Mammoth Saudi Petrochemical Center Braces for War : Industry: But the plant has not been forced to cut production.

A senior Saudi government official looked out over the geometric smokestacks, plump storage tanks, warehouses, water canals and offices that make up the largest petrochemical city in the world--and the industrial heart of Saudi Arabia.

“Jubail,” he said wistfully, “would make a nice target to shoot at from the sea.”

At a time when Jubail is gearing up for an expansion of some of its plants by up to 70%, Saudi officials are now reinforcing gun positions, building new escape roads, fixing up labor quarters for U.S. troops and Kuwaiti refugees and hauling dangerous chemicals out of the mammoth industrial site that lies just 185 miles south of the Kuwaiti border.

“We never thought this would happen. We still are in shock. We still wake up every morning and say, ‘Maybe it’s all a bad dream,’ ” said Prince Abdullah ibn Faisal ibn Turki, secretary-general of the commission that oversees Jubail. “But we basically are preparing for the worst and hoping for the best, and every minute we become better prepared.”

In fact, Saudi officials now say that with substantial multinational forces in place in the Saudi desert, there is little risk of Jubail taking a military hit. But Saudi Arabia’s Eastern province, the core of its oil industry and an employment center for tens of thousands of Americans and other expatriate workers, has already been knocked off balance.

A few companies, like Southern California’s Fluor Corp., have largely pulled out of Dhahran, south of Jubail, and relocated to safer quarters in Jidda on the Red Sea. Japanese contract workers flew home. Saudi Aramco, the country’s oil-producing giant, is working around the clock to process exit visas for thousands of expatriate dependents who are flocking out of the country on the heels of the Iraqi invasion to the north.

Though production has remained relatively constant, the awarding of new contracts in the region is at a virtual standstill, and companies are beginning to wonder what will happen next if the stalemate of the past several weeks drags into several months--or longer.

“Another decision time is coming. Once you work off the backlog, what do you do?” said Ted Bevec, a pipe and boiler manufacturer who has been associated with American businesses in the Eastern province.

At Jubail, officials estimated that $10 billion in expected new joint ventures will be delayed by at least a year. Ten of 12 potential new international investors who had been scheduled to visit the industrial city on the Persian Gulf between now and October have canceled their trips.

Nor has the bad news been confined to the Eastern province. Two weeks ago, the announcement that the U.S. was dispatching troops to Saudi Arabia caused a small run on banks that left several with temporary cash and foreign-currency shortfalls. Western analysts in Riyadh say there are unconfirmed reports that as much as 10% of the country’s banking deposit base has been moved abroad.

None of this is to say that the crisis in the gulf necessarily means crisis for the Saudi economy, however. With oil prices already over $30 a barrel and indications that Saudi Arabia will increase its production by 2 million barrels a day to make up for shortfalls in Iraq and Kuwait production, Western analysts estimate Saudi Arabia’s monthly income could double for the rest of this year, with earnings increasing by more than $100 million a day.

That would go a long way to dispel the pain of even the $8 billion to $10 billion that one Saudi official calculated as Saudi Arabia’s cost for sustaining the massive military defense and refugee support efforts over the next two to three months.

One Saudi official could not suppress a grin over dinner recently when asked whether he feared that foreign investors would shy away.

“Investment?” he said. “Remember, the main investors in Saudi Arabia are the Saudis, and the biggest investor of them all is the Saudi government.”

In fact, Saudi officials say they plan to proceed with the major expansion of several plants and construction of new facilities at Jubail. Aramco also is expected to move forward with a massive project to upgrade Saudi Arabia’s oil production facilities from 5.38 million barrels a day to their former capacity of 10 million barrels a day. Contractors and analysts in the region say the project is expected to net $15 billion to $40 billion in contracts, depending on how rapidly the timetable is set.

“We’re doing today exactly as we were doing at the first of August. . . . I’m preparing the operating plant for exploration in 1991 at this point, and so is everyone else in this area,” said Sydney Bowers of Aramco.

Although a few oil companies have encouraged “non-essential” workers to leave the Eastern province in accordance with recommendations by the U.S. Embassy, others have attempted to reassure their workers that the danger is now minimal. Instead of exit visas, most have been satisfied with evacuation plans.

“We don’t consider anyone non-essential,” Aramco’s Bowers said. “Someone comes up to me occasionally and asks me, ‘Am I essential?’ And I say, ‘You’re getting a paycheck.’ ”

Bevec said that “one hell of a lot of people left here that first week after the invasion,” but with a few exceptions he has managed to keep nearly all of his staff.

“I keep testing the water,” he said. “I go out and walk through the factory and say, ‘How are you?’ And if they smile, I know everything’s OK. If they don’t smile back, then I know we got trouble.”

Employers in the area were irked when Japanese contractors left the country in the face of the need to gear up oil production.

“They just left. Their embassy told them to leave, and they left,” said one Saudi oil industry executive, shaking his head. “I told them, ‘Your government is asking us to increase oil production to make up for the shortfall. If your people leave and other people follow the example, how are we going to do it? Or do you want other people to do the dirty work for you?’ ”

Khalid Ali al Turki, chairman of Tradco, a $100-million-plus-a-year construction conglomerate, said the business community’s biggest task now is not to attract capital but to ensure that Saudi Arabia will still be able to attract outside know-how to keep its businesses competitive.

“I think companies will be reluctant in the immediate future to submit capital. But that’s not the problem. We have capital,” he said. “Our biggest problem in this country has not been lack of funds but to find areas in which to invest.”

With a recent program under which Great Britain is re-investing some of its earnings from Saudi military contracts in Saudi Arabia, he said, “They’ve asked me, ‘What are some viable projects to invest in?’ My response is, ‘If we knew that, we wouldn’t need you.’ I don’t need technology. I can buy technology. I don’t need management. I can buy management. I can buy management . . . but technology and know-how brought in in a major organized fashion . . . by people that already have the marketing know-how, that’s what we are lacking.”

At Jubail, production has remained constant and officials say they believe that investors who delay this year will probably come around next year.

Companies in the region are no strangers to trouble, said Aramco’s Bowers.

“We’ve faced a lot of crises in the past, you know,” he said. “We’ve had a lot of wars, in ‘67, ’73. . . . We just had an eight-year war in the gulf. We’ve had all these tankers shot up in the gulf almost on a daily basis. So crisis is not new to us.”