Saudi Arabia's Energy Era - 80 Years

Al Falih ... ably stewarding Aramco

Al Falih ... ably stewarding Aramco

Glorious 8 decades

During the past eight decades, Aramco has grown from an oil-producing company to a fully integrated, global energy enterprise with partnerships the world over. Over the course of its history, it has been considered sui generis in the oil world

EIGHTY years after the momentous signing of the May 29, 1933, concession agreement with American company Socal, Saudi Arabia, the world’s largest oil exporter, is still working to add new crude increments to its massive reserves on the back of a $35 billion spend over the next five years in oil exploration and production (E&P) as part of an effort to maintain capacity.

The agreement had marked the beginning of a new era in the kingdom’s history. The story of Saudi Aramco relates the discovery and development of the greatest energy reserves the world has ever known and the rapid transformation of Saudi Arabia from desert kingdom to modern nation-state, where the oil behemoth’s operations span the kingdom, including its territorial waters in the Arabian Gulf and the Red Sea, with production and distribution facilities linking all market areas around the world.

Today, Saudi Aramco manages the world’s largest conventional reserves of crude oil, and as a fully integrated, global petroleum and chemicals enterprise, it is a world leader in exploration, production, refining, distribution, shipping and marketing.

Besides, Saudi Aramco, the national oil company of Saudi Arabia, seeks to become the largest producer of refined petroleum products including fuel and petrochemicals, according to the company’s CEO Khalid Al Falih.

Al Falih says that Saudi Aramco plans to become the world’s single largest oil refiner within the next few years increasing its global refining capacity to 8 million barrels per day (mbpd) in 10 years. This compares to ExxonMobil’s 5.4 mbpd crude processing capacity by the end of 2012 – currently the largest processor worldwide.

Saudi Aramco is seeking to expand refining and petrochemical production to meet Saudi Arabia’s domestic demand and export products that can fetch higher prices than crude internationally. In the short term, Saudi Aramco seeks to turn its Satorp plant in Jubail, where the French company Total holds a 37.5 per cent stake, into the kingdom’s largest refinery on Arabian Gulf when it starts processing 400,000 bpd of Arab Heavy Crude this year.

In addition, Saudi Aramco has finalised negotiations with Indonesia’s Pertamina Persero to build a $8-billion refinery in Indonesia with a capacity of 300,000 bpd.

Shaykh ‘Abd Allah As Sulayman, Saudi
Finance Minister, and Lloyd N Hamilton,
lawyer and negotiator for Standard Oil
of California, sign the agreement
on May 29, 1933, in Jeddah

Saudi Aramco operates refineries in Saudi Arabia, and abroad. The company operates four domestic refineries in Riyadh, Jeddah, Yanbu and Ras Tanura. The Riyadh refinery has a vacuum column, which enables the processing of heavy crude fractions. It has a daily refining capacity of 120,000 barrels of oil equivalent per day (boepd), with a 30,000 boepd naphtha cracker and 30,000 boepd catalytic reformer.

The Jeddah refinery has a daily refining capacity of 60,000 boepd nominal capacity and 100 Mboepd utilisation capacity. It features a 20 Mboepd cat cracker, 22 Mboepd naptha cracker, and 3 Mboepd catalytic reformer.

It is connected to the marine terminal which has two outer berths with 100,000 DWT capacity and eight inner berths with 40,000 DWT capacity. Its product handling facilities consist of 84 tanks with an aggregate capacity of 8 million barrels of oil equivalent (mmboe). Aramco has its largest refinery complex at Ras Tanura.

The refinery has a daily crude distillation capacity of 550,000 boepd. It contains a 325,000 boepd crude distillation unit, 305,000 boepd NGL processing unit, 75 storage tanks with aggregate capacity of 5.8 mmboe, 225,000 boepd gas condensate distillation unit, 960,000 boepd crude stabilisation facility, 107,000 boepd catalytic reformer, and 50,000 boepd hydrocracker unit.

The Yanbu refinery has a daily crude processing rate of 225 Mboepd. The complex includes a hydro-skimming facility and 74 storage tanks with capacities of 170,000 boepd and 12 mmboe respectively. Besides, Saudi Aramco is associated in the expansion of the Port Arthur refinery to 600,000 boepd in Texas, the US, with its partner, Shell. The company has a global refining capacity of over 4 mMboepd, through its independent operations, and joint ventures. Its robust refining operations make it one of the leading oil and gas companies in the world.

On the E&P side, Saudi Aramco will begin work this year on two new crude increments that will add 550,000 bpd by 2017, but the country’s overall capacity will remain at 12.5 mbpd.

Al Falih says the state giant plans to expand two of the country’s biggest oil fields. “We are expanding Khurais ... and we will be doing Shaybah,” he says.

Manifa ... completed ahead of time

Khurais, which came on stream in 2009, is being expanded from 1.2 mbpd to 1.5 mbpd, Al Falih says. Work will start this year on the 300,000 bpd upgrade and will be complete by 2016 or 2017.

Current production comes from Khurais, and two satellite fields, Abu Jifan and Mazalij. Aramco officials said in 2011 that the 27 billion barrel Khurais can pump up to 1.4 mbpd because it is “still at the beginning of its production life” and has virtually no water cut. The 1.2 mbpd nameplate capacity is the plateau rate that can be maintained over 30 years with a 30 per cent water cut.

Al Falih says Aramco will be expanding Shaybah from 750,000 bpd to 1 mbpd. That upgrade is scheduled to be on stream in 2017. There have been active plans to push Shaybah to 1 mbpd since early 2008, when oil demand was surging and prices were soaring. Aramco had planned to bring the increment on stream by 2010 before it was shelved following the global financial crisis in mid-2008.

The 18 billion barrel field, located in the Rub Al Khali desert on the Abu Dhabi border, began pumping 500,000 bpd in 1998, and added another 250,000 bpd in 2009.

Al Falih was clear that both new projects would not increase the kingdom’s current capacity beyond 12.5 mbpd. “All this will allow us to offset decline that will happen over the years and decades to come,” he says.

Meanwhile, Saudi Aramco has begun pumping heavy crude from its giant Manifa oil field ahead of schedule and plans to ramp up production to 500,000 bpd by July, the company says.

Aramco started output at Manifa on April 10, saying it was three months sooner than planned – although senior officials had recently pencilled in the start-up for June. Industry sources had anticipated that the field could start early, as the water injection process, which typically begins six months before first oil, had begun in October.

Over the next three months the offshore field will reach the phase one production plateau of 500,000 bpd of Arabian Heavy crude. By the end of 2014, it will hit full capacity of 900,000 bpd, Aramco says.

Manifa is the latest in a long line of massive field developments undertaken in the past decade. The 14 billion barrel field was discovered in 1957, but only produced small volumes before it was mothballed. Aramco decided to green light the complicated development last decade as part of its plan to maintain overall company capacity.

Aramco says Manifa also came in “well under the programme’s approved budget.” The megaproject, which required 27 manmade islands, was estimated to cost some $15 billion back in 2009.

“The Manifa story will be a very bright and shining example in our corporate history. It really opens a new page in terms of overcoming various hurdles and complexities most notably through human and technological innovation,” Al Falih says.

The Manifa project will tap the field’s two most prolific reservoirs – Khafji and Safaniyah – out of a total of at least five to produce 28 deg API Arab Heavy crude, 90 million cubic feet per day of associated sour gas and 65,000 bpd of condensate.

The two-staged upgrade will not add to Aramco’s overall capacity. Other older producing fields will be reducing their capacity as the Manifa increments come on stream.

That crude will feed two new 400,000 bpd complex refineries being built in the eastern oil hub of Jubail and the western export city of Yanbu. Jubail is expected to start receiving crude “in weeks,” Total Chief Executive Christophe de Margerie says.

Yanbu, being built in partnership with China’s Sinopec, is due in 2014. Aramco has repeatedly made it clear that it does not see any need to increase its capacity in the foreseeable future. Al Falih said that thanks to the unconventional revolution any remaining worries about “peak oil” have been largely “dispelled.”

The expansions to Khurais and Shaybah are the first crude increments announced by Aramco since Manifa was launched in 2006, although both were part of a prospective development roadmap of Saudi fields rolled out by the oil ministry in 2008 to ease concerns when prices shot to $147 per barrel. Saudi production touched all-time highs of over 10 mbpd last year, requiring its fields to pump harder and requiring a major ramp-up in drilling in 2013 and beyond to maintain output.

Saudi Aramco conducts its energy operations by maintaining strong oil and gas reserve base. The company leads the upstream oil development operations in Saudi Arabia. The company’s crude oil and condensate reserves stood at 259.7 billion boe and gas reserves stood at 282.6 trillion standard cubic feet (tcf). The company owns significant oil reserves at Ghawar, the world’s largest oil field and at Safaniya, the world’s largest offshore oilfield. It holds 13.3 per cent of total crude oil production in the world, with an average of 9.1 million barrels of crude oil production and 9.9 billion scf of average gas production. As a state-owned company, Saudi Aramco manages the largest oil reserves and the fourth largest gas reserves in the world.

Saudi Aramco conducts its energy operations by maintaining strong oil and gas reserve base. The company leads the upstream oil development operations in Saudi Arabia. The company’s crude oil and condensate reserves stood at 259.7 billion boe and gas reserves stood at 282.6 trillion standard cubic feet (tcf). The company owns significant oil reserves at Ghawar, the world’s largest oil field and at Safaniya, the world’s largest offshore oilfield.

It holds 13.3 per cent of total crude oil production in the world, with an average of 9.1 million barrels of crude oil production and 9.9 billion scf of average gas production. As a state-owned company, Saudi Aramco manages the largest oil reserves and the fourth largest gas reserves in the world.

Saudi Aramco entered into a series of strategic agreements with leading companies. In November 2012, Saudi Aramco and its subsidiary Vela International Marine Ltd (Vela) entered into a merger agreement with National Shipping Company of Saudi Arabia (Bahri) to combine the fleets and operations of Vela.

As per the agreement, Bahri will be responsible transporter of crude oil sold by Saudi Aramco, under protected rates on delivery basis via very large crude carriers (VLCCs). In February 2012, the company renewed its crude oil supply contract with its joint venture company, S-Oil. Crude oil will be supplied to its Onsan Refinery Project. In January 2012, China Petrochemical Corporation (Sinopec) and the company entered into an agreement for the formation of a joint venture company, which will oversee the development of Yanbu Aramco Sinopec Refining Company (Yasref) Limited.

Besides, in November 2011, the company officially formed the Sadara Chemical Company (Sadara), with Dow Chemical Company (Dow). According to the terms of their agreement, Sadara will build an integrated chemical complex in Jubail. The complex is scheduled to commence operations in 2015.




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