Saudi-Kuwaiti Neutral Zone; Bahrain

The Saudi-Kuwait Divided Zone or the Neutral Zone , 2230 square miles between the borders of Saudi Arabia and Kuwait that was left undefined in 1922, contains an estimated 5 billion barrels of proven oil reserves, shared between the two countries, from which approximately 600,000 bbl/d is produced. (See App. 6)

Saudi Arabia and Kuwait are planning to increase capacity in the Neutral Zone to about 630,000 bbl/d. The increases are expected to come from the offshore area where steam injection technology will be employed.

Within the Neutral Zone, Japan's Arabian Oil Co. (AOC) traditionally operated the two offshore fields of Khafji and Hout with 300,000 bbl/d in production, but in February 2000, AOC lost the concession, and Aramco took over operation of the former AOC fields (in January 2003, AOC reached an agreement with Kuwait on the right to purchase at least 100,000 bbl/d of crude for the next 20 years from Khafji). ChevronTexaco operates three onshore fields (Wafra, Humma, and South Umm Gudair) in the Neutral Zone under a 60-year license that was renewed in July 2008. These fields have 2 billion barrels of proven reserves and total production of about 260,000 bbl/d of Arab Heavy oil. Finally, Bahrain and Saudi Arabia share the 300,000 bbl/d production of the Abu Safah offshore field.

Processing Saudi Aramco operates the world’s largest oil processing facility and crude stabilization plant in the world at Abqaiq, in eastern Saudi Arabia, with a crude processing capacity of more than 7 million bbl/d. The plant processes the majority of Arabian Extra Light and Arabian Light crude oils, as well as NGLs. The facility’s infrastructure includes pumping stations, Gas Oil Separation Plants (GOSPs), hydro-desulphurization units, and an extensive network of pipelines that connects the plant to the ports of Ras al-Juaymah, Ras Tanura and Yanbu (for NGLs). Nearly two-thirds of Saudi crude is processed at Abqaiq before export or delivery to refineries. The facility was the target of a terrorist attack in 2006 (see Security Issues Section). Refining/Petrochemicals According to Oil and Gas Journal, Saudi Arabia has seven domestic refineries, with a combined crude throughput capacity of about 2.1 million bbl/d (of which Aramco’s share is approximately 1.1 million bbl/d). The Saudi Aramco development plan calls for a $70-billion investment in the sector, increasing domestic refining capacity to 3 million bbl/d and international holdings by at least 1-2 million bbl/d by 2011, particularly in an effort to meet requirements of the fast-growing Asian market. Several of these new refineries will be integrated with large petrochemicals complexes, in what has been described as the creation of petrochemical cities. Saudi Aramco has begun a Saudization initiative (General Engineering Services Plus, or GES+) to improve Saudi technical capability in these projects. Planned refineries or refineries under development include:

• Saudi Aramco’s 400,000 bbl/d joint venture export refinery with Total in Jubail, which is expected to be fully operational by end-2013. It will run mainly Arab Heavy crude, and maximize production of diesel and jet fuel.

• Saudi Aramco 400,000 bbl/d Yanbu refinery project, scheduled for startup at end-2014. Conoco-Phiilips was originally to have been a joint venture partner in this project, which will process heavy oil from the planned Manifa project.

• Saudi Aramco has decided to relocate its joint petrochemical project with Dow Chemical from Ras Tanura to Jubail.

• Saudi Aramco is moving ahead with its first venture into the petrochemical business, a $10 billion expansion at its integrated PETRORabigh Refinery and petrochemical joint venture with Sumitomo.

• Saudi Aramco is proposing to re-launch its 400,000 bbl/d Jazan refinery project without any petrochemicals component.

In the United States, Saudi Aramco and partner Royal Dutch/Shell own three Motiva joint-venture refineries in Louisiana and Texas. The three facilities currently have a total capacity of about 740,000, or approximately 5 percent of the U.S. refining market. Saudi Aramco owns 50 percent of Motiva though a subsidiary, Saudi Refining.