April 2019

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Viewpoint: Downstream expansions will accelerate needed production growth

Two transformative drivers—global economic growth averaging more than 3%/yr and the world population expanding to more than 9 B by 2040—will have the net effect of adding another India and China to today’s global energy demand.

Al-Judaimi, A. M., Saudi Aramco

Two transformative drivers—global economic growth averaging more than 3%/yr and the world population expanding to more than 9 B by 2040—will have the net effect of adding another India and China to today’s global energy demand.

In the decades ahead, two-thirds of global energy demand will come from India and Southeast Asia. This demographic growth must be matched by the rise in basic living standards that reliable, accessible energy can provide. That is a challenge complicated by increased urbanization and a rise in consumer purchasing power by a growing middle class.

Even with a global energy transition underway, where all viable energy sources will be required to power sustainable economic growth, oil and gas will meet more than 80% of the world’s energy needs, including the transport sector, for decades. As the world’s largest oil supplier responsible for one out of every 8 bbls produced, and the world’s fourth largest refiner on a net refining capacity basis, Saudi Aramco is committed to helping ensure that tomorrow’s energy needs are reliably met. That includes building refining capacity worldwide and integrating refining with chemicals production to meet demand for the energy products that accompany higher living standards—especially in high-growth markets.

Extending our reach in upstream oil production, we leverage preferential crude oil placement in our downstream business to create value across the hydrocarbon chain through a network of domestic wholly-owned and joint-venture refineries with international partners. Our downstream business portfolio produces critical feedstock for industry and the essential fuels that meet the needs of productive communities around the world.

Two JV refinery expansions—the Saudi Aramco Total Refining and Petrochemical Co. (SATORP) petrochemicals complex (Fig. 1) and the Saudi Aramco Base Oil Company (Luberef) base oils project—demonstrate how expanding downstream portfolio is revving our growth engine.

Fig. 1. View of the SATORP complex. Photo courtesy of Saudi Aramco.
Fig. 1. View of the SATORP complex. Photo courtesy of Saudi Aramco.

SATORP

The world-class refinery emerged when Saudi Aramco and Total joined forces in 2008 to build the facility. The $9.6-B export refinery in the industrial city of Jubail, in Saudi Arabia’s Eastern Province, is ready to take a quantum leap forward with SATORP’s second-phase expansion: the addition of a $5.7-B petrochemicals complex integrated with the project’s refining operations.

The petrochemicals complex and refinery will create the first integrated mixed-feed cracker in the Gulf region, making possible a slate of more than 2.7 MMtpy of high-value chemicals for customers on three continents.

The integration aspect will use low-cost refinery offgas and ethane generated by SATORP, with the cracker feeding petrochemical and specialty chemical plants owned by third-party investors. SATORP’s 440,000-bpd refinery will be complemented by operational efficiencies achieved through the project’s abundant industry feedstock and essential fuels. These advantages are good news for high-demand-growth markets in Asia and the Middle East.

In fact, SATORP’s chemicals expansion is calculated to spur the development of mega-manufacturing hubs and conversion parks connected with Saudi Aramco’s chemicals plants.

As a result, the project will create a sustainable source of economic diversification and job creation in the Kingdom, while producing more than 2.7 MMtpy of high-value chemicals for significant impact in the energy, transportation, infrastructure and consumer product sectors.

Luberef

Like SATORP, Luberef started its ambitious expansion in Yanbu in 2018. The facility produces high-quality Group II base oils to meet domestic and international demand.

This project saw Luberef grow significantly beyond its original Group I plants in Jeddah and Yanbu, ushering a new era of quality base oils supplied in the Kingdom. Luberef has traditionally produced, sold and exported only Group I base oils used in drilling fluids, pharmaceuticals and construction materials.

Along with Saudi Aramco’s downstream affiliates, Motiva and S-Oil, Luberef will deliver new solutions for evolving markets. Group I, Group II and Group III base oils from these three entities will be integrated under the Aramco Base Oils global brand.

A JV with Jadwa Industrial Investment Group, Luberef is not only the Kingdom’s sole producer and supplier of base oils, but the first in the region to grow purposely made production capacity for Group II in the Middle East. Group II base oils, used in automotive and heavy transport lubricants, will enable lubricant blender companies in Saudi Arabia to produce a wide range of high-quality products compliant with international fuel and emissions standards—important for rising mobility in these emerging markets.

Doubling Luberef’s base oil production, the $1.5 B expansion has increased Luberef’s consolidated market position in the Kingdom while growing exports, company margins and local jobs. The project will also create local and international opportunities for new businesses and investors, as Luberef produces the main feedstock for a variety of lubricants in the automotive, industrial and marine sectors.

A winning formula

The largest middle-class growth in history and its impact on the fast-growing automotive sector—as well as rapid industrialization in emerging economies—will drive rising demand for fuels, chemicals, base oils and lubricants. Saudi Aramco’s downstream investments are set to meet this demand in a way that not only strengthens the company’s business but also leads major change by attracting new revenue and creating broader economic opportunity.

As we look to create more value from our crude oil through refining, marketing, lubes and chemicals, we are encouraging new business and investment growth locally and internationally. It is a winning formula that will help provide the reliable and accessible energy products that a rising global population needs. HP

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