Saudi Arabia is mulling over options on providing improved investment incentives for private investors to bid for a planned multi-billion-dollar refinery at Jizan, a remote Red Sea city in the country's southwest, an adviser to the petroleum ministry said Wednesday.

"We are trying to make Jizan refinery as attractive as any other refinery in the kingdom. We want to create a suitable investment environment. We understand the investors' concerns," Yahia Al Zaid said in a phone interview.

He declined to provide details on the nature of incentives the ministry was considering to improve the project's attractiveness.

The petroleum ministry announced the country's first private sector refinery project last November, saying a license to build the semi/full conversion facility with capacity to process 250,000-400,000 barrel a day of crude oil would be awarded by the end of 2007.

However, interest in the project has been limited so far, with international oil companies staying away from the scheme due its remote location and distance to the oil-rich areas in the country's eastern region at the Persian Gulf.

Jizan is located about 700 kilometers south of Jeddah close to Saudi Arabia's border with Yemen and as much as 1300 kilometers from Damman at the Gulf coast.

Chevron Corp.'s vice chairman Peter Robertson said last week in Jeddah that his company had no interest in the project.

"A refinery in the west is not something that Chevron would be participating in. It wouldn't make strategic sense for Chevron to have a refinery in the west," Robertson said.

Among the companies that have expressed interest in the scheme until now is a consortium comprising the local Nama Chemicals Co. and Malaysia's Petronas.

Companies still have until mid-April to express their interest in developing the refinery, Al Zaid said.

A request for proposals for the project will be issued to qualified companies in the second quarter, with bids due to be submitted to the ministry by the beginning of the fourth quarter of 2007.

Investments in refineries in the Middle East have increased in the past three years as demand for refined products that meet increasingly tight environmental specifications is rising, both in the region and internationally.

Jizan's location has raised questions about the project's economics and ensuring crude supplies.

"We have no plan to build a pipeline. We will transfer the crude oil by ships from Ras Tanura exporting port on the Arabia Gulf, or from Yanbu on the Red sea," Al Zaid said.

The ministry said the crude would be supplied at market prices by Saudi Arabian Oil Co., the country's national oil company, under a yet-to-be-signed long-term agreement.

A location for the project has also still to be agreed on, according to Al Zaid.

"We have to have a location that complies with all relevant environmental standards, suitable soil and with access to deep water to receive large vessels," he said.

The refinery is set to be fully owned by the private sector and may sell shares in an initial public offering once the project's viability has been established, according to the refinery's Web site.

"There is no plan for the government to take a stake of this project. The main purpose was to give the private sector the opportunity to own and run a refinery in Saudi Arabia," Al Zaid said.

The refinery could also be integrated with petrochemical plants to improve project economics, according to the Web site.

Copyright (c) 2007 Dow Jones & Company, Inc.