Saudi Arabia reviews aluminium deal

Saudi Arabia’s state mining company and Rio Tinto Alcan on Monday said they were reviewing a $10.5bn aluminium project, which was seen as an integral part of diversifying the kingdom’s oil-dependent economy, in the wake of the deepening financial crisis. The statements from Ma’aden and the international mining giant – which have a preliminary agreement to mine bauxite and build a refinery, smelter and power station to produce at least 1.4m tons of alumina a year and 650,000 tons of aluminium – are further evidence of how the global credit crunch is impacting the oil-rich Gulf. A lack of international financing combined with a liquidity crunch in the region’s domestic banks, as well as concerns of a global recession, have caused analysts to predict many of the estimated $2,500bn-worth (€1,955bn, £1,595bn) of projects slated for the Gulf will be delayed and some cancelled. Production at the aluminium project in Saudi Arabia – touted as the world’s largest fully integrated mine-to-metal project – was scheduled to begin in 2012. Ma’aden released a statement saying that it was conducting a detailed review of the project in “the context of the current international financial climate”. Dick Evans, chief executive officer at Rio Tinto Alcan, said the company was looking at the “technical and financial feasibility of all our projects”, adding that it was not unique to Ma’aden. The aluminium smelter was one of two massive projects led by Ma’aden, as it sought to provide much-needed jobs and investment in rural Saudi Arabia. It was not clear if a review was being conducted on the second project, a $5.6bn development that involves mining phosphate and building the world’s largest sulphuric acid and phosphoric acid plants to produce diammonium phosphate (DAP), an agricultural fertiliser. The goal was to produce 15 per cent of the world’s DAP by 2011. Ma’aden’s partner in that project is Sabic, the kingdom’s petrochemicals giant, and it was announced in June that just under $4bn in financing had been raised. Last week, officials at Saudi Aramco said the world’s largest oil company was reviewing some of its longer term projects, although the officials did not elaborate on the details of the review. There have also been reports that some of Dubai’s huge real estate projects are already being delayed, while an official in Abu Dhabi, the hugely wealthy capital of the United Arab Emirates, has said that the emirate was reviewing some of its investments in tourism. Abu Dhabi was still pushing ahead with flagship projects, including the near $30bn development of an island that will be home to Louvre and Guggenheim museums, but was “reprioritising some of our major projects, especially those that have not been announced”, Lee Tabler, chief executive of the Tourism Development and Investment Company, said. Libya, however, sought to buck the trend on Monday as a Libyan government fund and Gulf Finance House, a Bahrain-based investment bank, gave details of highly ambitious plans to launch a $5bn energy city in the north African country. In spite of being rich in hydrocarbon resources, Libya remains one of the least investor-friendly states in the Middle East.