April 19, 2012

Saudi Arabia investing hundreds of billions on upstream and downstream oil production

1. Business Week - Saudi Arabian Oil Co. plans to build refineries in China and Indonesia as part of a $200 billion spending program to double refining capacity and explore for oil and natural gas during the next decade.

Aramco, the world’s largest crude exporter, is expanding refining and petrochemical production to meet domestic demand and export refined products that can fetch higher prices than oil. The company plans to boost its global refining capacity to 8 million barrels a day in 10 years, including projects yet to be announce.

The company is exploring for unconventional gas, including shale and tight gas, in the nation’s northwestern region, al- Falih said on Jan. 14. Low gas prices are a “challenge” to developing these hard-to-reach deposits, he said. Aramco’s capital spending will probably rise to more than $20 billion a year if it develops unconventional gas, he said in the interview.

Aramco will invest $90 billion in the next five years to increase refining capacity by 50 percent to 6 million barrels a day in projects “that more or less have been identified,” al- Falih said. Refining capacity in Saudi Arabia itself will rise to 3.46 million barrels a day in 2016 from 2.26 million barrels, according to a presentation Aramco officials made at an October conference in Bahrain




Most of the capacity to be added above the five-year target will be at refineries in Asia, with the bulk of that in China, al-Falih said. Aramco seeks to tap increasing consumption in China, Asia’s biggest energy user, by forming joint ventures with local partners.

A pipeline to transport crude to the refinery from neighboring Myanmar will be completed in 2013, al-Falih said. Aramco would ship Arabian Light and Arabian Medium crude grades under long-term contracts to Myanmar for onward transportation through the pipeline, he said.

In Indonesia, “early indications are positive” on Aramco’s plan to develop a refinery with state-run PT Pertamina, al-Falih said. The companies may build a 300,000 barrel-a-day refinery in Tuban in East Java, Edi Setianto, Pertamina’s processing director, told the Jakarta Globe newspaper. The $8.8 billion plant may start operating in 2018, according to the Dec. 29 report.

2. As part of its diversification programme Saudi Arabia’s new policy for hydrocarbon resource utilisation is based on adding value at every step in the production chain.

The Kingdom needs to increase the availability of gas feedstock amid increasing domestic demand. In this regard, Saudi Arabia has undertaken an aggressive programme of exploration to move gas resources in reserve utilisation and developing the most advanced technologies.

“This will enable the Kingdom to grow its gas production capacity to about 15 billion standard cubic feet per day by 2016, from 7.7 billion standard cubic feet per day in 2002,” says Prince Faisal bin Turki bin Abdulaziz, advisor, Ministry of Petroleum and Mineral resources.

In spite of a shortage of gas feedstock, the Saudi petrochemical industry is entering a golden era.

“We are witnessing the largest growth in the industry’s history with the total production of petrochemicals, chemicals and polymers expected to be over 100 million tonnes by 2016; a 250% growth from 2006 levels,” says Prince Turki.

“Our annual production of ethylene and propylene is expected to grow by over 230% and 300% respectively from 2006,” Prince Turki adds.

“The associated cumulative investments for all of these petrochemical projects are expected to be more than $150 billion by 2016,” he reveals.

Saudi Arabia has focused on expanding its downstream portfolio and moving up the value chain to include 120 new petrochemical and chemical products, which will empower its future downstream conversion industries, supporting Saudi Arabia’s drive towards economic diversification.

Background

An article at Nextbigfuture from 2008 about Saudi Arabias oil fields and development plans

The Oildrum had a Tech Talk article recently that referred extensively to my 2008 article

Recent reports indicate that Saudi Arabia did develop the projects stated in the 2008 article and have achieved 12.5 million barrel per day capacity.

Aramco has started up two new fields by the end of June: the 1.2 million-bpd Khurais development and the 100,000-bpd Nuayyim field, followed by the 250,000-bpd Shaybah expansion in the third quarter.

The 900,000-bpd Manifa heavy oil field, which was scheduled to come on line in 2011, will not begin production by until mid-2013.

Aramco is now holding back on using its new production capacity following the Opec decision not to raise output. In March, Aramco completed drilling on 310 wells to bring the 1.2-mbpd Khurais development into operation 10 months ahead of schedule.

Saudi Aramco annular review 2010, 53 pages

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