Newsletter No. 1363
News-Analysis
May 22, 2009

 

RAS AZZOUR DESALINIZATION PROJECT IN TROUBLE

Sumitomo Corporation’s US$6 billion Ras Azzour desalinization project in eastern Saudi Arabia is in trouble. According to a Reuters report hot of the press, Sumitomo has just announced that they are suspending participation in the project effective immediately. The report does not explain clearly why Sumitomo has taken this action, but we surmise that Sumitomo is in a dispute with the Saudi government over the terms of the investment, in particular an announcement by Riyadh that “the plant was no longer designated an independent project.”

Sumitomo Corporation spokesman Katsuhiko Onishi told Reuters, “We need to see what the plans for the project are before we can make a decision about whether or not we can participate. We haven’t given up necessarily. We are just back at square one.”

The Ras Azzour project was profiled in Shingetsu Newsletter No. 1067 last July. According to the information at that time, the Saudi Arabian government would own 40% of the venture while Sumitomo and two Malaysian partner companies would each hold 20% shares. The most recent report, on the other hand, suggests that Malaysian power provider Malakoff Bhd and Saudi Arabia’s Al-Jumaih Automotive Company are Sumitomo’s partners.

However, a report from a desalinization business site states that Malakoff pulled out of the project last month and that this withdrawal is what triggered Riyadh’s decision to appoint a government body to oversee the project. Apparently, Sumitomo is unhappy with the new arrangements that the Saudi government has been making.

If the facts of the story become any clearer, we’ll report it.

The plant was expected to account for a third of Saudi Arabia’s total desalinization capacity.

Other Sumitomo Projects

The PetroRabigh Project of Sumitomo Chemical seems headed in a much more favorable direction. Last month, Sumitomo Chemical signed with Saudi Aramco a Memorandum of Understanding (MoU) to conduct a feasibility study for the second phase of the huge US$10 billion project. In a statement, the two companies said that they aim to conclude the study by the third quarter of 2010 and, if the project proves to be economically viable, complete work on the second phase by the third quarter of 2014. The proposed expansion would allow the facility’s ethane cracker to increase capacity by an additional 30 million cubic feet per day of ethane. Despite rising costs and some concerns about the international business environment, the first phase of PetroRabigh seems to be going smoothly. Hiroshi Hirose, Sumitomo Chemical’s new president, recently told an interviewer: “Rabigh is a long-term undertaking based on a strategy looking to a future twenty to thirty years from now, and we don’t swing between optimism and pessimism about the project.”

A Silicon Carbide Venture was agreed to by Sumitomo Corporation and Saudi Arabia in March. Sumitomo is expected to hold a 20% share of the US$20.2 million project. The partners are Washington Mills Management Inc. of the United States and Ahmad H. Algosaibi & Brothers of Saudi Arabia, which will both hold 40% shares. The venture calls for the construction of a plant in Jubail Industrial Park on Saudi Arabia’s west coast. Silicon carbide, or black diamond, is an abrasive agent and fire retardant used in silicon wafer cutters and graphite filers for diesel vehicles.

NEW SAUDI AMBASSADOR IN TOKYO

Faisal Hassan Trad, the former ambassador of Saudi Arabia in Japan, has now been posted as Saudi’s envoy to India. Riyadh’s new man in Tokyo is Abdul Aziz Turkistani. In a new first for the Shingetsu Institute, we were actually sent a letter from the Saudi Embassy announcing the change of ambassadors. I gather that these kinds of letters are usually distributed among the diplomatic community, and that we are now on the mailing list.

The incoming ambassador is very familiar with Japan. Apparently he has thirty years of experience dealing with Japan, and he lived in the country for at least eight years as a graduate student. He is said to be fully fluent in Arabic, English, and Japanese. Since Japan is Saudi Arabia’s largest trading partner, with the two-way trade amounting to more than US$42.2 billion in 2007, it is an important post for his nation.

Ambassador Turkistani commented to an interviewer: “This is a challenging opportunity and I will do my best to further strengthen Saudi-Japanese relations in political, educational, cultural, commercial, and economic fields.”

Personally, I think that any country should be congratulated for posting ambassadors are diplomatic staff based on genuine expertise about the country they serve in. It sounds like Riyadh made a good choice.

NEWS BRIEFS

Saudi Oil Minister Ali al-Naimi visited Tokyo in late April to attend a roundtable ministerial meeting of Asian oil producers and consumers. Prior to the meeting, he also met with METI Minister Toshihiro Nikai. The two ministers pledged to promote bilateral cooperation in renewable energy, conservation, and support for bilateral small businesses.

Suzuki Saudia, the sole distributor of Suzuki vehicles in the Kingdom of Saudi Arabia, recently organized a ten-day trip to Japan for twenty-two Saudi sales staff who achieved their set targets in appreciation for the excellent sales results achieved in 2008. Mahir al-Nabawi, deputy general manager of Suzuki Saudia, told a local news service: “Suzuki Saudia values the excellent performance and dedication of its staff, and the trip is the way of showing our appreciation. We have posted a very good year in terms of sales and our after-sales services that have been appreciated by our customers. Rewards like this trip to Japan will go a long way in boosting the confidence and morale of the employees and motivate them to strive harder.”

Saudi Businesswomen attended a two-day seminar in March on how to start small and medium-size enterprises conducted by female Japanese business experts. The Japanese women delivered lectures on business and economy, and made presentations on how to be a successful businesswoman. One wonders how well those lessons would travel between the two cultures.

Japanese Taiko Drummers held a performance in Riyadh in February, which wrapped up a month-long cultural exhibition organized by the Japanese embassy in Saudi Arabia. Diplomat Katsunobu Takada commented, “The drum show is another tool to introduce Japanese traditional music to the Saudi society.”