Gulf Arab continue refinery projects with long-term view

Sep 17, 1997 02:00 AM

Gulf Arab oil states continue with oil refinery expansion and upgrading projects despite fears that currency and stock market collapses in Asia will blunt energy demand growth. With economic slowdown forecast in key Asian oil importers such as Thailand, Malaysia, South Korea and the Philippines, export-oriented refiners in the Gulf could find themselves with surplus product from multi-billion-dollar projects coming onstream over the next five years.
"Tendering, procurement and project work is still going on. The whole refinery workload is accelerating, not slowing down," one contractor with a Western engineering firm said. Refinery projects in Southeast Asia in contrast are being delayed because of poor profit margins and earlier forecasts of near double-digit growth in annual oil product imports are being looked at again after stock and currency market jitters. "We look at the long-term. Asia will remain an important and healthy market for our products," said one manager at a state-owned refinery in the Gulf.
A major incentive for the work programmes is also the fast rate of population growth in the Gulf which, spurred by heavy state price subsidies on petrol, gas and electricity, has fuelled domestic energy demand.
Not content with sitting on more than 60 % of the world's oil reserves, producers from Kuwait to Yemen have issued contracts to expand and upgrade existing domestic refineries and to build new plants.
"There is major work underway, particularly in Saudi Arabia and United Arab Emirates...The amount and quality specification from the region will steadily grow in the next five years," said one seasoned Western industry executive in the region.
Refining capacity in Saudi Arabia, Kuwait, UAE, Bahrain, Oman and Qatar is expected to nearly double to 4 million barrels per day in 10 years, according to a study by the Emirates Industrial Bank.
Downstream activity in Saudi Arabia, the world's largest oil producer and exporter, centres on a $ 3.5 billion refit of its Ras Tanura and Rabigh refineries which come onstream in 1998 and 2001 respectively.
Neighbouring Abu Dhabi has awarded contracts to build two 140,000 bpd condensate units at its Ruwais plant to come onstream at the end of the decade while 5 privately-financed refineries are set for expansion or to come onstream in the UAE over the next 3 to 4 years. Expansion and upgrading the Ruwais plant has a price tag of around $ 1.8 billion.
Kuwait is planning to lift domestic capacity to boost domestic refining to 1 million bpd from 900,000 bpd under a current 4-year plan.
Even in Qatar, Yemen and Oman, often overshadowed by the three major refiners in the region, are launching refinery projects to refine more of their crude for export markets.
Qatar has set itself to expand the Umm Said refinery to 137,000 bpd at the end of the decade from a current 80,000 bpd at a cost of $ 500 million.
Oman's government is studying a proposal to build a 50,000 bpd cracking unit at Salalah to refine heavy residue shipped from its single 80,000 bpd capacity Mina al Fahal plant by the turn of the decade. This will cost around $ 500 million.
Yemen is supporting a $ 800 million, private-sector backed plant at Ras Isa to refine 120,000 bpd and has just completed a revamp of its 40-year-old Aden plant.

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