On average, Saudi Arabia imports 96,000 b/d of gasoline, but only exports 65,000 b/d of the fuel
The fact that Saudi Arabia is a net gasoline and diesel importer would come as a surprise to many. It is not that the state-owned oil major Saudi Aramco has a lack of capacity. The oil giant currently has a global refining capability of more than 4 million barrels a day (b/d) of crude oil.
What is lacking is the capacity to produce large amounts of more complex refined goods, such as gasoline, diesel and jet fuel.
The kingdom consumes about 454,000 b/d of gasoline and imports account for about 20 per cent of this demand. On average, Saudi Arabia imports 96,000 b/d of gasoline, but exports 65,000 b/d of the fuel, making it a net importer of 31,000 b/d.
To address the imbalance and to make more volumes of refined products available for export, the kingdom has launched a huge programme of refinery investments with $60bn-worth of projects planned or under way.
Oil refinery make-up
Aramco’s facilities are a mix of simple and complex refineries. Simple refineries are also known as hydroskimming refineries and work by boiling the oil and processing it into products such as fuel oil and naphtha, which are then exported to markets around the world.
Complex refineries work with a cracker – a much more technical process that works by breaking down the molecules in the crude oil to release lighter molecules. This process allows a broader mix of products to be made.
Aramco has seven domestic refineries and they are a combination of wholly owned facilities and joint ventures with international firms.
The oil giant owns four refineries outright – located at Ras Tanura, Riyadh, Jeddah and Yanbu – which have a combined capacity of more than 1 million b/d.
Ras Tanura is the largest refinery in Saudi Arabia and has a capacity of 550,000 b/d. The Yanbu refinery is second-largest with a capacity 235,000 b/d, then Riyadh with 120,000 b/d and Jeddah with 100,000 b/d.
Most of these facilities are simple refineries, although many also have small hydrocrackers that are used to produce more complex products, or converters that can upgrade naphtha into gasoline.
“Most of the wholly owned [refineries] are getting old now and are simple in their design. This means they are making a lot of products they don’t actually need,” says a source working in the oil industry in Saudi Arabia.
Aramco’s domestic joint ventures are mostly complex refineries and therefore make a broader mix of products. All the joint ventures are with internationally renowned companies and a lot of the products are exported overseas. The joint ventures have a combined capacity of more than 1.1 million b/d.
[PetroRabigh] is a good indicatin about where [Saudi] Aramco’s refining industry is heading
Oil industry source
Saudi Aramco Mobil Refining Company (Samref) started production in 1984 and is a 50:50 joint venture of Aramco and the US’ ExxonMobil. Based at Yanbu on the kingdom’s Red Sea coast, the refinery is complex and has a capacity of 400,000 b/d. The Samref refinery has a cracker and produces a wide range of products that are exported worldwide.
The Saudi Aramco Shell Refinery Company (Sasref) is a similar operation to Samref and is a 50:50 joint venture of Aramco and the UK/Dutch Shell Group. Based at Jubail in the Eastern Province, the facility started production in 1981 and has a capacity of 305,000 b/d. It is also a complex refinery that cracks crude oil to make products, including benzene and kerosene.
The plant was designed as an export refinery and it has a terminal at King Fahd Industrial Port in Jubail.
PetroRabigh is a much more recent addition to the kingdom’s domestic refining sector and is the country’s first world-scale refining and petrochemicals complex.
Commissioned in 2009, the facility processes 400,000 b/d of crude oil into a full range of complex products and is located at Rabigh on the Red Sea coast.
Aramco and Japan’s Sumitomo Chemical each own 37.5 per cent of the facility, with the remaining 25 per cent traded on the Saudi Stock Exchange, the Tadawul. The plant is also planning a phase II expansion, which will see it produce an extra 3 million tonnes a year of naphtha.
World-class technology at PetroRabigh
“[PetroRabigh] is a good indication about where Aramco’s refining industry is heading,” says the oil industry source. “The technology used is as good as any you’ll find in the world.”
The future for expanding the kingdom’s refining industry lies in using the latest technology to process oil that will get increasingly heavy, or more viscous, as the decades go by.
There are three major refineries being planned by Riyadh, each with a capacity of 400,000 b/d. Two of the refineries will follow the joint-venture model, while one will be wholly owned by Aramco.
The Saudi Aramco Total Refining & Petrochemical (Satorp) complex is a joint venture of Saudi Aramco, which owns a 62.5 per cent stake, and France’s Total, with the remaining 37.5 per cent.
The $10bn Satorp refinery is also known as the Jubail Export Refinery and is currently under construction. Completion is due for 2013 and there are 30,000 people working on site.
The 400,000 b/d capacity will be used to make a wide selection of products. About 49 per cent will be used to make diesel with 23 per cent used to make gasoline, while 11 per cent will be made into jet fuel. The jet fuel will be exported, but all of the gasoline and diesel is expected to be sold into the domestic market.
On the west coast of the kingdom, the Red Sea Refining Company is building a similar facility to the Satorp plant at Yanbu.
Also known as the Yanbu Export Refinery, the facility is a joint venture of Aramco and China’s Sinopec.
The project was initially set to involve the US’ ConocoPhillips, but the company left the scheme in 2010. Aramco then decided to continue alone until Sinopec came on board and took a 37.5 per cent stake in March 2011. The refinery will process heavy crude from the offshore Manifa oil field and the product mix is similar to Satorp.
The reason Riyadh is keen on building these refineries is to meet booming domestic demand
John Tottie, HSBC Group
“There is a shortage in the kingdom of both diesel and gasoline and the reason why Riyadh is keen on building these refineries is to meet booming domestic demand,” says John Tottie, a Riyadh-based senior research analyst for the UK’s HSBC Group. “The new refineries will be able to meet this shortfall, while the jet fuel and propylene will be exported.”
Plugging the oil refinery deficit
The new refineries at Yanbu and Jubail are highly technical complex facilities, but the final refining facility being built as part of Aramco’s expansion plans is less so.
The Jizan Refinery is currently at the front-end engineering and design (feed) stage. The feed is being carried out by the US’ KBR and consists of the design of a 400,000 b/d hydroskimming refinery.
Jizan was planned by Riyadh to be the kingdom’s first fully independent refinery, but due to a lack of interest in developing such a facility at a remote location, Aramco decided to move ahead alone. Because of the location, the crude oil will be brought in by ship.
“Despite the first phase [of Jizan] being a hydroskimming refinery, it is still pretty sophisticated compared with some of the older facilities,” says Tottie.
With domestic demand for oil rising at 6 per cent a year and demand for gasoline at more than 7 per cent, the new refineries coming on stream should plug the deficit for more complex products and allow Riyadh to cut back on imports.
The kingdom also has ambitious plans to add further value to its hydrocarbons resources by investing heavily in its petrochemicals sector and the new refineries will supply the much-needed feedstocks.
“The kingdom is the only country in the world that is really rivalling China in terms of bringing new capacity on stream,” says Tottie. “This is an exciting time for the sector.”
The kingdom strives for cleaner fuel
Saudi Aramco is implementing initiatives targeted at improving air quality in the kingdom and these are shaping it refinery investments.
Saudi Aramco’s Fuel Quality Roadmap aims to cut air pollution by supplying ultra-low sulphur diesel for domestic use.
This involves lowering the sulphur content in diesel for transportation to 10 parts a million. This will bring the kingdom’s fuel in line with international standards. Aramco is looking to reduce sulphur in its diesel by 95 per cent by 2016.
The three new refineries being constructed by Aramco will produce ultra-low sulphur diesel and other cleaner fuels, but its old facilities need to be upgraded. International engineering contractors, including the US’ Jacobs Engineering and Foster Wheeler, are helping Aramco and its joint venture partners to improve existing refining facilities.
All four of Aramco’s wholly owned refineries are being fitted with new diesel hydrotreaters to lower the sulphur content in the diesel they produce.
As for the joint ventures, Sasref has already completed a scheme that brings its diesel to the 10 parts a million international standard, while Samref is implementing a clean fuels programmes that will do the same.
Riyadh still needs to address rapidly rising consumption driven by fuel subsidies for transport and utilities. Oil consumption is growing at 6 per cent a year in the kingdom and while subsidies are considered a principal source of wealth sharing, demand growth shows no signs of abating.
Saudi Arabia is now ranked sixth in the world in terms of oil consumption, putting it ahead of much larger economies, including Brazil and Germany.
Improving public transport links and other infrastructure should allow Riyadh to gradually increase fuel prices. When this happens, consumption should come down and then the cleaner fuel initiatives will start to have more of an impact.