Aramco, Conoco sign $6b Yanbu refinery accord

Riyadh: Saudi Aramco and US oil firm ConocoPhillips signed a deal yesterday for a 400,000 barrel-per-day (bpd), export-oriented refinery the second such agreement this week.

The two refinery deals, valued at a total of $12 billion, are part of plans by Saudi Arabia, the world's largest oil exporter, to become an increasingly important supplier of badly needed gasoline and heating oil to global markets.

The memorandum of understanding signed by Aramco and Conoco-Phillips for the refinery in Yanbu on the Red Sea coast follows another signed on Sunday between Aramco and France's Total to build another 400,000 bpd, heavy crude refinery in Jubail on the kingdom's Gulf coast.

State-run Aramco will supply the full-conversion refineries, targeted for start up in 2011, with 400,000 bpd of Arab Heavy crude.

Aramco and its partners will share marketing of output.

Aramco has put the cost of each refinery at $6 billion.

The Yanbu refinery would produce high quality, ultra-low sulphur products that meet current and future US and European specifications, the statement said.

"This proposed venture ... will allow us to expand our role to downstream exports in addition to the upstream," Aramco President Abdallah Jumah said.

Aramco and partners plan to spend $50 billion in the next five years to boost refining at home and abroad.

Saudi Arabia and other Opec producers have said concern over oil products shortages due to a global refining crunch has fuelled a rally that has taken oil prices to record highs.

ConocoPhillips Chairman Jim Mulva said the Yanbu project would provide "significant" new supplies of refined products to help meet growing requirements around the world.

"ConocoPhillips welcomes this opportunity ... to add needed capacity to the international refining system," he said.

Aramco plans to set up joint venture firms with Total and Conoco for the refineries with each party holding a 35 per cent stake and offer 30 per cent to the Saudi public in the future, subject to regulatory approval.

Fuel oil: Saudi Arabia to cut exports by more than 50%

Fuel oil supplies from Saudi Arabia will fall by more than 50 per cent in the third quarter as the region enters peak summer demand, industry sources said yesterday.

All of state-owned Saudi Aramco's term contracts for supply from its refineries in Yanbu, Jubail and Ras Tanura are expiring at the end of the second quarter and no new term deals for third- and fourth-quarter exports have been signed.

Aramco typically exports about 600,000-800,000 tonnes from all three refineries each month in the first half, either through term contracts, spot tenders or spot deals.