On-ground coverage of the Middle East markets



Oman boosts refining capacity to beef up oil products exports

17 March 2015 | Muhamad Fadhil, Middle East Correspondent, ICIS | Sohar, Oman

Oman will more than double its refinery output by 2019 as part of efforts to boost exports and compete with OPEC members Saudi Arabia and Kuwait for a bigger slice of the global market, industry sources said on Tuesday.

A refinery upgrade and a new project will raise Oman’s refining capacity to 312,000 bbl/day four years down the road.

The country, a non-OPEC member, currently exports a medium sour crude with high sulphur content called Oman blend.

It ships out a total of 833,400 bbl/day of crude and condensate, 60% of which is absorbed by China, according to data from the US Energy Information Administration (IEA).

Oman currently has two refineries with a combined capacity of 222,000 bbl/day, with Asia as a key export market.

“Oman wants to punch above its weight and produce more crude. Typically, crude production in the region is centred around Saudi Arabia,” a Middle East-based energy trader said.

State-owned Oman Refineries and Petroleum Industries Co (Orpic) plans to boost its refining capacity in Sohar by more than 70% or 82,000 bbl/day, once upgrading works at the site are completed in 2016 or 2017, a source close to the company said.

Its Sohar refinery currently has a 116,000 bbl/day capacity. Upon completion of the upgrade, the refinery will be able to process heavier Omani crude oil for exports.

Omani crude, which is traded on the Dubai Mercantile Exchange (DME), is considered as the third benchmark for the oil market after WTI and Brent.

Orpic – which comprises Oman Refineries and Petrochemicals, Aromatics Oman and Oman Polypropylene – also operates a 106,000 bbl/day refinery located in Mina Al Fahal near the Omani capital of Muscat.

Meanwhile, Oman is looking at building a 230,000 bbl/day refinery at the port town of Duqm. The project will be a joint venture between Oman Oil Co and the International Petroleum Investment Co (IPIC) of Abu Dhabi.

It is designed to process a mixture of UAE and Omani crude oil to be shipped out as refined products, according to IPIC’s website.

The Duqm refinery is expected to become operational in 2019, said an official close to the joint venture company.

The Middle East has been actively bolstering its refining capacity to cater to its export markets, notwithstanding concerns about oversupply amid the shale oil and gas production boom in the US, industry sources said.

“We will see a lot of new refining capacities but demand prospects [in Asia] remain uncertain,” a petrochemical source based in the UAE said.

Kuwait is expected to ramp up construction of a planned 615,000 bbl/day refinery this year, with the start-up expected before the decade is through.

The new refinery will increase the country’s refining capacity by 34% from 936,000 bbl/day, based on OPEC data.

Saudi Arabia, which is the biggest crude exporter in the world, is adding two new refineries that will raise its refining capacity by 32% by 2017 from 2.51m bbl/day last year.

Its new 400,000 bbl/day refinery in Yanbu is currently undergoing final runs and is expected to start operations sometime this year.

The new Yanbu refinery will be operated by Yanbu Aramco Sinopec Refining Company (YASREF) – a joint venture between Saudi Aramco and China Petrochemical Corp (Sinopec).

The country will also welcome a new 400,000 bbl/day refinery in the southwest region that will be operated by Saudi Aramco. The refinery is expected to be completed by late 2016.

Saudi Arabia is an influential member of OPEC, and is instrumental in the oil cartel’s decision not to cut crude production despite the sharp falls in crude prices between June 2014 and January 2015.
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