With one-fourth of the world's proven oil reserves and some of the lowest production costs, Saudi Arabia produces 12-14 percent of global crude oil. It has 286 discovered billion barrels of oil equaling 25 percent of the world’s oil reserves, while the Kingdom may have at least 200 billion barrels of undiscovered additional oil. The Kingdom is one of the top oil exporting countries. Saudi oil exports were expected to reach $157 billion in 2005, 48 percent more than in 2004. Saudi Aramco, the world’s largest oil company, plans to increase oil production from the current 9.5 (10.5 million b/d) million barrels a day to 12 million barrels per day by 2009. The company has an ambitious domestic exploration program targeting both oil and gas. Investments in the oil and gas sectors and in upgrading oil-refining capacity in the next five years are estimated at $50 billion.
Saudi Arabia has eight refineries, with combined crude throughput capacity of around 1.75 million b/d, plus around 1.6 million b/d of refining capacity overseas.
In addition to expanding its Ras Tanura refinery, Saudi Aramco also plans to build two grassroots export refineries in joint venture with foreign principals and each with a capacity of 400,000 b/d. One will be in Jubail, on the east coast and the other in Yanbu on the west coast. The company has already awarded Sumitomo from Japan the expansion works at the Rabigh Refinery, which is expected to become one of the world’s largest refining and petrochemical complex. The value of the contract is $9 billion.
Saudi Aramco plans to boost its refining capacity by almost 50 percent to 6 million b/d. Some of the agreements that Saudi Aramco signed to pursue this objective include:
- In July 2004, Saudi Aramco signed an agreement with Shell to purchase a 9.96 percent share in Showa Shell Group, a refining and marketing company based in Japan. Under the deal, Aramco will supply Showa Shell with 300,000 b/d of crude oil.
- In March 2005, Saudi Arabia signed an agreement with India, whereby the Saudis reportedly acquired a stake in the 300,000-b/d Paradip Refinery and the 152,000-b/d Vizakh Refinery. Saudi Aramco also is reported to be considering a forward oil stockpile and a 400,000-b/d, $3 billion refinery in India.
- In July 2005, a new $3.6 billion refinery and petrochemical plant complex was inaugurated in Fujian, China, as a joint venture between Sinopec (50 percent), ExxonMobil (25 percent), and Saudi Aramco (25 percent). Saudi Aramco will supply the crude oil for the plant. Saudi Aramco is also negotiating with Sinopec to build a second major Chinese refinery, in the northern province of Shandong. Both plants will be able to handle high sulphur ("sour") oils, which is important because there is a dearth of such capacity worldwide.
- Upgrading the Yanbu refinery to increase its complexity and boost capacity by 100,000 b/d.
- Expand by as much as 300,000 b/d at one of the U.S. Gulf Coast refineries under the Motiva Enterprises LLC joint venture between Shell Oil Co. and Saudi Refining Inc.
- Saudi Aramco plans to build a grassroots refinery in South Korea.
High oil prices will continue to swell government coffers, underpinning the favorable macroeconomic backdrop in 2006. Likely, oil market trends and Saudi Aramco’s substantial investment in expanding crude production will combine to deliver another wave of growth in 2006, though at a likely slower pace than in 2005.
But beneath the headlines inspired by a $60 a barrel, business investment and consumer spending have emerged as important a driver of economic growth as hydrocarbons have been over the past three decades. Saudi Aramco plans to increase its production capacity to 12.5 million b/d over the next four years.
Saudi Arabia expects new investments worth $20 billion in 10 giant gas projects within the next six years. The new projects are expected to produce 18 mm tons of petrochemicals and minerals. The products of these projects will serve as a basis for downstream industries such as plastics, insulators, carpets and fertilizer. The projects are expected to come on stream between 2006 and 2009.
By Yousef Daqqaq