State oil giant Saudi Aramco and U.S. firm Dow Chemical have decided to relocate their planned giant petrochemical complex to Jubail, industry sources said on Thursday.

The $20-billion-plus plant was initially to be located in Ras Tanura, home to the world's biggest offshore oil facility. But the cost of reclaiming the land at Ras Tanura and congestion at the site led Dow and Aramco to reconsider plans, sources said. Dow's investment in Ras Tanura would have been the largest single foreign investment ever in the energy sector of the world's top oil exporter and the plant would be one of the largest petrochemical facilities in the world.

"They instructed us that the complex will move to Jubail," a source told Reuters. But with the move, the complex - originally due to produce 8 million tons per year of petrochemicals from 35 process units - will be downsized, two sources said. "The capacity will be lower, they are doing that to save costs," the source said. Aramco has a $10.1 billion petrochemical complex with Japan's Sumitomo Chemical in Rabigh on the west coast. Rabigh Refining and Petrochemical Co (PetroRabigh) can produce an annual 18 million tons of refined products and 2.4 million tons of petrochemical products.

"The complex would probably be as big as PetroRabigh," he said. "At least five plants have been cancelled," a second source said.

"All I can tell you is the project continues to progress through the initial development phases," a Dow spokesperson reiterated. "The evaluation phase of the project is on schedule and will be completed later this year."

Aramco's spokesperson could not immediately comment.

In Jubail, a major hub for petrochemicals, Aramco already has a 305,000 bpd refinery with Royal Dutch Shell and is building with France's Total another 400,000 bpd refinery. The complex was to be integrated with the 400,000 barrel-per-day (bpd) expansion of the Ras Tanura refinery, already the largest plant in the Middle East with capacity of 550,000 bpd.

The Ju'aymah gas processing plant would also have fed into the initial complex. But Aramco may shelve for years plans to expand the refinery, industry sources said last week. Contractor WorleyParsons, which holds the contract for both front-end engineering and design and project management, has taken staff off the project and halted work.

"With the move to Jubail, doubling of capacity at Ras Tanura refinery would no longer be needed," the first source said. With the relocation, feedstock is expected to come from Aramco-Total refinery and from the Berri field, the second source added. The front-end engineering and design (FEED) of the complex is split between U.S. firm KBR, Foster Wheeler and Jacobs Engineering Group. KBR is conducting the main portion of the FEED. Relocating the plant also means the FEED work would have to be revised to match the possible modifications at the plant, sources said.