A U.S.-Saudi consortium named MERA Oil is advancing plans for a $5 billion refinery in the Persian Gulf with a capacity of 200,000 barrels of crude oil daily, Reuters has reported. The partners will site the complex outside the Strait of Hormuz and are choosing between three shortlisted Gulf locations. The plan surfaces while a Houthi strike keeps Saudi Aramco's Jazan refinery shut.
A consortium of U.S. and Saudi companies is set to build a new refinery in the Persian Gulf despite the current situation in the region, at a price tag of $5 billion and a capacity of 200,000 barrels of crude oil daily, Reuters has reported. The location will be outside the Strait of Hormuz, the consortium said.
MERA Oil weighs three Gulf sites
The consortium, dubbed MERA Oil, includes Texas-based MWG Group, the Patel Family Office, and PWS, a company associated with Saudi AHQ Group. Its partners are currently selecting the site, working from a short list of three possible locations from the Gulf Cooperation Council, the bloc comprised of six Gulf states.
Besides a refinery, the project will also feature a deepwater port, storage capacity, and export facilities, the report said. At a future date, the complex may add sustainable aviation fuel processing capacity and carbon management facilities, Reuters also said.
A Houthi strike keeps Jazan shut
Meanwhile, Saudi Aramco had to shut down its Jazan refinery earlier this week, removing 400,000 barrels daily from global refining capacity, following a strike by the Yemeni Houthis. The attack took place Saturday, and video verified by Reuters showed a large plume of smoke rising from the refinery. Houthi military spokesman Yahya Saree said the group also struck Aramco facilities in Yanbu.
Saudi Aramco has not commented on the damage or restart schedule. Per media reports, repairs at Jazan will take until mid-August.
Crack spreads at an all-time high
The shutdown will aggravate a supply situation in refined fuels that analysts have been warning about for months but that only began to bite in the past couple of weeks. Crack spreads soared to an all-time high due to the gap between demand for fuels and their supply amid fighting in the Persian Gulf, the Red Sea, and Russia. Russia has begun restarting refineries damaged by Ukrainian drone strikes, but its ban on diesel exports is still in place.
Tanker routes for crude oil are shifting as well. Beijing has held direct talks with Yemen's Houthi movement to let its tankers sail through the southern Red Sea, seeking to keep oil exports flowing from Saudi Arabia's Red Sea terminals and plug the gap caused by Iran's effective closure of the Strait of Hormuz, six sources told Reuters. The Houthis declared their blockade on July 20 after pledging to prevent access to Saudi ports.
Sailing southward from Yanbu to Asia through Bab el-Mandeb takes 16 days on average, against 50 days if a ship turns north for the Suez Canal and then sails around Africa.
Sources: Oilprice.com, Investing.com
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