DUBAI, (Reuters) – Saudi Arabia will start gasoline production at its $10.3 billion Rabigh Refining and Petrochemical Co (PetroRabigh) in July, industry sources said on Monday.
PetroRabigh, an export-oriented joint venture between state oil giant Saudi Aramco and Japan’s Sumitomo Chemical, will have the capacity to produce up to 60,000 barrels per day (bpd) of high octane gasoline that will be converted from fuel oil.
“We have been informed by PetroRabigh that gasoline production will start in July,” a Gulf-based source familiar with the project said.
PetroRabigh started partial operation of its facilities in the fourth-quarter of 2008.
The world’s top oil exporter typically imports between 60,000 to 70,000 bpd monthly, traders said.
“Most of the gasoline coming out of Rabigh is going to be for the domestic market, so we are definitely keeping an eye on this to see if Saudi cuts back on their imports,” a Middle East based trader said.
“Logically this should be the case, but we don’t know if they will be at capacity when production starts in July.”
The kingdom’s gasoline imports are expected to fall about 15,000 bpd this year, energy consultancy PFC Energy said in a report.
“The decline would have been significantly higher but for the exceptionally large volumes imported during the first four months of 2009 due to refinery maintenance,” Raja Kiwan of PFC Energy said.
The OPEC member had raised imports over the past three months due to the unplanned shutdown of a 44,000 bpd hydrocracking unit at its largest refinery in Ras Tanura and scheduled maintenance at its 120,000 bpd Riyadh refinery, traders said.
The Gulf Arab state imported about 80,000 bpd of gasoline in May, similar to levels purchased in the previous month, traders said.
Gasoline demand in the kingdom surged to an historic high of nearly 400,000 bpd in April, up six percent when compared to the same period last year, Kiwan said.
“Gasoline this year is far outpacing diesel as the kingdom’s fastest growing consumed product,” he said.
The boost in gasoline production will likely see the kingdom lowering its import requirements.
“Diminishing export opportunities to Saudi Arabia …will squeeze margins for those who were counting on the Middle East to offset a weaker demand environment in the United States,” Kiwan said.