With one-fourth of the world's proven oil reserves, Saudi Arabia is likely to remain the world's largest oil producer for the foreseeable future. During 1999, Saudi Arabia supplied the United States with 1.4 million barrels per day of crude oil, or nearly 16 percent, of U.S. crude oil imports during that period.
Information contained in this report is the best available as of January 2000 and is subject to change.
Ports and Pipelines
Most of Saudi Arabia's crude oil is exported via the Arabian Gulf through the Abqaiq processing facility. Saudi Arabia's primary oil export terminals are located at Ras Tanura (5 million bbl/d capacity) and Juaymah (3 million bbl/d) on the Arabian Gulf, plus Yanbu (3 million bbl/d) on the Red Sea.
Saudi Arabia operates two major oil pipelines. The 4.8 million bbl/d East-West Crude Oil Pipeline (Petroline) is used mainly to transport Arabian Light and Super Light to refineries in the Western Province and to Red Sea terminals for direct export to European markets. Running parallel to the Petroline is the 270,000 bbl/d Abqaiq-Yanbu natural gas liquids pipeline, which serves Yanbu's petrochemical facilities.
The Trans-Arabian Pipeline (Tapline) is mothballed (having provided only limited service to a refiner in Jordan since the 1970s), and the 1.65 million bbl/d Iraqi-Saudi Pipeline (IPSA-2) was closed indefinitely following the 1990 Iraqi invasion of Kuwait. Currently, according to Saudi Oil Minister Naimi, "we have surplus oil export and pipelines capacity....[including the] East-West oil pipeline system [which] can carry and deliver 5 million bbl/d" but is being run at "only half capacity."
Also, according to Naimi, "our oil export terminals on the Arabian Gulf can load 14 MMBD but are currently handling much less than half of that."
Refining:
Prior to the the sharp downturn in oil prices and the resulting financial pressures on the Saudi budget during 1998 and early 1999, Saudi Arabia had been investing in refinery upgrades and expansions. These included a $1.2-billion upgrade of the 300,000-bbl/d Ras Tanura refinery (apparently still on schedule).
Also slated for upgrading had been the Rabigh refinery located on the Red Sea coast. Previous plans called for boosting capacity at Rabigh, Saudi Arabia's largest domestic refinery, to as much as 400,000 bbl/d, as well as upgrading the refinery's product slate away from low-value heavy products towards gasoline and kerosene at an estimated cost of $2 billion.
Due to Saudi Arabia's ongoing financial difficulties, however, the Rabigh project was scaled back by 60 percent or so, and as of October 1998 appears to have been canceled. Another project, the $200-million Haradh-2 gas-oil separation plant for the Ghawar field, was deferred as of June 1998.
Saudi Arabia has ambitious plans for expanding petrochemical production using natural gas as a feedstock. State-owned (70%) Saudi Basic Industries Corporation (SABIC) accounts for 5% of world petrochemical production, and is pushing ahead with the third stage of an expansion plan which aims to increase petrochemical production to 30 million tons per year (t/y) by 2000 (from 23.7 million tons in 1997).
In February 1997, Saudi Petrochemical Company (Sadaf), a joint venture between SABIC and Shell Oil Company of the United States, launched a $1 billion expansion program that includes a new 700,000 metric ton/year plant for methyl tertiary butyl ether (MTBE).
The plant's opening boosts SABIC's total MTBE production capacity to 2.7 million metric t/y. A large ($415 million) MTBE plant also is to be built by a domestic/international joint venture called Tahseen. SABIC also is aiming to increase its sales to Iran.
NATURAL GAS:
Saudi Arabia's proven gas reserves are estimated at 204.5 trillion cubic feet (Tcf), ranking fifth in the world (after Russia, Iran, Qatar, and the UAE). Most (around 2/3) of Saudi Arabia's currently proven gas reserves consist of associated gas, mainly from the onshore Ghawar field and the offshore Safaniya and Zuluf fields.
The Ghawar oil field alone accounts for one-third of the country's total gas reserves. Most new associated gas reserves discovered in the 1990s have been in fields which contain light crude oil, especially in the Najd region south of Riyadh. Most of Saudi Arabia's non-associated gas reserves are located in the deep Khuff reservoir, which underlies the Ghawar oil field.
Another gas field, called Dorra, is located near the Khafji oil field in the Saudi-Kuwaiti Neutral Zone and may be developed by Japan's AOC. Gas also is located in the countries extreme northwest, at Midyan.
With domestic gas demand expected to grow as much as 8 percent per year through 2007, increasing gas production is a priority for the Saudi government, with gas development slated to consume a large share of Aramco's budget (in late 1999, Aramco decided to invest $45 billion over 25 years on upstream gas development and processing facilities).
Additional gas production is being encouraged as a feedstock for the country's growing petrochemical industry, as well as for electricity generation, desalination plants and other industrial establishments, and as a replacement for direct oil burning.
Using gas instead of oil domestically will help free up additional crude oil for export. Saudi Arabia is interested in applying new technologies, specifically the Fischer-Tropsch gas-to-liquids process to convert gas into middle distillates like diesel, jet fuel, gas oil, kerosene, and naphtha. To date, Saudi Arabia has not expressed interest in liquefied natural gas due mainly to doubts regarding economic viability.
Domestic demand is driving investment in Saudi Arabia's Master Gas System (MGS), which started up in 1982. Previously, all of the country's natural gas was flared. In November 1996, a project management contract was signed with U.S.-based Parsons Corp. for construction of a $1.9 billion, 2.4-billion-cubic-feet (Bcf)-per-day gas processing plant at Hawiyah.
Others involved at Hawiyah, located south of Dhahran and east of Riyadh, include Japan's JGC and Argentina's Techint. At an estimated cost of $2 billion, this is the largest Saudi gas project in more than 10 years, and is to be completed by 2001. The Hawiyah plant plus the debottlenecking of three other existing plants is to boost Saudi Arabia's gas processing capacity to 6.3 Bcf per day by 2002.
Despite Saudi Arabia's ongoing financial difficulties, and severe cuts in capital spending by Aramco and others, Hawiyah, which will process nonassociated Khuff gas for power plants and industry near Riyadh, has not been postponed due to rising gas demand from industrial users and regional power generators.
ELECTRICITY:
Saudi Arabia's relatively affluent and rapidly growing population is increasing demand on electric utilities. Overall, Saudi power demand is growing by around 5 percent cannually.
Industry and Electricity Minister Hashim bin Abdullah Yamani has stated that $117 billion will need to be invested in the country's power sector over the next 24 years, with most of this to be raised by the private sector, in order to expand capacity and build a national power grid.
Yamani also has estimated that Saudi Arabia needs to install 2,000 megawatts (MW) of new capacity each year through 2020. Meanwhile, new industrial projects have been delayed and brownouts have occurred due to inadequate power supplies.
Saudi Arabia's Consultative Council reportedly has begun pushing for a radical solution to the country's power supply challenges.
Privatization of Saudi Arabia's electricity sector is under consideration, as is a division into three parts -- generation, transmission, and distribution. Electricity Minister Yamani said in November 1999 that the power sector would be privatized soon.
Several projects now underway employ financing mechanisms that are new to Saudi Arabia's electric power sector. For example, the 1,200-MW, PP9 power station north of Riyadh has been funded with extra revenues generated by a special tariff imposed on heavy users since January 1995.
Expansion of the 2,400-MW, $1.5-billion Ghazlan II power plant is being financed by an internationally syndicated, $500-million, commercial loan (the first such loan in Saudi history). Ghazlan II consists of four units, which are expected to come online, approximately one unit per year, through 2002.
Meanwhile, plans for a 1,100-MW, gas-fired power plant at Shuaiba on the Red Sea coast apparently have been dropped by Saudi Consolidated Electricity Company (SCECO) West. ABB Asea Brown Boveri had been awarded the contract on a turnkey basis.
Saudi Arabia's electricity sector is run mainly by four regional state-owned companies: SCECO East, West, Central, and South. Overall, SCECO controls around 85 percent of the country's power supply. In December 1999, Saudi Arabia's cabinet announced the creation of a single shareholding electric company (Saudi Electric Co.) from the country's 10 existing regional power companies (including the four SCECOs), which control 85 percent of the country's power supplies.
The four SCECO companies have operated at a loss because they have been required to sell power below cost to Saudi consumers, as well as due to inefficiencies and difficulties with non-payment of bills.
The government has subsidized the cost of electricity and has paid a guaranteed dividend to private shareholders. Restructuring of the SCECO system could be accompanied by a more general streamlining/privatization of the Saudi power sector, and possibly even an increase in power tariffs, at least to major customers. Creation of the Saudi Electric Company could open the door to independent power projects (IPPs) in Saudi Arabia.
Saudi Arabia has downsized plans for a new utility company in its twin industrial cities of Yanbu and Jubail. The proposed company, known as the Utility Company (UCO), would be owned 40 percent by the Royal Commission for Jubail and Yanbu and 60% by major local companies including SABIC.
Bechtel and Parsons were to be founding shareholders, although it now appears that state companies will own UCO, at least initially, while Bechtel and Parsons will continue in advisory roles.
ENVIRONMENT:
Saudi Arabia's vast oil reserves mean that environmental issues are seen mainly related to oil exploration and production. Despite technological advances in exploration and production, offshore oil development continues to have a significant impact on the marine environment, as do oil spills and illegal discharges.
Several air quality initiatives, including the planned introduction of unleaded gasoline into the country in 2001, should reduce Saudi Arabia's level of air pollution, but rising rates of energy consumption and carbon emissions portend possible future problems for the Kingdom. Oil production and development make the country very energy- and carbon-intensive as well.
Saudi Arabia's plentiful supply of domestic oil and gas reserves has stifled incentives for the country to develop a significant renewable energy sector.
However, the Saudi government is intensifying its efforts to increase public awareness about the need to protect the environment, and in the 21st century Saudi Arabia will need to invest heavily in environmental initiatives in order to preserve its delicate desert environment.
Annex:
ENERGY OVERVIEW
Minister of Petroleum and Mineral Resources: Ali bin Ibrahim al-Naimi (since 8/95)
Minister of Industry and Electricity: Hashim bin Abdullah Yamani
Proven Oil Reserves (1/1/00): 263.5 billion barrels (includes half of Neutral Zone -- NZ)
Oil Production (1999E): 8.5 million barrels per day (bbl/d), of which 7.8 million bbl/d is crude oil (includes NZ)
OPEC Crude Oil Production Quota (as of 4/1/99): 7.438 million bbl/d
Oil Consumption (1999E): 1.25 million bbl/d
Net Oil Exports (1999E): 7.3 million bbl/d
Crude Oil Refining Capacity (1/1/00): 1.71 million bbl/d
Natural Gas Reserves (1/1/00): 204.5 trillion cubic feet (Tcf) (includes half of NZ)
Natural Gas Production/Consumption (1998E): 1.65 Tcf
Electric Generating Capacity (1/1/98): 21 gigawatts
Net Electricity Generation (1998E): 110 billion kilowatthours
OIL AND GAS INDUSTRIES
Organization: The Supreme Petroleum Council governs the nationalized oil industry, including Saudi Arabian Oil Co. (Saudi Aramco) crude production, refining and marketing; Saudi Basic Industries Corp. (SABIC) petrochemicals.
Major Foreign Oil Company Involvement: AOC, Mobil, Shell, Texaco
Major Ports: Jeddah, Jubail, Ras al-Khafji, Ras Tanura, Juaymah, Rabigh, Yanbu, Zuluf
Major Oil Fields: Ghawar, Safaniya, Najd, Abqaiq, Berri, Manifa, Zuluf, Shaybah, Abu Saafa, Khurusaniya
Major Pipelines (capacity - million bbl/d): Petroline (4.8), IPSA 1 (0.5), IPSA 2 (1.7), Abqaiq-Yanbu NGL line (0.4), (note: IPSA I shut since 1990)
Major Refineries (capacity, 1/1/00): Aramco - Ras Tanura 325,000 bbl/d, Rabigh 325,000 bbl/d, Yanbu 190,000 bbl/d, Riyadh 140,000 bbl/d, Jeddah 42,000 bbl/d; Aramco/Mobil - Yanbu 366,000 bbl/d; Petromin/Shell - al-Jubail 292,000 bbl/d; Arabian Oil Company - Ras al-Khafji 30,000 bbl/d
Source:United States Energy Information Administration
© 2000 Mena Report (www.menareport.com)
