Saudi Aramco plans to build a multibillion dollar export-oriented refinery with a 400,000 barrel-per-day (bpd) capacity in the Red Sea city of Yanbu. Investment for the plant will run to $ 4 billion-$ 5 billion. This was disclosed by Khalid Al-Buainain, vice president of refining at Saudi Aramco.
Speaking to reporters on the sidelines of the recently held energy conference in Dubai, he unveiled Saudi Aramco's plan to form a joint venture with one or more international partners for the facility. "We are talking across the globe to all refiners," he said, adding that the deal should be finalized "within a year or so."
According to Al-Buainain, Yanbu is strategically located and the new refinery could supply the US East Coast with high-quality gasoline, low-sulfur diesel to Europe and naphtha to East Asia. The proposed refinery will run on a diet of heavier quality crude, he pointed out. "Saudi Aramco wants to grant 30% stake in the new refinery of Yanbu to international partners," he said.
Meanwhile, M.B. Lal, chairman of India's Hindustan Petroleum Corp. Ltd. (HPCL), said that his company has held preliminary talk for a stake in the new Yanbu refinery. "We offered Saudi Aramco a stake in HPCL's Vishakhapatnam refinery which will double capacity to 300,000 bpd in three years," he said. Lal visited Saudi Arabia with India's Oil Minister Mani Shankar Aiyar late last month.
Aramco has two joint-venture partners in the Kingdom's refining sector. It operates the 320,000-bpd Sasref refinery at Jubail with Royal Dutch Shell, and the 400,000-bpd Samref refining complex at Yanbu with ExxonMobil Corp.
The Kingdom is planning to invest billions of dollars in its refinery sector, which can process 2.1 million bpd of crude oil. "Saudi Arabia's existing refineries can handle 450,000 bpd of heavy crude, although the system is actually running less than 100,000 bpd of heavier grades," Al-Buainain pointed out. Total capital expenditure for expanding and upgrading existing plants over the next five years is around $ 1.5 billion-$ 2.0 billion. Aramco was also considering revamping its Ras Tanura refinery at a cost of around $ 4 billion-$ 5 billion and adding a petrochemical complex, he said.
Aramco and Japan's Sumitomo Chemical Co. Ltd. are investing $ 6 billion-$ 7 billion to upgrade the Rabigh refinery and also build a petrochemical plant by 2008. The increase in the cost of upgrading the Rabigh refinery attributed to the rise in the prices of building materials.
Saudi Aramco also wants to expand its activities to other countries. Indian Oil Ministry officials say Aramco is in talks with state-run Indian Oil Corporation for a stake in IOC's 180,000-bpd Paradip refinery, which is likely to be built by 2010. "They are very keen to involve Indian firms in the new refinery and we want to invest in Saudi Arabia to strengthen our relationship. We depend heavily on Saudi crude oil," an official added.
© Saudi Economic Survey 2005
