The Refined Products Side, and Output from Three New Saudi Refineries
OPEC also has lost relevance on the refined product export side. Most OPEC countries subsidize fuel prices to their own consumers, which has stimulated demand growth. The strong internal demand has eaten into refined product exports. Refinery capacity has grown in the Middle East, but as Figure 3 illustrates, Middle Eastern refinery throughput as a percentage of global refinery output has stagnated since 2006, and it has fallen between 2011 and 2013.
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Saudi Arabia made history in the mid-1980s when it decided to capture more value from its crude resource by building export-oriented refineries. Saudi Arabian refining capacity doubled from 0.7 mmbpd in 1980 to 1.4 mmbpd in 1985. Crude distillation capacity in 2014 was approximately 2.5 mmbpd, with another 0.4 mmbpd (the new YASREF project) coming onstream. Although many other Middle Eastern countries followed suit and began to expand their domestic refining industries, a great deal of the product that was intended for export eventually ended up feeding domestic demand. Some Middle Eastern countries even became product importers.
Saudi Arabia remains a major exporter of refined product. It continued to invest in refining, with an emphasis on petrochemical-refinery integration. But product exports, while significant, have shrunk. As Figure 4 shows, product exports reached a peak of approximately 1.5 mmbpd on 1996, fell below 1.0 mmbpd in 2002, climbed back to 1.4 mmbpd in 2005 then slid to below 0.8 mmbpd in 2013. Refinery utilization rates have been suboptimal.
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Despite continued weak demand and low utilization, however, three Saudi megaprojects already were in the works, and two are now complete. The new 400,000 bpd Saudi Aramco Total Refining and Petrochemical Company refinery at Jubail was commissioned in 2013, and it shipped its first product in September. The 400,000 bpd Yanbu Aramco Sinopec Refining Company started coming onstream in the third quarter of 2014. The 400,000 bpd Jazan refinery is scheduled to be completed in 2016. Thus, Saudi Arabia will have an additional 1.2 million bpd of refinery capacity. All three refineries are highly sophisticated, deep conversion refineries, capable of producing high-quality fuels. Will Saudi Arabia run the new capacity flat out? If so, how much fuel will be produced?
To answer this, the author used refinery modeling tools to build up the appropriate downstream configurations for these refineries, charged 400 kbpd of Arab Heavy crude to each, and quantified the potential output. Figure 5 presents the results, summarized as follows:
- Middle distillates 614 kbpd
- Gasoline 292 kbpd
- LPG and naphtha 95 kbpd
- Coke, fuel oil and other products 92 kbpd
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