RABIGH, Saudi Arabia - Saudi state oil giant Aramco and Japan's Sumitomo Chemical said Sunday they had started building a huge oil refining and petrochemical complex on the Red Sea.

The two companies, which formed the PETRORabigh joint venture in August 2005, have also finalised the financing agreements for the multi-billion-dollar project, a joint statement said.

"When completed in late 2008, the Rabigh project will be one of the largest integrated refining and petrochemical projects ever to be built at one time," the statement said.

The two companies had signed in London on March 2 financing agreements totaling 5.8 billion dollars with Japan Bank for International Cooperation (JBIC), Public Investment Fund of Saudi Arabia (PIF) and 17 financial institutions, it added.

Although the total cost of the project was not revealed in the statement, Sumitomo Chemical had said earlier the project will cost some 8.5 billion dollars -- way up from the initial estimate of 4.3 billion dollars in part because of soaring steel prices.

But Saudi oil minister Ali al-Nuaimi, who took part in the project launching ceremony, said the total cost will be around 10 billion dollars, shouldered evenly by the two partners, SPA official news agency reported.

Saudi Aramco currently owns and operates a refinery at Rabigh with the capacity to process 400,000 barrels of crude oil a day that will be completely overhauled by the vast new project.

The initial plans for expansion will include annual production of about 1.3 million tons of ethylene and 900,000 tons of propylene and daily output of 60,000 barrels per day of gasoline as well as other refined products.

Japan is heavily reliant on imported oil to keep the world's second largest economy running.

Under the 50-50 joint venture agreement, Saudi Aramco will supply the Rabigh Project with crude oil, ethane and butane, and will market the resulting refined products.

Sumitomo Chemical has operated a large petrochemical refining complex in Singapore since 1984, but the Rabigh project is its first foothold in an oil and gas producing country.

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