LONDON(Reuters) – Top oil exporter Saudi Arabia is aiming to boost refining capacity in the kingdom by more than one million barrels a day and a new plant on the Red Sea will help it reach the goal, a Saudi oil adviser said on Tuesday.
To ensure its place as a major supplier of much-needed transport and heating fuels by early next decade, Riyadh will spend billions. Overall investment of $150 billion in oil, gas and petrochemicals has been budgeted for the next five years.
“We are in the process of becoming a major refining centre to the world,” Ibrahim al-Muhanna, adviser to Saudi Oil Minister Ali al-Naimi, said on the sidelines of an energy conference.
The aim is to have total refining capacity of more than three million barrels per day (bpd) in Saudi Arabia, he said.
Riyadh has moved fast to show it is determined to tackle a worldwide refining crunch that helped drive U.S. oil prices close to $80 a barrel this summer.
The kingdom has already struck deals worth $12 billion to build two new refineries — one with France’s Total at Jubail on the Gulf coast, the other with U.S. ConocoPhillips in Yanbu on the Red Sea.
The export facilities will churn out 800,000 bpd of products by the end of the decade.
Muhanna said plans are also in the works for a third refinery in Jizan on the west coast. Details of the facility will be revealed after the ministry of oil completes its study.
State oil firm Saudi Aramco now has five domestic refineries with a combined capacity of around 1.4 million bpd.
Its two domestic joint-venture refineries, with ExxonMobil in Yanbu and Shell in Jubail, boost capacity at home to more than 1.9 million bpd, making Saudi Aramco one of the largest refiners in the world.
The Saudi oil adviser was confident the world’s growing thirst for fuel would justify Riyadh’s ambitious refining target. He saw demand for oil continuing to grow at an annual rate of around 1.1 million bpd.
Muhanna disputed the assumption of some major consuming governments that high oil prices would stunt economic growth in importing nations.
“Our observation is that this has not happened,” he said. “This year, the countries with the highest economic growth are largely net importers such as China and India.”
To bolster its position as the world’s top exporter of crude and build its standing on gas, Saudi Arabia will spend up to $80 billion over the next five years on rigs, refineries, wells and processing plants, a senior Gulf source said.
That investment covers Riyadh’s long-standing plan to expand crude oil production capacity to 12.5 million bpd by 2009 from a current level of 11.3 million.
Some $70 billion will be spent on petrochemicals during the five year period. Riyadh now supplies eight percent of the world’s petrochemicals and aims to increase its market share to 15 percent next decade, Muhanna said.