Japan's Sumitomo Chemical Co and Saudi Aramco are in talks to expand their petrochemical joint venture with additional investment of at least 200 billion yen ($1.8 billion), the Nikkei business daily reported on Friday.

They are discussing building a new plant in Saudi Arabia for compound resin for digital consumer electronics and automobiles as early as 2012, the paper said.

The chief executive of the venture between Sumitomo Chemical and the Saudi state oil giant said last month they were in talks to expand their $10 billion joint venture, Rabigh Refining and Petrochemical Co (PetroRabigh).

The 50-50 joint venture's petrochemical complex will start commercial operations in the fourth quarter of 2008.

The two companies will launch a feasibility study on the new plant as early as spring 2008 with an eye to starting construction in 2009, the Nikkei said.

Sumitomo Chemical spokesman Tomoyuki Hirayama said nothing has been decided on the expansion plan and his company is now talking with Aramco on whether to conduct a feasibility study.

The new plant will produce optical materials for liquid crystal display TVs, compound resin for automobiles and other value-added resin and will supply China, the Middle East and Europe, the paper said.

Sumitomo Chemical said last month it expects a bigger profit contribution from the venture thanks to rising oil prices. The company said it now expects the venture to contribute some 60 billion yen to its profit for the year ending in March 2010.

As of 0138 GMT, shares of Sumitomo Chemical rose 2.6 percent to 989 yen, outperforming a 1.1 percent gain of the Nikkei average .N225. (Reporting by Taiga Uranaka; Editing by Malcolm Whittaker)