Saudi Arabia signs for refinery

Paul Boughton

Saudi Aramco and Total have signed a comprehensive memorandum of understanding (MOU) related to the planned development of a 400000 barrel per day world-classfull-conversion refinery in JubailSaudi Arabia.

The proposed refinery will be designed to process Arabian heavy crude and will produce high-quality refined products that meet current and future product specifications. The project is currently scheduled to start up in 2011.

“This proposed project represents an excellent opportunity to build on the Kingdom’s strategy of addressing global energy demand while attracting foreign investment to expand its economy” said Abdallah S Jum’ahSaudi Aramco’s president and chief executive officer. “I am proud that Saudi Aramco can support the Kingdom in this processand I am gratified that our friends and colleagues from Total will be our partners in this world-class project” he added.

“Total is proud to have been chosen by Saudi Aramco to build an efficient and full conversion refinery that will provide the country with an increased capacity to meet different markets needs in refined petroleum products” said Thierry DesmarestTotal chairman and chief executive officer. “This agreement reinforces our presence in Saudi Arabia and through this long term project strengthens our close cooperation with Saudi Aramco” he added.

The MOU sets out the agreement between Saudi Aramco and Total regarding the key parameters of the projectthe project configurationand a broad range of the major technicalcommerciallegaland financial terms.

To proceed as quickly as possible with the projectthe parties have agreed to undertake without further delay a comprehensive joint front-end engineering and design (FEED) study. The definitive documents to implement the project will be negotiated in parallel with the joint FEED study.

In terms of the project’s commercial structureSaudi Aramco and Total have agreed to form a joint venture companywith each holding an ownership interest of 35 per cent. Subject to required regulatory approvalsthe parties are planning to offer up to 30percent interest in the project to the Saudi public.

Saudi Aramco will supply the project with 400000 barrels per day of Arabian heavy crude oil. Saudi Aramco and Total will share the marketing of the refinery production.

Speaking at the MOU signingJum’ah explained the importance of this latest project: “Our industry is in the midst of a tremendous period of changeand I would argueat an historic crossroads – or as the old proverb sayswe are living in interesting times. We are producing more energy than at any time in historyare operating more efficiently than ever beforeand continue to have a tremendous impact on societies and economies around the globe. But what the petroleum industry has gained in efficiency we have lost in flexibilityin part due to chronic global underinvestment in facilities and infrastructure.”

He then went on to describe the importance of downstream investments to the country’s economy: “Perhaps nowhere along the value chain do we see capacities as tight as they are in the refining sector. Crude oil is of little good to the average end-user until it is refined into useful productsand at the momentour industry’s ability to do that is being stretched. That is why downstream investments – like the Jubail export refinery – are so critical at this point in timeand why forward-looking companies like Total and Saudi Aramco are working so diligently to meet the refining challenge. This facility in particularwith its ability to process large quantities of heavy crudenot only eases tight refining capacities but also addresses the mismatch between available crude supplies and refinery configurations that is complicating today’s market situation.”

Mega projects

More than E79billion will be spent on constructing mega projects over the next five years in Saudi Arabia (Fig.1) and businessacademic and government leaders met in al-Khobar recently to discuss ways to develop the Kingdom’s work force so that more of that money will stay in the local economy.

The two-day Mega Projects and Learning Dialogue was organised by the Gulf Society for Organisational Learning (Gulf SoL) and sponsored by Saudi Aramco and Saudi Basic Industries Corporation (SABIC). The discussions focused on using the current building boom as an opportunity to lift skill levels in the construction and engineering sectors of the Saudi economy.

“I have a vision for the futurea vision full of possibilities” said Saudi Aramco’s senior vice president of engineering and operations services Salim S Al-Aydh“a future where Saudi Arabia is a centre for engineering excellencea future where Saudi-based companies are major players in mega projects across the Gulf region and beyond. This will require that we do business differently.

“In the last oil boom” he said“we invested heavily in construction of new plant facilities. We left behind a legacy of steel and concrete. This timeas we build up new plantswe will invest not only in our physical capacity for oil and gas productionbut also in the capacity of our people to plan and execute major projects. Alongside the steel and concrete of our new facilitieswe want to leave behind a core competency in engineeringprocurement and construction for Saudi Arabia.”

Sabic vice president of human resourcesMohammed Al-Bat’higave the gathering a sobering look at the challenges of ‘Saudisation’. Kingdom employment statisticshe saidshow that of a total private-sector labour force of 6.5 millionSaudis represent just 12percent. Although that number is risingwithout a concerted effortmoney from the massive construction boom is more likely to travel overseas as expatriate worker salaries rather than fuelling growth and prosperity in the Kingdom.

Noting that the Kingdom graduates about 100000 students from colleges and universities across the land and overseasAl-Bat’hi said that only about

20 000 students graduate from technical and vocational institutes.

More than 20000 engineers and 300000 technical and trade positions will be required by 2010he said. Graduating engineers account for less than 10percent of the annual university crop.

“We can turn challenges into opportunities by investing in education geared to market requirements” Al-Bat’hi said. "We need higher quality outcomes in technical and science fields.”

He said education needed to give students good analytical capabilities and that the highest standards should be maintained in craft and semi-skilled training programmesemphasising the need for fostering discipline and a strong work ethic in the younger generation.

MeanwhileMohammed Binladina vice president of the Saudi Binladin Groupand Hamed Amina vice president of Consolidate Contractors Corporationboth discussed massive training efforts at their companies.

Amin told participants of his company’s support of a Riyadh training centre where students learn carpentryscaffoldingpipefittingsteel fixingplumbing and welding – all skills vitally needed in the construction sector.

The Saudi Binladin Group employs more than 50000 workers in the Kingdom. Binladin said the company is working on the creation of the National Institute for Construction Technologyan ambitious effort that could be turning out more than 2200 skilled trade workers annually in the near future.

“We need to empower human capital and value it more than assets” Binladin said. “It’s the most important asset a nation can have.”


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