Saudi Aramco is not aiming to become a swing supplier of oil products with spare refining capacity, an official said, dampening hopes for further plant expansions that could help ease high fuel prices.

Saudi Arabia’s state oil firm aims to maintain spare crude production capacity to give consumers a cushion in the event of supply shocks, but sees no value in doing the same in its downstream business.
“That’s not our plan. If you overexpand, margins will collapse,” Khalid Buainain, vice-president of refining at Saudi Aramco, said on the sidelines of an industry conference.
Aramco, with refining capacity of 4.095 million barrels per day (bpd), is already planning to build two new 400,000-bpd refineries in Saudi Arabia and is in talks over joint projects in the US, China and South Korea.
Buainain said Aramco had shortlisted four companies, including oil majors, for the development of its new Saudi plants, but declined to name the firms.
Analysts point to a lack of refining capacity in consumer nations as a key reason behind oil’s two-year rally.
Refining margins have seen record levels in the past year after decades of poor profitability. But the cyclical nature of returns and difficulty in gaining planning permission is leading to limited expansion in the West, though fast-growing China and India plan large expansions.
Buainain said there would be an increasing reliance on Middle East sour crude, which forms the bulk of new supplies from Opec producers, so that refiners need to upgrade plants to deal with heavier oil that is more difficult to refine.
“We share the view that major capital investment in this sector will be needed,” he said.