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Oman to up Sohar Refinery capacity

Dubai, October 6, 2011

Oman plans to boost capacity at its Sohar refinery by up to 50 percent by 2016 to satisfy its own rapidly rising fuel demand, the chief executive of Oman Oil Refineries and Petroleum Industries Company (Orpic) said.

Oman could spend up to $1.5 billion on the project needed to quench the thirst for vehicle fuel, part of a wider trend of Middle Eastern oil producing countries becoming significant consumers.

'The expansion project is designed primarily to meet the growing fuel demand of Oman,' Orpic CEO Musab Al-Mahruqi told Reuters in an interview.

Oman's oil consumption has more than doubled over the last decade, thanks to energy-intensive industry growth and an expanding vehicle fleet which has driven substantial growth for fuel over the last five years.

But vehicle ownership in the non-Opec oil producer remains 55-60 percent below other countries in the region, leaving plenty of room for rapid growth over the next few years, Al-Mahruqi said.

'The indicator of potential demand growth for fuels ...
supports the expected growth of approximately 10 percent year-on-year growth,' he said.

Fuel demand has been soaring in the Middle East over the last few years, thanks to a petro-dollar fuelled economic boom and fuel subsidies, which have driven a spate of refinery expansions and new plant investments from Saudi Arabia to Bahrain.

Oman's Sohar refinery, operational since 2006, currently produces up to 116,000 barrels per day (bpd) of fuel while Mina Al Fahal produces some 106,000 bpd.

'We estimate an increase of 50,000 bpd to 60,000 bpd in Sohar refinery capacity,' he said. 'The target completion date is end-2015, early 2016.'

State-owned Orpic is conducting the front-end engineering design (Feed) work and plans to tender for the engineering, procurement and construction (EPC) phase in 2012.

'We are doing the pre-qualification for EPC contractors and we hope to tender some time in the first half of next year,' Al-Mahruqi said, adding that the company was aiming to start construction before the end of next year.

The details of how the expansion will be funded are still to be finalised, Mahruqi said, but will probably be a mix of bank finance and shareholder funding.      

'The ratio will be up to market conditions,' he said, adding that the company would seek funding from both local and international banks.

'Oman had a very strong track record over the last 15-20 years in project finance,' he said when asked if global financial market gloom could hinder funding.

'It is going to be challenging but it should not be a project stopper,' he added. Despite surging domestic demand for fuel, Orpic hopes the refinery expansion will ensure fuel exports will continue, mostly to Asia, although how much will be available is unclear.

'By 2015-2016, our local demand will have increased because we're growing but we will still be exporting some products,' he said. 'Although I'm not sure if it will be less or more.' Mahruqi did not give a current export figure.

Oil storage facilities have been developing fast at the deep-sea port of Sohar, thanks to its strategic location outside the Straits of Hormuz, through which much of the world's oil is shipped.

Orpic's integrated complex includes a plant to produce industrial chemicals and it exports around 1 million tonnes of aromatics every year.

The company imports some 500,000 tonnes of naphtha annually from Vitol's Fujairah refinery to use as feedstock for its aromatics plant but has no current plans to raise naphtha imports, Al-Mahruqi said.

'We take all the naphtha that's produced in Fujairah. Vitol is operating the refinery at full capacity,' he said. 'We don't have a plan to expand aromatics... and the decision to import naphtha will always be governed by the economics of it.' -Reuters




Tags: Oman | oil refinery | Orpic |

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