Jubail & Yanbu Review

Manifa ... strategic value

Manifa ... strategic value

Manifa, Jubail give Saudis heavy oil

With its series of new refinery projects, the kingdom has guaranteed at least 1.2 mbpd of incremental demand for Arabian Heavy and Arabian Medium by 2016

BIG changes are looming in Saudi Arabia’s upstream and downstream following the start-up of Saudi Aramco’s Manifa and Jubail megaprojects, both of which will gradually get up to full capacity in 2014.

Arabian Heavy crude from Manifa will displace almost 1 million barrels per day (mbpd) of lighter Saudi capacity hitherto available to the market, while the deep conversion refinery at Jubail will ensure that an additional 400,000 bpd of heavy crude is consumed domestically.

Aramco could not confirm that Manifa hit its planned 500,000 bpd target by the end of July, but there is little evidence to suggest it didn’t. The state oil giant began production in April, three months ahead of schedule, and has – aside from some serious delays to upstream schemes in 2008 – typically delivered marquee projects on time.

If everything is on track, Aramco should already have begun shutting down lighter production at aging fields, such as the supergiant Ghawar, to keep production capacity unchanged at 12 mbpd. By the time Manifa hits 900,000 bpd by the end of 2014, Aramco will have 2.4 mbpd of Arabian Heavy capacity – and about 1 mbpd less Arabian Light and Arabian Super Light.

There are obvious synergies between the new upstream increment and the 400,000 bpd refinery, but there is more to this than simply funneling Manifa’s heavy crude directly into Jubail.

For the time being, in fact, the refinery is running exclusively on Arabian Light, processing 120,000 bpd of the grade in its first crude unit and another 120,000 bpd once the second starts up.

Jubail will switch from Arabian Light only when its coker plant, which converts residual fuel into higher value products, is ready to go, and even then will run 28° API, 3 per cent sulphur Arabian Heavy blend rather than specifically Manifa crude.

“Getting light feed in the beginning reduces the heavy ends, which from an economic point of view is okay, and from a technical point of view allows you to commission the downstream units,” one source involved in the project says. The coker plant was expected to be on line by the end of September, the source added, although industry sources now say start-up is running slightly behind schedule.

Longer term, Aramco’s decision to bolster its heavy crude output looks prescient. Even before the boom in US light, tight oil production, Riyadh had been questioning whether the market needed more Saudi crude before the end of this decade.

With its series of new refinery projects, the kingdom has guaranteed at least 1.2 mbpd of incremental demand for Arabian Heavy and Arabian Medium by 2016, even if it does not increase overall crude exports much above their current average of 7.4 mbpd.

In addition to Jubail, Aramco will next year start the 400,000 bpd Yanbu refinery, which will run on Arabian Heavy, and another 400,000 bpd facility in Jazan in 2016 to run on Arabian Heavy and Arabian Medium. That will take internal consumption capacity for Saudi crude to 3.3 mbpd – and possibly higher if the kingdom continues to direct-burn some 500,000 bpd of crude in power plants. Clearly not all products from these refineries will be consumed domestically – Jubail joint-venture partner Total, for example, plans to export its 37.5 per cent share of the refinery’s gasoline, naphtha, middle distillates and petcoke.

More Stories