Saudi Aramco is implementing ambitious plans to increase its production capability and refining capacity to meet growing world energy demand or cover unexpected shortfalls in supply.

It has also commissioned several studies to evaluate the impact of climate change policies on future energy demand scenarios, and is working to develop cleaner-burning transportation fuels, both in-house and in conjunction with other companies and institutions.
Aramco’s innovative approach to its domestic and international business activities was highlighted by board chairman and Petroleum and Mineral Resources Minister Ali Al Naimi in a report released this year.
“Energy is essential in today’s world, and because Saudi Aramco is a substantial supplier of petroleum to so many markets across the globe, reliability is not simply a goal for the company, it is an imperative,” he said in the 2006 annual review.
President and chief executive officer Abdallah Jumah points out in the report that the company’s achievements were not only about petroleum, but also about people.
“Modern life would simply be unimaginable without petroleum and the many indispensable products that Saudi Aramco provides.
“From helping to raise living standards for entire societies to enabling individuals to pursue more mobile, more dynamic and more satisfying lives, we at Saudi Aramco never forget that our efforts are measured not only in barrels and cubic feet, but also in promises kept, prosperity delivered and possibilities realised,” he says.
The Middle East oil giant is also inspiring emerging oil powers as a sign of Saudi Arabia’s widening influence among oil exporting nations. Nigeria’s energy minister said this month that Aramco was a model for his country’s restructuring national oil producer.
Odein Ajumogobia, who became a minister only a few weeks ago, also stressed a “misalignment” between the objectives of private, foreign oil companies and the aspirations of the country.
“Saudi Aramco is perhaps the ultimate goal of where we would like to be, but we are a long way from that,” he said.
His comments indicate the desire of the new Nigerian government to tighten control over production in the African state, whose industry is dominated by joint ventures with foreign groups such as ExxonMobil, ChevronTexaco, Shell, Total or Eni.
Saudi Aramco has said that it is on schedule with plans to boost its crude oil production capacity to 12.5 million barrels per day (bpd) by 2009.
Higher labour and raw materials prices have, however, hit two planned joint-venture refineries, which will now cost more than original estimates of around $6 billion, according to Abdulaziz Al Khayyal, senior vice-president for industrial relations.
Both are 400,000 barrel per day export-oriented projects, one with Total and the other a partnership with ConocoPhillips.
Aramco last month asked five companies to bid for the project management and design of a new 400,000 bpd refinery it plans to build at Ras Tanura, industry sources said.
The plant is one of four newbuilds planned by Saudi Arabia to boost domestic refining capacity. The refinery will cost around $7 billion to $8 billion, said a source.
Aramco has invited bids from Bermuda-based Foster Wheeler, Japan’s JGC, US-based KBR, Canada’s SNC-Lavalin and Australia’s WorleyParsons, the sources said.
Aramco aims for the plant to start up in early 2012 to supply rapidly growing domestic demand.
In May, Saudi Aramco and Dow Chemical Company signed a detailed memorandum of understanding regarding the construction, ownership and operation of a world-scale chemicals and plastics production complex in Saudi Arabia, named the Ras Tanura Integrated Project (RTIP).
Estimated to cost nearly $20 billion, the Ras Tanura petrochemical joint venture will be operationally integrated with the Ras Tanura Refinery complex and its Juaymah gas processing plant, two of the largest facilities of their kind in the world.
The latter two facilities will supply feedstock to the joint venture and continue to be owned and operated by Saudi Aramco.
When fully operational, the new complex will be one of the largest grassroots plastics and chemicals production facilities in the world and will be ideally positioned to serve major world markets.
RTIP will produce a broad range of both basic and performance products, including ethylene, propylene, aromatic and chlorine derivatives and introduce new value chains and performance products to the kingdom.
The initial project scope includes world-scale production units for polyethylene, ethylene oxide and glycol, propylene oxide and glycol, chlor-alkali, vinyl chloride monomer, polyurethane components, epoxy resins, polycarbonate, amines and glycol ethers.
A conversion industries park will also be developed adjacent to the large industrial complex at Ras Tanura. This park will provide business opportunities for small to medium sized industries that are either consumers of products or provider of value added services to RTIP.
KBR, a former unit of Halliburton, has been awarded the project management contract for the Ras Tanura petrochemical plant.
Saudi Arabia has also announced plans to invite bids for another refinery, the 250,000 to 400,000 bpd Jizan plant, in the fourth quarter this year.
The Jizan refinery will be part of an “economic city” in the region of Jizan in the far south.
The plant will have the capacity to process 250,000 to 400,000 bpd and the kingdom wants the plant to be privately owned.
Saudi Arabia has often stressed its determination to tackle a worldwide refining crunch that plays a part in soaring oil prices.
But its domestic fuel consumption is also rising rapidly as the economy expands on the back of record revenues from crude exports. And the oil giant says it is on track to complete in December the Khursaniyah project that would give the largest boost to global crude output capacity this year.
This project will bring online around 500,000 bpd of light crude.
Recent reports have said Aramco is likely to delay a tender for a fourth package on the onshore portion of its Manifa heavy oil field by three months. Aramco met contractors in London to discuss the first three tenders at the 900,000 bpd oilfield.
Saudi Aramco had earlier this year signed a contract with Belgian dredging firm Jan De Nul Group to help develop the Manifa offshore project.
Jan De Nul will carry out dredging works in the Arabian Gulf before building several drilling islands and a 41 km causeway that will provide Saudi Aramco with a direct link from the coast to shallow-water offshore man-made drilling islands. The work is set for completion in 2009, and production of Arabian Heavy crude will begin by 2011.
Reports have said Aramco is considering using steam injection at the Wafra and Manifa fields.
In addition to the Arabian Light crude, Aramco’s Khursaniyah development is designed to have production and processing capacity of 300 million standard cu ft (scft) per day of associated gas online in December.
The plan includes the construction of a new gas facility that would eventually boost gas processing at Khursaniyah to one billion feet per day.
Aramco cut preliminary work at Khursaniyah to eight months from 20 months as part of its plan to accelerate its oilfield expansion to maintain spare capacity of between 1.5 million to two million bpd.
The Khursaniyah project includes the development of the Abu Hadriyah and Al Fadli fields in eastern Saudi Arabia.
Saudi Arabia holds the world’s fourth-largest natural gas reserves at 252 trillion cu ft. Its domestic gas sales were expected to rise by 40 per cent through 2012. Saudi Aramco’s domestic gas sales last year totalled 6.86 billion cu ft per day, up from 6.63 billion in 2005.
In line with this, Aramco is stepping up gas exploration to boost reserves 40 per cent in the next 10 years to meet rising demand, Minister Al Naimi said early this year. In the next 10 years, the company hopes to add 50 trillion cu ft to its current reserves.
Meanwhile, according to latest data, Saudi Arabia has about 25 per cent of global crude oil reserves.
Total known global reserves are about 716 billion barrels, of which about 260 billion barrels have been officially quoted as being “proven,” or recoverable with current methods.
New technologies being employed by Saudi Aramco could push that figure over 1 trillion barrels in the next 20 years, reservoir management manager Nansen Saleri, who retired last month, told a conference early this year.
Meanwhile, among other projects, a contract was signed in September for the installation of 585 km of 30-inch natural gas liquids (NGL) pipeline as part of Saudi Aramco’s project to expand the capacity of its Shedgum-Yanbu NGL pipeline.
This contract with Suedrohrbau Saudi Arabia is the final major contract relating to the Khurais field development, a 1.2 million bpd crude oil increment that is part of Saudi Aramco’s programme to increase its maximum sustainable crude oil production capacity.
“In addition to providing critical additional expansion to the Shedgum-Yanbu’ pipeline, this project also will inject over $500 million into the Saudi economy directly, as 70 per cent of the material will be provided by in-kingdom vendors,” said Mohammad A Al Juwair, Saudi Aramco executive head of project management.
“Maximising local content of these contracts is one of our ongoing objectives in order to contribute to the kingdom’s effort to expand the economy and create jobs,” he added.
“This is just one example of the fine work Saudi Aramco is doing in this regard, as the total execution of this major contract will be in-Kingdom.”
The Shedgum-Yanbu Pipeline Expansion Project is part of Saudi Aramco’s ongoing capital investment programme that will increase the company’s ability to provide gas as fuel and feedstock to domestic customers. This is particularly critical as the demand for ethane and NGL in Saudi Arabia’s western region increases.
Saudi Arabia, also the world’s biggest LPG exporter, sees its production rising to 25 million tonnes a year by 2009, from 20 million tonnes last year.
A top Saudi Aramco marketing official said domestic LPG consumption was expected to rise to 19 million tonnes a year, compared with eight million tonnes in 2006, halving its export availability to six million tonnes a year.
As Saudi Arabia expands its petrochemical industries, “numerous other industries also flourish,” not just in Saudi Arabia, but in the world.
That could make the kingdom a major player in the world economy for something other than oil, senior vice-president Abdulaziz Al Khayyal told an industry conference in Bahrain earlier this year.
Although the $1.7 trillion chemical industry is a global business dominated by the EU, Japan and the US, Al Khayyal said the Middle East could become a leading contributor.
“What we have to offer … is the fuel and feedstock that constitute the lifeblood of the petrochemical industry,” he said.
Al Khayyal pointed to Saudi Aramco’s groundbreaking integration of refining and petrochemicals through its PetroRabigh joint venture with Sumitomo Chemical and the memorandum of understanding with Dow Chemical Company for the Ras Tanura complex.
Industry sources and end-users, meanwhile, said Saudi Chevron Phillips was likely to delay the start up of its $3 billion petrochemical plant in Jubail to the first quarter of 2008 from Q4 this year.
This may have prompted Saudi Arabia to make a rare offer of term naphtha for October 2007-March 2008 at lower premiums, they said.
Saudi Chevron Phillips Company is equally owned by Saudi Industrial Investment Group and Chevron Phillips Chemical Company, and Saudi Aramco is the naphtha supplier for the plant.
Within Saudi Arabia, the Saudi Electricity Company, reflecting the oil giant’s crucial role, said recently it needs Saudi Aramco to invest in more gas exploration and fuel pipelines to avoid the power outages that affected it last year.
A document, authored by a Saudi Electricity technical committee, said one of the biggest challenges facing the struggling utility was transporting fuel from oil refineries to power plants during the summer peak demand period.
Saudi Electricity power plants rely on trucks to ship fuel from Aramco’s Riyadh refinery to provinces in the north and south of the kingdom, a process that costs at least SR300 million ($80 million) a year, the document said.
The committee also wants Saudi Aramco to build pipelines that would transport fuel directly to plants, enhancing productivity.
“Aramco should be instructed to include in its strategy expansion and investment in gas production,” the committee said.
Finally, Saudi Aramco paid glowing tributes to its human resources at a recent conference in London, UK.
Abdullatif Al Othman, Saudi Aramco’s senior vice-president of finance, told the 29th Oxford Energy Seminar that it was the company’s people who make the difference when it comes to reliably supplying energy to the world.
In a presentation titled “What It Takes to Deliver,” Al Othman highlighted six key components that have been instrumental in Saudi Aramco’s ability to reliably deliver natural resources to the market. Those components are effective management practices; corporate governance; leading-edge technology; commitment to talent, safety, health and the environment; and social responsibility.
In the final analysis, though, it is Saudi Aramco’s employees who make the difference, he said. It is the new talent and youth identified by Saudi Aramco management who are trained, educated and supported within the company who will forge the way forward in securing the company’s future, he said, adding that each day, more than eight per cent of the Saudi Aramco workforce participates in training.
That, more than anything, illustrates the importance Saudi Aramco places on training leaders for the company’s future success, Al Othman concluded.