Syed Rashid HusainADDING value is the new mantra. Unveiled a few years back, this new strategy is now fully in operation. Saudi Arabia and other regional oil producers are endeavoring to diversify their economy – away from crude. Changing crude fortunes have almost forced it upon them. New, emerging, oil frontiers are changing the global crude landscape. North America, for the first time in decades, is approaching the much sought after independence from the Middle Eastern oil. Even Australia is now reporting hundreds of billions of barrels in new finds. Shale gas, tight oil, shale oil, off-shore oil and gas – all are combining to give a completely new identity to the emerging scenario – a glut like situation indeed. We are living in a changed world. Energy planners in Riyadh and indeed Dhahran are fully aware of it. And are reacting accordingly. A new strategy is in work. And although this new strategy has a number of salient features, yet one of the most important components of this strategy is to add value to crude instead of selling it as it is. “More of our liquids production can travel farther down the value chain, rather than being exported as crude oil, refined products or natural gas liquids," Saudi Aramco now declares on its web page. Prince Faisal bin Turki, the advisor at the Ministry of Petroleum and Minerals, too has been underlining that his ministry was currently stressing the need to focus on manufacturing valued-added products. And we continue to see the manifestation of the strategy - in one form or the other – on almost a daily basis. Riyadh is moving ahead, rather in a fast pace, on the global chemical highway – so as to add value to its crude. Besides adding value, this would also add jobs and business in the Kingdom. The almost $20 billion joint venture between Saudi Aramco and Dow Chemical is a clear expression of seriousness of the planners on the issue. And in the meantime, Saudi Aramco has also joined hands with Sinochem too for another venture on the west coast. But this is just one aspect of the value addition strategy. Refining is another major plank, of the new Saudi offensive. The Kingdom is now moving ahead on this trajectory too – and at a fast pace. When early in 2012, Saudi Aramco announced setting a product trading arm, there was indeed a specific reason behind it. Aramco was preparing itself for the eventuality - to be able to navigate properly into the products market too. Three new refineries, in various parts of the Kingdom, each able to process 400,000 barrels per day (bpd) of mainly heavy crude, in different stages of construction at this very moment, would soon be presenting Aramco with a portfolio of products to market. And Aramco needed to be prepared for it! Of this, Satorp, the largest addition to global refining capacity since 2009, the Aramco joint venture with French oil major Total, is expected to go on stream during the second half of the year. Work on Yasref, the refining joint venture between Aramco and China's Sinopec, on the Red Sea coast is also moving in full steam and this venture is expected to go on stream by late 2014. And then the strategically important Jizan refinery is also set to come on stream in 2017. Indeed the world's largest crude exporter has not invested tens of billions of dollars raising refinery capacity, to 3.5 million bpd by 2016, for no reason. Logic seconds the move too. This transition, from just selling crude to produce and be able to sell more value-added products, is not only aimed at diversifying the economy only, but by using the heavy and sour crude for refining, these ventures would also take care of the type of crude, for which there are currently not many takers in the world. The scenario forces the Kingdom to sell those at a discount to other grades. That situation should now be taken care of. A smart move indeed – killing two birds at the same time! And the global refining industry too is taking note of the development(s). A rush seems on to capitalize on this development. Only last week, Grace Catalysts Technologies organized a two-day workshop for refining professionals in Yanbu. Grace, one of the largest fluid catalytic cracking (FCC) catalyst producers, dominates the region with a market segment share of over 70 percent in Europe, Middle East & Africa (EMEA) since 2000 – and indeed for reasons. The two-day refining workshop was well attended by engineers and operators from most existing Saudi refineries, KFUPM and the Aramco headquarters in Dhahran, initiating an intense debate, especially on unit optimization and troubleshooting aspects of refineries. During the workshop, one could definitely sense a feeling of urgency, among the budding refining leaders of the Kingdom, to master the art and indeed the science of refining. And indeed there is rationale behind – one can't really negate. And this development is not limited to Saudi Arabia only. Despite all the problems and sanctions, Iran is also to invest $122 billion in the refining sector by the end of its Fifth Five-Year Economic Development Plan (March 2016). The development operation of Lavan and Tabriz oil refineries' gasoline production units will be completed by the end of current Iranian calendar year in March this year, Alireza Zeighami deputy Iranian oil minister revealed recently. Work on the gasoline units of Isfahan and Bandar Abbas oil refineries' are also expected to be completed by April, 2013 and March 2014, respectively. According to the deputy minister, after all these developments, the Iranian gasoline production is set to touch 70 million liters per day by the end of April this year, as against the current 55 million liters/day capacity. This would reduce Iranian dependence on imports to meet its galloping gasoline needs. Its current average gasoline consumption stands at 64 million liters/day. China, in the meantime is also endeavoring to generate enough refining capacity. As per the State Council's 12th five-year plan for energy development, the Chinese crude oil refining capacity is to be raised to 620 million tons and output of refined oil products to 330 million tons by 2015. The nation's crude processing capacity is already set to increase by 39.5 million metric tons a year to 614 million a year in 2013, while actual throughput is to climb 5.4 percent to 489 million tons, China National Petroleum Corp. said recently in its annual report. Refining is all set to take a major stride – all around – and Dhahran has definitely leapt into an early lead in this direction!
