Shell Oil Co. and federal officials have agreed to modify pollution limits so the company can keep running its Bakersfield refinery through March 31 and have more time to negotiate with a "short list" of potential buyers, Shell said December 6.

The amended environmental agreement represents another reprieve for a facility Shell had planned to close Oct. 1.

The company granted its first stay of execution in August in the midst of antitrust investigations, fuel supply worries and political pressure.

Shell said it would keep the Bakersfield facility open through the end of this year. And it pledged to continue operations in Bakersfield for an additional three months — through March 31 — if it won a waiver of certain emissions limits contained in a 2001 consent agreement between the oil company, the Environmental Protection Agency and the Justice Department.

Shell said it got the necessary dispensation on nitrogen oxide emissions.

The accord with the federal officials, which must be approved by a federal judge in Texas, would ease layoff worries for many of the 250 employees at the relatively small refinery, which produces 2% of California's gasoline supply and 6% of its diesel. It also would keep alive the possibility that a buyer could step in to save the facility and stop car-dependent California from losing badly needed fuel-production capacity.

Shell said discussions with potential buyers were continuing but wouldn't identify the bidders or give a deadline for a sale agreement. However, the company made clear that it intended to close the refinery March 31 if it couldn't strike a deal to sell it.

"We are pleased to be in a position to extend operations at the Bakersfield facility," Lynn Laverty Elsenhans, president of Shell Oil Products US, said in a statement. "Extending operations at the Bakersfield plant would help with transition issues, should a new owner emerge from the sales process."

State officials and others have been pressuring the company to sell the refinery instead of closing it. They say shuttering the Bakersfield plant would worsen the state's chronic fuel supply troubles and lift prices at the pump.

Tom Dresslar, spokesman for Atty. Gen. Bill Lockyer, praised the emissions agreement and the extra time it would provide for fuel production and negotiations with potential buyers. But he added that "the real prize is a sales transaction that will keep it open for the long term."

Lockyer, who secured the postponement from Shell in August, continues to push for a sale. "We're hopeful that Shell can reach an agreement with a qualified buyer that will keep the refinery open and spare California drivers even higher pump prices than they pay now," Dresslar said.

Under the modified environmental agreement, Shell can exceed emissions limits for the first three months of 2005. In exchange, Shell said it agreed to meet other emission reduction deadlines more than three years earlier than required under the 2001 settlement.

The original agreement called for Shell to reduce total nitrogen oxide emissions from a list of refineries by Dec. 31, 2004, and make further reductions by Dec. 31, 2008. The agreement was one of several pacts between federal regulators and refiners accused of illegally polluting the air.

The Bakersfield refinery had already reached its required emissions reductions, Shell said. The firm had been relying on the closure of the Bakersfield plant to meet required overall emissions reductions at all of its refineries by the end of 2004.

Benham Lands $23 Million Hydrotreater Contract with Holly Corp.’s Utah Refinery

An Oklahoma City-based engineering company has been awarded a $23 million contract to design and build a diesel "hydrotreater" for a refinery in Utah.

Benham Co. will produce the hydrotreater for Dallas-based Holly Corp.'s refinery in Woods Cross, Utah.

Benham's oil-and-gas division in Tulsa will do the work for Holly Refining & Marketing Co., a wholly owned subsidiary of Holly.

The system at the refinery north of Salt Lake City will produce 10,000 barrels of ultra-low-sulfur diesel and jet fuel per day by June 2006, Benham said. The system will mean the refinery can meet the earliest deadline for new requirements of the Environmental Protection Agency, the company said.

Getting the refinery up to the new EPA standards was a priority for Holly, said Mike Smith, vice president and head of private-sector operations in Benham's Oklahoma City office.

Smith said the project will account for a large portion of the division's revenue next year.

"Essentially, what it does is lower the sulfur content of diesel," he said of the process. "In a typical refinery, you have units with large vessels and pipes and pumps. In this case, there's a catalyst that interacts with the product and through all the magic, sulfur is removed from the product.

"In essence, it's like the catalytic converter on your car. There's a feed stream coming in, and there's a catalyst there that removes sulfur from the feed stream and ties it up (chemically) in another way."

"In the past year, we've grown our oil-and-gas division, and we see it as a stable market. It's expanding," he said.

Jacobs Engineering Group Awarded Pascagoula Refinery Expansion

A Baton Rouge engineering company that it has been selected for work on an expansion project for the ChevronTexaco's Pascagoula refinery.

Jacobs Engineering Group Inc. announced that it has received a contract from ChevronTexaco to provide engineering services for the fluid catalytic cracking unit modification project at the refinery. Officials did not disclose the contract value.

ChevronTexaco officials announced the project last week during a press conference in which they also announce plans for a proposed LNG terminal facility at the refinery.

Jacobs will provide engineering, design and procurement services for major FCCU modifications to enhance the long-term reliability of the refinery.

Yuma Supervisors Approve Zoning for New $2.5 Billion Refinery

The Yuma County Board of Supervisors has unanimously approved a zoning change needed to construct a new oil refinery.

The change in designation for 3,300 acres of land near Tacna would accommodate plans by Phoenix-based Arizona Clean Fuels LLC to build a $2.5 billion refinery.

It would be the first ever built in Arizona and the first in the United States in nearly three decades.

"Whether or not a refinery is built at the site remains to be seen. The vote I make is to allow the process to proceed," said Supervisor Bob McLendon on December 13 before he voted for the zoning change.

Arizona Clean Fuels still needs approval from the U.S. Environmental Protection Agency and state environmental regulators before it can build the facility.

If built, the refinery would be on desert land 40 miles east of Yuma.

Rosemount Oil Refinery to Undergo $100 Million Expansion

Flint Hills Resources, formerly Koch Petroleum, said December 20 that a $100 million expansion of its Rosemount refinery will boost oil capacity by 50,000 barrels a day.

Capacity is expected to rise from about 280,000 barrels a day to 330,000 by 2007 through the expansion, which is part of an effort to meet the growing demand for gasoline and diesel fuel in the Upper Midwest.

"Increasing our crude oil processing capacity is essential to meet growing demand for both diesel fuel and gasoline, which is projected to grow throughout the rest of the decade in the states we serve," Flint Hills President Dave Robertson said in a statement.

The Rosemount refinery transforms Canadian crude oil into gas and diesel fuel for use in Minnesota, Wisconsin, South Dakota, North Dakota and Iowa. Demand has been escalating at the rate of 2 percent a year since 1997, officials said.

Spokesman John Hofland said that western Canadian crude oil production is expected to rise 1 million barrels a day during the next five years. The Rosemount refinery will take on a portion of that excess to meet increased demand, Hofland said.

Flint Hills is obtaining the state and city permits needed to expand the Rosemount plant. The project is expected to create 100 to 150 construction jobs.

Weather Causes Equipment Malfunctions at Valero Refinery

Officials with Valero Energy Corp. told state regulators that snow and ice over the weekend caused several equipment malfunctions at the company's refinery in Three Rivers, Texas.

According to filings made with the Texas Commission on Environmental Quality on Dec. 24, Valero's 98,000 barrel-per-day refinery experienced problems with the fluid catalytic cracking unit, hydrotreater and naphtha fractionator. Problems persisted until Sunday, Dec. 26.

Valero spokeswoman Mary Rose Brown could not immediately be reached for comment to provide an operations update at the refinery.

Adria Dawidczik, a spokeswoman for the Texas Commission on Environmental Quality, confirmed the filings but declined further comment until the company completes its assessment of the situation.

Valero has two weeks to provide the state with additional information on the extent of the damage, Dawidczik says. Refineries are required to report problems to the state because of the threat of chemicals contaminating the environment.

Flint Hills Plans $100 Million Pine Bend Refinery Expansion

Flint Hills Resources LP plans a $100 million expansion of its Pine Bend refinery in Rosemount, Minn., that will increase the refinery's crude oil processing capacity to 330,000 b/d from 280,000 b/d.

The increased capacity, expected to come on line in mid-2007, will help meet growing demand for gasoline and diesel in Minnesota, Wisconsin, Iowa, South Dakota, and North Dakota, the company said.

The project also will enable Flint Hills Resources, Wichita, Kan., to utilize an anticipated increasing supply of Canadian crude oil in 5-7 years.

Flint Hills Resources, a wholly owned subsidiary of Koch Industries Inc., also owns refineries in Texas and Alaska, a chemical facility in Illinois, and has an interest in a base oil facility in Louisiana.

December Snow, Ice Cause Problems at Valero Refinery

Officials with Valero Energy Corp. told state regulators that snow and ice have caused several equipment malfunctions at the company's refinery in Three Rivers, Texas.

Valero spokeswoman Mary Rose Brown could not immediately be reached for comment to provide an operations update at the refinery.

Adria Dawidczik, a spokeswoman for the Texas Commission on Environmental Quality, confirmed the filings but declined further comment until the company completes its assessment of the situation.

Valero has two weeks to provide the state with additional information on the extent of the damage, Dawidczik said. Refineries are required to report problems to the state because of the threat of chemicals contaminating the environ

CANADA

Chevron British Columbia Refinery Set to Produce Low Sulfur

Chevron Canada Limited (Vancouver, British Columbia), a wholly-owned subsidiary of ChevronTexaco Corporation (NYSE:CVX) (San Ramon, California), is completing construction of a gasoline desulfurization unit.

BRAZIL

Petrobras Weighs Building $3 Billion Refinery

Brazil's state-run oil giant Petrobras is studying building a US$3 billion (euro2.26 billion) petrochemical refinery, the company's refining director said December 1.

The refinery, called Basic Petrochemical Unit, will use Brazilian crude oil to make ethene and propene, used to produce plastics. The company will decide on construction early next year, director Paulo Costa said

Petrobras also could speed up construction of a new refinery for petroleum derivatives, Costa said. Work was originally supposed to start in 2007, and the company will decide the timetable early in 2005.

The refinery will cost between US$2 billion (euro1.5 billion) and US$2.5 billion (euro1.88 billion) and will produce up to 15,000 barrels a day of diesel fuel and other oil products, Petrobras said.

The company, which is likely to offer a majority share to future partners, has discussed a possible joint venture with Venezuela's state-run giant Petroleos de Venezuela.

Brazil's oil needs are expected to rise as its economy expands. The economy grew a hefty 6.1 percent in the third quarter, buoyed by exports and rising domestic consumer demand.

The use of oil derivatives has risen 3.5 percent this year, exceeding Petrobras estimates of a 2.4 percent increase in 2004.

2. ASIA

AUSTRALIA

Caltex Australia says Kurnell Gas Leak Stopped, Investigation Begins

A gas leak at an oil refinery in Sydney's south has been stopped, Caltex Australia said.A faulty pressure relief safety valve leaked thousands of liters of LPG gas into the atmosphere December 14.

There were no injuries reported and no members of the community were evacuated, but around 500 employees arriving at work were denied access to the plant as a precaution, Caltex said.

Caltex's general manager of refining, Eion Turnbull said the problem was brought under control around 8am (AEDT).

"This particular unit, it will take a few hours to depressure it so we can get a look at what actually happened," Turnbull said.

"But in terms of the overall refinery, we don't anticipate any disruption to the operation at all."

Acting NSW Fire Brigades Superintendent Robert Comerford said the leak from a faulty valve in a storage unit was under control.

"There was a faulty valve on this tank but quick work from the Caltex response crews and NSW Fire Brigade crews managed to get some water onto that to prevent any sign of fire and also to disperse the gas away," he said.

"We've had crews here monitoring the atmosphere, obviously we need to keep the gas out of explosive range."

Supt Comerford said there was still a lot of gas in the storage unit.

"We think in about three hours it should be potentially empty so everything should be back to normal, hopefully," he said

"We are very comfortable with the procedures we have in place."

Australian Ethanol Refinery Grant Failure Blamed on Senate Inquiry

The failure of the proposed Gunnedah-based Ethanol refinery in northern NSW Australia to win a key grant from the Federal Government is being blamed on a Senate inquiry into political patronage.

The refinery was believed to have been in line for millions of dollars from the Government's Biofuels Capital Assistance Program, but missed out on the latest round of funding announced December.

The mayor of Gunnedah, Gae Swain, says she is not surprised by the failure which she attributes to the Senate inquiry sparked by allegations of political patronage made by member for New England Tony Windsor.

The Member for Gwydir, Deputy Prime Minister John Anderson, says he is confident the project still has a future.

The failure to attract the grants funding is not expected to prevent the project getting off the ground.

INDIA

ONGC Unit Planning to Hike Refinery Capacity

Mangalore Refinery & Petrochemicals Ltd. (MRPL), a subsidiary of Indian government-owned Oil & Natural Gas Corp. (ONGC), unveiled plans to hike capacity of MRPL's refinery in Mangalore, India, to 225,000 b/cd from 180,000 b/cd by 2007.

The expansion, estimated to cost $455 million, will raise maximum output of products to 15 million tonnes/year from 12 million tonnes/year.

In addition, ONGC has applied on behalf of MRPL for permission to market liquefied petroleum gas and kerosene.

BPCL, Kochi Refineries Merger by April; MP's Nod for Bina Refinery Soon

Bharat Petroleum Corporation Ltd (BPCL) said the merger of Kochi Refineries Ltd with itself will be completed by April and hoped that the Madhya Pradesh Government would 'soon' grant concessions for setting up the Bina Refinery.

''The scheme of amalgamation is on and the merger of KRL with BPCL will be over by April,'' Mukesh Rohatgi, Director (Refineries), BPCL, said.

He also said that BPCL is in talks with the Madhya Pradesh Government and ''very soon we will get the concessions for setting up the 6-million-tonne Bina Refinery.'' For setting up the refinery, BPCL is scouting for a joint venture partner as the earlier partner Oman Oil Company (OOC) has refused to pump in fresh investment, he said.

After the merger, KRL will be the second refinery to come under the BPCL fold. BPCL holds a 54.81 per cent stake in KRL. While, the refining capacity of KRL is 7.5 million metric tonne per annum (mmtpa) against the 12 mmtpa that BPCL processes in Mumbai.

The merger will not only enhance BPCL's refining capacity, but the company is also expected to gain from the high refining profit margins of KRL.

Kochi Refineries earned refining margins of 5.60 dollars for each barrel of oil it turned into fuel in the second quarter ended September 30, 2004. Some of the major plus points of the merger plan was that KRL would get a better and assured marketing facility for its products because of BPCL's existing wide marketing network.

KRL, a subsidiary of BPCL since March 2001, would become the second refinery under BPCL after the one in Mumbai.

On the proposed Allahabad refinery, he said work for setting up that refinery will begin only after receiving necessary concessions from the Madhya Pradesh government for Bina Refinery.

He also said that upgrading of BPCL's Mumbai Refinery to 12 million tonnes per annum from the present 8.8 mtpa will be done in the next two to three months. The company is investing Rs. 2,259 crore to raise the refinery's capacity by three million tonnes.

BPCL is also setting up a lube base oil manufacturing plant at the refinery. The base oil plant will have a 1,80,000 tonne per annum capacity and would be set up at an investment of Rs 330 crore, he added.

The additional three million tonnes per annum refinery capacity is also expected to boost the company's profits which have been taking a hit lately owing to the burden of subsidy on kerosene and LPG as well as constraints on raising auto fuel prices.

The modernization program involved setting up of a hydrocracker plant with technology from Chevron of the U.S. as well as a new crude distillation unit that are expected to give the refinery the capacity to use light and heavy crude oils.

HPCL to Set up Refinery in Punjab, not in Rajasthan

Giving a direct blow to the BJP government's attempt to moot an MoU with HPCL for setting up a petroleum refinery in Rajasthan, Union Petroleum Minister Mani Shankar Aiyar said HPCL had already spent Rs 300 crores for setting up a refinery at Bhatinda in Punjab, and how could it set up a second tower in the desert state.

At the 17th meeting of Board of Infrastructure Development Investment Promotion (BIDI) in Jaipur, the Rajasthan government had announced that the HPCL was interested to set up the refinery and given green signal for an MoU.

Clarifying his government's stand, the Minister said he had written a letter to the Punjab Chief Minister to expedite the refinery project at the earliest.

The financial closure has not reached to the matter in Punjab yet, and the MoU has not been concluded despite the expenditure of Rs 300 crores, he maintained.

It is not an easy decision for us to pull HPCL out of Punjab and get another MoU signed in Rajasthan, he categorically said.

If HPCL could not build in Punjab, Rajasthan having ample gas and petroleum can be another site, he said.

Indian Refiners Unprepared to Supply Clean Fuel

India may miss the April 1, 2005 target of conforming to Euro-III emission norms in metro cities and Euro-II norms in the rest of the country due to inability of refiners to supply the specified category of petrol and diesel.

Except for refineries at Mangalore, Chennai and North- East, all other refineries would not be ready to start producing the fuels with ultra low sulfur and benzene content, a top government official said.

"We may need to push the deadline by at least six months," he said.

IOC's Mathura, Panipat and Haldia refineries, which are supposed to supply Euro-III fuels to Delhi and Kolkata, would be ready for producing diesel with 0.035 per cent sulfur and cetane number 51 and petrol with 1 per cent benzene and octane number 91 only by March 2005. The Mumbai refineries of BPCL and HPCL would be ready by February 2005 and June-July 2005.

The hi-tech Jamnagar refinery of Reliance Industries too may default as problems at the refinery's hydrogen unit forced it to write to Petroleum Ministry on December 7 stating its inability to produce the clean fuels before August 2005.

"To begin a smooth rollout of the clean fuel program we need to stock ultra low sulfur and benezene content petrol and diesel at various locations from January onwards," the official said.

The government's Petroleum Planning and Analysis Cell convened a meeting of public and private sector refiners in Mumbai to assess the availability and suggest a revised time-table for rolling out the clean fuel program.

IOC may Restart Koyali FCC in April 2005

India's largest petroleum refiner, IOC, may restart the Fluidized Catalytic Cracker, FCC, plant at the country's largest refinery by April 2005. The plant was closed down after a fire started during a planned shutdown in October.

Indian Oil Corporation, IOC, may restart the 1.5-million-metric-ton-a-year Fluidized Catalytic Cracker, FCC, unit at its Koyali refinery in April 2005, a senior IOC official said on December 28.

"The entire unit is being rebuilt. We would still require a bit more than three months to bring it back on stream," the official told newswires.

The fluidized catalytic cracker at the 13.7-million-ton-a-year Koyali refinery in the western state of Gujarat was damaged when it caught fire while being brought into operation after a planned shutdown on October 28. The unit produces gasoline and liquefied petroleum gas.

The crude intake at the refinery has fallen by 5,000 metric tons a day since the fire. The Koyali refinery is the main supplier of petroleum products in western India.

IOC is India's largest refiner and Koyali is its largest refinery. IOC and its units have a combined refining capacity of 48.15 million tons a year. Along with its units, IOC has more than a 60% share of the country's $15 billion a year oil retail market. India consumes around 108 million tons a year of petroleum products.

PAKISTAN

India’s Reliance Industries Seeks Stake in Pakistani Refinery

In the wake of confidence building measures between India and Pakistan as part of the composite dialogue for peace, including the strengthening of bilateral economic ties, an Indian company has entered the race to buy a monopoly stake in a state-owned Pakistani company.

According to an Indo-Asian News Service (IANS) report on December 16, India’s Reliance Industries, soon to set up the world’s largest gas based power project in Utta Pradesh, is among 29 bidders for a 51 percent strategic stake the country’s largest refinery complex, National Refinery Ltd (NRL).

The Privatization Commission issued a statement saying that it had received unprecedented interest following its announcement to sell off NRL shares.

It said the fact that many of the 29 investors interested in securing a stake in the company were from overseas, proved that the international financial community had confidence in the Musharraf administration’s economic and privatization policies.

The government is offering a 51 percent (33.99 million shares) monopoly stake in NRL, which has a crude distillation capacity of 2.7 million tonnes per annum. The company enjoys a unique position in the market as the only lube base oils producer and the largest manufacturer of asphalts.

The company was established in 1966 as a lubes refinery. Since then, it has expanded and upgraded its operations to include a fuel refinery, a second lube refinery and a petrochemical plant. Aside from its crude oil processing capacity, NRL produces a broad range of petroleum products to cater to Pakistan’s increasing energy needs.

PHILIPPINES

Philippine Govt to Sweeten Incentives for New Oil Refinery Projects

The Philippine government is keen on pushing amendments to the Downstream Oil Deregulation Act that would fortify incentives to lure new capital for oil refinery investments.

An official of the Department of Energy (DOE) disclosed that they are currently collaborating with the Board of Investments (BOI) as to proposed necessary revisions in the existing guidelines for registration and availability of incentives under Republic Act 8479, otherwise known as the Oil Deregulation Law.

Aside from new investments, the proposed new package of investment perks shall also include those for refinery expansion, modification and rehabilitation.

“The DOE and BOI will collaborate in amending the existing guidelines for registration and availment of incentives under RA 8479 to cover investments in oil refining and/or oil processing including expansion, modification and refinery rehabilitation,” the energy department said.

Section 9 of the law fleshes out the following incentives for new investments in the oil industry, including refining activities: a) income tax holiday; b) additional deduction for labor expenses; c) minimum tax and duty of 3.0percent and value added tax on imported capital equipment; d) tax credit on domestic capital equipment; e) exemption from contractor’s tax; f) unrestricted use of consignment equipment; g) exemption from the real property tax on production equipment or machineries; and h) exemption from taxes and duties on imported spare parts; among others.

Of these incentives, one has already been modified through an Executive Order issued by President Arroyo jacking up import duty to 5.0percent from 3.0percent; as part of the government’s measure to shore up revenue collection to arrest a worsening budget deficit.

However, with the flagging financial condition with most of the upstart players in the industry, especially the upstart players, it takes more than policy amendments that government would have to set in place. They would also need to prove further that they can provide viable investment climate and the political will to ensure that sunk costs are viably recovered.

While government officials are hushed about the closure of the Caltex refinery in Batangas, it appears now that this has been a big blow to their drive to corner new investments in refineries.

Caltex officials point to the very stringent requirements of the Clean Air Act as its primary reason for ceasing refinery operations. The company noted that while it is agreeable to drive for a “cleaner air,” the major turn-off point is the requirement for huge investment to upgrade its refinery but cost recovery mechanisms are not in place to assure them of reasonable return for infused capital.

In fact, there were also persistent reports that Pilipinas Shell Petroleum Corporation has been in the process of reviewing if it is still keen on pursuing its refining operations.

To this day, however, Shell officials intimated that they are still posting high refining margins; in light of the uphill climb in international oil prices; especially for finished products.

Of the three giant players, only Petron Corporation has been constantly reinforcing its plan to sustain its refining activities. Its upgrading and facility reconfiguration is also due for completion.

TAIWAN

FPG Planning New $120 Billion Giant Oil Refinery to be Largest Supplier

The Formosa Plastics Group (FPG) is planning to build a new giant oil refinery with a daily capacity of 600,000 barrels of crude oil. This will enable it to become the largest supplier of oil products in Taiwan.

FPG executives revealed the plan calls for capital investment of NT$120 billion on the coast of Yunlin County in southwestern Taiwan, according to a report of the local Economic Daily News.

More land will be reclaimed on the coast adjacent to the group's petrochemical complex at Mailiao for the new project.

The group, which currently has a daily refining capacity of 300,000 barrels of crude oil, aims to boost the amount to one million barrels per day.

The expansion will enable the group to replace the state-owned Chinese Petroleum Corp. (CPC) as the top oil products supplier on the island.

The group's Formosa Petrochemical Corp. (FPC) has been competing head-on with CPC on the domestic oil products market.

Executives of FPC and other affiliates in the same group, notably Formosa Plastics, Formosa Chemicals & Fiber, and Nan Ya Plastics, are still working on the downstream projects for the giant oil refinery to decide on what petrochemical materials and intermediary materials to be produced in the projects.

The additional capital investments could exceed the total capital already sunk into the existing Mailiao Petrochemical complex, according to one estimate.

THAILAND

New Oil Refinery Planned for Thailand

Thailand’s plans for a new oil refinery plant in the country are expected to be considered after February’s general election, as experts believe that there will be oil shortages after 2005.

The new government, formed after the next general election on 6 February, is expected to seriously consider building the new refinery plant.

The government will consider an investment plan and a location where it will not pose any environmental risk.

Under the planned scheme, the private sector will provide the investment.

Several potential investors have already expressed interest in the project, but so far all of them have been reluctant to commit themselves because of the huge capital needs, especially as the country’s oil refinery businesses had their debts restructured recently.

Private investors are expected to make their decisions on the project in the middle of next year, according to industry sources.

Investors are concerned that the new oil refinery would only break even with the production of at least 150,000 barrels a day, and that it would take a year to build the plant.

The private sector and energy analysts have predicted that Thailand’s oil consumption in 2005 could exceed 700,000 barrels a day, and the country will need an eighth oil refinery to meet the growing domestic demand for oil.

3. EUROPE / AFRICA / MIDDLE EAST

FINLAND

Mogas Wins Contract to Supply Valves for Refinery Upgrade

Mogas Industries, severe-service, metal seated ball valve provider, has been awarded a multi-million dollar contract to supply high- and low-pressure ball valves to Fortum’s Porvoo (Finland) refinery upgrade project. The valves are among enhancements to the Residue Hydrocracking Unit consisting of an integrated LC-Finer and mild hydrocracker.

The refinery is one of the most modern oil operations in Europe with almost 40 process units. The main objective of the diesel project, says Martti Ronkainen, Fortum’s project diesel steering manager, is to guarantee delivery of sulfur-free (less than 10 ppm) diesel fuel and intermediate feeds for other refinery units. With this investment, he went on, Fortum Oil will be better able to face future challenges and increase refining margins.

Planned startup is set for the end of 2006. Porvoo refinery is located in Kilpilahti, 35 km east of Helsinki. It produces light and heavy fuel oil, base oils for lubrication, diesel oils, aviation fuels, motor fuels, and liquefied petroleum gas markets to Finland, Scandinavia, Northwestern Europe, and the United States.

Mogas is the only ball valve manufacturer that has valves installed in or is currently in technical negotiations with all 14 proposed or present heavy oils projects worldwide, according to Louis Mogas, chairman of CEO of Mogas Industries Inc. A total of 706 valves, ranging in size from ¾ in. to 16 in. will be supplied to maintain the integrity of the process and safety of plant personnel and equipment. Delivery schedule meets installation requirements that range from 32 to 52 weeks.

POLAND

Poland's No. 2 Refinery, Lotos, to Borrow PLN 340 mln to Develop Retail Network in South

Poland's second-largest refinery, Lotos Group, signed a deal to borrow a total of PLN 340 mln from Poland's two biggest banks, PKO BP and Pekao SA, to develop its retail network in southern Poland.

"According to the deal, Lotos Group will get PLN 340 mln to realize its retail network development program, which includes reaching at least a 12% share in fuel market by 2010 and enlarging the network to 500 [gas stations]," reads a Friday statement.

The two banks are splitting the loan equally.

"Our share in the loan is equal and guarantees for the loan are good but [they do not include] the company's shares. This is a large and ambitious development project, which in our opinion is real," Pekao SA President Jan Krzysztof Bielecki told a press conference on Thursday. "It is visible now that investment recovery is beginning in the Polish economy."

On December 15, Poland's central bank said it expects investment to replace export as the main economic growth driver in Poland in 2005. Investments rose by 4.1% year on year in the third quarter, up from the revised 3.6% in the second quarter. Analysts had expected investment growth to exceed 6%. Economists say that a delay in the distribution of EU funds for small and medium-sized companies, as well as tighter fiscal policy, both cut into investment.

The loan marks top Polish retail bank PKO BP's efforts to work more with corporate clients.

"This is one of the largest recent loan agreements, which means that companies are not just thinking about investments, but also beginning to invest. PKO BP is ready to provide them with loans and to gradually strengthen its position in this sector," PKO BP management board member Piotr Kaminski said.

In late October, Lotos Group revised its 2004 consolidated net profit forecast up by nearly 270% to about PLN 500 mln, from the previously planned PLN 135 mln, on the back of rising oil prices worldwide. On Tuesday, the company said that it expects its 2005 net profit to come in close to or slightly lower than this year's PLN 500 mln.

The company nearly doubled its net profit to a record-high PLN 393.5 mln for the three first three quarters of 2004 from PLN 201 mln for the same period of 2003. The company's sales revenues increased by 24.6% to PLN 7.62 bln for the first nine months of 2004 from PLN 6.12 bln for the first three quarters of 2003.

ALGERIA

Honeywell Wins $60 Million Contract to Modernize Algeria Refinery

Honeywell (NYSE: HON) announced December 14 it has received a $60 (U.S.) million contract from Algerian oil company Naftec Spa for an automation project at its refinery in Arzew, Algeria.

Honeywell will modernize the refinery's instrumentation systems with the goals of improving production and optimizing operational efficiency. The Honeywell technology and equipment upgrades will give operators greater visibility into plant-wide operations and help them make business decisions quickly. Honeywell project engineering and construction services will help the plant to maintain a safe and consistent operating environment throughout the project. The multi-phase project is scheduled to begin in early 2005 and will be completed by 2009.

"Honeywell won this project because the company understands our business needs and objectives and has extensive experience working with the petrochemical industry," said M. Djellout, Director of Development, Naftec. "We know Honeywell will deliver reliable technology solutions that will help us achieve our production goals without compromising the safety of our workers or slowing down operations."

Under the terms of the contract, Honeywell will install its Experion(TM) Process Knowledge System (PKS), field instrumentation systems, an advanced process control system, a training simulator and a centralized control room. The automation project will enable the Arzew refinery to upgrade existing controls and maintain normal plant operations.

"Oil companies choose to upgrade their control systems because they can achieve better returns on their investments and avoid the high costs involved in replacing equipment," said Jack Bolick, president, Honeywell Process Solutions. "Honeywell is pleased to offer Naftec this opportunity to boost productivity, improve worker efficiency and enhance plant safety."

Naftec Spa is part of the Sonatrach Group, Algeria's state-owned oil and gas supplier. With this new project, Honeywell broadens its presence in Algeria, where the company has operated for 12 years and has earned a reputation as a leading supplier of advanced process control solutions and comprehensive services for the petrochemical industry.

KENYA

MP Wants Kenya Oil Refinery Renovated

The Kenya Oil Refinery is an old, inefficient and dangerous white elephant which serves no economic purpose, an MP has said.

Mbita MP Otieno Kajwang' now wants the Government to modernize the refinery to make it produce safer products.

The MP at the same time faulted the Open Tender System (OTS), in which every major oil importer buys a share of crude oil imported by another, saying it scared off new entrants.

He said in a statement: "The refinery produces leaded fuel and high sulphur diesel which are destructive to engines".

The Government, he said, had forced the oil industry to keep the refinery alive, with negative consequences on the environment.

"The quantity of crude oil imported is dictated by the ministry under the threat that any importer who fails to pay for the crude oil can have its license withdrawn," Mr Kajwang' said.

He said OTS rules were not investor-friendly, since they provided that the importer fixes the prices of crude oil on an average price prevailing in the month of loading.

NIGERIA

Nigeria’s Oando Plc to Build Refinery

On December 13, OANDO Plc listed its hybrid shares on the Nigerian Stock Exchange (NSE) and said it would be approaching the capital market to raise more funds to enable it to build a refinery, having successfully raised over N5 billion in its last hybrid offer. The hybrid offer comprising Rights Issue and Public Offer was 167.8 per cent and 459 per cent respectively over-subscribed.

Managing Director/Chief Executive Officer of Oando Plc, Mr. Wale Tinubu, said on the occasion of the listing of the shares that: "There is going to be substantial increase in profit as we are committed to create value to our shareholders. Oando Plc is determined to create a world class company being managed by Nigerians and we would also build a world class refinery when we must have secured the necessary funds. Oando Plc has evolved into the premier 'last mile' energy company.

The company listed its 20,384,957 ordinary shares of N95 per share (rights issue) and 144,216,800 ordinary shares of N97.50 (public offer). Tinubu said: "Post offer number of shares stood at 572,300,897 while number of shareholders post offer stood at 291,968."

NNPC Satisfied With Port Harcourt Refineries Maintenance

The Nigerian National Petroleum Corporation (NNPC) on December 15 informed the Senate Committee on Petroleum Resources (Down stream) that the turn-around maintenance of Port Harcourt refineries carried out by Chrome Energy Consortium was performed to specifications.

NNPC Group Executive Director (Petro-chemical and Refineries), Mr. Abubakar Yar'Adua told the committee that "we are completely satisfied with the job done by Chrome based on the contractual obligations." He noted that the explosion of Fluid Catalytic Cracker (FCC), which is the heartbeat of the refinery, shortly after the completion of the turn around maintenance was responsible for the collapse of the refineries.

Absolving the contractor, Chrome Energy Consortium, of blames in the functionality or otherwise of the refinery, Yar'Adua maintained that before the FCC explosion, the refineries were producing 92 per cent of their installed capacityHe however blamed the explosion on the attitude of inexperienced operators.

However, Managing Director, Shell Nigeria Oil Production, Mr. Humphrey Doody, who also participated at The December 15 session of the pre-public hearing sitting, was categorical that his company was not one of the participants in the turn around maintenance project but only served on the invitation of NNPC to provide technical guidance and support to the corporation because of its experience in refinery operations.

"Shell was not involved in choosing the contractor. Our relationship was strictly between us and the Corporation. What Shell did was to share with the NNPC, ideas on how the scope of work could be amended to address specific problems," Doody said.

Maintaining that his company made several suggestions to the NNPC and pointed out certain areas of defects that should be catered to in the turn around maintenance, Doody said Shell was comfortable with performance of the job even though "there are undoubtedly some problems."

Earlier, the Chrome team, led by its Chairman, Chief Emeka Offor, told the Agboti Committee that the scope of the turn around maintenance was prepared and handed down to the company by the NNPC.

Dr. Mircea Furtos, Chrome's Project Manager, explained that there were two stages of certification in the course of the project performance. He added that the first was the certificate of mechanical completion issued after the stage-by-stage verification of the job performed while the second was issued on completion of the period of liability.

22 Foreign Firms Bid for Construction of Nigeria's Oil Refinery

Twenty-two foreign firms have put intenders to construct the proposed Anambra government-owned refinery of Orient Petroleum Resources Ltd., the News Agency of Nigeria reported December 30.

Emeka Anyaoku, chairman of the company's board, was quoted as saying that the board of directors would meet to choose the best among them to handle the project soon.

"We hope to start the construction early next year, and by December next year, we will pump out refined petroleum products from the refinery," he said.

Anyaoku told reporters that the company expected its partners in the refinery project to play their roles effectively, adding that the board would soon meet with representatives of the refinery's 22 host communities.

The proposed refinery is to be sited at Otuocha in the Anambra East council area in Nigeria's southern state of Anambra.

Governor Chris Ngige of Anambra state assured the board that the state government would meet its obligations by contributing its equity shares.

Nigeria is the largest oil producer in Africa and the sixth largest oil export country in the world with a daily crude output of over 2.5 million barrels.

However, it has to import two billion US dollars refined petroleum products per year as the nation's four state-run refineries are unable to operate normally due to poor maintenance and management.

SOUTH AFRICA

Fluor Selected By Sasol to Upgrade South African Refinery

Fluor Corporation announced December 22 that it has been selected by Sasol Ltd., to provide engineering, procurement and construction management services at its Natref refinery near Sasolburg, South Africa. Contract value to Fluor was not disclosed and was booked in the company's third quarter.

The project will upgrade the refinery to produce diesel fuel with reduced sulfur content, in compliance with stricter South African clean fuels standards. Major construction is planned to begin early in 2005. "Fluor has been working with Sasol for decades, and we're pleased to continue that relationship on this project. We look forward to providing value-added service to help Sasol meet their clean fuels compliance needs, an area in which Fluor is a global leader," said Jeff Faulk, president of Fluor's Energy & Chemicals group.

Based in South Africa and operating in more than 30 other countries, Sasolis the leading provider of liquid fuels in South Africa and a major international producer of chemicals.

SUDAN

Sudan Sees New 100,000 bpd Oil Refinery Contract Award Soon

Sudan's oil minister said on December 11 he hoped to award a contract for a new 100,000 barrel-per-day (bpd) refinery at the country's main port in two months.

Awad Ahmed al-Jaz also told reporters in Cairo that new exploration could help boost oil output beyond the 500,000 bpd expected to be hit in August. Current oil production stands at about 300,000 bpd.

"We are going on with exploration in new blocks, like block 9, 8 and C ... and we just signed an agreement on block 11," he said, adding that an award for block 15 was expected by the start of January.

Jaz said he hoped output could hit about 1 million by the end of 2006. "That's my hope ... We hope we can hit that or more than that," he said.

Analysts have been more conservative than Sudan about the prospects for swift output growth, though they have predicted significant production increases over the coming years. Sudan is also seeking to expand its refining capacity. Jaz said a Chinese firm was expanding the capacity of a refinery in Khartoum to 100,000 bpd, from the current capacity of 70,000 bpd. Sudan also has a 20,000 bpd refinery in Port Sudan.

"Now we are negotiating on building a new refinery in Port Sudan with capacity of 100,000 bpd. We have a number of companies who are negotiating with us," he said, adding that the list included Indian, Malaysian and European firms.

Asked when he expected an award, he said: "Hopefully in two month's time we will conclude that."

He said the project was worth "$700 million plus", adding that some bidders were offering finance.

Jaz said he was not worried that plans to expand the country's oil industry would be disrupted because of threatened sanctions over Sudan's Darfur conflict. The Sudanese government felt that international pressure was diminishing, he added.

RUSSIA

Shell Diversifies Crude Sources with First Order from Russia

Major oil refiner Pilipinas Shell Petroleum Corp. recently sourced crude oil from Russia, boosting the country’s bid to diversify sources of crude oil products, the Department of Energy (DOE) reported over the weekend.

Shell, in its report to Energy Secretary Vincent S. Perez, said some 600,000 barrels of crude oil from Sakhalin, Russia were delivered to its refinery in Tabangao, Batangas this month.

"We are very pleased that there is a continuing supply of crude oil coming from Russia," Perez said.

Perez noted that the Philippines started sourcing crude requirements from Russia only last year following a series of oil diplomacy meetings in 2002.

Crude oil from the Russian Far East takes a shorter shipping time than delivery of crude oil from the Middle East.

In addition, the shipping route does not pass through any geographic chokepoints such as the Straits of Hormuz and Malacca.

"The strong partnership we have built in the past is now bearing fruit. The DOE will continue to search for other non-traditional petroleum sources to ensure sufficient supply in the country," Perez said.

The first shipment of Russian crude oil, some 570 thousand barrels of Urals crude oil from Novorissyck, arrived at the then Caltex refinery in San Pascual, Batangas in May 2003.

Another 680,000 barrels of Vityaz crude oil from Sakhalin, Russia were also delivered at the Shell refinery in August last year.

For the first half of 2002, Russian crude oil exports already soared by 24 percent against the same period last year. In the last seven years, Russia’s net oil exports have been increasing. In 2001, oil exports rose to 4.91 million barrels per day.

Russia is the world’s second largest oil exporter, behind only Saudi Arabia.

Russian oil exports to Asia are set to increase with the development of oil fields in Eastern Siberia , Sea of Okhotsk and in Sakhalin Island.

The Russian oil industry has been on an expansion mode. Reports issued by the Russian government noted that oil production is forecast to reach 450 million to 520 million tons per year by 2010.

IRAN

Iran to Build Two Major Oil Refineries in Khuzestan Province

The Iranian Oil ministry has authorized the construction of two major oil refineries in Khuzestan province, Deputy Governor of Khuzestan province, Faramand Hashemizade said.

According to local press reports, the twin refinery will be built between the towns of Mahshahr and Omidiye, in southeast of Khuzestan, Hashemizade added. It is expected to produce some 200,000 to 250,000 barrels of crude oil per day.

Germany, Britain and China have proposed to invest in the project, the official disclosed.

IRAQ

Iraqui Oil Refinery to be Built in Zakho

Iraq plans to build an oil refinery in the Kurdish north near the borders with Turkey and Syria, a senior Kurdish official and oil industry sources said.

Senior Kurdistan Democratic Party (KDP) official Nechirvan Barazani said the refinery would be situated in the Kurdish town of Zakho, on a pipeline that pumps Iraqi oil to Turkey. "A specialist American company will build the refinery," Barazani said, adding that the proximity of the pipeline would make it easier to transport Iraqi oil to the new facility.

A source in Iraq's state-owned North Oil Company said that plans for the refinery, around 500 kilometers north of Baghdad, had been in the works for around six months. Both declined to name the US firm or say how much the project would cost. It was also not clear when construction would begin or what the capacity of the new refinery would be.

There are at least eight oil refineries in Iraq, which has world's second largest oil reserves and capacity to refine 350,000 bpd. None are situated in the Kurdish north, which relies on the rest of Iraq and Turkey for refined oil products. Most Iraqi refineries now operate below capacity, ravaged by 13 years of economic sanctions and war damage.

Since last year's US invasion, sabotage by insurgents bent on undermining the government has also hampered efforts to overhaul refineries. The largely autonomous Kurdish north, which effectively broke from Baghdad in 1991, has seen less violence in the past year than other parts of the country.

New Refinery Planned for Amara, Iraq

Relative stability in the southern city of Amara has encouraged private entrepreneurs to draw plans for the construction of a refinery, a power plant and a liquefied gas factory.

The local branch of business and industry chambers in the city has set up a “consultancy board to energize the role of the private sector,” said Ali Jaber.

“We are preparing for the construction of a refinery and have submitted a feasibility study to the Ministry of Oil,” Jaber, who leads Amara’s business chambers, said.

Jaber said the city entrepreneurs were also planning other projects “among them an electricity generation station.”

Amara is the capital of the Province of Missan where some of the richest undeveloped Iraqi oil fields are situated.

The provincial capital is home to nearly 40% of the province’s population estimated at 1.1 million.

The province borders Iran and includes the Marsh Arabs homeland which the former President Saddam Hussein had drained to punish its restive population.

As a result more than 100,000 Marsh Arabs were displaced when their wetlands began to dry and turn into desert.

Jaber gave no details on how his chamber plans to finance the refinery.

Attacks on Oil Sites Cost Iraq $8 Billion

Terrorists are waging an all-out war on Iraq's vital oil industry, which has lost nearly $8 billion in revenue since the 2003 U.S.-led invasion, Oil Minister Thamer Ghadban said.

"We want to tell the Iraqi people that there is an all-out war against the country's oil infrastructure," Mr. Ghadban told reporters as he toured the capital's Dura refinery, which came under mortar fire during the last week of December.

Mr. Ghadban estimated lost export revenue from sabotage at about $8 billion since the March 2003 U.S.-led invasion of Iraq, which sits on the world's second largest known reserves of crude oil.

"Exports are now limited only to the south; there are no exports in the north," he added. Oil exports from southern terminals in Basra are averaging 1.8 million barrels per day.

Osama bin Laden ordered his supporters to sabotage oil facilities in Iraq and the Gulf, in an audiotape attributed to the al Qaeda leader broadcast on an Islamist Web site last month.

KUWAIT

Kuwait to Start Building New Refinery in 2007

Oil-rich Kuwait will begin building a 3.5-billion dollar 450,000 barrels per day refinery in 2007, the head of state-owned Kuwait National Petroleum Co (KNPC) said December 20.

The ecologically-friendly plant, which will produce cleaner fuels for Kuwait's power generation plants, should be completed by 2010, KNPC Chief Executive Officer and Managing Director Sami Rushaid told state news agency KUNA.

Rushaid was speaking to reporters after KNPC signed a Project Management Consultant (PMC) deal with U.S. engineering and construction firm Fluor Daniel.

Fluor will provide administrative as well as consultative services to the new refinery project and to a project to expand and upgrade Kuwait's current refineries, KUNA said.

According to KNPC's plan, the new refinery -- which will also produce kerosene and diesel -- is expected to start operations at the same time as the ageing 200,000-bpd Shuaiba refinery will be shut down.

The tiny Gulf country which controls one tenth of global oil reserves currently has three refineries with a total crude processing capacity of 930,000 bpd.

Unlike the other three the new plant will be able to handle several types of crude oil, said Ahmad al-Jimaz, who heads the new refinery project.

The new refinery is one of several projects being developed by OPEC-member Kuwait in the energy sector over the next two decades at an estimated total cost of up to $40 billion, including a plan to upgrade its total oil production.

Kuwait can now produce crude oil at a maximum rate of about 2.5 million bpd but plans to increase that to 4 million bpd by 2020.

Fluor to Design New Refinery for Kuwait National Petroleum Company

Fluor Corporation announced December 21 that it has been selected to provide front-end engineering and design services for Kuwait National Petroleum Company's new refinery. Contract value to Fluor was not disclosed.

The multibillion-dollar refinery will be located in Shuaiba, approximately 31 miles south of Kuwait City. When complete, the refinery will provide low-sulfur fuel to be used as feedstock for Kuwait's existing and new power plants. The refinery will have an initial capacity of about 450,000 barrels per day.

"This refinery is the first major grassroots refinery to be constructed in the world for many years," said Jeff Faulk, Fluor's group president of Energy & Chemicals. "This award is a testament to Fluor's extensive grassroots refinery experience. To date, Fluor has worked on 20 such refineries, more than any other contractor in the world. We're pleased to have been chosen for this work and to continue our relationship with Kuwait National Petroleum Company."

Employees in Fluor's Houston, Texas, office began work on this project earlier this month. The project is scheduled for completion in early 2009.

Fluor provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. Headquartered in Aliso Viejo, Calif., Fluor is a FORTUNE 500 company with revenues of nearly $9 billion in 2003.

OMAN

Machinery Arrives for Oman’s Sohar Refinery

An official source from Sohar Refinery said that refinery equipment has started to arrive at the project site.

The source said a cargo ship is expected to deliver seven major processing units weighing a total of 3,643 tonnes on December 20 at Sohar Industrial Port.

The company implementing the project has so far completed construction of 30 per cent of the refinery facilities, according to the source.

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