Saudi Arabian Oil Co. (Saudi Aramco), the world's largest producing company, has a problem unrelated to oil wells. It is in refining.
Saudi Aramco is the world's seventh largest refiner, with refinery interests in Saudi Arabia, the U.S., Korea, and Greece. Aramco operates five refineries in the kingdom, owning four totally and the majority of the other. It also owns a 50% share in big refineries at Jubail and Yanbu with, respectively, Shell and Mobil (OGJ, Dec. 18, 1995, p. 41).
Aramco is responsible for supplying Saudi Arabia's domestic needs in a way that optimizes the kingdom's return on hydrocarbon exports. The catch is that the company's refining arm must supply the products below cost relative to world prices. In Saudi Arabia, gasoline, for example, sells for only about 30/gal at the pump.
This and other challenges facing the Saudi refining sector were aired in some rare and frank presentations and discussions by Saudi Arabian executives and engineers at Petrotech 96, June 10-12, in Bahrain (OGJ, June 17, p. 24).
Lead and gasoline
Abdullah G. Al-Ghanin Sr., vice-president of Saudi Aramco, made a case for unleaded gasoline in Saudi Arabia and member countries of the Gulf Cooperating Council (GCC). All still burn high lead gasoline (OGJ, June 17, p. 24). The GCC comprises Abu Dhabi, Bahrain, Kuwait, Qatar, Saudi Arabia, and Oman.
Michael D. Stewart of Saudi Aramco's facilities planning department said his company is conducting studies on supplying unleaded gasoline and low sulfur diesel.
Producing unleaded gasoline will cost the company $1 billion, and the cost to bring diesel down to 0.3% sulfur will be in excess of $1 billion, he said.
Stewart said that demand growth for refined products in Saudi Arabia had moderated from 10%/year to about 5%/year. He declined to give current Saudi gasoline and diesel consumption, but observers at the conference say it is running, respectively, 250,000 b/d and 350,000 b/d.
Diesel/electricity
One of the ironic results of price controls in Saudi Arabia has been the burning of diesel fuel to generate electricity.
The price of diesel has been set lower than that of gasoline to promote business and industrial activity primarily through lower transportation costs. Power producers found that diesel was a better deal than crude oil or fuel oil for generating electricity.
It is now hoped that a realignment of crude and diesel prices will discourage burning of diesel. A bigger problem, however, still exists-high-sulfur heavy fuel oil.
Burning crude
Saudi generators have been allowed to burn fuel with a maximum 3.7% sulfur, which is reminiscent of the U.S. in the late 1960s. But new facilities will have to use fuel with 2.1% sulfur or less.
The sulfur content of current heavy fuels produced by Aramco runs 3-4%. Therefore, says Stewart, unless the refining industry puts in more desulfurization plants (costing a total of about $1 billion), more and more Saudi Light crude, with a sulfur content of 1.8%, will be burned.
In short, Saudi Arabia will have to burn a high quality, premium crude oil, thus reducing its exports of that crude.
More conversion
Yahya Al-Zaid, vice-president and head of Saudi Aramco's Ras Tanura refinery, the company's biggest, also addressed the refining sector's problems. He said its complexity factor of 4 is too low.
Rising population is driving up demand, and unless more conversion capacity is added the country will need 440,000 b/d additional distillation capacity by the year 2000. Cracking capacity would cut into the fuel oil surplus and delay addition of pure hydroskimming capacity.
Ras Tanura is adding capacity for hydrocracking, visbreaking, and continuous catalyst-regeneration reforming. It will be ready in 1998 and will satisfy the country's demand for white products until 2000.
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