Tucked away in the 35 sandy acres of the Arabian American Oil Company refinery at Ras Tanura, Saudi Arabia is a strange clearing that might remind some visitors with long memories of the abandoned sidewalks of real estate booms that collapsed in the 1920's.
The site was laid out for a catalytic cracking facilities system. One can still see concrete footings meant to support part of the giant aviation gasoline facility. But the "cat cracker" was never built. Only the ghostly outlines of the site remain.
To Aramco old-timers the survey lines of the clearing bring memories quite different from those long ago inspired by the eerie geometry of houseless suburbs. For traced in the loose driftsand at Ras Tanura is a reminder of the grim purpose that lay behind the beginnings of the refinery.
The Aramco plant is now 17 years old. Since the termination of World War II, it has been turning out the fuels that are basic to the economic growth of both Saudi Arabia and the other free world markets the company serves. It has grown more than fourfold, from 50,000 to 210,000-barrels-a-day capacity, a good index to the whopping increase in world oil consumption in recent times.
However, at the time the refinery went on the drawing boards, peacetime economic growth was a distant dream. Allied land and sea forces were then fighting the desperate "island-hopping" battles of World War II in the Pacific.
In the autumn of 1943 the drain of global military demands on United States oil fields caused growing alarm in Washington. A team of American oil experts flew to the Middle East on an urgent survey of the Persian Gulf oil fields. Fortunately, an American company—now known as Aramco—had developed commercial production of oil in Saudi Arabia five years earlier.
When the experts flew back to Washington, the government decided to release war-priority materials for a refinery at Ras Tanura in Saudi Arabia.
Announcement of the war emergency plant brought on an outbreak of newspaper headlines and editorial comment. Harold L. Ickes, Secretary of the Interior and head of the Petroleum Administration for War, wanted the government to acquire an interest in Aramco and to finance, build and control the proposed refinery.
Oil men, newspapers and Congressmen objected—strenuously. The Ickes plan was quickly abandoned by the government. Instead, Aramco was given the go-ahead to build the refinery.
Against great wartime odds, work on the Ras Tanura plant was speeded. By late 1944 the construction camp was nearly finished. However, before the refinery itself was very far advanced, the war in Europe was over, and American oil supplies were diverted to the massive Pacific air offenses. The tide had turned.
Happily, the millions of gallons of Pacific bombing-mission gasoline that had been designed into the Ras Tanura refinery were not needed. So the big cat cracker being fabricated for Aramco in the United States was rerouted to a refinery near Chicago.
The site clearing for the catalytic cracker at Ras Tanura thus remained empty. The new Aramco plant, the first of the postwar international refineries to go on stream, was destined for peaceful uses. Nonetheless, a product of swift and dramatic changes itself, the plant was to witness a further parade of changes that would reshape the world of oil.
Oil men are an adaptable lot. They long ago learned that if there is one thing that is constant in their business it is change. The lament of an American refinery superintendent's wife eloquently underlines this on-the-move atmosphere: "Never hang the last curtain. Soon as you do, something changes."
Early in 1962 the billionth barrel of crude oil flowed into the refinery at Ras Tanura. It took only nine-tenths of a second to slip silently past a flow meter. On the way through the array of refining units it yielded its hydrocarbons in a dazzling variety of chemical reactions, some of which are speeded up by catalysts. Part of it was boiled off and the vapors collected in a simple distillation. In some processes its hydrocarbon molecules were reformed into new molecules of a different structure.
Like the river of crude oil of which it was a mere drop, the billionth barrel ended up as saleable products. Underground it had only potential value. Once it was refined into products and headed toward the market, its real economic life was ready to begin.
It came out of the processing streams at Ras Tanura as bunker fuel for ships, fuel oil for industrial use, diesel oil for truck and railroad engines, kerosene, motor gasoline and aviation gasoline. Part of it was also changed into liquefied petroleum gas, which upon release from pressure or refrigeration into normal temperature and atmospheric pressure once more becomes a gas and is ready for use as fuel.
From product storage it entered into the economic life-stream of Saudi Arabia or one of the other free world markets. Within the Kingdom it would be used by the company in its own operations, by the Government or by private Saudi Arab consumers. The Saudi Government Railroad is a major consumer of diesel fuel; Saudi industrial plants use other fuels. But in all, Saudi Arabia can currently consume only less than five per cent of the petroleum products processed at Ras Tanura, the country's sole refinery. The remaining output must be exported.
A billion barrels ago, when the refinery went on stream in October of 1945, a puzzling phenomenon was in the making. The slide rules of oil economists everywhere had delivered a pessimistic verdict. They predicted that as the world turned away from war and took up its civilian pursuits, oil consumption would fall off severely.
Just the opposite happened. Countries the world over were determined to go all out for industrial development and economic progress. Postwar oil consumption zoomed.
As a part of this spiraling use of oil, a shift took place in the historic location of international refining. The best way to visualize the shift is to imagine three toy blocks set in a line. From right to left they read: Production, Refining, Marketing. At the end of World War II, the block marked Refining lay very close to the one marked Production and a long way from the block marked Marketing.
In other words, historically the petroleum refinery was built close to the oil fields, the crude oil source. There were many reasons for this. For instance, there are always some vapor losses in refining. Today this loss is small, but once such loss was great enough for oil men to ask: "Why pay to ship your losses a great distance to a refinery located near a big marketing area?"
Further, a refinery makes use of some of its by-product gases to fire its many furnaces. Oil is always heated and reheated on its journey through the processing units. "Why," oil men asked, "pay to ship your own by-product fuel?"
The ideal refinery was thus located near an oil field, close to home.
By the end of World War II this tradition still held, but a change was in the making. It must be kept in mind that outside of the United States and a few nations of western Europe, there were very few countries that used enough oil in the mid-1940's to support an oil refinery large enough to operate efficiently. But within five years industrial progress the world over slipped into high gear. Consequently, the historic location of the petroleum refinery began to change. The growing marketing areas—the consumer countries—wanted their own refineries for a number of reasons.
The image of the toy blocks provides a simple visualization of the change. The block marked Refining began slowly and inexorably to move away from that marked Production toward that called Marketing. A trend was in the making. More new refining capacity was being built in the marketing countries rather than in the producing-exporting nations.
In 1950 about two-thirds of the world refining capacity was located in the oil producing-exporting countries. When the new refining capacity now being built (1962) is completed, the ratio will have been reversed: almost two-thirds of the world capacity will lie outside the countries with the big oil fields.
Recently the Petroleum Press Service of London listed 105 refinery construction projects around the world. "The new capacity will be spread over 51 countries in all continents and will include plants in 18 countries where there is as yet no refinery in existence," the survey reported.
The basic cause of this change lies in the simple economic fact that many, in fact most, market countries can now consume the output of one or more refineries. But there are other factors influencing the change. For one thing, marine technology has had a hand in it. Huge supertankers have greatly reduced the cost of shipping crude oil from export to import countries. The per-barrel transport cost has dropped steeply from the old days. Worry about the cost of "shipping your refining losses" has been wiped out as an economic factor.
Once, a refinery near an oil field had the advantage of a sure source of crude oil for round-the-clock operations. Today a refinery in a big marketing area, say in the Far East, can draw from many oil fields for its crude oil supplies and have assurance of a steady flow of tanker shipments.
A critical financial factor also bears upon the trend toward "market-oriented" refineries, as economists designate them. The marketing countries need to maintain a favorable balance of trade in foreign exchange in all segments of their domestic economy to promote industrial growth. They have, therefore, instituted protective tariffs and have built government-owned, or subsidized, refineries in an aggressive program to develop refining capacity.
The oil consumer countries are also guided in their refinery construction programs by the fact that it is cheaper to import crude oil than it is to import refined products. Crude oil costs less. When it is upgraded by refining, several changes in value take place. The change in value of the oil itself as it is turned into saleable products is obvious. But there are also hidden economic values that accrue to the country with its own refining industry: added employment, added tax revenues, a broader industrial base for the country and the financial vitality that comes from the use of domestic capital to create more capital to be used in further expansion.
These are some of the factors behind the big change in international refining.
The world of oil is complex and filled with economic subtleties. One might assume that the usefulness of the refinery located close to the oil field in the producer-exporter countries has been diminished as a result of the boom in "local" refineries. The fourfold growth of the Aramco refinery at Ras Tanura shows that, on the contrary, the resource-oriented processing facility has simply adopted a new role.
In the language of international oil economics, Ras Tanura has become a "swing" refinery. It might today be described as a basic refinery that incorporates many processes to assure efficiency in meeting changing requirements.
For example, many of the new market-oriented refineries are designed to meet average local conditions. When they head into the heavy summer motoring season, they are unable to meet the peak demand for automobile gasolines. A severe winter may create heating oil shortages. Or perhaps industrial expansion may suddenly increase the need for fuel oils. If local refineries cannot meet these changing consumer conditions, the refineries of the producer-exporter nations, such as that at Ras Tanura, make up the shortages. And they continue to supply countries that do not yet have sufficient demand to support a refinery of economic size.
The Aramco refinery also joins with other resource refineries to serve unpredictable peaks in world demand such as those created by the Korean emergency in the 1950's.
In addition to these distant demand "swings," the Ras Tanura plant supplies large volumes of the bunker oil that runs the tankers that ply the world's sea lanes and 'lift" crude oil and products at Aramco piers in Saudi Arabia.
And, of course, it continues to meet the steadily increasing Saudi Arabian demand.
Several months ago the Ras Tanura refinery quietly and proudly observed another of the significant changes which have marked its career. One night at 11 p.m. the first crew made up entirely of Saudi Arab employees took over an eight-hour shift on the fluid hydroformer. This unit turns out high octane gasoline; there are fewer than ten of its size and type in the world. The all-Saudi Arab crew now regularly mans its daily shift.
The crew supervisor, Ahmed R. al-Magbil, started to learn his art just about five weeks after the formal surrender of Japan ended World War II. He knows well the meaning of change, and he stands as a personal symbol of that permanent condition of the world's oil industry.
He has seen the Ras Tanura refinery grow from a "war baby" to a peacetime refinery, grow fourfold in its output, and efficiently assume the role of a "swing" refinery in the changing economic pattern of international oil processing.
Ahmed R. al-Magbil, along with other Ras Tanura refinery veterans, sometimes passes the clearing that was surveyed for a catalytic cracking unit late in World War II. None of them regrets that it never had to be delivered.