Saudi Aramco is pressing ahead with a major expansion of its refining capacity, which will ensure it continues to play a leading role in meeting the demand for whiter and lighter refined products throughout the world.
“The petroleum industry has seen tighter capacities all along the oil supply chain, resulting in a smaller margin for error and a curtailed ability to make up for supply disruptions and shortfalls, which in turn have led to greater price volatility,” Saudi Aramco notes in its 2006 Annual Review
“Although oil prices moderated at the end of 2006, the long-term demand trend will continue to rise, meaning refining capacities matched to crude oil grades will need to increase accordingly to support continued global economic growth. Increased demand for natural gas is also placing strains on the industry.
“Tight capacity is particularly apparent downstream, where there is a sizable mismatch between available crude oil supplies and existing refinery configurations. This gap is forecast to widen unless there are appropriate investments in optimal refining systems, since future crude supplies are going to be heavier and more sour, while the slate of refined products will continue to grow whiter and lighter with more demanding specifications.”
Thus, Saudi Aramco is taking the initiative to respond to market needs through a systematic programme of strategic investments all along the petroleum value chain to help meet future global energy demand while simultaneously growing the kingdom’s economy.
Currently, Saudi Aramco has more than 3.5 million barrels per day (bpd) of refining capacity evenly split among Saudi Arabian and international markets. It is looking at the possibility of working with a range of partners over the next five years to expand that capacity by nearly 50 per cent, to almost 6 million bpd. A crucial difference is that much of this capacity will be able to process heavy, sour crude, helping alleviate the worldwide mismatch between crude quality and refinery configurations.
All told, Saudi Aramco is considering scenarios to build close to 2 million bpd of additional refining capacity domestically and around the world, meaning it may be engaged in roughly one quarter of the announced plans for refinery capacity increases worldwide.
Last May, the oil giant signed separate memoranda of understanding with ConocoPhillips and Total for development of 400,000 bpd export refineries in Yanbu and Jubail, respectively. The projects are part of the kingdom’s strategy to address growing global energy demands, attract foreign investment, create profitable businesses and provide increased job opportunities for Saudis. These refineries will be designed to refine heavy, sour crude into high-quality, low-sulphur products that meet current and future US and European specifications.
Comprehensive studies to confirm the capital and operating costs of both refineries are being conducted, with completion expected at the end of 2007. Upon completion of these studies, it is anticipated that a joint venture company will be established with each partner. At an appropriate time, and subject to regulatory approvals, an ownership interest in these joint venture companies will be offered to the public. The targeted start-up for the proposed refineries is the second half of 2011.
A proposed project with ExxonMobil and Fujian Petrochemical Company to triple the existing crude capacity of the Fujian refinery in China is well under way. The preliminary engineering associated with the physical infrastructure of the Fujian Integrated Project was completed, and the engineering, procurement and construction phase initiated.
The project, targeted for completion in early 2009, will increase capacity from 80,000 to 240,000 bpd and also add a petrochemical complex to the refinery. The resulting petroleum products will be sold mainly through a marketing joint venture between Saudi Aramco Sino Company (Sasco), a wholly-owned subsidiary of Saudi Aramco, ExxonMobil and Sinopec.
Saudi Aramco affiliate Petron, the leading oil refining and marketing company in the Philippines, undertook a number of initiatives in the past year to upgrade and expand its facilities, including constructing a new Petro FCC unit to produce more high-value white products and propylene. A unit to produce other petrochemicals (benzene and toluene) is also in the works, with both units expected to be commissioned in early 2008.
S-Oil Corporation, Saudi Aramco’s affiliate in South Korea, marked its 30th anniversary last year. For the third time and the second year in a row, S-Oil was named the top company in the Korea refining sector by the Korea CEO Association.
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KEY INITIATIVES
Domestically, Saudi Aramco completed initiatives to maximise revenues at its refineries, including increasing Ras Tanura Refinery diesel production and exporting atmospheric gas oil. Additionally, it performed product-optimisation activities to maximise higher-value products at Riyadh, Jeddah, Rabigh and Yanbu refineries. Ras Tanura Refinery’s third-party cogeneration plant came on stream, eliminating the need to upgrade or expand the refinery’s in-house electric power generating facilities and also reducing in-house steam generation requirements.
The American Association for Laboratory Accreditation awarded Ras Tanura Refinery Laboratory ISO 17025-2005 quality system accreditation, making it the first Saudi Aramco lab to achieve this recognition. Four major capital projects were completed at Yanbu Refinery: continuous catalyst regeneration (CCR) platformer, light straight-run naphtha isomerisation unit, diesel hydrotreator (DHT) and laboratory building replacement. The CCR platformer and isomerisation unit added 20,000 bpd of gasoline production, while the DHT complex improved air quality by reducing the sulphur content in diesel fuel.
Last August, Riyadh Refinery also commissioned a new diesel hydrotreater to reduce the sulphur content in diesel. Preliminary design work started last October on a diesel hydrotreater project at Ras Tanura Refinery. Saudi Aramco added, for domestic sale, a 91-octane gasoline grade in addition to its current 95-octane grade. The new grade of gasoline was targeted for launch on January 1, 2007. To achieve this target, Saudi Aramco conducted an extensive programme to develop and modernise various facilities, including refineries, pipelines and tankers, and the 18 company bulk plants that handle gasoline.
Saudi Aramco is also boosting production of natural gas and expanding its master gas system (MGS) to meet growing domestic demand from utilities and a thriving industrial sector.
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MASTER GAS SYSTEM
For some three decades, Saudi Aramco has operated the MGS, the largest integrated gas gathering, processing and distribution system of its kind. The MGS is the backbone of Saudi Arabia’s economic development and diversification, and has the capacity to process more than 9 billion standard cu ft per day (scfd) of gas and deliver more than 7 billion scfd of net sales gas.
Hawiyah NGL Recovery Plant, scheduled to come on stream in fourth quarter of this year, will process nearly 4 billion scfd of sales gas from the Hawiyah and Haradh gas plants to yield 318,000 bpd of NGL. The facility will supply feedstock for forthcoming petrochemical complexes in the Eastern and Western provinces.
Total manpower on the project peaked at 14,000 in early 2007. The project team has focused on purchasing equipment from local contractors, including awarding the low-temperature carbon steel vessel fabrication to an in-kingdom company for the first time. Detailed engineering design is progressing to increase the overall fractionation capacity at Yanbu NGL plant from 390,000 bpd to 585,000 bpd. This project is due to be commissioned in December 2008. The capacity of the East-West NGL pipeline will be increased by December 2009 to utilise fully the plant’s increased fractionation capacity.
A new de-ethaniser column will be installed in Yanbu Gas Plant to increase ethane and NGL processing by 185,000 bpd, helping meet the growing demand for feedstock supply for the burgeoning petrochemical industries in Yanbu and Rabigh. The column is scheduled to be commissioned in December 2008.
Khursaniyah Gas Plant will come on stream this December and is designed to process 1 billion scfd of associated gas to produce 550 million scfd of sales gas and 290,000 bpd of ethane, plus NGL. The gas feed to Khursaniyah Gas Plant will include associated gas from crude production at the Khursaniyah increment and other adjacent fields.
To help meet the aggressive deadline, Saudi Aramco fabricated 11 large vessels on site, including six NGL storage tanks 230 feet (70 m) tall by 22 feet (6.6 m) in diameter, and weighing 1,100 tons each. Saudi Aramco is already in the planning stage to nearly double the capacity of the gas plant to process non-associated gas recently discovered at the offshore Karan field in a new, separate unit. The project to expand fractionation capacity at Juaymah Gas Plant by 50 per cent is on schedule to be completed in first quarter 2008. The plant’s new module is designed to fractionate ethane and NGL streams from Hawiyah NGL Recovery Plant and Khursaniyah Gas Plant.
Hawiyah Gas Plant will be expanded by 50 per cent to process more non-associated gas. The gas-processing capacity will rise from 1.6 billion to 2.4 billion scfd. This project constitutes the final phase of the Hawiyah NGL Recovery programme and is scheduled to be completed in July 2008.
As part of the project to increase Shaybah’s crude oil production capacity, the Shaybah Gas Compression Upgrade Project was commissioned in early 2006 to handle the increasing gas oil ratio (GOR) associated with the crude to eliminate gas flaring while maintaining maximum crude production. The project added a capacity of 200 million scfd of gas compression to the facility.
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NEW TERRITORY
Saudi Aramco is charting new territory for itself and industry in the region through a strategy to transform conventional refineries into petrochemical manufacturing centres to serve as hubs for new industrial clusters, the report notes.
This strategy will contribute to Saudi Arabia’s continued industrialisation and job creation. These industrial clusters will use the refineries’ petrochemical feedstocks to manufacture plastics, high-performance materials, and other value-added goods and products for export, it adds.
Saudi Aramco’s first foray into this area is a joint venture with Sumitomo Chemical of Japan to develop Rabigh Refinery into an integrated refining and petrochemical complex.
Ground was broken on the PetroRabigh project last March, and construction is well under way. Last October, one of the heaviest lift ships in the world delivered two 1,000-ton polyethylene reactor columns, which were unloaded onto special multi-wheeled trailers for delivery to the site. Once completed in 2008, the PetroRabigh facility will produce about 2.5 million tons of petrochemical derivatives annually, in addition to high quality fuels.
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Most recently, Saudi Aramco has partnered with Dow Chemical Company to construct, own and operate a world-scale chemicals and plastics production complex integrated with its Ras Tanura Refinery.
The US-based KBR was awarded a contract in July to manage the construction of the complex. When fully operational, the new petrochemical complex will be one of the largest plastics and chemicals production facilities in the world, well-situated to access most major world markets.
The petrochemical complex will produce an extensive and diversified slate of chemicals, operate profitably and introduce new value chains and specialty products to the kingdom.
This, in turn, will help spur development of downstream conversion industries, further diversifying the domestic economy and generating job opportunities for Saudis. The anticipated project start-up date is 2012.
Direct investment in the kingdom’s petrochemical industry during the next five years is expected to be significant.
These investments target not just the production of basic commodity products, but also specialty and downstream products that are more labour intensive.
This latest chapter in Saudi Aramco’s transformation from a production powerhouse to a fully integrated, international energy enterprise is further evidence of the kingdom’s efforts to leverage its resources to strengthen and diversify its economy, the report says.
Source: 2006 Annual Review
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