Downstream & Upstream Expansions.

Two major world petroleum conferences held in early May, one in Houston followed by one in Abu Dhabi, highlighted capacity expansions at both ends of the industry. In a speech to the Offshore Technology Conference in Houston, Saudi Aramco's Vice President for E&P Abdullah S. al-Saif said his country will ramp up offshore exploration in the Persian Gulf between now and 2010.

Saudi Arabia, whose desert reserves of conventional oil are the largest in the world, will deploy 20% of its rigs in offshore waters to explore for new oil and gas fields. By year-end, Saudi Aramco will have 120 rigs operating in the country, up from 85 in 2005 and 54 in 2004. Saif said: "The offshore is growing. We see it as at least 20 to 30 rigs from here on instead of six or eight".

Onshore, Saif emphasised the Khurais development west of Saudi Arabia's massive Ghawar axis of oilfields as the primary way the Saudi Aramco will boost crude oil production capacity to 12.5m b/d by end-2009. Khurais is thought to contain 23 bn barrels of oils, most of them light, sweet crudes which are easy to refine. The adjacent Abu Jifan and Mazalif fields hold about 4 bn barrels. Saif said the project required 310 horizontal wells to access all of the reservoirs, but together the fields should produce an extra 1.2m b/d of crude oil by end-2009. Saif said: "This is the largest development in Saudi Aramco's history".

On May 1, it seemed that everything in energy was much higher than it had been in two decades - the price of oil, the number of rigs drilling around the world and the number of conventioneers attending the OFC in Houston, which opened at Reliant Centre. The energy world had descended on Houston for the OTC, where attendance topped last year's gathering of 51,320.

The annual OTC, which started in Houston in 1969, pulls energy workers from 110 countries, from Kazakhstan to Canada and Scotland to Syria. Marketing efforts of the petroleum companies from around the globe reflect the energy attitudes of their home countries. At the station for UK-based MacDermid Offshore Solutions, which applied specialised technologies to declining North Sea basins to wring more hydrocarbons out of those old fields, marketing materials carried a tag line of "Yes we can!" The booth for China Oilfield Services Ltd. was emblazoned with "We can do better".

China Oilfield Services is a state-controlled energy service company run by Chairman Fu Chengyu of the China National Offshore Oil Co. (CNOOC). Last year, Chengyu sparked a bidding war for Unocal as part of his country's efforts to secure oil and gas assets around the world. Eventually, Chevron bought Unocal.

The Middle East's oil refining capacity is projected to increase by 3m b/d to above 9.6m b/d by 2012. "There is significant refining capacity additions in almost all Middle East countries between now and 2012 to above 9.6m b/d over the next six years", Dr. Fereidun Fesharaki, Chairman and CEO of FACTS Global Energy, said at the Middle East Petroleum and Gas Conference in Abu Dhabi on May 3, adding: "The joint implication of upcoming refining and GTL projects is that the Middle East's product's exports will grow by 1.3m b/d between now and 2011-12".

The Middle East's current refining capacity stands at 6.65m b/d with Saudi Arabia having the region's largest capacity of more than 2m b/d followed by Iran's 1.4m b/d which is to rise to 2.5m b/d by 2010, and Kuwait's 940,000 b/d to exceed 1m b/d by 2010 - with a 600,000 b/d plant to be built and the oldest of the existing three refineries to be closed, according to APS Energy Group.

Dr. Fesharaki said: "The UAE has seen remarkable refining expansion with capacity doubling between 1995 and now". But the region still lags significantly behind US, Europe and even Asia in terms of fuel quality, he added.

Fesharaki said Saudi Arabia will emerge as a refining powerhouse by the next decade: two major export-oriented grassroots refineries are to be built at Yanbu' and Jubail with capacities of 400,000 b/d each. In Iran, three new condensate splitters of 120,000 b/d each will come online between 2009 and 2011. In the UAE, ADNOC is building a 300,000 b/d refinery in Fujairah. "It could even be 500,000 b/d", Fesharaki said.

The Middle East and North Africa (MENA) states must allow the private sector to invest more and participate on a wider scale to create better jobs. "The dominating challenge on the economic agenda of MENA countries is unemployment and most...[them] need...[GDP] growth rates exceeding 5-6% to deal with the problem", said Hossein Razavi of the World Bank.

Razavi, director of the bank's finance, private sector and infrastructure development department, said MENA states were facing very complex investment decisions and investments in oil and gas are seriously intertwined with other critical needs. He told the Abu Dhabi conference: "The key to unlocking the investment dilemma is to let the private sector play a bigger role. But the overall size of the public sector is an issue". About $56 billion per annum of investments are needed to expand capacity and replace facilities in the energy related sector in the MENA between now and 2030.