Gulf countries continue to increase refinery capacity, complexity

DOWNSTREAM IN THE PERSIAN GULF-1

Abdullah M. Aitani, Syed Halim Hamid
King Fahd University of Petroleum & Minerals Dhahran
Saudi Arabia

By the end of 1996, the Gulf Cooperation Council (GCC) countries held 466 billion bbl of crude oil reserves and 22,545 billion cu m of natural gas, representing, respectively, about 45% and 15% of the world's proven reserves. The GCC comprises Saudi Arabia, Kuwait, the United Arab Emirates (U.A.E.), Bahrain, Qatar, and Oman.

GCC countries are building on this base by becoming increasingly prominent in downstream operations. GCC refining capacity increased from 1.7 million b/d in 1980 to 3.1 million b/d in 1995 and is projected to reach 4 million b/d in 2010. In addition to adding crude distillation capacity, Persian Gulf refineries are planning or building conversion units that will increase the region's refining complexity.

The first article in this three-part series looks at refinery capacity, planned expansions, and projected demand increases. The second article will examine the petrochemical industry in GCC countries, and the third will present an outlook for petrochemical feedstocks in the region.

GCC refining

More than 53% of GCC refining capacity is in Saudi Arabia, followed by Kuwait (26.5%), Bahrain (8%), U.A.E. (7.9%), Oman (2.7%), and Qatar (1.9%). New and expanded refining capacity is anticipated over the next 15 years to satisfy growing regional demands and to increase exports.

The region has 17 refineries with a combined capacity of 3.1 million b/d; this represents 4.1% of world refining capacity. Half of the refined products produced are consumed locally; the remainder is exported, mainly to the Asia/Pacific region.

The average refinery capacity in the GCC is 182,000 b/d, and its average Nelson complexity index is 5.2. These values compare to world averages of, respectively, 105,600 b/d and 5.9. Table 1 [24,557 bytes] shows the current and projected capacity of GCC refineries through 2010.

Some refiners in the region have made downstream investments in major markets by acquiring refining assets through outright purchases or joint ventures. These moves are intended to increase their level of integration in the industry and to capture added value in all stages, from production through refining, transportation, and marketing.

Saudi Aramco, Kuwait Petroleum Co., and others have decided to upgrade their downstream investment worldwide and, more specifically, in the Pacific region, which is experiencing significant demand growth.

The features of the GCC refining industry can be summarized as follows:

• Only 23% of the region's oil production, which is currently more than 13 million b/d, is refined into highervalue products.
• The region accounts for about 46% of global oil reserves but only 4% of refining capacity.
• Half of the refined products are exported (about 1.5 million b/d), mainly to the Asia/Pacific region.
• Upgrading of conversion capability is under way or planned at several refineries.
• Substantial new refinery investments (locally and abroad) will be developed in the remainder of the 1990s.

These factors indicate that the region's degree of integration is relatively low. Several GCC countries, however, are methodically closing the gap between production and refining capacity.

The overseas market continues to show a growing demand for gasoline (particularly unleaded) and middle distillates. The main factor driving reconfiguration of the region's refineries, however, is predicted massive growth in middle-distillate consumption in domestic markets over the next 15 years.

Moreover, the shift from fuel oil to gas in power generation in most countries (especially in Europe) has resulted in a glut of fuel oil, which constitutes as much as 40% of the output of a hydroskimming refinery. This trend is forcing refiners to seek other markets for fuel oil.

Simple refining schemes without conversion (hydroskimming) are no longer suited to the present GCC market. The refinery using traditional conversion, such as catalytic cracking or hydrocracking, plus optional thermal processing (visbreaking or coking), has become common, and accounts for more than two thirds of the world's refineries.

In the GCC market, there is a growing need for middle distillates; hence, hydrocracking is preferred over catalytic cracking, which is oriented mainly toward gasoline production.

Processing capability

Almost all GCC refineries process light, sour crude oil and produce large quantities of heavy fuel oil because of their modest conversion capabilities. The data in Table 2 [32,736 bytes] and Table 3 [54,440 bytes] reveal the structure, capacities, and yield patterns of GCC refineries.

There are nine medium cracking refineries, five hydroskimming refineries, and three topping plants. The overall conversion capacity, which includes thermal processing, catalytic cracking, and hydrocracking, is 645,000 b/d, or 20.8% of crude capacity. About 48% of conversion capacity is devoted to hydrocracking, mainly at the Kuwait refineries, 28% to catalytic cracking, and 24% to visbreaking and delayed coking (Table 4 [33,484 bytes]).

The relative importance of the different gasoline-production units in each country depends not only on the size of its motor fuel market, but also on the severity of the local specifications and the types of conversion units present. Catalytic reforming is by far the most common process in GCC refineries, because it supplies the bulk of octane demand and efficiently converts low-octane virgin naphtha.

The region's naphtha-reforming capacity is 320,000 b/d (3% of world capacity), and the standard process is semiregenerative. New and revamped units will use continuous catalyst regeneration (CCR) processes to improve yields and reduce operating pressures. Another process that increases gasoline production is alkylation, which converts light olefins produced in the catalytic cracking and C6 isomerization units.

Significant additions of fuel-oil conversion capacity in the GCC are expected before the year 2000. These additions are needed to meet continued growth of light-products demand, which is expected to outpace fuel-oil demand. There is only one residue hydroconversion unit in the GCC: a 42,000 b/d unit at Kuwait's Shuaiba refinery.

The GCC is dealing progressively with tighter restrictions on product qualities. Some countries are considering phasing out lead in motor gasoline and reducing sulfur in diesel and residual fuel oil. Growth of unleaded gasoline is expected to increase as more member countries encourage its use.

Isomerization, CCR reforming, alkylation, and some MTBE capacity additions have been announced in some GCC countries. Even with these additions, the units are expected to be fully utilized considering refinery balances, and the region is expected to remain tight on octane.

Beyond 2000, GCC countries will begin to reduce diesel sulfur content, which will mean increased hydrodesulfurization (HDS) capacity. Some sulfur reduction will be achieved by upgrading residual fuel oil via hydrocracking.

The GCC refining industry will be required to make a number of changes in configuration and operation to produce better-quality products. Reformer runs will be reduced, and reformers will operate with higher initial feed cut points and lower severity. There will be more isomerization of C6 cuts, rather than reforming, and increased hydrocracking to meet low-sulfur diesel requirements and provide reformulated-gasoline components.

Saudi Arabia

Saudi Arabia has eight refineries: five are owned and operated by the Saudi Arabian Oil Co. (Saudi Aramco); two are jointly owned, one by Saudi Aramco and Mobil Oil Corp. and the other by Aramco and Shell Oil Co. (both are operated by separate companies); and one is a topping refinery owned and operated by Arabian Oil Co. (AOC) in the partitioned zone between Saudi Arabia and Kuwait.

Saudi Aramco is the world's largest oil company and the sixth largest refiner; it holds refinery interests in Saudi Arabia, the U.S., South Korea, the Philippines, Greece, and China. These interests help the company secure outlets for its crude and diversify its global presence.

About 15% of Saudi crude exports is refined abroad by Saudi Aramco joint ventures refineries. Aramco is pressing ahead with a far-reaching program to boost its refining capacity, both at home and abroad. Within the kingdom, refineries are being expanded to meet domestic demand growth, both from industrial and individual consumers.

The combined design capacity of the eight Saudi refineries is 1,655,000 b/d. Aramco's five domestic refineries are located at Ras Tanura, Riyadh, Jeddah, Yanbu, and Rabigh, while the two joint-venture export refineries are at Jubail and Yanbu.

The Ras Tanura refinery is the oldest in Saudi Arabia. It was built by Saudi Aramco in 1945, with a capacity of 50,000 b/d. Additional units have been installed over the years, increasing its capacity to 530,000 b/d.

The refinery was modernized and upgraded in the mid-1980s, when a new 265,000 b/d crude-distillation unit, 20,000 b/d vacuum unit, and a 300-ton/day sulfur plant were installed, replacing old units. However, in December 1990, a fire badly destroyed one of the crude distillation units and halved the refinery's throughput to 265,000 b/d.

A 40,000 b/d CCR reformer, 44,000 b/d hydro cracker, and 36,000 b/d visbreaker are being added at the refinery. This $1-billion upgrade program will be completed in 1998 and will satisfy the kingdom's demand for white products until 2000.

The Jeddah refinery was developed by the Saudi Arabian Oil Co. (Sarco) and came on stream in 1968 with a capacity of 12,000 b/d. The plant is now owned and operated by Saudi Aramco. It was expanded to 99,500 b/d in 1978; further upgrading in 1980 raised its maximum throughput to 105,000 b/d.

The refinery's current capacity is 82,000 b/d; it includes a 13,000 b/d fluid catalytic cracking (FCC) unit and a small 3,000 b/d naphtha reformer. An upgrade program entails the addition of a 29,000 b/d reformer, a 17,000 b/d visbreaker, and a 4,500 b/d isomerization unit.

The Riyadh refinery started production in 1975 with a capacity of 15,000 b/d. In 1977, capacity was increased to 20,000 b/d, and a major expansion in 1981 raised the plant's capacity to 140,000 b/d.

The refinery processes crude from the Khurais field, which is transported to the refinery through a 140-km pipeline. The average throughput of the refinery is 110,000-15,000 b/d. The refinery has a 33,800 b/d hydrocracker, a 35,600 b/d naphtha reformer, and several product hydrotreaters. An upgrade project is expected to include a 23,000 b/d reformer and an 8,500 b/d isomerization unit.

The Yanbu refinery, a hydroskimming plant, started production in 1983 with a capacity of 170,000 b/d. The plant can produce 75,000 b/d of fuel oil for industrial and marine use, 37,000 b/d of diesel oil, 24,000 b/d of premium gasoline, 12,400 b/d of jet fuel, and 2,100 b/d of LPG.

The refinery has a 35,000 b/d naphtha reformer and some hydrotreaters. A major upgrade will increase capacity by 130,000 b/d and will include a 40,000 b/d hydro cracker and a 55,000 b/d reformer.

The Rabigh refinery is a 325,000 b/d hydroskimming export refinery on the Red Sea. It was completed in 1985 as a joint venture between Saudi Arabia's General Petroleum & Minerals Organization (Petromin) and the Greek company Petrola Hellas SA, but it started operation in 1990 at only 60% of its capacity. In 1995, Aramco bought Petrola's 50% share and assumed full ownership.

The refinery has an atmospheric distillation unit and an HDS unit and at full capacity can produce 156,000 b/d of fuel oil, 77,000 b/d of gasoline, 36,000 b/d of kerosine, 75,000 b/d of naphtha, and some LPG.

A planned upgrading scheme will reduce the high proportion of heavy products. It will start in 1998 and is scheduled for completion sometime in 2000. In addition to the existing units, the upgrade is expected to include a 172,000 b/d vacuum distillation unit, a 55,000 b/d CCR reformer, a 100,000 b/d hydrocracker, a 63,000 b/d visbreaker, and an 89,000 b/d naphtha splitter.

The 250,000 b/d Yanbu export refinery is a 50/50 joint venture between Saudi Aramco and Mobil. It was built in 1984 and is operated by Saudi Aramco-Mobil Refinery Co. (Samref). During the late 1980s, it was debottlenecked and its capacity increased to 300,000 b/d.

Its throughput now exceeds 330,000 b/d, and most of the output is exported. The refinery has a 142,400 b/d vacuum unit, a 90,600 b/d FCC unit, a 46,700 b/d reformer, a 23,500 b/d alkylation unit, a 46,100 b/d visbreaker, a 12,600 b/d C4 isomerization unit, a 20,400 b/d C5/C6 isomerization unit, and a 2,200 b/d MTBE unit.

The Jubail Export Refinery was built in 1985 by a 50/50 joint venture between Aramco and Shell. Its initial capacity was 250,000 b/d, and it is operated by Saudi Aramco Shell Refinery Co. (Sasref).

It can process heavy crudes into lighter products using various conversion processes. The refinery was debottlenecked in 1991, increasing its capacity to 292,000 b/d. The refinery has an 84,000 b/d vacuum unit, a 19,000 b/d reformer, a 44,000 b/d hydrocracker, and a 32,000 b/d visbreaker.

Benzene is extracted from the reformer unit and supplies Saudi Basic Industries Corp.'s adjacent Sadaf styrene plant. For this purpose, the refinery operates a 5,800 b/d benzene plant and a 7,000 b/d toluene hydrodealkylation unit.

The Khafji refinery is a 30,000 b/d topping refinery. It was built in 1966 and is operated by the Arabian Oil Co. (AOC) in the partitioned zone with Kuwait. It was designed to convert Khafji crude to naphtha, fuel oil, and diesel, mainly for export to Japan.

During the Gulf War, it was slightly damaged but was repaired quickly and restarted in June 1991. Currently, AOC is planning to increase the plant's capacity to 180,000 b/d by 2000.

Kuwait

Kuwait has three refineries at Mina Ahmadi, Mina Abdullah, and Shuaiba. All are operated by Kuwait National Petroleum Co. (KNPC), a subsidiary of Kuwait Petroleum Co.

Kuwait's refining capacity is 824,000 b/d. Before the Gulf crisis, its refineries were among the most modern and sophisticated in the world, following the implementation of an 8 year, multibillion-dollar expansion and upgrading program completed in mid-1989.

A fourth topping refinery in the partitioned zone-the 50,000 b/d Mina Saud plant operated by Saudi Arabian Texaco-was so badly damaged in the Gulf War that it has never been repaired.

The Mina AlAhmadi refinery was the first to be built in Kuwait; it started operation in 1949 with a capacity of 25,000 b/d. The capacity was increased in phases and reached 370,000 b/d in 1989.

This refinery was the least damaged during the Gulf War and was the first to be restarted. Two of the three distillation units, the FCC unit, and the control room were badly damaged, while the catalytic reformer (the only one in Kuwait) was virtually destroyed. The refinery's effective capacity is 415,000 b/d, and it is the eighth largest refinery in the world.

The refinery has a 28,000 b/d FCC unit, a 36,000 b/d hydrocracker, and a 125,000 b/d residue desulfurizer. An upgrade project will add a 1,300 b/d MTBE unit, a 4,500 b/d alkylation unit, and a spent-acid regenerator. Increasing the capacity of the FCC unit from 30,000 b/d to 40,000 b/d will provide feedstock for a polypropylene unit being built by Petrochemicals Industries Co.

The Mina Abdullah refinery started in 1958 and processes high-sulfur, heavy Kuwaiti crudes such as Barqan, Retawi, and Ioseen. The refinery's initial capacity of 30,000 b/d has been increased to 255,000 b/d.

After being damaged during the Gulf crisis, it was partially on stream by the end of 1991, operating at a rate of 100,000 b/d, and was restored to full capacity in the fourth quarter of 1993. The refinery has a 38,000 b/d hydrocracker, a 60,000 b/d delayed coker, and a 96,000 b/d residue desulfurizer. The refinery produces kerosine, gas oil, high-sulfur fuel oil, and petroleum coke.

The Shuaiba refinery started operation in 1968 with a capacity of 95,000 b/d. It was one of the world's largest refineries, in terms of hydrotreating capacity, enabling it to produce highquality export products.

The refinery was equipped with state-of-the-art distillation and conversion facilities and was not included in the big upgrading program of the 1980s. It was so badly damaged during the Gulf War that it had to be effectively rebuilt rather than repaired.

The 154,000 b/d refinery includes a 40,000 b/d hydrocracker and a 42,000 b/d residue upgrading unit. The product slate is heavily directed towards middle distillates, with gas oil accounting for 34% of output, fuel oil for 23%, kerosine for 17%, and gasoline for 6.5%.

United Arab Emirates

The U.A.E. refining industry is centered in Abu Dhabi, which has refineries at Umm Al-Nar and Ruwais, with a combined capacity of 205,000 b/d. Both are operated by Abu Dhabi National Oil Co. (Adnoc). A third topping refinery with a capacity of 35,000 b/d is operated by Metro Oil Corp. in Fujaira.

The output of the three refineries is more than enough to meet the federation's domestic consumption, which is about 135,000 b/d. Moreover, Adnoc is adding condensate distillation facilities.

The Ruwais refinery started up in 1981 with a capacity of 120,000 b/d. In 1985, a 27,000 b/d hydrocracker was installed to convert atmospheric residue to light and middle distillates. The refinery also has a 45,000 b/d vacuum distillation unit, a 17,000 b/d reformer, and 40,000 b/d of hydrotreating capacity.

Adnoc is upgrading and expanding the Ruwais refinery by adding two 140,000 b/d condensate distillation trains and associated sweetening units. Phase 2 of the project includes a 27,500 b/d CCR reformer, a 25,000 b/d isomerization unit for the production of unleaded gasoline, and a 25,000 b/d gas oil hydrotreater.

Other facilities included in Phase 2 are an acid gas removal unit, a 50 ton/day sulfur-recovery unit, and related facilities and off sites. Adnoc intends to complete both phases by June 1999. The revised upgrading program reflects the removal of planned crude, vacuum, hydrocracking, and delayed coking units from Phase 2.

The Umm Al-Nar hydroskimming refinery was built in 1985 to replace a 15,000 b/d Umm Al-Nar refinery that started up in 1976. The new plant's capacity was increased in stages and reached 85,000 b/d in 1993. The refinery processes crude oil from the Asab and Sahil fields. It has a 12,600 b/d CCR naphtha reformer and 73,000 b/d of hydrotreating capacity.

Bahrain

Bahrain's 250,000 b/d conversion refinery at Sitra is the oldest in the GCC region. Built in 1936 with a capacity of 10,800 b/d, it was expanded in stages to its current capacity. Most of the crude input to the refinery arrives by pipeline from Saudi Arabia.

The refinery is owned and operated by Bahrain Petroleum Co. (Bapco). Bahrain took a 60% stake of the refinery in 1980 and the remainder was owned by Caltex. In March 1997, the Bahraini government bought Caltex's stake, and the company continues to provide Bahrain with operational expertise where required.

The refinery has a 41,400 b/d FCC unit and a 48,600 b/d hydrocracker. Domestic demand for petroleum products has been stable at slightly less than 10,000 b/d for 2-3 years, while exports have averaged 243,000-245,000 b/d. Almost half of this quantity is sold to Southeast Asia; the remainder is distributed between the Far East, Middle East, Africa, and the U.S.

Plans for upgrading and expanding the Sitra refinery have been under consideration since 1986. The $600-million project will probably be carried out in two phases. Phase 1 calls for replacing four atmospheric distillation units with a single, 150,000 b/d unit. Phase 2 will include a 7,500 b/d LPG-recovery unit, an 18,000 b/d CCR naphtha reformer, a 750 b/d MTBE unit, and a 4,600 b/d alkylation unit.

Fuel oil production will be cut by more than half, from 26-27% of total output to 10-12%, while production of unleaded gasoline and middle distillates will be correspondingly increased.

The final decision regarding the upgrade program has been delayed another 2 years.

Qatar

Qatar has one hydroskimming refinery at Umm Said which is operated by the National Oil Distribution Co. (Nodco), a wholly owned subsidiary of Qatar General Petroleum Co. The facility was developed in two stages: the original plant, Umm Said 1, was built in the 1960s and had a capacity of 13,000 b/d. Then in 1983, Umm Said 2, came on stream with a capacity of 50,000 b/d.

The two plants are operated as a single, integrated refinery. Units include a 11,500 naphtha reformer and a 3,500 b/d isomerization unit for unleaded gasoline production (completed in 1993).

Nodco is planning to expand and upgrade Umm Said 2, increasing distillation capacity by 25%, and adding a 20,000 b/d FCC unit and a 30,000 b/d condensate refinery that will process North Field condensate. The new facilities will be integrated into the existing plant and are scheduled for completion in 1998.

Oman

Oman Refinery Co. has one hydroskimming refinery at Mina Al-Fahal with a capacity of 85,000 b/d. The refinery started production in 1982, then expanded to its current capacity in 1987. In 1993, the refinery installed a 16,000 b/d CCR reformer for the production of unleaded gasoline.

The refinery was managed by Ashland Petroleum Co. until 1990, when a 3-year management contract was awarded to Caltex and Transworld Oil Ltd. About half the refinery's output is absorbed by the domestic market, and the surplus-mainly fuel oil-is exported.

Supply/demand

Saudi Arabia, Kuwait, Bahrain, and U.A.E. are the major exporters of refined products in the region. In 1995, total production of refined products was 2.72 million b/d, consumption was 1.32 million b/d, and exports were 1.41 million b/d (Table 5 [25,708 bytes]).

By 2005, production is expected to reach 3.72 million b/d, consumption 1.56 million b/d, and exports about 2.15 million b/d.

The increase in exports will result from the expansion of Saudi and U.A.E. refineries. Saudi refineries produce nearly twice the volume of oil products needed to meet the country's demand and therefore export a large volume.

In recent years, however, there has been a far more rapid rise in domestic consumption, which exceeded 953,000 b/d in 1995, compared to 721,000 b/d in 1992.

Table 6 [48,883 bytes] shows production, consumption, and exports of several refined products by GCC countries in 1995. Table 7 [50,896 bytes] shows the authors' forecasts of consumption, production, and exports of these products in 2005.

Regional demand is expected to reach 1.16 million b/d, and exports will rise to 896,000 b/d.

In Kuwait, refined product output was 436,700 b/d in 1993, compared to 688,900 b/d in 1989, the last full year before the Gulf crisis. Domestic consumption was 95,200 b/d in 1993, compared to 72,300 b/d in 1989. A surplus of all products is anticipated in 2005, which means that current capacity and planned additions will meet expected growth in demand and exports through 2010.

In the U.A.E., deficits in all refined products are expected in 2005 if no additional refining capacity is added. This is because U.A.E. has the highest per-capita consumption of refined products. The Ruwais refinery is being expanded, however, and there are plans to build a 150,000 b/d refinery in Dubai by the year 2000.

In Bahrain, Qatar, and Oman, a surplus of all products is anticipated, which means current capacity and future additions will meet expected growth in products demand until 2005. Expanded use of natural gas in various sectors in Qatar and Oman will reduce or stabilize product consumption by 2005.

The Authors