RIYADH: The changing fortunes of the crude world are forcing regional producers and even consumers to look the refining way too – generating a major headache for the Indian export oriented refineries. Adding value to crude is the new mantra.
A new strategy is thus in work. And one of the most important components of this strategy is to add value to crude - instead of selling it as it is.
“More of our liquids production can travel farther down the value chain, rather than being exported as crude oil, refined products or natural gas liquids,” Saudi Aramco now declares on its web page.
Prince Faisal bin Turki, the advisor at the Ministry of Petroleum and Minerals, too has been underlining that his ministry was currently stressing the need to focus on manufacturing valued-added products (from its crude resources).
The almost $20 billion joint venture between Saudi Aramco and DOW Chemical is a clear expression of embarking on the value addition route. And in the meantime, Saudi Aramco has also joined hands with Sinochem for another chemical venture on the west coast of the Kingdom.
But this is just one aspect of the value addition strategy. Refining is another major plank, of this new Saudi offensive. Three new refineries, in various parts of the Kingdom, each able to process 400,000 barrels per day (bpd) of mainly heavy crude, in different stages of construction at this very moment, would soon be presenting Aramco with a portfolio of products to market. And by setting up a products trading arm, as early as early last year, Aramco is already preparing for the eventuality.
Of this, SATORP, the largest addition to global refining capacity since 2009, the Aramco joint venture with French oil major Total, is expected to go on stream during the second half of the year. Work on YASREF, the refining joint venture between Aramco and China’s Sinopec, on the Red Sea coast is also moving in full steam, with completion expected by late 2014. And then the strategically important Jizan refinery is also set to come on stream in 2017.
Indeed the world’s largest crude exporter has not invested tens of billions of dollars raising refinery capacity, to 3.5 million bpd by 2016, for no reason. These ventures also take care of its heavy sour crude, for which there are currently not many takers in the world, and which the Kingdom is currently forced to sell at a discount to other grades.
And this development is not limited to Saudi Arabia only. Despite all the problems and sanctions, the next door Iran is also to invest $122 billion in the refining sector by the end of its Fifth Five-Year Economic Development Plan (March 2016).
According to the Alireza Zeighami deputy Iranian oil minister, the Iranian gasoline production is set to touch 70 million liters per day by the end of April this year, as against the current 55 million liters/day capacity, curtailing its import requirements. Its current average gasoline consumption stands at 64 million liters/day.
Crude thirsty China, in the meantime, is also endeavoring to generate enough refining capacity. As per the State Council's 12th five-year plan for energy development, the Chinese crude-oil-refining capacity is to be raised to 620 million tons and output of refined oil products to 330 million tons by 2015. The nation’s crude-processing capacity is already set to increase by 39.5 million metric tons a year to 614 million a year in 2013, while actual throughput is to climb 5.4 per cent to 489 million tons, China National Petroleum Corp. said recently in its annual report.
Refining is all set to take a major stride – all around – and Dhahran has definitely leapt into an early lead in this direction!