Special Report: Oil & Gas - Focus turns to downstream developments

15 January 2010

Over the next five years, contractors will be working hard to help Riyadh achieve its goal of doubling its oil refining capacity by 2015.

Much of the planned new capacity is aimed at turning the kingdom’s vast reserves of heavy crude oil into gasoline, diesel, jet fuel and other petroleum products for shipment to Europe and Asia.

The industrial ports of Jubail and Yanbu will be the focus of the expansion. The 400,000-barrels-a-day Jubail project, a joint venture between state-owned Saudi Aramco and France’s Total, is scheduled for completion in 2013. The Yanbu refinery, due for completion in 2014, is an Aramco joint venture with US oil major ConocoPhillips, which will supply the US with high-quality gasoline.

While world demand for oil has dropped since the boom of the mid 2000s, Riyadh’s focus on downstream projects is evidence that it is eager to raise capacity in anticipation of a return to high demand for oil.

The Jubail and Yanbu refineries will have the ability to refine heavy crude - a key consideration, given that crude oil will become heavier as firms have to drill deeper for it.

Oil majors world-wide are also investing in such bottom-of-the-barrel refining, but the scale of the Saudi investment should ensure that their refinery projects are economically successful in the long term.

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