Aramco Fuels Export Plans With Petrofac Deal
Saudi Aramco's (Aramco) US$1.4bn engineering, procurement and construction (EPC) contract awarded to Petrofac for the Jazan Refinery and Terminal project seals the deal to what we have long argued to be an increasing trend in the Middle East and Asian downstream markets: A move away from independent refineries towards an integrated value-chain with both upstream and downstream operations under the same roof. In fact, we are seeing a rapid expansion of downstream capacity to meet the growing economic needs of the two regions, with operators rushing to capture an increasing slice of the market. This presents new opportunities for the oilfield engineering companies, that will see the number of greenfield projects rise in these two regions.
Meanwhile, independent refineries have been struggling to cope with reduced margins due the increasing cost of crude. Hence, oil giants such as Aramco are taking advantage of current market conditions. Via an integrated model - owning both upstream and downstream production - it can procure feedstock at a low cost and sell refined products at a high price, meaning there are unexplored opportunities for increasing refining margins.
Saudi Arabia, despite its wealth of sour and heavy crude, still has to import refined products to support its domestic needs. Jizan is one of three 400,000 barrels per day (b/d) refining projects that Aramco is currently juggling, alongside Jubail (under construction) and Yanbu (planned). If completed in 2016, Jizan will, in conjunction with the other projects, bring the Kingdom's total refining capacity to 3.30mn b/d.