State oil giant Saudi Aramco and France's Total have decided to go ahead with plans to build a new 400,000 barrels per day refinery in Saudi Arabia, Aramco and Total said in a joint statement on Wednesday.

The plant is one of four that the world's top oil exporter aims to build to boost domestic refining capacity by as much as 1.6 million bpd from 2.1 million bpd.

The refinery on the Gulf coast at Jubail will start up at the end of 2012, the companies said. They provided no details as to the cost of the plant.

Equipment and labour shortages have pushed costs up globally in the energy sector, raising industry concerns about whether the new Saudi plants would be built. Industry sources have pegged the cost of the new plant at over $10 billion, up from the initial estimate of around $6 billion.

The refinery will be a complex plant able to convert the increasing quantities of heavy crude Aramco plans to produce in the future into transport fuels.

'Saudi Aramco and Total will contribute to supply growing demand for transportation fuels and petrochemicals, especially in Asia and the Middle East, but also in Europe where the deficit of diesel is growing,' Michel Benezit, Total's president of refining and marketing, said in the statement.

Aramco will own 62.5 per cent of the plant, and Total 37.5 per cent. Aramco will later offer 25 per cent to the Saudi public, leaving both Aramco and Total with an equal 37.5 per cent share in the plant.

Aramco and Total will form a joint venture company in the third quarter for the refinery, and will invite companies to bid for the plant's construction in June.

All packages for construction will be awarded in the first quarter of 2009, the companies said. Finance for the plant should be closed in early 2009.

Aramco and Total signed a deal to build the plant in 2006. Aramco also signed a similar deal for another 400,000 bpd refinery with ConocoPhillips, but has yet to announce a final investment decision on that plant.-Reuters