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Saudi Arabia and Japan’s Sumitomo have agreed to create a giant petrochemical complex in Rabigh, signalling Riyadh’s intent to lure investment despite the recent killing of foreigners at an energy site.

The project between Saudi Aramco and Sumitomo Chemical Co could see investment of up to US$4.3bn.

The two firms unveiled their plans a week after five engineers were gunned down at a petrochemical plant in Yanbu, just north of Rabigh on the Red Sea coast.

“While we would have to deal with various unforeseen challenges which may lie ahead of us, I am convinced that this joint project is bound to succeed,” says Hiromasa Yonekura, president of Sumitomo Chemicals.

The deal marks Sumitomo’s first attempt to establish a foothold in an oil and gas producer. For the kingdom, the world’s biggest oil exporter, it shows further success in attracting foreign investment into its energy sector.

The scheme, due for completion in 2008, will turn the Rabigh refinery into a petrochemical complex producing a total of 2.2mn tonnes of olefins along with large volumes of gasoline and other refined products.

The two companies said it would be one of the largest petrochemical and refining projects built at one time.

The first step of the project is a joint feasibility study. The definitive documents to implement the scheme will be negotiated in parallel with the study.

The May 1 attack which killed five western engineers in Yanbu raised international fears about the security of Saudi Arabia’s oil and petrochemical industry.

The US had already urged around 35,000 US expatriates to leave the kingdom, which is battling a wave of militancy blamed on supporters of Saudi-born Osama bin Laden’s al Qaeda network.

More than 50 people, including nine Americans, were killed in suicide bombings at housing compounds in Riyadh last year. Another blast at a security headquarters in the capital last month killed six people.

Abdallah Jumah, president and chief executive of Saudi Aramco, says the state oil giant’s facilities were protected by 5,000 guards as well as physical barriers, cameras and government security forces.

“We cannot take one incident and say the situation pertains across the whole of the kingdom,” he says. This agreement “is yet another signal that Saudi Arabia is open to the serious, far-sighted investor,” Jumah adds.

Yonekura says security was a top concern for Sumitomo, but adds that the company is more worried by regional tension in the Middle East than the Yanbu shooting.

Jumah says he hopes Rabigh eventually would join Jubail, on the east coast of the kingdom, and Yanbu as petrochemical hubs.

The Rabigh refinery, which supplies both the domestic Saudi and international markets with oil products, processes about 400,000 barrels per day of crude.