Oil, Gas & Petrochemicals Opportunities in Saudi Arabia

An Expert's View about Oil in Saudi Arabia

Posted on: 22 Sep 2010

Saudi Arabia holds 25% of the world’s proven oil reserves and has only fully explored 25% of its potential oil producing area.

Sector briefing Oil, Gas & Petrochemicals Opportunities in Saudi Arabia Why Saudi Arabia? Saudi Arabia holds 25% of the world?s proven oil reserves and has only fully explored 25% of its potential oil producing area. The aim of the latest round of exploration is to increase the proven oil reserves by a further 200 billion barrels to 460 billion barrels. Saudi Arabia has proven gas reserves of 263 trillion cubic feet, the fourth largest in the world. The total gas production average is approximately 8 billion standard cubic feet per day. SABIC is the largest petrochemical company in the Middle East, the fifth largest globally and Saudi Arabia?s most successful listed company. ?Saudi Arabia holds 25% of the world?s proven oil Find general information on the Saudi Arabian market conditions on UKTI?s website. The reserves and has only fully Doing Business Guide for Saudi Arabia gives an explored 25% of its potential overview of Saudi Arabia?s economy, business oil producing area.? culture, potential opportunities and an introduction to other relevant issues. UK Trade & Investment Sector briefing: Oil, Gas & Petrochemicals opportunities in Saudi Arabia Opportunities Saudi Aramco have given the following breakdown of material expenditure for the Recent Developments: period 2009-2014 (all figures in US$ billion): Saudi Aramco, the world?s largest fully integrated oil company is projecting expenditure of US$ 129 billion throughout its Material Expenditure for period US$ current five year plan (2009-2014). The global 2009-2014 billion economic slowdown and the accompanying Drilling related 4.7 slide in project costs have forced Saudi Aramco Fabricated steel products 3.4 to revise many of its new and ongoing ventures. Line pipes and fittings 3.5 Valves 2.9 The projects are still going ahead, however Pumps 1.7 costs and time frames are being reviewed as commodity prices have fallen. In 2005 the Speciality chemicals 0.8 company embarked on a massive US$ 50 Structural steel products 0.8 billion expansion of its capabilities, in order to Compressors 0.8 meet the global increase in oil demand. Field processing equipment 0.22 The first target was to increase production capacity from 10 million bpd to 12.5 million bpd. To put this increase in perspective, the For services over the same period the total production capacity of the UAE is 2.5 breakdown is: million bpd. This was achieved in June 2009 year, when 3 new oilfields, Khurais, Nuayyim Services for period 2009-2014 US$ and Shaybah, commenced production. billion Drilling related 9.43 Future Plans: Saudi Aramco currently purchases Construction/communication 6.21 approximately 20% of its goods and services Seismic/surveying 2.07 through Saudi companies but has stated that Engineering 1.84 within the next two years it will double this figure. Direct sale by foreign companies is thus Maintenance 1.61 becoming increasingly difficult and Aramco now Pipeline maintenance 0.92 has a strongly stated preference under its Production services 0.46 ?Saudisation? policy for local procurement. Pipeline testing 0.46 Manufacture under license, joint venture or establishing a local company is becoming the Such a detailed breakdown of material and more viable route to achieving business with service needs is not available from SABIC but Aramco. they are committed to a capital spend of US$21 billion over the next 4 years. Most of SABIC have announced a capital programme of their purchases are made by the EPC US$ 21 billion, to increase annual production contractor, working from a list of approved from 48 million tonnes per annum to 60 suppliers. million. Longer term, SABIC are aiming for 80 million tonnes per annum by 2012 and 100 Around 3,000 UK companies are currently million tonnes by 2015. approved Aramco vendors and UK sales to Aramco exceed US$ 100 million. Before UK In addition, there are many other companies companies can supply to Saudi Aramco they that have invested in petrochemical facilities in must be on the approved vendor list. Aramco?s Jubail and Yanbu that aim to come on stream European procurement is handled by the in the next three years. SABIC have also Aramco Overseas Company BV, based in expressed an increasing preference for Leiden. Full details on how to register are procurement from indigenous sources, provided on the website: reinforcing the drive for strategic alliances as www.aramcooverseas.com an effective method of UK companies gaining market share. UK Trade & Investment Sector briefing: Oil, Gas & Petrochemicals opportunities in Saudi Arabia It is not necessary to have a local agent to deal around $80-85 per barrel in order to sustain with Saudi Aramco. However, experience has global economic recovery. shown that a good agent is invaluable. Saudi At more than 224 trillion cubic feet, Saudi Aramco employs over 50,000 staff directly, Arabia has the 4th biggest gas reserves in the with double that number of contractors. A good world. A significant increase in gas production agent will ensure you are dealing with the is required to feed the growth of the rapidly correct Aramco contacts. expanding petrochemicals sector. The demand for natural gas is set to double by 2030. Saudi Aramco are keen that more of the Although 85% of the Kingdom's gas is from benefits of their expenditure should be felt in associated are from associated petroleum Saudi Arabia. They are therefore giving priority deposits, Saudi is not likely to increase gas to suppliers who can show that they have a production from this area, due to OPEC crude local partner who adds value in Kingdom. oil production constraints. They are therefore Ideally they would like to see manufacturing in increasing exploration work in many non-oil Saudi Arabia. However, if a UK company producing areas such as the area North of invests in local assembly, warehousing or Riyadh and the Red Sea. They are also aftersales service and maintenance, this is focussing on offshore fields to the east such as looked upon favourably. Karan and Durra. For companies seriously interested in investing The Empty Quarter of the Kingdom has also in Saudi Arabia, the New Business been targeted as a potential source of natural Development team are willing to share fairly gas. In partnership with Saudi Aramco 4 detailed projections of Aramco?s material needs consortia have ventures in the Rub Al Khali over the next 5 years to aid business planning. (Empty Quarter) Royal Dutch Shell, Lukoil, Sinopec and Eni Repsol. However so far the Shared Services was set up to handle all results have been relatively disappointing and procurement for the SABIC organisation. The significant commercial discoveries have not department only handle procurement for been made. maintenance and day to day running. Capital expenditure is normally handled on a LSTK If you have any questions on the opportunities basis with the PMC contractor responsible for above, contact the UKTI contacts named in this equipment decisions. Shared Services, unlike report. Business opportunities aimed Aramco, will only work with local agents if the specifically at UK companies are added daily to agent adds value in Saudi Arabia. If the UKTI?s website. These leads are sourced by our agent?s sole role is to forward an order, SABIC staff overseas in British Embassies, High will go direct to the manufacturer. However Commissions and Consulates, across all sectors SABIC share Aramco?s aim of boosting the local and in over 100 markets. economy and they will look favourably on suppliers who create jobs in Saudi Arabia. You can be alerted to business opportunities on a regular basis by registering on the UKTI The second is the construction of refineries, website. Find out more on UKTI?s business petrochemical plants and the development of opportunities service on the UKTI website natural gas processing plants. The aim is to push petrochemical manufacturing further downstream, to satisfy local and international demand for such products. Saudi Arabia is looking to increase its capacity of refined petroleum products by 1.6 mbpd to reach 3.4 mbpd. Many of these projects are being developed in partnership with major international oil firms such as Conoco Phillips in Yanbu and Total in Jubail. The Kingdom is looking to play its part in easing constraints on global refining capacity. Such constraints played a role in taking oil prices to a record high near $140 in 2008. The Saudi's are cautious and have stated that a 'fair' oil price is UK Trade & Investment Sector briefing: Oil, Gas & Petrochemicals opportunities in Saudi Arabia Major events and activities UKTI contacts SAOGE 2010 Neil Wilson www.saoge.org Deputy Head Contact: Neil Wilson British Trade Office, Al Khobar Email: neil.wilson@fco.gov.uk Tel: 00966 (0) 3 882 5300 ext. 2006 10-12 September 2010 Email: neil.wilson@fco.gov.uk www.ukti.gov.uk ADIPEC 2010 www.adipec.com Sharif Moussa Email: info@adipec.com Senior Trade & Investment Officer 1-4 November 2010 British Trade Office, Al Khobar Tel: 00966 (0) 3 882 5300 ext. 2005 Email: sharif.moussa@fco.gov.uk Find full details of all events in this www.ukti.gov.uk country and sector on the UKTI website. New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events UK Trade & Investment Sector briefing: Oil, Gas & Petrochemicals opportunities in Saudi Arabia Next steps - How UKTI can help British companies wishing to develop their business in the Saudi Arabian market are advised to undertake as much market research and planning as possible in the UK. UKTI?s team in Saudi Arabia, with its wide local knowledge and experience, can provide a range of services to British-based companies wishing to grow their business in global markets. This can include: ? Provision of market information ? Validated lists of agents/distributors ? Key market players or potential customers in the Saudi Arabian market ? Establishment of interest of such contacts in working with you ? Arranging appointments ? Organise seminars or other events for you to meet contacts and promote your company in the Saudi Arabian market This work is available via our Overseas Market Introduction Service (OMIS) a chargeable service which assists British-based companies wishing to enter or expand their business in overseas markets. To find out more about commissioning this work, or accessing other UKTI services and specialist advice, please visit the UKTI website to find contact details for your local UKTI office. Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2010 by UK Trade & Investment. Crown Copyright © UK Trade & Investment Sector briefing: Oil, Gas & Petrochemicals opportunities in Saudi Arabia
Posted: 22 September 2010

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