Saudi Arabia Review

Total ... investing in refining

Total ... investing in refining

Total eyes Saudi refining expansion

Saudi Arabia added 800,000 bpd of refining capacity during 2014-15, with the start-up of Satorp and the Yasref plant that Aramco runs with Sinopec

French major Total has reduced its capital spending by a third since 2013, but several downstream projects are up for sanction in coming months -- from new Saudi refining capacity to ethane crackers in Qatar and the US.

"Integration has real value," says Philippe Sauquet, Total’s president of refining and chemicals.

Total’s downstream division is winding down a massive restructuring programme launched in late 2011, and the effort is bearing fruit. Last year the major’s downstream return on capital employed soared to 32 per cent, eclipsing perennial leader ExxonMobil.

As part of that initiative, Total will reduce its European-centric refining and chemicals capacity by 20 per cent by the end of 2016.

"Refining is a very competitive business," Sauquet acknowledges, with the sector coming under mounting pressure as new capacity that "doesn’t make economic sense" continues to pop up globally, particularly in Asia. But Total sees an exception in Saudi Arabia.

The Satorp refinery in Jubail began operating in June 2014, and is "going very well," Sauquet says. The project was delayed from an initial targeted start date of 2013, but partners Total and Saudi Aramco are successfully running the plant above its nameplate capacity of 400,000 barrels per day (bpd).

In fact, Sauquet says Aramco and Total have plans on the drawing board to debottleneck the facility and add another 40,000 bpd of capacity. Aramco owns 62.5 per cent of the $10 billion refinery, with Total controlling the balance. The duo will make a final investment decision on the expansion in around six months.

If the expansion is green-lighted, it will support Saudi Arabia’s postponed mission to become the world’s second-largest exporter of crude products as well as meet growing domestic demand. Saudi Arabia added 800,000 bpd of refining capacity during 2014-15, with the start-up of Satorp and the Yasref plant that Aramco runs alongside China’s Sinopec. Aramco has plans to add another 400,000 bpd with its wholly owned Jizan refinery, but the complex export-oriented scheme has been pushed back from 2017 to 2018 at the earliest.

Beyond Satorp, the primary focus of Total’s downstream capital investment programme is petrochemicals. There, two expansions are under review, one at its existing refining-chemicals integrated complex in Port Arthur, Texas, and the other at a chemicals complex in Mesaieed, Qatar.

Total is running the preliminary engineering on the projects in parallel, and Sauquet speaks glowingly of the cheap, abundant ethane feedstocks available at each location. The only concern that Total must reconcile before going forward is the "wave of ethylene" that is coming to market in the next couple years as several export-oriented steam crackers come on line in the US, he explains.

That says, Sauquet called the Port Arthur scheme -- which envisions a new 1 million tonne per year ethane cracker -- "one of the best projects available globally."

Total is actively seeking out a partner to join the project on a 50-50 basis, and Sauquet says several parties have expressed interest. It is also marketing a 50 per cent stake in its 174,000 bpd refinery at the site. A final investment decision on the cracker will be reached around the third quarter and, if approved, will start up in 2019.

The Qatari petrochemicals expansion under consideration is less onerous, with a brownfield expansion eyed rather than a second cracker, as is the case in Texas.

Total has operated in Qatar for roughly 80 years and was a "first mover" in both LNG and petrochemicals, Sauquet says. On the latter front, Total’s portfolio includes the largest ethane cracker in the world -- a 1.3 mtpy steam cracker -- as well as an 800,000 tpy ethane cracker.




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