MANAMA, (Reuters) – A short-term drop in profit margins will have no impact on Saudi Aramco’s plans to spend tens of billions of dollars on raising refining capacity, an official from the state oil firm said on Monday.
Top oil exporter Aramco aims to boost its domestic and international refining capacity to 3.2 million barrels per day (bpd) in 2013, up from around 2.4 million bpd.
The expansion will place Aramco in the top five global refiners by capacity, said Khalid al-Buainain, senior vice president for refining, marketing and international.
“We are in it for the long haul,” Buainain told reporters on the sidelines of a conference. “Margins are not as strong as last year, that’s for sure. But we’re not concerned about short-term volatility in the margins.”
Aramco is considering options to take the expansion even further, Buainain said. The company may increase capacity at its Yanbu refinery to 400,000 bpd from around 235,000 bpd now and add an integrated petrochemical plant, he added.
Aramco is considering Saudi Basic Industries Corp (SABIC) as one of the potential partners for the expansion at the Red Sea plant, he said. SABIC is the world’s largest chemical maker by market value
“We are looking at it, we see Yanbu as an opportunity for growth,” Buainain said. “It stands as a good prospect. SABIC is one of our candidates, we would love to do business with SABIC.”
Aramco is exploring all options to have it fit in with a strategy of integrating refining assets with petrochemical facilities, Buainain added.
He declined to say when Aramco would decide on whether to proceed with the project, but said it was “a long way down the road.”
The government has not asked Saudi Aramco to take a role in developing a planned new refinery at Jizan, Buainain said.
“Jizan is a government-sponsored refinery to invite private investors,” he said. “We are always ready to help.”
Spiralling costs have cast doubt over the viability of new oil refineries worldwide. Industry observers were sceptical over the Jizan refinery going ahead as it is a long distance from crude production.
The project is part of government plans to give an economic boost to the impoverished region of Jizan in the far south, on the Red Sea coast. The government plans an “economic city” there.
When the government announced the project in 2006, it said the refinery would be 100 percent privately owned and that an initial public offering would be held once the refinery was deemed viable.
Earlier this month, Aramco decided to go ahead with two new 400,000 bpd joint venture refineries in the kingdom orientated to the export market. The plants will be built with ConocoPhilliips and Total.
Saudi Arabia is also expanding its petrochemical industry as it looks to diversify the economy and lessen dependence on crude export revenues.