Saudis Plough Windfall Cash into Petro Production Expansion

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Before, during, and after the hurricane disaster season in the Gulf of Mexico, Saudi Arabian oil industry spokesmen were harping on the need for more global refinery capacity to ensure an adequate flow of fuel to industry, commerce and the forecourt pumps. The country is now putting its money where its mouth was in terms of investment in new refining capacity and expansions of existing installations. The government is also sustaining its investment drive towards infrastructure and social development.

Saudi Arabia is set to complete 2005 with a 54% increase in oil revenue and a budget surplus of $55.5 billion. This will complete two years of record oil revenues driven by the windfall produced by the Gulf hurricane crisis and limited spare production capacity. The GDP is set to hit 6.8% in 2005/06 and in the non-oil sector GDP is showing a significant rise of almost 8%.

The Samba financial group has predicted that Saudi export revenues would reach $163 billion in 2005 at an average value for Saudi crude of $51 per barrel over 2005. In 2004, the average price was $35 per barrel and the production rate was nine million barrels per day. In 2005, the rate will be 9.5 million barrels per day.

$14 billion has already been invested in projects aimed at expanding Saudi Aramco’s production to 12.5 million barrels per day by 2009. The company is expected to make continuous investments in natural gas and other energy resource sectors.

An example of this drive would be the plans to integrate the Ras Tanu refinery into a major petrochemical complex. Saudi Aramco (Dhahran) says this development will increase revenue and profit margins for the company and provide additional job opportunities for Saudis. Job opportunities are a key concern of the government since the profile of job seekers and the unemployed gets younger each year.

Ras Tanura went online 60 years ago when it replaced a 3,000 barrels per day ‘tea kettle’ refinery. The refinery had a 50,000 barrels per day capacity. Since then it has grown to one of the most complex refineries in the world with a capacity of 550,000 barrels per day of crude and gas condensates. The complex has a natural gas to liquids (NGL) plant, a crude stabilization facility, water desalination and electrical power and steam generating facilities.

The refinery has grown and diversified to meet the changing needs of the market place. “Over the years, the refinery has undergone several expansions and upgrades to meet the Kingdom’s growing demand for refined products,” said Ibrahim K. Al-Naimi, manager of refinery operations. Currently, the refinery produces about 40% of the country’s fuels with gasoline being the major product followed by kerosene, diesel and fuel oil.

Since major modernization was undertaken in 1984, the refinery has seen a number of upgrades. In September 2003, a 200,000 barrels per day gas condensate splitter was installed, which was then increased to 225,000 barrels per day capacity allowing the refinery reaching its current total capacity of 550,000 barrels per day. Development has meant that the refinery now is able to capture more high value ‘white’ products including diesel, naphtha and kerosene instead of concentrating on lower added value fuel oil production.

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