Saudi Aramco has been a major contributor to meeting the Kingdom’s and the world’s energy needs for nearly seven decades. Responsible for roughly 260 billion barrels of proven oil reserves, Saudi Aramco is the largest producer and exporter of crude oil and a major player in refining as well natural gas production. The company stands committed to providing a reliable supply of petroleum and petroleum products to communities and consumers around the globe. Throughout its history, Saudi Aramco has never failed to meet a delivery commitment to a customer due to operational reasons. The company’s ability to bring its excess capacity on-stream has been repeatedly proven in recent years in response to market needs.
Saudi Aramco pursues a pair of intertwined objectives: To be the world’s most reliable supplier of energy and continue to strengthen and diversify the local economy. In pursuit of these objectives, Saudi Aramco has embarked on a series of massive projects of breathtaking scope. The array of undertakings ranges from expanding crude oil and natural gas production capacity to new refining, petrochemical and marketing ventures.
The synergistic integration of petrochemicals with Saudi Aramco’s domestic and international refineries is an important part of its downstream strategy in order to grow the profitability of these assets.
Rabigh: The Petro-Rabigh joint venture agreement signed last August with Japan’s Sumitomo Chemical Company will convert the existing Rabigh topping refinery into an integrated refining and petrochemicals complex. This $9.8 billion project will produce 2.4 million tons per year of petrochemicals, and is set to come on stream in the third quarter of 2008. It is the first phase of a three-phase program that will ultimately make the Rabigh site one of the world’s most integrated petrochemical and refining sites, with a diverse product portfolio. This project has also created third-party investment opportunities in Saudi Arabia’s private sector for utilities and other related infrastructure.
It represents an opportunity for increased industrialization in Saudi Arabia and provides a platform for the development of a diversified downstream conversion industry. This project is a concrete example of the Kingdom’s strategy of attracting foreign investment to expand its economy and provide increased job opportunities for Saudi nationals.
Ras Tanura: Following Rabigh, the plan is to turn the Ras Tanura and Yanbu refineries into large manufacturing complexes that would take advantage of petrochemicals integration. The Ras Tanura integrated refining and petrochemical project will be located adjacent to Saudi Aramco’s existing Ras Tanura Refinery and the Juaymah NGL plant in the Eastern Province.
The $16 billion project will feature the first naphtha cracker in the Middle East, coupled with ethane cracking and aromatics production. This fits with the company’s strategy to promote crude oil-based petrochemicals and produce the diverse products that are essential for the establishment of an advanced export-oriented conversion industry (such as synthetic rubber and automobile parts).
The project will integrate with the 550,000 bpd Ras Tanura Refinery and produce about three million tons per year of olefins and aromatics, as well as being expected to produce more than four million tons per year of polymers and petrochemicals. Similar to the Rabigh project, Ras Tanura will also develop an industrial park, thus creating an environment for a successful conversion industry adjacent to the project. The target completion date for the project is 2010-2011.
In July, Saudi Aramco selected Michigan-based Dow Chemical as its potential partner to engage in exclusive negotiations for the proposed joint venture.
Yanbu: The plan for Yanbu is currently under development, evaluating options to upgrade the existing 235,000 bpd refinery into an integrated refinery, olefins, and aromatics complex that will provide a diverse line of petrochemical products. The master plan will also consider synergies with existing Saudi Aramco plants and planned projects. It is intended to pursue downstream expansion, both domestic and international, in collaboration with high-quality partners. These partnerships will help strengthen the world’s product-supply system, in addition to being economically attractive investments for Saudi Aramco.
Export Refineries: In May 2006, Saudi Aramco signed memoranda of understanding with Total and ConocoPhillips to build two grass-roots export refineries, the former at Jubail, the latter at Yanbu. Changes in the dynamics of the global refining industry have made investments in new refining capacity attractive. The refineries are planned to come on-stream at the same time as the Manifa field under the waters of the Gulf, which will feed the two with Arabian heavy crude. It is the first time that refining and oil production have been brought on together. They are due for start up in 2011.
The two refineries will each have an initial capacity of 400,000 bpd, and the ability to double that capacity. The projects will produce a range of products, including gasoline for export to the United States, diesel fuel to Europe, and naphtha and fuel oil to Asia.
Fujian, China: Saudi Aramco is partnering with ExxonMobil, Sinopec and the government of Fujian province in China to expand an existing refinery in Fujian and build an integrated petrochemical complex. The Fujian Refining Ethylene Project (FREP) will be a joint venture between Fujian Petrochemical Company Ltd. (FPCL), ExxonMobil China Petrochemical Company and Aramco Overseas Company (AOC). It is currently intended that the partners will have an equity ratio of 50 percent, 25 percent and 25 percent respectively.
The FREP project is located in Quangang district in Quanzhou city, which is in the coastal area of Fujian province. The FREP project will increase FPCL’s existing capacity of four million tons annually (80,000 barrels per day) to 12 MTA (240,000 barrels per day). After the revamp, the refinery will greatly improve its refining ability and be able to process Saudi sour crude and produce high-quality petroleum products. At the same time, the project will involve construction of new chemical units, including an 800,000 tons per year ethylene cracking unit, a 650,000 tons per year polyethylene unit and a 450,000 tons per year polypropylene unit with a one million ton per year aromatic unit. The project will also involve construction of supporting public utilities and a 300,000 tons per year crude oil terminal.
Upstream Projects: To keep its pledge to maintain 1.5 to 2 million bpd of spare capacity, Saudi Aramco is undertaking a series of “mega projects” to expand its crude oil production capability.
The Abu Hadriyah, Fadhili and Khursaniyah fields are being developed, with production of 500,000 bpd of Arabian Light crude oil, plus more than one billion standard cubic feet/day (scfd) of associated gas. This is forecast to come online in December next year.
Located deep in the Rub Al-Khali, or Empty Quarter, the Shaybah field has been delivering 500,000 bpd of Arab Extra Light crude oil since its start-up in 1998. Plans call for increasing production capacity to one million bpd, with the first increment of 250,000 bpd under implementation and slated to come onstream by the end of 2008.
Two other major field development projects on track to meet the maximum production capacity target are the Khurais and Nuayyim fields. The Khurais project, which will also include production from the Abu Jifan and Mazalij fields, is projected to produce 1.2 million bpd of Arab Light crude oil in 2009. The Nuayyim project, a central Arabian field, is slated to add 100,000 bpd of Arabian Super Light crude oil by 2008.
The Manifa field development project is another mammoth undertaking that is now under way. This offshore field calls for production of 900,000 bpd of heavy crude and is due to come on-stream in 2011.
In conjunction with the expansion of production facilities in the Southern Area, Qurayyah, the world’s largest sea water treatment plant, is also being expanded. Capacity has been increased by 2.5 million bpd, thus giving a total capacity of nine million bpd, matching the dual needs of maintaining reservoir pressure and conserving precious ground water. An additional expansion of 4.2 million bpd is planned in conjunction with the Khurais project.
These new production increments come on the heels of other major projects completed in recent years, including Shaybah (500,000 bpd) in 1998; Haradh I, II and III (900,000 bpd in total) 1996 - 2006; and Qatif (800,000 bpd) in 2005.
Gas Development: The Master Gas System, built and operated by Saudi Aramco and already one of the largest integrated gas systems in the world, is also expanding still further. This system currently has the capacity to carry over nine billion scfd of sales gas, 700,000 bpd of Natural Gas Liquids (NGL) and roughly 650 million scfd of ethane gas. Expansion plans to increase delivery capacity of all these products are now in hand.
An NGL recovery plant at Hawiyah, designed to process nearly four billion scfd of gas and to yield 310,000 bpd of NGL, is scheduled to be completed in 2008. The Hawiyah Gas Plant will also be expanded by 50 percent.
A new grass-roots gas plant, designed to process 300 million scfd of sour gas associated with the development of the Abu Hadriyah, Fadhili and Khursaniyah oil fields, is taking shape at Khursaniyah.
To accommodate the processing (fractionation) of higher levels of NGL received from both the Hawiyah NGL recovery plant and the Khursaniyah gas plant, the capacity of the Juaymah gas plant will be expanded 45 percent by 2008.
This past year marked the first full year of exploration activities by four upstream gas joint ventures between Saudi Aramco and international energy companies — Shell, China’s Sinopec, Russia’s Lukoil and an Italian-Spanish consortium of ENI and Repsol. The landmark ventures, formed in 2003-2004, call for the exploration, production and processing of nonassociated gas, NGL and condensate in four contract areas of the Rub Al-Khali. These ventures promise to attract substantial foreign investment and will ultimately help diversify the Kingdom’s economy, create jobs and provide additional fuel and feedstock for industries, desalination plants and electricity generation.
Saudi Arabia is currently the second highest per-capita user of gas, outstripping most of the highly developed, energy-intensive OECD economies. Given the continued expansion of both upstream and downstream gas activities, that status should continue well into the future, and in turn spark further economic development and diversification.
