The U.S. Justice Department, the Environmental Protection Agency (EPA) and the U.S. Attorney, San Francisco, today announced a comprehensive Clean Air Act settlement with Chevron U.S.A. Inc. The settlement is expected to reduce harmful air emissions by almost 10,000 tons per year from five U.S. petroleum refineries that represent more than five percent of the total refining capacity in the United States.

The states of Hawaii, Mississippi, and Utah and the Bay Area Air Quality Management District in California are joining the settlement, which is part of EPA's national effort to reduce air emissions from refineries.

A consent decree filed today in U.S. District Court in San Francisco, Calif., will require Chevron to spend an estimated $275 million to install and implement innovative control technologies to reduce emissions at its refineries. Chevron's actions under this agreement will reduce annual emissions of nitrogen oxide (NOx) by more than 3,300 tons and sulfur dioxide (SO2) by nearly 6,300 tons. The air pollutants addressed by today's agreements can cause serious respiratory problems and exacerbate cases of childhood asthma.

"The emissions reductions required by this settlement will lead to cleaner air and significant environmental and public health benefits," said Assistant Attorney General Thomas L. Sansonetti. "We expect to continue our strong enforcement efforts and see to it that other refiners will follow suit by improving environmental controls to reduce harmful emissions."

To meet obligations under EPA's New Source Review program, Chevron will cut emissions significantly from its largest emitting units through the use of innovative technologies. In addition, under the negotiated settlement, Chevron will upgrade its leak detection and repair practices, implement programs to minimize flaring of hazardous gases, reduce emissions from its sulphur recovery plants and adopt strategies to ensure the proper handling of hazardous benzene wastes at each refinery. The affected Chevron refineries are located in Richmond and El Segundo, Calif., Pascagoula, Miss., Salt Lake City, Utah and Kapolei, Hawaii.

"The settlements benefit not only the environment, but the communities that were directly affected by the pollutants," said John Peter Suarez, EPA Assistant Administrator for Enforcement and Compliance Assurance. "It goes a long way in leveling the playing field for all companies that are good neighbors in the places where they do business."

Chevron also will pay a $3.5 million civil penalty and spend more than $4 million on further emissions controls and other environmental projects in communities around the company's refineries. Part of the penalty is to resolve claims for hazardous substance release reporting violations at its El Segundo, Calif., refinery. The states of Hawaii, Mississippi, and Utah and the Bay Area Air Quality Management District will share in the cash penalties and the benefits of the environmental projects to be performed by Chevron.

This agreement is the latest in a series of multi-issue, multi-facility settlements reached by EPA under its Petroleum Refinery Initiative. Two weeks ago, EPA and the Justice Department announced Clean Air Act settlements with Coastal Eagle Point Oil Company, Ergon-West Virginia Inc. and Ergon Refining Inc., and CHS that will reduce refinery emissions by nearly 4,000 tons per year in five states. In the past three years, the United States has reached similar agreements with other major refiners, including Motiva Enterprises, Equilon and Deer Park Refining, Marathon Ashland Petroleum, Koch Petroleum Group, BP Exploration & Oil, Conoco, and Navajo Refining. These settlements provide for a comprehensive, cooperative approach to addressing environmental problems across the industry. To date, settlements under this initiative are reducing pollution at 42 refineries across the United States that account for nearly 40 percent of domestic refining capacity.

The proposed consent decree is subject to a 30-day public comment period.

A national public advocacy group has called on oil refineries, including five in Louisiana, to stop using hydrofluoric acid, a deadly chemical that puts nearby communities at risk in the event of a leak.

In a report called "Needless Risk" issued Tuesday, the U.S. Public Interest Research Group said the threat of a catastrophic terrorist attack should force chemical plants and refineries to rethink how safe their facilities are. It said current defenses against a leak are inadequate.

"Hiring more guards, building higher fences and placing more lights may all be part of a good security plan, but this does not reduce the threat to the community," the report said. "Switching chemical processes to something less volatile not only reduces the hazard to the community, but reduces the cost of physical security and the attractiveness of the facility as a target for attack."

Of the 153 oil refineries in the United States, the report found that 50 use hydrofluoric acid to make an additive that increases the octane in gasoline. When released, the chemical, known in the industry as HF, forms a toxic, ground-hugging cloud that can kill on contact. Even minor exposure can cause skin burns and blindness. Inhaling it can lead to lung damage.

A release in 1987 from a refinery in Texas City, Texas, sent 1,000 people to the hospital and forced 3,000 people from their homes for three days.

With 11 refineries using HF, Texas leads the nation, followed by Louisiana with five -- including four in the metropolitan New Orleans area storing nearly 2.5 million pounds of the chemical, according to the Environmental Protection Agency.

The Louisiana facilities are Exxon Mobil's refinery in Chalmette, Murphy Oil in Meraux, ConocoPhillips refining in Belle Chasse, Marathon Ashland Petroleum in Garyville and Placid Refining in Port Allen near Baton Rouge.

On Sept. 30, the Chalmette plant had an accidental release of a small amount of hydrofluoric acid, but no injuries were reported. Chalmette resident Ken Ford, president of St. Bernard Citizens for Environmental Quality, said storage of the chemical puts residents in danger for miles around.

"The public is not aware of what's going on," said Ford, who lives a half-mile from the plant.

An official at the Chalmette facility said there are no plans to move away from HF.

"We're continuing to look at different types of technology," said Nora Scheller, the plant's public affairs manager. "We are constantly evaluating that. The biggest thing for us is ensuring we're running a safe refinery."

In the wake of Sept. 11, 2001, the plant has beefed up traditional security, and Scheller said it uses cameras and sophisticated sensors to monitor storage tanks for leaks. If a leak occurs, a system of water hoses has been installed to "knock down" the HF cloud and prevent its migration.

But critics warn that a catastrophic attack could render leak-detection and mitigation equipment useless.

Less toxic alternatives to HF are readily available, and one, known as modified HF, was developed by Mobil Corp. and Phillips Petroleum Inc. An Exxon Mobil refinery in Torrance, Calif., made the switch several years ago at a cost of $3.6 million as part of a court settlement with the city. The Exxon Mobil refinery plant in Baton Rouge uses another less dangerous HF alternative, sulfuric acid.

Federal efforts to curb HF use have gone nowhere. A bill by Sen. Jon Corzine, D-N.J., which would force companies to adopt "inherently safer technology," was derailed after heavy lobbying by the chemical industry. The Bush administration has pushed instead for a voluntary system of security assessments and upgrades.

Rep. Frank Pallone, D-N.J., sent a letter Oct. 9 to Rep. Billy Tauzin, R-Chackbay, chairman of the House Energy and Commerce Committee, requesting a hearing on a companion bill in the House. With the session winding down, chances of it advancing are slim.

Four oil refineries have agreed to reduce air emissions by more than 3,900 tons annually under an agreement with the federal government.

The U.S. Environmental Protection Agency and the Justice Department announced the Clean Air Act settlements Oct. 1. The agreements involve Coastal Oil Company, CHS Inc., Ergon-West Virginia Inc. and Ergon Refining Inc. The companies have a collective production capacity of about 185,000 barrels per day.

The four refineries will install and implement control technologies to reduce emissions from their largest emitting units, reducing annual emissions of sulfur dioxide by 2,800 tons and nitrogen oxide by 1,100 tons.

The refineries are located in Westville, N.J.; Laurel, Mont.; Newel, W.Va.; and Vicksburg, Miss.

Valero Energy, which owns 14 refineries in North America, is starting a new unit at its plant in Texas City.

The unit, a coker, can convert heavy oil products into lighter products such as naphtha and heating oil. The coker has a capacity of 45,000 barrels a day, said Richard Marcogliese, senior vice president of refinery operations in San Antonio.

The San Antonio-based company began operating the coker last Wednesday after more than a year of construction, he said this week.

"We'll easily get 30,000 barrels a day more product from the refinery as a result of the new coker" in addition to the 200,000 barrels produced, Marcogliese said. "The new unit will also allow us to run heavier, cheaper crude oil."

Time, air-pollution rules and racial issues are squeezing plans for an oil refinery south of Phoenix.

New ozone regulations could be a "deal breaker" for the Arizona Clean Fuels plant, and threats of an environmental-justice complaint could cause unacceptable delays for the multimillion-dollar project proposed near Mobile, said Ian Calkins, a spokesman for the refinery backers.

Still, Calkins said Clean Fuels company officials are confident they can overcome the challenges and win a state air-quality permit.

The concerns arise as state officials near a decision on whether to issue a preliminary permit for the refinery, which would be built about 20 miles south of the Valley.

Steve Owens, director of the Arizona Department of Environmental Quality, said a decision should occur within the next few weeks.

The agency has until April 5 to make a final decision on the refinery's permit, or it will lapse. State licensing rules dictate the deadline.

Coincidentally, the deadline falls 10 days before federal officials must finalize the boundaries for a new ozone area, in which tougher regulations on emissions would apply. The refinery is likely to be within the new boundary but would be exempt from the new layer of ozone regulations if construction were under way.

Calkins said it is crucial that the Clean Fuels plant permit get a final nod from the state before the new ozone boundary is set. Otherwise, the cost of paying for the needed steps to offset the air pollution from refinery emissions would be insurmountable. "It would be a deal breaker," he said.

Complicating the issue is the Mobile Community Council, which is threatening to file an environmental-justice complaint over the project's site in a historically Black area.

Mobile was founded by African-American sharecroppers from Mobile, Ala., among other places. Attorney Howard Shanker has notified Owens of his concerns that the refinery would continue a pattern of discrimination against minority communities when it comes to locating industry. The area is home to two landfills, and another large landfill is proposed.

To Shanker, the only solution is to bar the refinery.

Arizona Clean Fuels has made various offers to buy out residents who would be affected by the refinery. But Calkins admitted that the company doesn't have a strategy to deal with the complaints of environmental racism, noting the case could end up in court..

The complications of building a refinery close to an urban area have made some question why the company doesn't explore alternative sites.

Gov. Janet Napolitano said the company has looked at a site in northeastern Yuma County, and Owens said the agency has determined that about 90 percent of Clean Fuels' permit work would be transferable to a new site.

Calkins, however, said other sites are not on the table. The Mobile location is ideal because of its proximity to the urban area, to roads and the Union Pacific Railroad, and to a natural gas pipeline that would deliver natural gas needed to fire the refinery.

However, the project needs crude oil, and project leaders hope to build a pipeline from a Mexican port, perhaps Guaymas or Rosarito, to Mobile. Those talks are ongoing.

Arizona has no oil refinery, making it dependent on gasoline shipped from California and Texas. Clean Fuels has said that an Arizona-based refinery would provide a reliable fuel supply to the Valley, estimating it would sell half of its production to the Arizona market.

If approved, it would be the first refinery built in the nation in 24 years. Clean-air regulations and local concerns have blocked projects proposed since a refinery was built in Gary, Ind., in 1979.

Oil executives announced plans Monday night to hasten cleanup of the former Amoco refinery site at Wood River to prepare the way for future development.

BP Corp. informed the City Council that during the next year it will be removing all signs of the 95-year-old refinery along two key stretches.

Greg Jevyak, the environmental business manager for BP, said the company is investing $8 million to remove and relocate the BP marketing terminal on Old St. Louis Road and demolish oil tanks along Madison Avenue. In so doing the company will provide a major boost to previously announced plans to remediate 840 acres for commercial and industrial development.

The terminal, which provides fuel for around 150 trucks a day and maintains dozens of storage tanks, will be relocated to the southeast corner of BP property, Jevyak said.

"This is a major step in preparing the former Amoco refinery site for new development and it represents a sizeable investment by BP in the future of this site and the community," he said.

Jim LaBrie, distribution center manager for BP in Wood River, said BP’s marketing terminal is the last major petroleum operation on the former Amoco Refinery. It employs approximately 50 people with a payroll in excess of $3 million. The terminal supplies petroleum to service stations, petroleum suppliers and commercial customers in a 100-mile radius.

BP is putting emphasis into hiring local contractors for the project, he said.

Redevelopment of the site began shortly after the facility closed in 1981, but it picked up substantially last year with a plan to revitalize and convert the former brownsfield, announced by a partnership that included BP, a London-based company and owners of the former refinery, Triad Industries, Inc., RLJ, L.L.C., the developer of the project, Wood River City officials, and representatives from both federal and state Environmental Protection Agencies.

"Even though we remove everything it still has to go through EPA," said Bob Miner, a project spokesman.

He said the new terminal should be built within a year and the total project completed in about 18 months.

"The new terminal should be done by October (2004)," Miner said. "and all the storage tanks torn down by the following spring."

BP was one of the first major companies to volunteer cleanup of a former oil refinery site. After the federal EPA implemented reforms to accelerate changes to cleanup hazardous waste facilities so that communities could capitalize on the redevelopment potential BP invested more than $70 million for remediation. The BP site became one of five brownsfield pilot projects for the U.S. Environmental Protection Agency’s Resource Conservation and Recovery Act.

No federal or state money has been involved in the cleanup.

The refinery was first opened in 1908 by Standard Oil Co., which later became Amoco. Amoco and British Petroleum merged in 1998 to become BP Amoco, which is now referred to as just BP. BP is the largest oil and gas producer and one of the largest gasoline retailers in the United States.

Companies reported this year that they expect to invest nearly $1 billion in new projects in St. Charles Parish, making it the state leader in planned capital investment ventures, according to a Louisiana Department of Economic Development report.

Shell Chemical LP, Union Carbide Corp. and Motiva Enterprises LLC are responsible for many of the expansion projects. For example, six expansion projects reported in the third quarter of this year would create 394 construction jobs and cost about $200 million.

Valero Refining reported that its purchase of bankrupt Orion Refining Corp. this past summer would retain 300 jobs.

Of the parish's nearly billion-dollar total, Valero accounts for $400 million, the price to buy the refinery. Valero also plans to make about $200 million in capital improvements within three years.

Valero Energy Corp. (NYSE: VLO) announced that it has signed a 30-year agreement with London-based KBC Advanced Technologies PLC to license the firm's fluid catalytic cracking simulator (FCC-SIM) software at Valero's 13 refineries.

Valero will use the simulation software to perform process studies and troubleshooting on its fluid catalytic cracking units in order to optimize each unit's performance at the refineries.

KBC's fluid catalytic cracking simulator software also will allow the oil refining and marketing company to evaluate economic tradeoffs of alternative FCC operations by examining "what if" or "how much is it worth" scenarios.

"After a detailed technical due-diligence of the simulation packages in the marketplace, we chose KBC's FCC-SIM software package for its advanced prediction capabilities over a range of feeds and operations and for its ease of use," says Jacque Forrest, director of refinery planning systems at Valero.

KBC is an independent process engineering consulting firm that works to improve operational efficiencies in the hydrocarbon processing industry.

Dealing with the doubts hanging over the interest of North American refineries in stepped up oil sands volumes, Enbridge said it is trying to determine "whether modifications to refinery operations such as coking, hydrotreating and sulfur removal capabilities would improve the fit between oil sands supply potential and the ability of these markets to absorb this increase in supply."

Enbridge said meetings with oil sands producers and refiners will continue through 2003 before a decision is made to proceed with a full project application.

With some of the eastern pieces falling into place, interest is turning to the Gateway concept — a possible C$2.5 billion line from northern Alberta to either Kitimat or Prince Rupert on the British Columbia coast for tanker shipment to California and Asia.

Gateway could be designed to carry 400,000 bpd over 720 miles, coming on stream in 2009.

But Enbridge does not have that field to itself.

Suncor Energy Products Inc. and Shell Canada Products has announced they have signed an agreement under which Suncor's Sarnia refinery will process Shell's Sarnia refinery high-sulfur diesel into ultra low sulfur diesel.

This 20-year agreement enables both companies to meet federal regulations for ultralow sulfur diesel fuel that take effect on June 1st, 2006. The new regulations will limit sulphur in on-road diesel fuel to a maximum of 15 parts per million, from its current maximum level of 500 parts per million.

Suncor will be responsible for the design, construction and operation of a hydrotreater atthe Suncor refinery site. The hydrotreater will reduce the sulfur in both Suncor and Shell's high-sulfur diesel fuel. Shell will pay Suncor a processing fee for this service.

"Operating a single hydrotreating unit, instead of two separate units, will result in environmental benefits for the Sarnia-Lambton community," said Kirk Bailey, Suncor's vice president, Sarnia refinery. "This agreement enables us to meet new environmental regulations that will improve air quality and provide better quality products for consumers."

"Shell Canada is committed to the principles of sustainable development," said Peter St. George, Shell's general manager, Sarnia Manufacturing Centre.

"This agreement with Suncor is an example of how we integrate economic, environmental and social considerations into our day-to-day activities and plans."

Engineering and construction details of the new facilities are in development and being finalized. Subject to receiving regulatory approval, Suncor expects to begin construction of the approximately $300 million diesel desulfurization project in May 2004, with project completion expected in the first quarter of 2006. Contractor employment will peak at approximately 1,000. Additional processing capacity will be installed to ensure an overall reduction of sulfur dioxide emissions from the refinery. Suncor will also design the new facility to meet or exceed regulatory emission requirements.

Suncor Energy Products Inc. is a wholly-owned subsidiary of Suncor Energy Inc. In addition to a refinery in Sarnia, Suncor Energy Products has a network of 287 Sunoco-branded retail and Fleet Fuel cardlock sites and has a 50 percent joint venture interest in over 200 Pioneer and UPI retail sites. Suncor Energy Products Inc. manufactures, distributes and markets transportation fuels, heating oils and petrochemicals primarily in Ontario.

Sunoco in Canada is separate and unrelated to Sunoco in the United States, which is owned by Sunoco, Inc. of Philadelphia. Shell Canada Limited is a major integrated petroleum company in Canada, comprising three business units. The downstream business manufactures, distributes and markets refined petroleum products across the country. Refineries in Montreal, (Quebec) Sarnia, (Ontario), and Fort Saskatchewan, (Alberta) convert crude oil into gasoline, diesel fuel, aviation fuels, solvents, lubricants, asphalt and heavy fuel oils. Shell has a Canada-wide network of 1,459 retail sites.

MEXICO

PlantWeb(R) Digital Plant Architecture is Called "The Future in Process Control" by Pemex Official

Emerson Process Management, a business of Emerson (NYSE:EMR), announced that it has been selected by Pemex for a $3.9 million project to automate part of the oil and gas company's Tula refinery near Mexico City.

Emerson's PlantWeb(R) digital plant architecture with FOUNDATION(tm) fieldbus technology will be used to automate a new alkylation plant at the Tula refinery that will produce high-octane gasoline. The refinery has a production capacity of 320,000 BPD (barrels per day), with most of the production supplying the motor fuel needs of Mexico City residents.

"After exhaustive reviews of all the new automation technology presented to Pemex, we selected Emerson because we see PlantWeb as the future in process control," said Alfredo Martinez, control systems engineering manager.

In selecting Emerson, Pemex cited:

-- Efficiencies of supporting a single supplier solution with leading edge technology;

-- Engineering flexibility and savings due to PlantWeb's use of standards in the different layers of the system;

-- Improved plant availability through the use of advanced diagnostics in field devices; and

-- Quick availability enabled by PlantWeb's easy configuration and reduced time needed to engineer and commission the alkylation plant.

Martinez also cited the company's success with Emerson's PlantWeb at the Deer Park, Texas refinery that Pemex owns jointly with Shell.

Felix Rodriguez, member of the board of Venezuela´s oil company PDVSA Occidente VP (western division) has said that the company’s ongoing restructuring, is likely to be finished by the end of this year.

"This is the end of the restructuring process and means that the emergency situation of the company is over, so now we can focus on the new projects and expansion plans," Rodriguez said at the heavy oil conference in Puerto la Cruz.

The reorganization is evaluating the operations of the 940.000 b/d Paraguana refining complex or CRP as one separate entity, Rodriguez said. And the sale of some foreign assets is still a possibility, he added.

One of the assets that they have a eye on to sell is the 167,000 b/d Lemont refinery in the U.S. Rodriguez said, that it’s an example of "bad business" for Venezuela.

Earlier this year, PDVSA fired 18, 000 employees or around 50 percent of its work force that went on strike. The strike was aimed at forcing the resignation of Venezuelan President Hugo Chavez.

Chavez, however, survived the general nation-wide strike of two months.

PDVSA had to reorganize its whole operation and is not yet back to its pre strike level of operations and some observers said that PDVSA never will get back to its 3.3 m b/d of crude production, due to the lack of its present human resources and funds.

According to analysts, current production stands around 2.3 b/d well below government figures of 2.9 million b/d. Potential output capacity has fallen by around 400,000 b/d, according to analysts.

It would take Venezuela many years, plenty of financial and human resources to bring output capacity to its previous level.

2. ASIA

All Central trade unions, including the Centre for Indian Trade Unions (CITU), Indian National Trade Union Congress (INTUC), All-India Trade Union Congress (AITUC), and Hind Majdoor Sabha (HMS) have joined hands demanding complete stoppage to the government’s move to privatize public sector oil companies.

To counter the onslaught on the oil sector PSUs, all the leading unions representing production, refining, pipeline and marketing from across the country have formed a ‘national united forum’ to oppose privatization of oil companies.

Indicating this, CITU secretary Swadesh Dev Roye told FE that having failed to privatise HPCL and BPCL following the Supreme Court judgment, the Cabinet committee on divestment has decided to split and privatize Indian Oil Corporation.

The onslaught of privatization "will soon be extended to other oil PSUs such as Oil and Natural Gas Corporation, besides IOC, as these companies were not formed by an Act of Parliament, he pointed out.

He said IOC, the only domestic company in the Fortune 500 list, is also 17th largest petroleum company in the world. IOC controls 42 per cent and 55 per cent share in the domestic refining and marketing respectively.

The public sector oil giant has contributed a hefty Rs 33,007 crore to the national exchequer last fiscal whereas Reliance Industries, the country’s largest corporate group, contributed only about Rs 10,000 crore during the same fiscal.

He has alleged that the government wants to offer majority stake in IOC to Reliance which runs the 27-million ton capacity Jamnagar Refinery but does not have any retail outlet.

Saying that privatization will not be in the national interest, he said the government, in light of the Supreme Court judgment on BPCL and HPCL sell off, should reconsider its policy of disinvestments and privatization as this has Constitutional implication as well.

Meanwhile, HMS secretary general Umrao Mal Purohit has described the CDD decision to put on block the Rs 1,19,848-crore IOC as unfortunate, and has asked the government to immediately withdraw its proposal failing which they will have no option but to direct its 50 lakh members to fight it out with full strength. He also assured his union’s full cooperation and support to IOC unions in their struggle.

INTUC secretary-general Chandi Das Sinha said the long process of joint consultations, national conventions and joint representations to the Prime Minister have really contributed in strengthening and expanding horizontal and vertical expansion of trade union movement in the oil sector and major decisions will be taken at a convention to be held in Gauwhati next month. Trade unions of all affiliations functioning in oil PSUs will participate in the convention.

Speaking about the SC ruling on BPCL and HPCL,

Mr Sinha said, "the apex court has made a significant observation by recalling the Act which states that the acquisitions of oil companies were done to ensure that ownership and control of petroleum products is vested with the state so as to subserve the common good."

"The judgment definitely provides a little bit of breathing space but without being complacent, the ongoing united struggle will continue till realization of complete reversal of the policy of privatization pursued by the government."

Prime minister Atal Bihari Vajpayee has laid the foundation stone of Indian Oil Corporation's Rs 10,000 crore Panipat refinery expansion and petrochemicals project.

"The refinery expansion, which I hope will be completed by 2004, will help meet the deficit (in petroleum products supplies)," Vajpayee said.

While India had become a net exporter of food grains, it continued to rely heavily on imports to meet its liquid fuel requirements, he observed.

"This (the expansion project) is an important step in becoming self-reliant."

The country spent over Rs 84,000 crore in 2002-2003 on crude oil imports, he said, underscoring the need for India to become self-reliant in petroleum products availability.

Petroleum minister Ram Naik said doubling of Panipat refinery capacity to 12 million tonnes would meet the demand for petroleum products in north and northwest regions.

"At the present consumption level, the region requires over 32 million tons of petroleum products out of the total requirement of about 103 million tons consumed last year," Naik said, adding the two refineries operating in the region at Mathura (Uttar Pradesh) and Panipat have a combined capacity of 14 million tons.

Panipat refinery capacity is being doubled to 12 million tons by December 2004 at an estimated cost of Rs 4,165 crore.

Process technology selection for Panipat refinery expansion has been done considering the demand of petroleum.

Besides, IOC is also setting up a Paraxylene/PTA project towards integration in 'hydrocarbon value chain'.

PTA and Paraxylene, to be manufactured from Naphtha, are used to produce polyester staple fiber (PSF) and polyester filament yarn (PFY) for use in textiles, video and audio tapes.

IOC has said the PTA plant would be the single largest of its kind in India with a world-scale capacity of 553,000 ton.

With the latest genre of technology, the Paraxylene/PTA project will be one of the most advanced petrochemicals plants in South Asia.

Vajpayee said Panipat, which is known for textile and handlooms, would soon emerge as a petroleum products and petrochemicals hub driving the economy.

Elaborating on the steps taken to increase the country's self-reliance in hydro-carbon fuels, the Prime Minister said the government has started blending of ethanol, extracted from sugarcane, in petrol. Ethanol blending will reduce petrol prices.

Indian Oil Corporation (IOC) has mandated Tata Infotech Ltd to connect six of its refineries and other offices located countrywide with each other by way of a wide area network (WAN) structure.

The deal is worth over Rs 1 crore and WAN will connect IOC's Mathura, Barauni, Panipat, Digboi, Haldia and Koyali refineries with each other along with offices in Noida, New Delhi and Gurgaon, a Tata Infotech release said here today.

This network structure will also form the backbone of IOC's future plans for installing internet telephony and running of its SAP software on-line, it added.

India has introduced new emissions standards which are expected to cost car manufacturers and oil refining firms 550 billion rupees (11.8 billion dollars) in conversion costs.

The new standards will be phased in over the next seven years, Oil Minister Ram Naik told reporters after a cabinet meeting.

"The investment requirement of the automobile industry is estimated at around 250 billion rupees over this period," Naik said, adding that oil refineries would spend about 300 billion rupees upgrading their fuels.

However, one environmental group dismissed the new policy as "eyewash" which would not do enough to improve air quality in India's smog-choked cities.

India's sole private refiner, Reliance Industries, said on Tuesday it had shut a fluidzed catalytic cracking unit (FCC) at its 620,000 barrels-per-day Jamnagar refinery following a leak.

The company's Web site says the FCC, which converts gas oil into higher value products such as gasoline and naphtha, is the biggest of its kind in the world.

Bombay-listed Reliance, which exports about 25 per cent of its output, said all other units at the country's biggest single refinery were operating normally.

The FCC unit was expected to resume production in two weeks, the company said in a stock exchange statement.

"The shut down of the FCC section is not expected to have any material adverse impact on the company's performance," it said.

An industry source said Reliance had sufficient inventory to ensure that exports and domestic sales were not hit by the shutdown, which happened on Monday.

The Jamnagar refinery accounts for about one-quarter of India's total refining capacity of 2.3 million bpd. It processed 2.84 million tons of crude oil in August, equivalent to 669,000 bpd, against 2.62 million tons in the same month last year.

Indian refineries often run plants above so-called nameplate capacity.

The company sells about 17 million tons of products out of total output of 31 million tons to state-run oil firms, which have a network of gas stations throughout the country.

It also supplies liquefied petroleum gases to state companies. It uses some products for feed stocks into its own petrochemical units and exports the rest.

China's refineries worked at record levels in September to feed the world's fastest growing major economy, Chinese industry sources said. Reports showed crude imports also hit a new record and a break down of the figures indicated gasoline production hit a new high to provide fuel for the millions of vehicles on Chinese roads.

"With refineries running at this record level and with stocks still low, it shows demand is much stronger than expected," said a Beijing-based trading manager with China's largest refiner, China Petroleum and Chemical Corp (Sinopec).

"Gasoline has led the demand this year. That is why we are cutting back sharply on our gasoline exports."

The International Energy Agency, which monitors the world oil market for the West, has said China's oil demand growth was rising faster than expected following the economy-sapping outbreak of the deadly Severe Acute Respiratory Syndrome.

The latest economic data from China showed industrial output in September leaping ahead at more than 16 percent from a year earlier, showing little sign of cooling despite government attempts to prevent overheating.

New car sales topped one million last year and were up 89 percent in the first eight months of 2003 versus the same period last year.

BOOM TIME

The latest oil data from the State Statistical Bureau showed China processed 175.74 million tons of crude oil in the first three quarters of 2003, up 10 percent year on year.

The crude processed in September alone hit a new high of 21.19 million tons, up 12.5 percent from a year earlier.

If China's largest refinery, Zhenhai Refining & Chemical Co Ltd, is anything to go by, the sector could continue at record levels through October.

Zhenhai plans to raise production in October to a record 300,000 bpd, or 95 percent of its output capacity, a company source said China's gasoline production was a record 4.1 million tons in September, taking accumulative gasoline output for the first nine months of 2003 to almost 35 million tons, up more than 10 percent from a year earlier.

Robust demand has also seen China stepping up imports of both crude oil and oil products to replenish thin domestic inventories.

China imported 67.21 million tons of crude oil in the first nine months of this year, up almost 30 percent from the same period last year, the International Business Daily reported.

The figure is just 2.2 million tons short of China's crude imports for the whole of 2002.

Chinese industry officials have predicted China's total crude imports in 2003 would hit a record at more than 82 million tons.

Oil product imports soared 54.5 percent year on year to 21.62 million tons in the first three quarters, the International Business Daily said.

The Stone & Webster Limited company of Britain has signed a consultation contract with the Dzung Quat oil refinery. Under the deal, the British company will provide 70 high profile experts in management, construction and operation. Personnel training is a major part of the deal. It needs the training of an estimated 100-strong managerial staff, and 800 operating engineers to handle a factory which can produce 6.5 million tons of products a year. The Dzung Quat oil refinery is under construction in central Quang Ngai province.

Oil refiner Petron Corp. will spend six billion pesos for capital expenditure in 2004, the bulk of which is intended for the upgrade of its refinery in Bataan, company vice president for corporate planning Ziyad Al-Shiha said.

Petron will also spend some 500 to 600 million pesos on expansion of its service station network next year, he told reporters.

Next year, the company plans to put up around 20 stations, which will offer products complying with environment-friendly specifications under the Clean Air Act (CAA), he said.

At a cost of around 63 million dollars, Petron is putting up two refinery units that will enhance its compliance with the stringent petroleum product requirements under the CAA.

Petron expects the Gas Oil Hydroheater No.3 and LVN Isomerization Unit at its refinery to be ready for operation by end-2004 or a 15-month construction.

3. EUROPE / AFRICA / MIDDLE EAST

Invensys plc, one of the leading process automation vendors in the world, today unveiled a group that will tackle the future of innovation in the hydrocarbon industry, gathering a group of leaders from upstream, downstream and chemical companies and organizations to form the Centre for Hydrocarbon Business Innovation. The Centre and its invited members were announced at the Instrumentation, System and Automation Society conference in Houston.

The Centre will be led by Dr. Calvin Cobb, a leading industry figure who heads Invensys' new Global Hydrocarbons Consulting practice and serves on the boards of several industry publications.

"The Centre in effect will imitate something the high-tech industry does well, engaging a broad range of industry leaders, academics, analysts, trade media, senior officials from trade associations to identify and investigate leading issues and problems in the industry," Cobb said. "This 360-degree perspective on issues will serve as the catalyst for change in an industry that isn't known for its innovative, collaborative spirit." Cobb added that Centre activities will offer visions for the Oilfield of the Future, the Refinery of the Future and the Chemical Plant of the Future. The Centre will research, investigate and develop proposed industry solutions around those three concepts, leveraging the Centre's "proof-of-concept" approach with clients and others, to assist in developing groundbreaking Invensys solutions. Cobb envisions publishing Centre viewpoints and research in a newsletter, "Issues in Hydrocarbon Business & Technology" as well as an annual journal.

"The Centre's initial board members see that an industry-wide organization like this Centre can develop solutions and thinking that will not only position companies for success tomorrow, but also provide them with ways to incorporate these new strategies for success in today's markets," Cobb said. "The Centre is an ideal way to facilitate conversation among acknowledged leaders in order to advocate for the collective knowledge of everyone involved."

The members' names and companies will be released after initial Centre meetings in North America and Europe in coming months.

About Invensys

Invensys is a global leader in production technology. The group helps customers improve productivity, performance and profitability using innovative services and technologies and a deep understanding of their industries and applications.

Invensys Production Management works closely with customers to increase performance of production assets, maximize return on investment in production and data management technologies and remove cost and cash from the supply chain. The division includes Global Hydrocarbon Consulting, Global Power Consulting, APV, Avantis, Eurotherm, Foxboro, IMServ, SimSci-Esscor, Triconex and Wonderware. These businesses address process and batch industries -- including oil and gas, chemicals, power and utilities, food and beverage, pharmaceutical and personal health care, and mineral processing -- plus the discrete and hybrid manufacturing sectors.

Invensys operates in more than 60 countries, with its headquarters in London.

Parsons E&C, a world leader in gas treating and sulfur recovery technologies, has been working successfully with ExxonMobil Research and Engineering (EMRE) using their Flexsorb(R) technology for nearly 10 years. More than 50 plants have been successfully installed using Flexsorb(R) technology. Recently, Parsons E&C was awarded contracts for three high-profile projects using our licensed technologies in widely differing applications as described below.

GASCO awarded Parsons E&C the process license services for a 30 ton per day (TPD) sulfur recovery unit for the third NGL train at GASCO's facility at Ruwais in the United Arab Emirates. Parsons E&C brings together an exclusive combination of technologies, enabling the processing of the lean acid gas streams to meet the tight guarantee requirements at the lowest capital and operating cost. The technologies used include:

-- Flexsorb(R) SE Plus Acid Gas Enrichment (AGE) - EMRE

-- Claus Technology - Parsons E&C

-- BSR Tail Gas Treating Unit (TGTU) Technology - Parsons E&C

-- Flexsorb(R) SE Plus (TGTU) Technology - EMRE

-- D'GAASS Technology Liquid Sulfur Degassing - GAA

The process scheme selected to meet the 200 mg/Nm₃ SO₂ emission guarantee (equivalent to greater than 99.9% sulfur recovery efficiency) is an acid gas enrichment unit, followed by Claus and an amine based tail gas treating unit, with liquid sulfur degassing by the D'GAASS process. The amine used in the AGE and TGTU is Flexsorb(R) SE Plus. In the AGE it enriches the lean acid gas with maximum of H2S selectivity resulting in relatively rich acid gases for conventional processing in the Claus and TGTU.

EnCana (U.K.) Ltd, on behalf of its Buzzard co-venturers Intrepid Energy, BG Group and Edinburgh Oil and Gas, awarded Parsons E&C the process license and basic engineering design package for an acid gas removal unit (AGR). The AGR will treat 76 MMSCFD of associated gas and lift gas from the Buzzard Field; an offshore development located 100km North East of Aberdeen on the United Kingdom Continental Shelf.

In the heart of the process, Parsons E&C is using its sub-licensing agreement with EMRE for Flexsorb(R) Hybrid SE Technology. This technology requires only a single gas treating process step to remove H2S, Mercaptans and CO2 down to the unit treated gas specification and thus reducing the project processing complexity and overall capital cost. This is augmented by the Flexsorb(R) solvent's high capacity for absorption of acid gases to reduce solvent circulation and related utility requirements. The sweet gas produced will feed downstream dehydration and hydrocarbon dew-point units before export.

CNPC-AMG (China National Petroleum Corporation International - Aktobe Petroleum Joint Stock Company) awarded Parsons E&C a contract to provide proprietary technologies and basic engineering design package for an acid gas removal unit (including Mercaptan removal), sulfur recovery unit, tail gas clean-up unit and LPG H2S & Mercaptans removal unit for a new gas purification plant in the Zhanazhol oil field of Aktobe in Kazakhstan.

Parsons E&C will provide engineering services to develop basic engineering design packages for the following licenses:

-- Flexsorb(R) Hybrid SE Acid Gas Removal - EMRE

-- Claus Technology - Parsons E&C

-- BSR TGTU Technology - Parsons E&C

-- Flexsorb(R) SE (TGTU) Technology - EMRE

-- D'GAASS Technology Sulfur Degassing - GAA

CNPC-AMG are building the new purification plant for treating associated gas and cap gas produced in the oil field to meet the sales gas Qualification Standard OCT51.40-93. The facility will be a critical part of the Natural Gas Treatment & Utilization Project in the Zhanazhol oil field. It will be designed to assure a lifetime of at least 20 years and meet local environmental protection requirements.

The Kaduna Refining and Petrochemical Company (KPC) Limited, a subsidiary of the Nigerian National Petroleum Corporation (NNPC) which was shut down in March this year due to pipeline vandalism has resumed production.

The general manager, group public affairs department of the NNPC, Ndu Ughamadu who confirmed this yesterday in Abuja, said that although the plant had resumed production of petrol, fuel oil and kerosene, the lube section of the plant as well as the Fluid Catalytic and Crack Unit (FCCU) were still not functioning and that the FCCU needed full rehabilitation to function at the desired level.

"The refinery has started receiving crude oil from Shell Petroleum Development Company (SPDC) from its Escravos facility," he said and that Turn-Around Maintenance (TAM) of the Warri refinery was in top gear and would be completed soon.

This is coming a day after the Bureau of Public Enterprises (BPE) invited expressions of interest of core-investors in the nation's four refineries in Kaduna, Warri, Port Harcourt and Eleme in line with government's privatization drive.

The KRPC is a complex conversion refinery, with a manipulate distillation capacity of 110,000 barrels per day. Supplied through a 700-kilometre pipeline from the Escravos Terminal in Delta State near Warri, the refinery has since coming on stream in 1980, undergone a series of expansion projects.

It is jointly managed with a petrochemical complex which was commissioned in 1988 which has a production capacity of 30,000 MTA of linear alkyl benzene, 15,000 MTA of benzene and 30,000 MTA of kerosene solvent. It was originally designed to supply the domestic markets in the North and North East zones of the country.

The Bureau for Public Enterprises (BPE), said it side-tracked due process in the appointment of Credit Suisse First Boston as privatization advisers for the planned sale of the nation's four refineries in order to meet the presidential directive that at least one refinery be privatized before the end of the year.

Also, the Nigerian National Petroleum Corporation (NNPC) has taken the first step to put the Kaduna refinery back to use when it contracted Shell Petroleum Development Company (SPDC) to supply crude oil to the refinery.

In its efforts to hasten the process of privatizing the nation's four refineries as ordered by the Federal Government, Credit Suisse First Boston (CSFB), a leading investment banking firm with global experience in refinery privatization has been hired as privatization adviser to lead a consortium that will help the Bureau in the privatization process.

Justifying the appointment of the advisers without a competitive process against the established tradition in taking such decision, the Director General, Dr. Julius Bala, said BPE was constrained to carry out a presidential directive that the sale of refineries be done immediately and therefore considered the call for expression of interest as time consuming in the circumstance.

Under the planned sale of the refineries, 51 per cent of equity in each of the refineries will be sold to a strategic investor, the Director-General stated.

He said the CSFB consortium, has swung into action and was carrying out a 60- day preliminary Sales study for all the refineries. He disclosed that the Sales study contract with CSFB has been signed while an inception report of the initial findings will soon be forwarded to the bureau.

To qualify as a core investor, Bala said all prospective investors must have "expertise in refining, an investment plan in rehabilitation and expansion of refining capacity and a social plan to deal with over- staffing."

The BPE, he disclosed, has identified some structural impediments to a successful privatization of the refineries and listed the impediments as "existence of fuel subsidies and petroleum products price controls, absence of an enabling legal and regulatory framework to foster a competitive environment in the refining and marketing sub-sectors and pipelines and distribution network still under NNPC control through Pipelines and Products Marketing Company.

But the NNPC said that the tentative arrangement made to get the refinery back into operation, was for Shell to supply 50,000 bpd of its Forcados blend of crude to Kaduna refinery through the Auchi-Lokoja-Suleja network.

"We have started pumping Forcados crude and test-running Kaduna refinery," the corporation said.

Shell is Nigeria's biggest crude oil producer and produces around 450,000 bpd of oil from Forcados area of Delta State.

The vandalizing of the Escravos crude pipeline also led to the closure of the 125,000 bpd Warri refinery, leaving the two Port Harcourt refineries as the only plants producing fuel locally.

NNPC officials said that the corporation had come under pressure to maximize local supply of fuel following the total deregulation of the downstream sector. The NNPC itself will start buying crude from the Federal Government at prevailing international market price from Monday.

The NNPC Group Managing Director, Mr. Jackson Gaius-Obaseki however, said that the fuel yield from Shell's Forcados crude would be lower than what was produced before.

"It will make it difficult for us in terms of revenue flow to be able to pay. But then, it will enable us serve the public in Kaduna and other areas in the north," said Gaius-Obaseki.

The NNPC chief hinted that the products from the refineries must the priced as such level that will enable the corporation pay for the crude.

The Federal Government had directed that the NNPC must appropriate all the payments for the crude into the Federation Account immediately.

Meanwhile, ChevronT-exaco said it would not risk reopening its oil facilities in the Warri area of the Niger Delta, which it abandoned in the wake of the ethnic violence in the area despite currently losing a daily production of 140,000 bpd.

A spokesman for the company said the company placed higher premium on the safety of its staff above the economic benefits that would have accrued from restating the flow stations shut.

The spokesman said that the flowstations were also vandalized during the clashes.

Chevron is Nigeria's third biggest oil producer. The company said it suffered heavy production losses in July and August this year at the height of the Warri crisis.

The Nigerian government says it will begin selling shares in the nation's oil refineries as part of efforts to modernize its key fuel industry. The Bureau of Public Enterprises released a statement on Wednesday offering investors the opportunity to buy a minimum 51 percent stake in Nigeria's four oil refineries.

Only one of the four currently functions, but at only 40 percent of its total capacity.

The government hopes the move to privatize will get the remaining three refineries operational.

Over the last six years, Nigeria has spent hundreds of millions of dollars to repair and improve its refineries with little success. And because it cannot refine its own substantial oil reserves, the general public relies on imported fuel. Chronic shortages of fuel are common in Nigeria. The West African county is among the world's top 10 oil-producing nations -with an estimated two billion barrel-per-day output.

The decision to sell shares is the latest of several policy changes by the government of President Olusegun Obasanjo. On October 1, the government announced it was scrapping heavy subsidies on fuel, causing a 15 percent jump in prices.

The nation's largest labor group immediately threatened a nationwide strike, saying the public should not have to pay the price of economic reforms. The Nigerian Labor Congress (NLC) called off the scheduled strike last week, after reaching a deal with fuel marketers to revert to the old prices.

But many fuel stations have reneged on the promise. Six NLC members were arrested on Monday for picketing the stations.

In an effort to defuse tensions, the NLC is meeting in Abuja with state governors, fuel marketers and Nigeria's state-run petroleum corporation.

SOUTH AFRICA

The petroleum industry suggested yesterday that government assist refineries in making the large investments needed to produce cleaner fuels.

A new project team, established to co-ordinate plans for SA's conversion to unleaded fuels, will investigate ways in which this can be done.

Government's deadline for oil refineries to stop leaded fuel production is January 2006.

The conversion could cost between $1bn and $1,5bn, (R7bn and R10bn), said South African Petroleum Industry Association director Colin McClelland at the sub-Saharan Africa refiners' workshop in Somerset West.

He said that refiners did not have to make the multibillion investments.

There were alternative ways in which refineries could supply clean fuels.

This implied that refineries could replace some domestic production with imports.

McClelland suggested that government take steps to prevent refiners from disinvesting.

"Governments may want to take certain steps to encourage refiners not to disinvest and to provide certain economic incentives to remain in the country, resulting in huge foreign exchange savings and the protection of jobs," he said.

McClelland said the project team, which included government, refineries and the automotive sector, would address "economic incentives for refinery investments".

The team would also co-ordinate planning to minimize the impact of a conversion, which would demand vast construction and engineering resources over the next two years.

Failure to make thorough provisions for the conversion could lead to serious shortages of supplies such as fuel and construction resources.

The steel construction sector had already warned that its resources, particularly skills, were insufficient to meet the demands created through the conversion.

McClelland said that the project team would look at phasing refinery shutdowns to spread the workload and would match these with the available resources while reducing negative supply effects.

Meanwhile, Octel SA, a fuel additives company that supplies tetra ethyl lead to the petroleum industry, has called for an extension of the 2006 deadline.

"The deadline will force a fuel onto a vehicle fleet that is not ready for it," said Octel's MD, Andy Raath.

He also noted that the average South African motor vehicle was 13 years old.

Raath suggested that the emphasis should be on improving emission-control features in vehicles.

RUSSIA

LUKoil has announced it would increase exports and grant managers stock options to help its shares catch up with those of its industry rivals.

Spokesman Dmitry Dolgov said the board would meet on Oct. 16 in the Black Sea port of Burgas in Bulgaria, where LUKoil has a refinery, to discuss the issue and revisit a strategy to boost foreign sales of crude oil and products.

He declined further comment. Interfax quoted LUKoil investor relations chief Gennady Krasovsky as saying the board would discuss granting share options to management in an attempt to boost its market value.

Analysts say LUKoil is heavily undervalued compared with YukosSibneft in terms of production to market value.

YukosSibneft will produce 2.35 million barrels per day this year, while LUKoil is expected to produce 1.6 million bpd.

Russia's oil-refining sector is set to shrink in the years to come unless funds are invested to modernize plants in the face of tough new EU fuel specifications due to come into effect from 2005, analysts said.

They said integrated Russian oil majors are shunning investing millions into refineries because they make more money by selling crude oil rather than processing it through the refineries.

At the same time, state legislation and environmental rules do not encourage refiners to upgrade their fuel quality.

"The Russian oil companies believe investing in refineries is not profitable due to state legislation and environmental rules. Refining is a forced necessity," said Vladimir Kapustin of the Gubkin State Oil and Gas University.

As a result, the industry, a major supplier of key oil products such as heating oil, diesel and fuel oil to Western Europe, will lose much of its competitive edge and could expect lower prices for its petroleum exports which will need to be upgraded to meet the new European Union specification.

Russian refineries rank very low in their complexity with only three plants meeting an established international index. This means the refineries produce mainly cheap fuel oil and have limited capacity to churn out much needed middle distillates and gasoline.

The industry will face a crunch in 2005, when the EU slashes the sulfur content of motor fuels.

This conclusion can be drawn from the meeting of Russian Prime Minister Mikhail Kasyanov and his Macedonian counterpart Branko Crvenkovski. A number of intergovernmental issues have been settled at the meeting.

According to Mr. Kasyanov, in the first place, this cooperation includes the repair of military equipment, mostly of Soviet and Russian origin. He said a working group had been set up to work in this area.

Mr. Kasyanov also said that the Russian government was interested in Russian companies taking part in the privatization of Macedonian companies, including in the oil processing industry. The Russian Prime Minister stressed that in this case, Russian gas stations would appear in Macedonia.

According to Mr. Kasyanov, this happened in countries bordering on Macedonia, where Russian companies purchased oil refineries and "opened gas station chains the next day". He also noted that bilateral cooperation in the energy sphere was a priority.

In particular, he did not rule out that Russia might take part in the reconstruction of old and construction of new power plants in Macedonia. Russia is also interested in using Macedonia’s gas transportation network.

For his part, Mr. Crvenkovski said that the problem of Russia’s clearing debt to Macedonia could be solved soon.

According to the Macedonian Prime Minister, the Russian and Macedonian working groups held talks on the issue last week. Several solutions to the problem have been offered. Mr. Crvenkovski promised that the Macedonian government would choose one of the variants shortly. He stressed that the settlement of the debt issue will help deepen economic cooperation between the two countries.