July 2014
2%
5%
24%
Power
Petrochemicals
Industry
33%
Transport
Others
Refinery fuel
28%
5%
Bunker
Gasoil consumption in the Middle East is forecast to increase the most, by more than 600 kb/d until 2020.
More than half of this increase is expected to come from Saudi Arabia as part of Kingdoms strategy to burn
less crude oil at its power plants and replace that by higher gasoil, fuel oil and gas consumption.
Saudi Arabia and Iraq are expected to contribute to around 65% of the fuel oil demand growth in the region as
a result of their higher power generation requirements.
Gasoline demand in the Middle East is forecast to increase by more than 320 kb/d until 2020 (AAGR 3%) and
reach above 1.70 mmb/d mainly because of heavy subsidized prices, fast growing population and limited public
transportation system. Saudi Arabia and Iran, which have the cheapest gasoline pump prices in the region
(around $0.22/liter) and the third cheapest pump prices in the world, are expected to be the main drivers
behind strong gasoline demand growth in the region.
Moreover, jet fuel consumption in the region is forecast to increase by more than 120 kb/d until 2020 as result
of higher air passenger traffic in the UAE and Qatar, which are expected to contribute to more than 100 kb/d of
this increase.
Naphtha and LPG consumption in the region are also expected to increase by more than 320 kb/d and 150
kb/d, respectively, until 2020 on the back of new petrochemical projects coming onstream. Qatar is expected
to contribute to more than 40% of the additional LPG requirements in the region through 2020 mainly as a
result of the Al Sejeel petrochemical project coming onstream in 2017. New petrochemical projects coming on
stream in Saudi Arabia and Iran are also expected to raise LPG demand in the region by more than 30 kb/d and
20 kb/d, respectively, through 2020.
2. Middle East Refinery ProjectsWill they Change Trade Dynamics in The Region?
Refining capacity in the Middle East is forecast to increase substantially by around 2 mmb/d through 2020 and
reach above 10 mmb/d. The Middle East is expected to become a major products exporter as the national oil
companies in the region are processing more crude domestically and increasing exports of higher value
products into the international markets. The majority of these grassroots, expansion and upgrading projects
are designed to maximize Euro IV and Euro V quality gasoline and gasoil production and reduce fuel oil output
in the region. Overall, we forecast refinery gasoil and gasoline production to increase significantly, by 1.25
mmb/d and 730 kb/d, respectively, over 2013-2020. Kerosene/jet fuel and naphtha output from the Middle
East refineries are expected to increase by around 360 kb/d and 250 kb/d, respectively. A brief review of firm
and likely refining projects scheduled to come onstream by 2020 are as follows:
Jubail Refinery
The 400 kb/d SATORP plant is a joint-venture project between Saudi Aramco (62.5%) and Total (37.5%). The
refinery has two CDU trains (each 200 kb/d) of which the first train was commissioned in end 2013 and has
gradually ramped up production. The second train along with the 100 kb/d coking unit are expected to become
operational around June/July this year. The 400 kb/d refinery is designed to process Arab Heavy crude
produced from the Manifa oil field and will produce around 185 kb/d of gasoil, 85 kb/d of gasoline and 45 kb/d
of kerosene/jet fuel meeting Euro IV and Euro V quality standards. Saudi Aramco will consume the majority of
the SATORP output domestically but will export some cargoes into European markets as well other Asian,
African and Middle East outlets. Total is also expected to sell most of its 37.5% share to international markets.
Saudi Arabia is expected to become a net gasoil exporter in 2014 when the SATORP refinery becomes fully
operational.
Ruwais Refinery
The new 417 kb/d Ruwais refinery is expected to be fully operational during the first half of 2015 and is
expected to produce more than 110 kb/d of gasoil, 110 kb/d of naphtha, 95 kb/d of kerosene/jet fuel and 70
kb/d of gasoline meeting Euro IV and Euro V quality specifications. The US$10 billion new refinery is expected
to cover domestic requirements as well as export high quality products to international markets. Takreer is
adding the new refinery next to the existing 417 kb/d Ruwais refinery, which currently runs 140 kb/d Murban
crude and around 277 kb/d of condensate.
Yanbu Refinery
The 400 kb/d YASREF plant, which is a joint venture between Saudi Aramco (62.5%) and Sinopec (37.5%), is
expected to become fully operational in early 2016. The refinery is designed to process Arab Heavy crude and
produce more than 260 kb/d gasoil, 90 kb/d of gasoline, 6.2 ktpa of petroleum coke, and 140 ktpa of benzene
and other products. Gasoil and gasoline produced from YASREF will meet Euro IV and Euro V quality standards.
The majority of these products are expected to meet domestic requirements, but we expect some of the high
quality gasoil and possibly gasoline to be exported to international markets as well.
Ras Laffan II Condensate Splitter
The 146 kb/d Ras Laffan II (LR2) is a new condensate splitter which is being built next to the existing 146 kb/d
Ras Laffan I condensate splitter in Qatar and is expected to be operational in mid-2016. The new condensate
splitter project is owned by a joint venture between QP (84%), Total (10%), Idemitsu (2%), Cosmo Oil (2%),
Marubeni (1%), and Mitsui (1%). The LR2 condensate splitter will take North Field condensate and has the same
configuration as the LR1 condensate splitter, producing products meeting European standards. Similar to LR1
splitter, the LR2 project is designed to maximize naphtha production (+60 kb/d) and hence boost exports out of
Qatar into Asian markets. Moreover, the LR 2 project will yield around 52 kb/d of jet fuel, 24 kb/d of gasoil, and
9 kb/d of LPG. The LR2 project is mainly an export refinery which is expected to raise exports out of Qatar into
regional and intra-regional markets.
Sohar Refinery
Oman Oil Refineries and Petroleum Industries Company (ORPIC) is expected to bring onstream the 60 kb/d
Sohar refinery expansion during the first quarter of 2017 and increase the capacity of the Sohar refinery to
around 176 kb/d. The US$1.5 billion expansion will produce products meeting European standards and increase
Omans products exports. Moreover, it will provide Aromatics Oman LLC (AOL) with naphtha feedstock and
reduces the Sultanates naphtha imports. The Sohar expansion project along with the Sohar bitumen refinery
project, which is expected to come onstream in end 2016, will meet growing domestic bitumen requirements
in the Sultanate and place Oman as a net bitumen exporter in the region.
Persian Gulf Star Condensate Splitter (Phase I and II)
The first phase of the Persian Gulf Star (PGS) condensate splitter project with 120 kb/d of capacity is expected
to come onstream in 2018 and the second phase with 120 kb/d capacity is forecast to be fully operational by
2020. This is part of a 360 kb/d condensate splitter project which is scheduled to come onstream in three
phases. The PGS project will process South Pars condensate and produce Euro IV and Euro V quality products.
The PGS project is designed to maximize gasoline production to meet rising domestic demand and cut gasoline
imports into Iran. Each phase of the PGS project will produce around 70 kb/d of gasoline, 30 kb/d of gasoil, 7
kb/d of jet fuel and other byproducts. Based on FGEs assessments, Iran will become self-sufficient in meeting
the domestic gasoline requirements only when the second phase of PGS is fully operational. Moreover, once
the third phase comes on stream, Iran is expected to become a net gasoline exporter in the region.
Karbala Refinery
The 140 kb/d Karbala refinery, which is expected to come on stream in mid-2019, is considered as the only
major refinery project materializing in Iraq by 2020. The Karbala refinery will be designed to process Basrah
crude oil and produce around 55 kb/d gasoline and 25 kb/d gasoil meeting Euro IV standards as well as 23 kb/d
fuel oil, 20 kb/d kerosene/jet fuel and other by-products. Despite the start-up of Karbala refinery, Iraq would
still require gasoline and gasoil imports to meet domestic consumption. Iraqs State Company for Oil Projects
(SCOP) awarded the US$6 billion project to a South Korean joint venture led by Hyundai Engineering &
Construction which also includes GS Engineering & Construction, and SK Engineering & Construction. Hyundai
E&C and affiliate Hyundai Engineering have a combined 37.5% stake in the project, worth $2.25 billion. GS also
has a 37.5% stake, while SK has a 25% stake worth US$1.50 billion.
Jizan Refinery
The 400 kb/d Jizan refinery is the last mega refinery project, which will be built in Saudi Arabia by 2020. We
expect the refinery to come onstream in 2019. The Jizan refinery is scheduled to be designed to process heavy
and medium crude and produce 75 kb/d of gasoline and 250 kb/d of ultra-low-sulfur diesel, meeting growing
domestic demand in the Kingdom as well as boosting Saudi Aramcos products exports. Unlike the SATORP and
YASREF projects, the Jizan refinery is 100% owned by Saudi Aramco and is part of Saudi Arabias bigger plan to
establish an industrial city in Jizan, which includes petrochemical and mining projects as well.
800
400
200
-200
units: kb/d
-400
-600
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
4. Conclusion
The Middle East is expected to become a major products exporter largely on the back of SATORP, YASREF, Jizan
and Ruwais refineries commissioning in Saudi Arabia and the UAE through 2020.
More than half of the increase in net product exports from the Middle East is forecast to be gasoil (+655 kb/d).
Net kerosene/jet fuel exports from the Middle East are also expected to increase by 250 kb/d by 2020. These
mega-complex refineries in the Middle East, which are designed to produce Euro IV and Euro V quality
products, are expected to mainly target European markets competing with Asian, Russian and the US refineries.
This will further deteriorate European margins and put pressure on the European refiners.
Moreover, the new refinery/condensate splitter projects coming onstream in the Middle East will turn the
region from being a net gasoline importer to a net exporter from 2018. By the end of 2020, Middle East net
gasoline exports are forecast to reach 150 kb/d. This is likely to put pressure on the Indian and Mediterranean
refiners, which relied heavily on the Middle East market for their gasoline exports.