Gulf states increase investment in refining capacity

Mar 11, 1997 01:00 AM

Gulf oil states are ploughing billions of dollars into refineries to meet growing world demand for quality transport and heating fuels in the next decade.
Saudi Arabia, United Arab Emirates and Kuwait are leading the move to install sophisticated units at existing refineries to lift the volume and improve the quality of high-value products such as petrol, diesel, kerosene and jet fuel. Refineries need more flexibility to match world demand, particularly from southern Asia, in motor fuels.
Saudi Arabia has allocated $ 1.2 bn to upgrade its Ras Tanura plant on the Gulf coast and a further $ 1.7 billion to develop its Rabigh refinery on the Red Sea coast. State-owned Abu Dhabi National Oil Company (ADNOC) is expected to spend close to $ 1.5 bn by 2002 to carry out a two-phase revamp of its Ruwais plant.
The expansion and upgrading of refineries in the Gulf is in contrast to consolidation and closure of refining and marketing systems owned by major oil firms in Europe and the US, where profits have been severely damaged by overcapacity.
Gulf refineries have traditionally been simple distillation plants that produced mainly heavy fuel oil sold at a sharp discount to light fuels such as petrol. Lack of upgrading units led even major refiners such as Saudi Arabia and the UAE to import petrol and diesel just to meet local demand. State-subsidized retail prices have led to an annual petroleum demand growth of more than 10 % in the Gulf and private firms, particularly in the UAE, are setting up small refineries to keep pace with higher Gulf use.
Investment by state-refiners is centered on units to increase hydrocracking capacity which increases gas oil output from processing fuel oil, catalytic reforming which improves gasoline yields, condensate handling capacity and desulphurisation units to meet stricter environmental rules.
The work, mainly at Saudi Arabia's Ras Tanura and the UAE's Ruwais refineries, will increase total product exports from the region by 600,000 bpd to2.2 million bpd by the year 2000.
Output of light-ends such as petrol and middle distillates like diesel will reach 72 percent of total refinery production in 2000 from 69 % in 1995 while refining capacity will hit 5.99 million bpd from 5.3 million bpd.
A boost to capacity will be the commissioning of Iran's new Bandar Abbas refinery later this year and completion of first-phase upgrades at Ras Tanura in 1998 and Ruwais in 1999. Smaller, privately-backed refining plants in the UAE are expected onstream over the next two years while Qatar, Oman and Kuwait are also planning downstream expansions.

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