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S.Aramco to have surplus gasoline with new refineries

Saudi Arabia needs policies to curb strong domestic demand.

December 8, 2010 3:49 by

State oil company Saudi Aramco expects to have plentiful gasoline supplies once its two new refineries come online, its chief executive said on Wednesday.

Khalid al-Falih said the kingdom, the world’s largest oil exporter, required new policies to curb rapidly rising domestic gasoline demand.

Saudi Aramco is building two new refineries, one in Jubail, on the Gulf’s coast in a joint-venture with France oil major Total  and one in Yanbu, on the Red Sea coast.

Each would produce 90,000 barrels per day (bpd) of gasoline.

The Yanbu refinery is expected to be operational in 2014, and the Jubail plant in 2013.

“With the two export refineries where the contracts have already been awarded, Yanbu and Jubail, we are going to be quite long on gasoline for a long time to come,” Falih told Reuters in an interview in Dubai.

“A lot of people don’t take into consideration that Saudi with our partners produces a lot of gasoline and exports some of it,” he said without quantifying how much gasoline Aramco is currently producing.

“And we still import, net-net we are slightly in deficit,” he added.

The kingdom typically imports between 60,000 bpd to 70,000 bpd of gasoline, traders say.

Gasoline in Saudi Arabia is heavily subsidised. Falih said demand was growing at 5.1 percent annually.

“I think the challenge for the kingdom is, in addition to adding extra supply, how to constrain demand,” he said.

“Demand is running faster than it should. Ultimately we need to have policies in the kingdom, setting mileage standards perhaps that would bring demand within a reasonable range.”

The Yanbu refinery was to have been built by U.S. oil firm ConocoPhillips  and Aramco, but Conoco pulled out of the plans in April.

Falih said Aramco was “exclusively speaking to one company at the moment,” but he declined to name the company.

He added that there were other companies which were also interested and Aramco was “keeping all of its options open.”

At least one Chinese firm is among the companies Aramco has approached for a role in building the refinery, industry sources have said.

(Additional reporting by Erika Solomon; writing by Reem Shamseddine; editing by James Jukwey)

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