8 billion.

The Saudi group said, as per the deal, its subsidiary Advanced Global Investment Company (AGIC) will set up a new joint venture, Advanced Polyolefins Company, along with the Korean firm for the smooth operation of these two plants being set up at Jubail Industrial City.

The PDH plant will boast a total capacity of 843,000 tonnes per annum of propylene, while the PDH facility will manufacture around 800,000 tonnes per annum of polypropylene.

According to AGIC, the entire project will be financed 25 per cent by equity from shareholders and remaining 75 per cent will be financed by JV Co through borrowing from lenders.

Under this agreement, AGIC will own 85 per cent equity stake in JV Co which will be financed by Advanced while the remaining 15 per cent will be owned by SKGP.

Construction is expected to start next year with commercial operations targeted for the second half of 2024.

AGIC has already signed a licence agreement with Lummus Technology, US for the supply of Catofin Technology for the 843 KTA PDH plant besides two other licence pacts with Basell Poliolefine Italia for the supply of Spheripol Technology and Spherizone Technology for two PP plants with capacity of 400 KTA each.

The Saudi group has already signed up project management consultants for the project, it added.

AGIC parent Advanced Petrochemical currently operates a 455,000 tonnes per annum PDH unit and 450,000 tonnes per annum PP plant in Jubail. SK Gas and Advanced also operate the SK Advanced joint venture in South Korea, which also includes Kuwaiti state-owned firm KPC’s PIC subsidiary, that operates a 600,000 tonnes per annum PDH unit in Ulsan.

Saudi Arabia is expanding its industrial base across sectors to diversify its economy and boost employment for Saudi nationals. The Arab world’s largest economy is encouraging public and private sector firms to form partnerships with foreign investors to increase foreign direct investment in the kingdom, a key pillar of its Vision 2030 economic reform agenda.

Saudi Arabia sealed more than $2 billion in investment deals with top global companies and local entities to boost investment in the petrochemicals sector, the Saudi Arabian General Investment Authority (Sagia) said in November last year.

Germany’s BASF, France’s SNF, Japan’s Mitsui, Shell and AMG (Advanced Metallurgical Group) are among the companies planning to invest in Saudi Arabia, Sagia said at the time.

According to the Invest Saudi Fall 2019 report, more than 250 overseas businesses were granted investor licenses in the third quarter of 2019, marking a 30 per cent increase compared to the same period in 2018.