Saudi Aramco and joint venture partner Sinopec have started test runs at their 400,000 barrel per day (bpd) Yanbu refinery, located in the oil-rich Middle Eastern kingdom.
This puts the new plant on schedule to begin commercial exports in November, possibly even by the second half of October, according to trade sources.
Yanbu will be the second major refinery to come online in Saudi Arabia in little more than a year, following the September 2013 start-up of the similar 400,000 bpd Jubail plant, a joint venture between Aramco and France’s Total.
Both these plants are largely aimed at the export market and can supply to both Europe and Asia because of their location.
However, Yanbu is coming online at a time when crude demand growth in Asia is disappointing, the region’s refiners are struggling to make decent profits, crude prices have gone into contango and Middle East producers are cutting official selling prices (OSPs).
The extra refined products from Yanbu may have two undesirable impacts, from a Saudi perspective.
The first is that they will lower demand from the region’s refiners for crude deliveries as competition in the refined fuels market gets tougher, prompting some plants to run at lower utilisation rates.
The second is that the additional products will put downward pressure on prices, thus reducing Asian margins, prompting refiners to ask for greater discounts on crude supplies.
