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Saudi Prince Wants Bush to Press Refinery Issue: Envoy Says U.S. Reneging on Agreement to Increase Capacity

Posted on: Wednesday, 31 May 2006, 18:00 CDT

By Jim Landers, The Dallas Morning News

May 31--WASHINGTON -- Saudi Arabia wants President Bush to do more to encourage U.S. companies to build refineries around the world as part of an agreed policy for reducing oil prices, Saudi Ambassador Prince Turki al-Faisal said Tuesday.

The ambassador, in a breakfast meeting with reporters, said political uncertainties and a lack of refining capacity were responsible for more than 20 percent of the run-up in oil prices this year.

He said that King Abdullah and Mr. Bush had agreed at their meeting last year in Crawford to boost crude oil production and refining capacity as part of a "common energy policy," but that the United States was not fulfilling its side of the agreement.

"We agreed to $50 billion of investments to raise our production capacity and refining capacity," Prince Turki said.

"And your president told our king he will encourage American business to invest in refineries, either in the United States or elsewhere, and we don't think that has happened."

Administration officials pointed to various statements over the last year by Mr. Bush and Energy Secretary Samuel Bodman exhorting American companies to build more refineries.

"Every time the secretary speaks about refining, he's encouraging companies to expand refining capacity in the United States," said Energy Department spokesman Craig Stevens.

"The president and the secretary have said some of the profits the oil companies are making should go into more exploration and more refining."

Expansion plans

The Saudi Refining Co. and Shell Oil Co. last month agreed to scope out designs for a 325,000-barrels-a-day expansion of the Motiva Enterprises LLC refinery in Port Arthur, Texas.

If approved, the expansion would make the refinery the largest in the United States. Shell and state-owned Saudi Refining are 50-50 partners in Motiva, which also owns two Louisiana refineries.

Mr. Bodman was at the Port Arthur refinery on May 18 to urge the expansion project forward.

Earlier this year, Prince Turki said his government was surprised by Mr. Bush's State of the Union address where he said, "America is addicted to oil" and vowed to reduce U.S. dependence on oil from the Middle East.

Tuesday, the prince said that Mr. Bush wrote King Abdullah last month, affirming the energy policy goals reached last year at the Crawford summit. White House officials would not comment on the letter.

Need for refining

ConocoPhillips Co. and the Saudi Arabian Oil Co. last week agreed to study construction of a new 400,000 barrels a day refinery in Yanbu, Saudi Arabia. A similar agreement was signed with the French company Total.

The Saudis and Exxon Mobil Corp. are working to triple production at an existing refinery in China to 230,000 barrels a day.

Analysts say these and other Saudi refinery expansions aim to give the world's largest oil producer a lead role in refined products as well. Much of the crude oil produced in Saudi Arabia is selling for less than the world price of $72.03 a barrel because refiners cannot handle the sulfur content easily.

The new Saudi refineries are designed to handle that crude oil and turn it into low-sulfur gasoline and other products for the United States, Europe and the Far East.

E-mail jlanders@dallasnews.com

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Source: The Dallas Morning News

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