US-Saudi alliance invests $5bn to build oil refinery outside Strait of Hormuz
The project includes the construction of a 200,000-barrel-per-day refinery, connected to a deep-water port, along with storage tanks for crude oil and refined products.
RIYADH: A Saudi-US alliance has entered the final stage of selecting a host country for a $5 billion integrated refinery and energy export corridor project.
This project aims to create a strategic energy export platform that bypasses the Strait of Hormuz,
Asharq Bloomberg has reported.
The alliance, known as MERA Oil, comprises the US-based MWG Enterprises and the Patel Family Office, along with PWS, a subsidiary of the Saudi AHQ Industrial Group.
In a statement, the alliance said it has completed three years of site evaluations in the Gulf Cooperation Council countries and narrowed down the options to three countries, all located outside the Strait of Hormuz, following two years of consultations with the respective governments.
The final location is expected to be announced before the end of 2026.
Project site selection criteria
The statement did not mention the three destinations, but the GCC countries with direct sea access outside the
Strait of Hormuz are Saudi Arabia on the Red Sea, the UAE and Oman.
Abdulmalik Al-Qahtani, CEO of AHQ Group,
told Asharq Bloomberg that the consortium would not disclose the three shortlisted countries, or whether Saudi Arabia is among them, to maintain the confidentiality of the selection process with the participating governments.
He added that the site selection is based on standardized criteria including logistical efficiency, ease of access to the sea, and industrial infrastructure as well as land and facility availability, workforce efficiency, regulatory frameworks, and long-term competitiveness.
He explained that the project is not limited to building a refinery, but aims to develop an integrated system encompassing refining, storage, logistics, and export infrastructure, with the potential for future expansion into downstream industries.
Al-Qahtani indicated that the consortium is currently conducting advanced feasibility studies for the three sites, remaining open to any exceptional proposal from another Gulf state, provided its evaluation can be completed within the project’s timeline.
The project includes the construction of a 200,000-barrel-per-day refinery, connected to a deep-water port, along with storage tanks for crude oil and refined products, and marine export facilities, allowing direct access to global shipping lanes without the need to transit the Strait of Hormuz.
The project comes at a time when the flexibility of energy export routes has become a key factor in investment decisions, after regional military tensions highlighted the risks of relying on the Strait of Hormuz, through which approximately one-fifth of the world’s oil trade passes.
Beyond a geopolitical investment
Lakshmi Narayanan, vice chairman of the Patel Family Office, stated in an interview with Asharq Bloomberg that choosing a site outside the Strait reflects a long-term vision for infrastructure, and is not a response to a specific geopolitical event.
He added that the consortium began studying the project three years ago with the goal of creating a facility capable of competing for decades.
He emphasized that locations offering direct access to global markets provide greater flexibility in shipping operations and enhance the reliability of supplies, which are attracting increasing interest from customers, governments, and financiers.
During the recent regional crisis, Saudi Arabia benefited from the East-West Petroline pipeline, which transports oil to the port of Yanbu on the Red Sea, bypassing the Strait of Hormuz.
This has bolstered regional interest in developing refining and export facilities in locations with greater logistical flexibility.
Components of the first phase
Marc Gunderson, founder of MWG Enterprises, explained to Asharq Bloomberg that the consortium has finalized its investment structure and financing strategy.
He stated that the current phase focuses on selecting the host country, noting that the country that moves quickly will attract a new refining, storage and energy export platform.
The first phase of the project represents an investment of $5 billion and includes the construction of a complex using highly efficient refining technologies and advanced emissions reduction systems.
The possibility of adding units for the production of sustainable aviation fuel and carbon management technologies is being explored for later phases.
Narayanan explained that the proposed financing structure combines contributions from institutional investors, project finance, corporate debt, export credit agencies, and Islamic finance instruments, including the potential issuance of sukuk.
He added that discussions with financial institutions and sovereign investors are ongoing, and financial closure will occur after the host country is selected and the final investment decision is made.
The consortium indicated that the pre-feasibility study is at an advanced stage, encompassing refinery design, product mix, supply chain, and implementation plans.
Final engineering studies will commence immediately upon site selection, with the target of completing mechanical works by the end of 2029, paving the way for the commencement of commercial operations.
A platform combining refining, storage, export
The project comes at a time when global energy markets are facing tighter supplies of refined petroleum products than crude oil, after geopolitical turmoil and attacks on Russian refineries tightened fuel markets and increased refining margins, particularly for diesel and jet fuel.
Gunderson emphasized that the project’s economic viability is based on long-term structural shifts, not fluctuations in refining margins. He pointed to declining refining capacity in the US and Europe, while demand for middle distillates continues to grow.
He added that the project does not aim to build a traditional refinery, but rather to develop an integrated platform combining refining, storage, logistics, and export infrastructure.
This will contribute to reducing operating costs and enhancing market access flexibility. He confirmed that discussions with potential buyers for the project’s output are ongoing, but no final agreements have been reached yet.
The complex will focus on producing high-specification petroleum products, including low-sulfur diesel and jet fuel, to meet demand in the US, the Atlantic region, the Gulf States, and other markets, according to the final design and marketing agreements.
The complex is expected to cover between 1,200 and 1,500 acres and will be connected to a seaport.
Regarding crude oil supplies, Gunderson noted that the supply strategy is a key part of the project evaluation, but final agreements will not be signed until the host country is selected. He added that the refinery will have the flexibility to process Gulf crude and other types of crude according to commercial requirements.
