I P W EEK
Round-up Daniel Lacombe,Jubail Refinery
Taking questions from the floor at the Wood Mackenzie conference – (left to right) Alan Gelder, Head of Global Downstream Oil Consulting, Wood Mackenzie; Daniel Lacombe, Jubail Refinery Project Director, Total; Michael Hafner, Head of Energy – EMEA, Deutsche Bank; Joe Gorder, Executive Vice President, Marketing & Supply, Valero and Jonathan Leitch, Senior Analyst Oils Research, Wood Mackenzie
take advantage of these trends,’ stated Gorder. ‘Our large,complex refineries on the Gulf coast are competitive with low-cost operations and feedstocks, while the structural supply-demand imbalance in Latin America and the diesel shortage in Europe provide higher margin export opportunities.’ He went on to explain that the com-
pany continues to invest in upgrading its refinery portfolio,with the refining sector accounting for over 75% of Valero’s strategic capital spending in 2010 and 90% in 2011. Among the pro- jects being undertaken are FCC revamps at its Memphis and St Charles facilities,the construction of new hydrogen plants at McKee and Memphis,new hydrocrackers at Port Arthur and St Charles,and a new prod- ucts pipeline at Montreal. Gorder concluded by noting that
although independent refiners will con- tinue to have growth opportunities, numerous challenges remain – economic risks and high oil prices will continue to threaten demand,competitive supply
growth will continue from biofuels and new refinery capacity additions; and reg- ulatory challenges (fuel economy, environmental etc) will persist. After coffee,delegates reconvened to
hear Michael Hafner,Head of Energy – EMEA,Deutsche Bank,provide an overview of the capital markets’ role in the ongoing evolution of the global refining sector. Noting that worldwide refining margins have recovered near to a global long-termaverage of $4.5/b,he confirmed that demand growth was taking place at two speeds: 1) the rapidly growing markets of the Far East,the Former Soviet Union,the Middle East, Latin America and Africa,and 2) the mature,slowly declining Atlantic basin market,where more than half of installed capacity is currently located and whichwill require significant rationalisa- tion in order to deal with absolute capacity. He also cited the ‘refining arms race’,noting that Asia will dominate the sector in the future,with some 41% of upgrading capacity expected to take place here between now and 2015.
Project Director,Total,closed the sem- inar with a review of the Jubail refinery project in Saudi Arabia. Located in Jubail’s industrial district,some 10 km from the Persian Gulf coast,the refinery will process some 400,000 b/d Arab Heavy crude from the offshore Manifa and Safaniya fields. With its high sulphur content and high propor- tion of heavy residues,the crude oil from these fields cannot be used directly. It must first undergo a com- plex process,called deep conversion, which requires a highly complex facility including a distillate hydrocracker (DHC),a fluid catalytic cracker (FCC) and a delayed coker. This configuration is geared to optimise the production of diesel fuel and jet fuel. Plans also call for the production of 700,000 t/y of paraxylene,140,000 t/y of benzene and 200,000 t/y of propylene for the petro- chemical sector. The plant will be operated by
SATORP,a joint venture between state oil company Saudi Aramco and Total of France. Saudi Aramco currently has a 62.5% stake in the project while Total has 37.5%. However,Saudi Aramco’s interest will be reduced to 37.5% fol- lowing the sale of a 25% stake to the public at some point in the future. Due onstream in 1Q2013,eight years
after the initial memorandum of under- standing (MoU) was signed,the Jubail refinery will market most of its gasoline in Saudi Arabia,with middle distillates also being sold to the domestic market as well as the Far East. Other products will be sold in local markets and the Far East. Lacombe noted that the project’s eight-year timescale was ‘actually quite quick’ for such a complex integrated facility,stating that the ‘good align- ment’ between Saudi Aramco and Total were fundamental in achieving such a schedule. With a project debt ratio of 60–65%,
Lacombe explained that a number of lenders had been required to finance Jubail,including export credit agencies (ECAs),commercial banks, Islamic banks,Saudi investment funds (PIF, SIDF),sukuks (Islamic bonds) and senior shareholders loans (pari passu (on an equal footing) with banks). He also stated that cost overruns had been ‘lim- ited so far’ and that the project was largely ‘on schedule and on budget’.
The presentations from day three of IP Week 2011 – ‘Updates on upstream’, ‘24th Energy price conference’ and ‘Downstream opportunities and diversi- fication’ – will be reviewed in the May issue of Petroleum Review.
Total’s Daniel Lacombe talks to delegates at the close of day two’s proceedings All photos: John Deehan
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PETROLEUMREVIEW APRIL
2011
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