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Saudi Arabia Capacity Increase Plans on Track | ASHARQ AL-AWSAT English Archive 2005 -2017
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DALIAN, China (Reuters) – Saudi Arabia is on schedule with plans to boost its crude oil production capacity to 12.5 million barrels per day by 2009, despite rising industry costs, a top official at state oil company Saudi Aramco said on Saturday.

Higher labour and raw materials prices have however hit two planned joint-venture refineries, which will now cost more than original estimates of $6 billion, said Abdulaziz al-Khayyal, Senior Vice-President for Industrial relations.

“We are on schedule,” Khayyal told Reuters when asked about Saudi Arabia’s crude capacity expansion plans. He was in the northeastern Chinese city of Dalian for the World Economic Forum.

Saudi Arabia, the world’s top oil exporter, has fast-tracked oilfield expansion plans to raise output capacity and maintain spare capacity of at least 1.5 million bpd to meet growing world demand or cover unexpected shortfalls in supply.

Khayyal declined to comment on expansions beyond 2009.

Oil minister Ali Al-Naimi said in May that a global push for efficiency and alternative fuels meant there would probably be no need for further expansion, although development of the Moneefa oilfield is expected to bring 900,000 bpd online by mid-2011.

Riyadh has ambitious plans to overhaul and expand its refining sector, but has not been immune to rising prices of steel and other raw materials and a shortage of skilled labour that are delaying projects and pushing up costs worldwide.

Estimates for the costs of two 400,000 bpd export-oriented refineries, one planned by Saudi Aramco and France’s Total and the other a partnership with U.S. firm ConocoPhillips, have gone up, Khayyal said.

“We have seen the same escalation that everybody has seen, we don’t have a final cost yet, but costs have escalated beyond the (original) $6 billion,” he told Reuters in an interview.

Asked whether costs for the Total refinery had risen beyond a higher $6.4 billion reported by the state news agency in March, he said yes. The project timing may also be under pressure.

“They are still under study, but both I think targeted around 2011 or 2012,” Khayyal said when asked when he expected them to come on-line.

A 2012 start up would be a slight delay from the end-2011 targets the company has previously given.

Aramco is also planning a minor expansion at its wholly owned 235,000 bpd Yanbu refinery on the Red Sea coast

“It is a small de-bottleneck project, nothing major at this time,” Khayyal said, but declined to comment on how much capacity would be added.

He did not mention plans for a new 400,000 bpd refinery at Ras Tanura, which a company spokesman said earlier this summer would supply the domestic market.

Saudi Aramco has asked five companies to bid for the project management and design by mid-September, sources told Reuters in August. The refinery will cost around $7 billion to $8 billion, one source said.

Saudi Arabia also expects to add another 250,000 to 400,000 bpd of capacity with the Jizan refinery, which Saudi Aramco will not be building as the government intended it to be a private sector project, Khayyal added.