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Saudi Aramco presses on with Jazan refinery ramp-up, despite continued Houthi attacks

Highlights

Some distillation units have started operations

Full commercial operations may not happen until 2022

Jazan a frequent target for Houthi missile attacks

Dubai — Activity at Saudi Aramco's Jazan refinery project is ramping up with a total 8.72 million barrels of crude discharged in March, according to commodity data company Kpler.

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The Jazan refinery is facing regular missile attacks launched from just across the border with Yemen, though sources say it remains unclear when the much delayed facility will enter full commercial operation.

The 400,000 b/d refinery, also known by the alternate spelling Jizan, lies in the far southwest of Saudi Arabia on the Red Sea, about 60 km from the Yemeni border.

It is a key cog in Aramco's downstream expansion plans, but the company has yet to formally announce its commissioning, with analysts citing weak market conditions and the persistent security threats from Iran-backed Yemeni Houthi rebels as reasons for the more than year-long delay. The most recent attack came April 15 -- at least the third targeting Jazan since the beginning of March -- though Saudi officials have said their defense forces have intercepted every missile.

Market sources have said the refinery has quietly started up operations of its primary distillation units and is set to begin runs at its secondary units in the coming months. S&P Global Platts Analytics expects Jazan's runs to increase through the year to hit full commercial status sometime in 2022, as global demand for refined fuels picks up in the recovery from the pandemic.

Others say the delays could extend further.

Aramco is likely in no hurry to fully ramp up Jazan given the sluggish gasoil market, and a critical power plant at the refinery has also faced operational difficulties, a market source told Platts.

Aramco declined to comment on the refinery's status.

Crude coming in

In addition to the missile attacks, Houthi strikes on ships in and around the Red Sea present a risk to Jazan, as the refinery is not connected with crude oil pipelines and must obtain its crude feedstock via tankers.

Saudi Arabia on March 22 made a ceasefire offer to the Houthis, but the rebels have rejected its terms so far.

Kpler estimated that 8.72 million barrels of crude discharged at Jazan in March, up from 4.69 million barrels in February, indicating a significant increase in activity.

The first cargoes arrived in October and November 2019, though those deliveries remained in tank storage for some time, Kpler said. The crudes are Saudi origin, from the east coast ports of Ras Tanura and Juaymah.

Meanwhile, about 91,000 b/d of dirty petroleum products loaded from the refinery in March, mainly vacuum gas oil (VGO) and off-spec high sulfur fuel oil (HSFO), as well as 32,000 b/d of off-spec gasoil loaded and 45,000 b/d of naphtha, Kpler said.

In mid-2020, Saudi Aramco CEO Amin Nasser said that when crude runs began at Jazan, throughput rates would average about 200,000 b/d before ramping up to the full 400,000 b/d.

The refinery had previously been expected to be commissioned at the end of 2019 and be ready for full operations in the second half of 2020.

Aramco is counting on the facility to expand its middle distillates exports and petrochemical production, but may have to wait for global economic conditions brighten.