Modern CEO Abdulaziz F. Barakat Al-Hamwah and Petrobras director Paulo Costa signed a preliminary joint venture agreement on Monday at the Four Seasons Hotel in Riyadh.

Modern chairman Prince Turki bin Abdulrahman bin Abdulaziz Al-Saud and Brazilian Ambassador Sergio Luix Canaes also attended the ceremony. According to the terms of the agreement, both companies will study the feasibility of jointly developing and operating a CPC production plant in Saudi Arabia.

The joint venture project, expected to be operational by the second quarter of 2012, will have an annual production capacity of up to 700,000 tons. It will be established in Jubail Industrial City or Raz az Zawr Mineral Industrial City and will cover approximately 400,000 square meters of land.

A major portion of the project cost will be financed by various government and commercial financial institutions, while the equity investment will be shared equally between Petrobras and Modern.

“The breakthrough that happened yesterday was a result of several months of meetings and negotiations regarding technical specifications for the project,” Al-Hamwah said on Tuesday.

He said this came as the result of Brazilian President Luiz Inacio Lula da Silva’s landmark visit to the Kingdom in 2009, which aimed to boost cooperation between the two countries in the energy and agriculture sectors. “At that time, Modern and Petrobras forged a memorandum of understanding to undertake the building of a manufacturing facility in the Eastern Province for the production of CPC,” he added.

“As the major raw material required by aluminum smelters, CPC is in great demand to meet the growing needs of the aluminum industry, not only in Saudi Arabia but throughout the Gulf region and worldwide,” said Costa.

He added that both partners have high expectations for the project and believed Saudi Arabia provided many competitive advantages, including the availability of low cost and reliable power, which translates into lower cost of production.

In addition, the joint venture will also establish strategic alliances and off-take arrangements with aluminum producers in Saudi Arabia and other Gulf nations.

Petrobras is the recent winner of Euromoney’s award for the best-managed company in Latin America's oil and gas sector.

The Modern Group, founded by Prince Turki and Al-Hamwah, has a number of strategic partnerships in various sectors, including chemicals, mining and pharmaceuticals, among others.