Possessing the worlds largest conventional crude oil reserves, Saudi Arabia is the global swing producer with a capacity of 12.5 million barrels a day (b/d).
State-owned Saudi Aramco is responsible for the kingdoms oil and gas sector, and in recent years has moved away from being a predominantly upstream operator to a fully diversified hydrocarbons company.
This transition is best illustrated by Aramcos recent massive investments in its downstream operations, which aim to increase the amount of refined products for domestic use and export, as well as drive industrial diversification.
One of the key motivations behind the refining push is the need to add capacity to meet rising domestic demand. Saudi Arabia is the regions largest oil consumer and, in 2013, used about 3 million b/d of oil double the 2000 figure, according to the US Energy Information Agency.
Since 2009, Aramco has invested almost $30bn in new refineries in the kingdom, with several billion more being spent on upgrading and expanding existing facilities.
This means Saudi Arabia now uses more oil than Germany, despite having only 30 per cent of its population. Consumption in the kingdom is growing at about 6 per cent a year, with gasoline demand rising even faster at 7.2 per cent.
Aramco operates seven refineries in the kingdom, with a total capacity of 2.5 million b/d. This is set to increase by 800,000 b/d within the next three years as two new refineries start operations.
|Major oil and gas fields|
|Project||Client||Status||Value ($m)||End date|
|Yanbu export refinery||Yasref||Execution||10,000||2014|
|Yanbu refinery||Saudi Aramco||Study||7,000||2019|
|Arabiyah-Hasbah development programme||Saudi Aramco||Execution||6,600||2015|
|Ras Tanura refinery upgrade||Saudi Aramco||Main contract prequalification||3,500||2018|
|Karan gas development||Saudi Aramco||Execution||3,375||2014|
|Divided Zone Facilities||Khafji Joint Operations||Execution||3,150||2015|
|Fadhili gas plant||Saudi Aramco||Main contract prequalification||3,000||2018|
|Khurais Arabian Light crude increment programme||Saudi Aramco||Main contract bid||3,000||2019|
|Shaybah natural gas liquids recovery programme: phase 1||Saudi Aramco||Execution||3,000||2014|
|Shale gas development||Saudi Aramco||Feed||2,000||2020|
|For further information visit www.meed.com/meedprojects|
The first venture in a series of three greenfield schemes, Saudi Aramco Total Refining & Petrochemical Company (Satorp), is now fully operational after commissioning for several months. Located at Jubail in the Eastern Province, the $9.6bn complex is a joint venture between Aramco, which owns 62.5 per cent, and Frances Total, which holds the remaining 37.5 per cent.
Satorp offers a glimpse into how Aramco is planning to integrate its operations, from upstream right through to petrochemicals production. The refinery is fed with heavy oil from the kingdoms offshore Safaniya and Manifa fields, which is then processed into downstream products that are either exported or fed into the domestic petrochemicals sector as feedstock.
The kingdoms heavy oil will also be used as the primary feedstock for the 400,000 b/d Yanbu Aramco Sinopec refinery, which is about to be commissioned at Yanbu on the Red Sea coast. The ownership structure is identical to Satorp, with China Petroleum & Chemical Corporation (Sinopec) taking the 37.5 per cent stake in the joint-venture company.
Building greenfield refineries at Jubail and Yanbu makes economic sense to Aramco. Both are huge industrial centres with well-established infrastructure networks and extensive petrochemicals facilities.
A third refinery is under construction at Jizan, one of the kingdoms most remote regions close to the Yemen border. The 400,000 b/d complex will be the anchor tenant of Jizan Economic City (JEC) and will be wholly owned by Aramco. The oil major plans to use the project as a catalyst for other developments at JEC, including a large network of petrochemicals plants. The Jizan refinery is expected to be fully operational by 2018.
Aramco has also been working hard to rehabilitate its existing domestic refineries in order to meet international demand for greener fuel and, in some cases, to add petrochemicals capabilities.
Aramcos Rabigh refinery was the first to undergo such a transformation. Rabigh Refining & Chemical Company (PetroRabigh), a joint venture between Aramco and Japans Sumitomo Chemical, transformed the existing facilities into a fully integrated refining and petrochemicals complex.
Phase 2 of the expansion is now under way and will add significant petrochemicals capacity to the 400,000 b/d refinery, taking the total investment to more than $17bn.
The six other refineries in the kingdom are all long established, with four serving the export market and the remaining two used for domestic consumption. Much of this existing refining capacity is old and needs to be upgraded to meet tighter product specifications. As a result, a series of clean fuel projects is under way throughout the kingdom, aimed at reducing sulphur content by 98 per cent.
This includes clean fuels schemes at two well-established joint-venture facilities at Yanbu and Jubail. The 400,000 b/d Saudi Aramco Mobil Refinery Company is a joint venture with the US ExxonMobil, while the 305,000 b/d Saudi Aramco Shell Refinery Company is a joint venture with the UK/Dutch Shell at Jubail.
Aramco wholly owns four of the existing refineries at different locations across the kingdom. Ras Tanura in the Eastern Province is the largest downstream facility, with a 550,000 b/d capacity; along with the 240,000 b/d Yanbu facility, it is geared towards exports. The 124,000 b/d Riyadh refinery and the 90,000 b/d Jeddah plant serve the domestic market. Jeddah also handles up to 350,000 b/d of imports through its marine terminal.
Looking ahead, it is clear Riyadh wants Aramco to ramp up its downstream operations as a means to further diversify the economy.
This refining and petrochemicals integration initiative will ensure downstream petrochemicals facilities have ample supplies of liquid feedstock, such as naphtha, and natural gas liquids (NGLs) to create a more diverse product slate, which can then be used for conversion industries.
Saudi Arabias largest petrochemicals company, Saudi Basic Industries Corporation (Sabic), is now planning to take downstream integration one step further and develop the worlds largest oil-to-chemicals plant, in partnership with another entity, probably Aramco. Slated for completion by 2020, the $30bn facility will process about 200,000 b/d of crude oil. Sabic is currently finalising the study.
When complete, a petrochemicals refinery will process crude and feed the offtake into three steam crackers. One will crack NGLs and liquefied petroleum gas, a second will crack naphtha and a third fuel oil.
The product slate of the three crackers will include ethylene, propylene, butadiene, benzene, toluene and xylene. These will be fed into downstream processing facilities at the complex.
There are challenges involved. Oil-to-chemicals plants require a large amount of fuel and, on the scale described by Sabic, an additional 30-40 per cent of crude would be needed to provide the power to run the facility. In Saudi Arabia, this would mean a subsidy bringing the crude used for power down to $36 a tonne, equivalent to the $0.75 a million BTUs the Oil Ministry charges for ethane in industrial use. Sources in the kingdom indicate that securing this price will be a central factor in deciding whether the scheme is economically viable.
Saudi Arabias downstream sector is now stronger than ever and the integration plans Aramco is putting in place mean it will soon rank alongside industrial giants such as the US and China in terms of size.
Minister of petroleum and mineral resources: Ali bin Ibrahim al-Naimi
Key contact: Saudi Aramco
Tel: (+966) 1 285 2225