may 04 update

The Murphy Oil Corp. refinery in Meraux, La., should be back at full capacity by October, the company's chief executive says.

President and chief executive Claiborne P. Deming commented about the refinery, which was shut by a fire last June 10 and reopened in March, after a shareholders meeting Wednesday.

Murphy says the refinery is one of the few in the country producing both gasoline and diesel fuels that meet the new low-sulfur standards.

Deming told stockholders that Murphy will continue exploring for new sources of oil and gas, mainly outside of North America, while it expands its filling stations at Wal-Mart stores.

Deming called North American oil and gas production "extremely mature" and said the firm would exit its Canada operation by the end of the year, freeing $600 million for other exploration.

Deming told shareholders Wednesday the El Dorado-based company will continue to explore in the Gulf of Mexico and in "frontier areas" around the globe.

Exploration and production in western Africa, the Middle East, Russia and Southeast Asia have a "much greater chance" for higher production than similar operations in North America, Deming said.

He said Murphy will continue to expand with Bentonville-based Wal-Mart Stores Inc., where 680 Murphy USA gas stations are already in place at Wal-Mart Supercenters in 26 states.

Deming said the 5-year-old venture with Wal-Mart has given the company a 1.5 percent share of the U.S. retail gasoline market.

Murphy has more than 14 million acres in three offshore projects in Malaysia, where the company says its Kikeh discovery will produce well for years. First production is set for 2007. Deming called the Kikeh Field "a company-altering find."

The Sabah Trough off the coast of Malaysia includes 9 million acres of potential drilling sites, while the 2-million acre field off the coast of The Congo has yet to show its first well. Deming said the first well could start late this year.

Marathon Ashland Petroleum blamed a power failure for an equipment malfunction that caused about 20,000 gallons of partially refined crude oil to spray out of a flare at its refinery.

The substance fouled the Big Sandy River, blackened trees along the shoreline and stained cars parked at a nearby plant.

Maleva Chamberlain, a spokeswoman for the state Division of Water, said MAP's cleanup contractor had recovered about 12,000 gallons of the substance from the river.

The contractor will use fire hoses to create a fine mist to wash the oil off the trees and down to the bank where it can be recovered, Chamberlain said.

The leak occurred May 9 as one of the plant's refining units was powering back up after an electrical outage, said MAP spokesman Chuck Rice.

The flare, which normally burns off excess product, had gone out during the outage, he said. As a result, the oil sprayed out of the flare.

Rice described the substance as partially refined hydrocarbon with the consistency of heating fuel. Most of it landed around the refinery's loading docks.

MAP is jointly owned by Marathon Oil Co. and Ashland Inc. However, the companies announced in March that they had reached an agreement for Ashland to sell its 38 percent interest in MAP to Marathon by the end of the year for $3 billion. The Catlettsburg refinery employs about 1,400.

EPA: Chevron Ahead of Game

What's happening now with diesel fuel is as significant as the introduction of unleaded gas in the 1970s, and Chevron's Pascagoula Refinery is ahead of the curve.

EPA Assistant Administrator for Air and Radiation Jeffery Holmstead came from Washington, D.C., to visit the refinery May 12 as part of a tour to drive that point home.

He ranked the cooperation between diesel engine makers and the refineries in this country to make diesel emissions 99 percent cleaner by 2010 as a once- or twice-in-a-lifetime event.

In heavy-duty diesel engines, "that black puff of smoke that happens when the accelerator is pressed will be a thing of the past," Holmstead said. "It's a big deal in the history of cleaner gas."

Cleaner fuel combined with modifications to diesel engines is what will eventually almost eliminate the emissions. The changes are being phased in over time to keep from disturbing the economy, he said.

It will begin in mid-2006, but Chevron's Pascagoula Refinery is already producing cleaner diesel. It completed $150 million in modifications last year that have enabled the refinery to meet the new standard well ahead of the federal schedule.

"The quality of fuels in this refinery is some of the best in the industry," said Refinery Manager Roland Kell.

He said that the improvements are "a platform for continued investment in the refinery over the next five to 10 years."

Carol Kemker, deputy director for EPA Region 4 out of Atlanta, said that taking sulfur out of diesel fuel and cleaning up emissions from construction, agricultural and industrial diesel-powered equipment will prevent 12,000 premature deaths a year and hundreds of thousands of visits to the emergency room for respiratory ailments.

"This is very important because it means that much to the nation's health," Kemker said.

From the Pascagoula refinery the EPA pair headed for Tampa, Fla., to continue a tour promoting the significance of the new diesel standards.

The new standards haven't caused the controversy stirred up by the introduction of unleaded gasoline or the catalytic converter for cars, but it is as significant, Holmstead said.

Shell Has No Plans to Cover Refinery's Loss

As the closing date approaches, the controversy surrounding the closure of the Shell Refinery on Rosedale Highway continues to heat up. KERO reported Consumer Reporter Heidi Carter sat down with the refinery manager, who said the Bakersfield refinery isn't efficient enough to keep open, even though it's making a profit.

Amir Farid said the Rosedale refinery isn't as efficient as Shell's two other California refineries, which is why Shell will close it down at the end of September.

"This refinery is two separate refineries that have been stitched together over time," Farid said. "You also have simply the economy of scale. This is a 70,000-barrel-a-day refinery. Martinez is currently 145,000 and can produce up to 160,000 (barrels a day.)"

Farid said the refinery closing has nothing to do with the current price spikes for gasoline. But the current market is making the refinery profitable.

"Clearly, in the environment today, we are profitable at the moment, but this is a cyclical business," Farid told KERO.

Farid admitted Shell has no current plans to make up for the total loss of supply that will occur when the plant closes.

"There is going to be a gasoline shortfall that we are still working on and potentially can offset some of that from our refinery up in the northwest," Farid said.

Shell only has the capacity to make up about half of the diesel production that will be lost.

Jamie Court, the president of the Foundation for Taxpayer and Consumer Rights, said that closing the refinery is about shorting the market and ultimately keeping gas prices above $2.

Farid said in spite of the current profits, the refinery has a history of losing money.

Court said Shell should put the refinery up for sale, rather than short California consumers by closing it down.

While Shell has not put the refinery up for sale, they have received 14 inquires from companies interested in buying it, but so far no offers have been made.

Operators of an oil refinery company say they have not decided on a site for new plant.

However, Marks Mayor Dwight Barfield said Quitman County is first in line for the $700,000 oil refinery.

Nettleton-based BioDiesel of Mississippi Inc. is looking to locate a natural fuels production plant in the Delta. The plant could employ up to 80 people.

"They've basically made a commitment to us," Barfield said. "It's pretty much a done deal."

BioDiesel's general manager, James W. Chiles Jr., said there is no deal with Marks or any other county or city. He said company officials are still scouting sites in Quitman, Coahoma and Sunflower counties and will build the new plant where they can get the best deal.

"I think they'll all be making us an offer within the next 30 days, and we'll go where the offer is best," Chiles said.

The company converts natural, renewable sources such as soybean oils into combustible diesel fuel. It has a plant in Nettleton and plans to begin building the second plant within 90 days.

Barfield said the proposed site in Marks would be leased for 10 years at $1,000 annually and is located across from a major soybean oil producer - Bunge North America.

"It makes sense for (BioDiesel) to be here," Barfield said. "They wouldn't have to ship the soybean oil; it'd be right across the street."

If BioDiesel builds the plant in Marks, the town would apply for a $500,000 grant to widen and resurface a nearby road.

The first plant in Nettleton cost a little more than $1 million, raised by private stockholders, Chiles said. He said funding for the second plant would come from government grants or private investors.

Brazil's state oil company Petrobras is considering buying or building an oil refinery in the United States, its top executive said on May 20, a move that would give it a foothold in a highly lucrative market.

"There is a refinery in the U.S. we've been studying," Petrobras President and Chief Executive Jose Eduardo de Barros Dutra told reporters in New York, through a translator.

"For the last two years we've studied refineries in the United States and Aruba, but these projects did not come to fruition," said Dutra, who declined to elaborate.

U.S. gasoline prices have surged to record highs this year amid thin inventories, soaring oil prices and worries that there is not enough capacity to meet rising demand. At the same time, refiners and integrated oil majors have been reporting strong profits.

Analysts predict refining margins will remain strong for the foreseeable future.

At the same time, many U.S. refineries have been put up for sale by U.S. oil majors seeking to shed assets they expect to be low-return in the long term.

Dutra emphasized that any U.S. downstream investment would be outside a seven-year strategic plan that Petroleo Brasileiro unveiled on May18.

Petrobras, among the world's largest oil producers, announced plans to invest $53.6 billion in exploration and production, refining, transportation and other energy projects between now and 2010.

The spending is primarily aimed at boosting domestic oil output to 2.3 million barrels a day in 2010 from 1.5 million. Production should increase on average by 5.9 percent a year for the next seven years, Petrobras said.

Petrobras says its plan will help boost production and increase return on investment, though some Brazilian analysts cautioned the pace of production growth will slow after 2007.

The plan also called for the construction of a new refinery and a petrochemicals plant in Brazil. Petrobras also will spend $7.5 billion on international projects, including exploration for oil off Iran's coast, and earmarked $3 billion for natural gas pipelines.

Meeting Slated on Refinery Dust

Newport residents in an area that spanned several city blocks awoke May 27 to find their yards and vehicles dusted with white powder following a problem overnight at the Marathon Ashland Petroleum refinery in St. Paul Park.

Marathon Ashland Petroleum workers were shutting down the fluid catalytic cracking unit about 4 a.m. when the processed clay catalyst escaped into the air.

Refinery and state Pollution Control Agency spokespeople said the processed clay —which contains silica, aluminum oxide, magnesium oxide, rare earth oxide and phosphorous compound — is not hazardous.

Sieben and Chapdelaine have invited representatives from the refinery, Washington County and the PCA, in addition to federal lawmakers.

A PCA specialist visited the site of the dusting but didn't collect samples of the processed clay, said PCA spokesman Walker Smith, who described that as routine. The refinery collects samples and analyzes them under its operating permit, he added.

Chapdelaine and Sieben took matters into their own hands on May 28 by having an independent lab collect samples of the processed clay for analysis.

The St. Paul Building Trades Council, representing labor unions, is paying for the testing, Chapdelaine said.

"In the past few years, Marathon Ashland has put forth a lot of effort to be a good community neighbor. I've found that people have become more suspicious of their activities," Sieben said.

"While people want to believe Marathon, someone needs to be looking out for the public's interest, asking hard questions and challenging the information that's fed to us."

US Looks at Easing Refinery, Fuel Rules

The Bush administration is considering easing environmental requirements for a multitude of gasoline blends and streamlining permits for new refineries to increase fuel supplies and fight soaring prices, Commerce Secretary Donald Evans said May 26.

Evans, a former Texas oil company executive, said in an Associated Press interview that the cost of gasoline, which hit a record national average of $2.06 per gallon The week of May 23, was affecting driving habits.

Mindful that oil shocks in the 1970s and 1980s were severe enough to push the country into a series of recessions, Evans said the administration was taking very seriously the current run-up in prices and the impact it might have on consumers' buying patterns.

"It is of great concern to us," Evans said. "The president will take all the steps we can to deal with the problem."

A CNN-USA Today-Gallup poll yesterday indicated that almost 6 in 10 people surveyed said they expected gasoline prices would cause them a financial hardship this summer and lead them to drive less.

The administration is also feeling political heat from the surge in energy prices. Democratic presidential challenger John F. Kerry, blaming President Bush's foreign policy, said yesterday that "instability and danger in the Middle East" are boosting oil prices.

On a campaign swing in Oregon and Washington states, Kerry said people are paying more for gasoline because the administration did not pressure the Organization of Petroleum Exporting Countries to lower prices by producing more oil.

Evans said the administration was exploring ways to reduce the requirements that now exist for gasoline blends in different parts of the country to deal with specific air pollution problems.

"We've got to think real hard whether we need 17, 18, 19, 20, whatever it is, different varieties of fuel in this country," Evans said. "That puts certain areas of the country at a very high risk of being dependent on a single source supplier."

Evans said the need for these "boutique fuels" was hurting the country's ability to import gasoline. While there is surplus capacity at refineries worldwide, foreign refiners often do not produce the specialty blends required only in the United States.

But Vickie Patton, a lawyer with Environmental Defense in Boulder, Colo., said that the use of cleaner-burning gasoline blends had been "one of the single most effective measures to protect public health and the environment from harmful air pollution."

Oregon Approves Multi-Million Dollar Expansion At The BP Refinery

As of May 24, a new deal between the city of Oregon, Ohio and the BP refinery, ensures that cleaner fuel will be coming soon. Council members approved a $335 million addition to the BP refinery in Oregon and the mayor said it should be a great deal for everyone involved.

At the Oregon City Council meeting, members talked about a couple of ordinances that would make the expansion a reality. Mayor Marge Brown said the BP plant needs to take sulfur out of the coke and it needs to build a hydrogen plant in order to help to do that.

The plan would give a million dollars each year to Oregon schools for the next 10 years.

"We're very happy they've decided to invest here in the city of Oregon," said Mayor Brown. "By doing this that means a lot of things for the city of Oregon...(BP's) choices were they could make less gas here but they've opted to make just as much gas only cleaner fuel and that's what's important all the way around," the mayor added.

On the flip side, there are people who are very worried about air pollution especially after new tighter standards are coming to Lucas County and others in Ohio. Mayor Brown said the facility will abide by the Clean Air Act, follow all government regulations, and she doesn't see any problems with the expansion.

She also said this should help gas supplies with more of the cleaner fuel getting out there, and that, in turn, could help gas prices. Mayor Brown said the plant will take several years to phase in and she predicted the Sun Oil plant will be looking to do the same thing down the road.

As the summer driving season kicked off this Memorial Day weekend, an overstretched U.S. gasoline market faced its toughest test yet.

An unexpectedly sharp rise in gasoline use this year is running headlong into the country's limited capacity to produce it. The tight supply - as well as higher crude oil prices - is a major factor behind the run-up in pump prices this spring and could drive them up further this summer.

"We're in uncharted territory because our demand is growing fast," said Jan Stuart, the head of energy research at Fimat USA, a brokerage in New York. Gasoline "imports will have to grow this summer, and opinion is divided on whether that can happen."

Gas stations aren't likely to run out of fuel, Stuart says, but pump prices may have to rise sharply to attract the needed imports.

Gasoline use is up about 3 percent so far this year, twice as much as the historical average. It's unclear why, though the improving economy is one factor.

America's refineries are already strained. Modest refinery expansions in the past decade haven't kept pace with population growth and America's appetite for ever-larger sport-utility vehicles.

Normally, refiners build stocks of gasoline in the spring to help meet higher summertime demand. But this spring, American drivers are using gasoline as fast as refineries can produce it.

If gasoline consumption continues to surge, the United States could face record demand with relatively low stocks. Imports would have to play an even bigger role than in the past.

"This year is the first one where we're running up against effective capacity across the board," said David Montgomery, the Washington-based co-head of the energy and environment practice at Charles River Associates, a consultant to the oil industry.

Zeta Rosenberg, the head of the fuels group at ICF Consulting in Fairfax, Va., predicts the gap between oil prices and gasoline prices will widen. That means pump prices will increase even if the price of oil remains unchanged. And if oil prices were to fall, gasoline prices won't decline as much, if at all.

The culprit is America's limited refining capacity, which is constricting supply and driving up prices independent of crude supplies.

Oil prices, for example, have risen about $10 a barrel since December, or about 24 cents a gallon. A barrel is 42 gallons. But gasoline is up more than 50 cents a gallon.

"I think it's going to be a tough summer," Rosenberg said. "You can't fix this sort of thing quickly."

No one knows whether the high price of gasoline will deter people from taking vacations. A survey by AAA, the travel group formerly known as the American Automobile Association, found that 30.9 million travelers would hit the roads Memorial Day Weekend, up 3.4 percent from last year.

But a separate survey by the National Retail Federation found that 32 percent plan to trim or halt vacation plans because of rising gas prices. For refiners, the higher prices are a windfall.

ConocoPhillips, Exxon Mobil and Valero Energy, the nation's three largest refiners, reported huge gains in refining profits for the first three months of the year.

The industry has entered "a new era for refining margins," Bill Greehey, chairman of San Antonio, Texas-based Valero, said in a conference call with analysts last month. "The highs will be higher, the lows won't be as low, and they will be (of) shorter duration."

No new refineries have been built in the United States in more than three decades, outside of a small one in Alaska.

Husky Energy Awards Gas Compressor Contract for BC Refinery

Husky Oil Operations Ltd., a unit of Calgary-based Husky Energy Inc. has awarded engineering firm Peter Brotherhood Ltd. (PBL) of Peterborough, UK, for the supply of a reciprocating gas compressor for Husky's 10,250 b/d refinery at Prince George, BC.

PBL will design, manufacture, install, and commission the $1 million (Can.) hydrogen compressor system as part of Husky's clean fuels program; the partially skid-mounted compressor will be used to remove sulfur from produced gasoline. Low-pressure hydrogen feed will be compressed to 25 bar and then fed into a hydrotreater.

Husky has selected Montreal-based SNC-Lavalin Inc. to conduct the project's procurement and installation work. Equipment is slated for delivery to the site in November.

Petroleos de Venezuela Plans Refinery Expansion

Ali Rodriguez, president and chief executive of Petroleos de Venezuela SA, Ivan Hernandez, vice president, Jose Rojas, vice president, and Luis Marin, president of Citgo Petroleum Corp., spoke at a news conference in New York about the state-owned company's plans to expand its refinery.

Shell Australia said a routine shut-down was underway at its oil refinery in Geelong, Victoria but supply would not be affected.

The shut-down began late last month and is expected to finish at the end of this month spokeswoman Helen Morgner said.

"All refineries have regular maintenance shut-downs every three to four years as part of our normal ongoing health safety security management plan," she said.

"The shut-downs are planned well in advance and do not affect production or supply as we create sufficient stockpiles in preparation."

Production at the Clyde refinery in New South Wales had resumed after a shut down there ended a ended a few weeks ago, again with no disruption to supply, she said.

Exxon, Aramco, Sinopec Advance China Refinery Plan

ExxonMobil Corp, Saudi Aramco and Sinopec Corp aim to start building a $3.6 billion refining and petrochemicals complex in China in late 2005, an industry source said on May 13.

"The project is moving ahead. Bids for engineering contracts are being evaluated and will be awarded as soon as July," the source said on the sidelines of a China oil and gas conference.

The integrated mega-project, planned for China's southeast coastal province of Fujian, has lagged similar investments involving multinationals such as BP Plc <BP.L> and BASF AG <BASF.DE> due to stumbling blocks that have prevented access by foreign partners to China's petroleum products market.

"Both ExxonMobil and Saudi Aramco are now assured of the market access," said the source, adding that market access was agreed among the parties involved before Saudi Oil Minister Ali al-Naimi's visit to Beijing in April.

The joint-venture agreement will give ExxonMobil and Saudi Aramco 25 percent each in the project, while Sinopec will hold 50 percent ownership.

The complex will triple the capacity of an existing Sinopec refinery to 12 million tons per year (tpy) from four million tpy, and will add an 800,000-tpy ethylene plant.

The expanded refinery is expected to begin operating from 2006/2007, and the ethylene plant not until after 2010.

Under its commitment to the World Trade Organization, China is due to open its domestic oil sector in 2004.

China's largest refinery, Zhenhai Refining and Chemical Co Ltd, also plans to build the country's biggest petrochemical complex at 20 billion yuan ($2.4 billion), by 2010, Chinese industry officials said on May 18.

The proposal for the one-million-ton-per-year ethylene project in Ningbo city in Zhejiang province, which is likely to be funded domestically, is awaiting Beijing's approval and will be followed by a feasibility study.

Kuwait Keen to Build Refinery in Thailand-Thai Energy Min

Kuwait has expressed an interest in building a refinery in Thailand if plans to develop a proposed land bridge in the south of the country as an oil transportation and trading hub come to fruition, Thai Energy Minister Prommin Lertsuridej said May 12.

"Kuwait is keen to build a 300,000 barrel-a-day refinery in southern Thailand," Prommin said.

Under provisional plans, a land bridge will be built across the isthmus that connects Thailand to the Malaysian peninsula, providing an alternative to shipping through the crowded Strait of Malacca.

The land bridge terminals and other Thai ports could also serve as points of access for delivery of oil products to southern China and the countries of Indochina.

Kuwait and six other Arab countries - Egypt, Morocco, Oman, Qatar, Saudi Arabia and the United Arab Emirates - have shown interest in the land bridge project, Prommin said after meeting May 11 with ambassadors from the seven countries.

Thailand will seek further collaboration with major oil suppliers from the Middle East as part of the country's drive to become a regional oil trading center, he said.

Prommin said the ambassadors of "each country will go back and discuss (with their goverments) the areas in which they will cooperate with Thailand."

Late last year, Prommin said the governments of Oman and the United Arab Emirates had expressed interest in investing in the land bridge project, and in oil trading and the petrochemical industry in Thailand due to increasing demand for oil products in Asia.

Thailand, a net oil importer, has six refineries, with a total refining capacity of 1 million barrels a day. Domestic consumption of refined oil products is around 708,900 b/d.

In January, Thailand opened a petroleum trading center in Sriracha, southeast of Bangkok on the coast of the Gulf of Thailand, opposite the planned land bridge.

The cost of the land bridge project, which would include petroleum terminals on the coasts of the Andaman Sea and the Gulf of Thailand, a 230-kilometer 42-inch pipeline and an accompanying road and railway, has been estimated at $700 million.

ConocoPhillips Irish Refinery in Turnaround-trade

ConocoPhillips is undertaking scheduled maintenance at its 75,000 barrels per day Whitegate refinery in Ireland, oil product traders said on May 10.

The maintenance began on April 19 and is due to be completed on May 21, one trader said.

Traders did not know which units at the refinery had been affected.

Company sources at the plant refused to comment on the maintenance.

The refinery is one of several plants in Europe undergoing maintenance. The heavy program of spring refinery maintenance in the region has led to tight oil product supplies.

Tight supplies in Europe and concern of a supply crunch in the U.S. ahead of the peak-demand summer driving season have helped push gasoline prices on both sides of the Atlantic to record highs.

Prompt-loading 10ppm gasoline barge prices reached a record price of $466 a ton on May 6. The barge market traded just below that level at $463.50 a ton on Monday amid losses on crude oil futures.

Crude futures slumped as leading world exporter Saudi Arabia said OPEC should raise crude oil supply to stop high prices hurting world economic growth.

HYSYS Refinery Source Code Released to KBC Advanced Technologies plc

In addition to the announcement made on April 26 2004, KBC has announced a further significant development in the enforcement of the UK Arbitration Award: -0- *T KBC received on May 21; the source code for HYSYS Refinery(1) from escrow. Since then KBC has successfully carried out an initial verification to confirm that the source code is complete. As stated in the previous announcement, this means that KBC can now continue the development, marketing, sale and maintenance of HYSYS.Refinery with no time limit and on a royalty-free basis.

Having the rights to HYSYS Refinery, the leading flowsheet product for the industry, will provide KBC with significant benefits and should lead to growth in software sales in 2005 and beyond. In addition, it will help to generate additional consulting and continuing services work with KBC clients in the future.

"This event is a milestone in the evolution of productivity improvement solutions in the oil refining industry. We are absolutely delighted to have confirmed our exclusive rights to this software product after fighting for more than two years through the arbitration process. This success vindicates our decision to devote the time and resources necessary to the recovery of KBC's intellectual property. KBC's ability to deliver HYSYS Refinery to the refining industry worldwide as a proprietary KBC product has finally brought clarity to the future of software-based optimization in the marketplace. KBC has the resources, and is fully committed, to continue to develop world-class refinery optimization solutions. Product release details will be announced shortly. All of us in KBC are looking forward to further developing business relationships with the many customers worldwide who we know are awaiting KBC's refinery-wide software solution."

HYSYS Refinery is a complete, refinery-wide simulation and flowsheeting environment which was jointly developed by Hyprotech and KBC between 1999 and 2002 when Hyprotech was sold to Aspentech and KBC's access to the code was denied. HYSYS Refinery integrates the KBC/Profimatics suite of non-linear refinery process unit models with the process engineering modeling capabilities of HYSYS.Process in the HYSYS Process flowsheeting environment. The power and flexibility of this carefully constructed combined modeling capability enables the analysis and determination of a broad range of profit improvement opportunities across entire refinery sites.

KBC Advanced Technologies is a leading independent consulting and services group, delivering improvements in business performance and asset value to owners and operators in the oil refining, petrochemical and processing industries worldwide. KBC analyses plant operations and business processes, and recommends changes that deliver material and measurable improvements in profitability. KBC works in partnership with its clients and offers implementation services when requested to assist them in realizing financial benefits. In support of these efforts, KBC makes extensive use of its proprietary process modeling and its refinery-wide simulation technology. KBC provides strategic planning advice, petroleum and chemical price forecasting, economic studies, capital project reviews, and process engineering services to help clients find the most cost-effective way to achieve their short- and long-term objectives. Formed in 1979, KBC has its principal offices in the UK, USA, Singapore, Japan, Russia, and the Netherlands.

KENYA

The Government of Kenya will not shut down the Kenya Petroleum Refineries Limited.

Energy assistant minister Mwangi Kiunjuri said closing down the refinery would lead to loss of jobs.

However, Kiunjuri said the ministry was conducting a viability study at the refinery.

He said the Government was intending to get crude oil from Sudan and Rwanda Replying to a question by Eldoret East MP Joseph Lagat (Kanu), Kiunjuri said some Asian countries have expressed interests in rehabilitating the refinery.

Lagat wondered why the minister should protect KPRL which is 50 per cent owned by Caltex, Kenya Shell and BP which are all competitors.

Kiunjuri admitted that the small oil companies were having financial problems in the Open Tender System.

Total Overseas Downstream has expressed interest in bidding for the acquisition of controlling shares in Kaduna Refinery and Petrochemical Company (KPPC), its president and chief executive, Mr. Alain Champeaux, said May 11.

The News Agency of Nigeria (NAN) reports that Mr Champeaux gave the indication when he called on the acting group managing director of the Nigerian National Petroleum Corporation (NNPC) Alhaji Abubakar Yar'Adua in Abuja.

The Total chief executive said his company, having undertaken Turn Around Maintenance (TAM) on the Kaduna refinery, was interested in taking a stake in the facility, and expressed Total's readiness to participate in discussions towards ownership of the refinery.

Champeaux said, given the chance, Total would bring its expertise and experience in refinery management to bear on the Kaduna refinery, and that the company was interested in partnering and cooperating with NNPC in the production of Liquefied Natural Gas (LNG) cylinders as well as other areas of oil business, and said the company had a lot of projects in Africa with Nigeria having a special place in Total's operations.

Yar'Adua said in reply that the NNPC would welcome moves that would add value to the nation's hydrocarbon resources. "There are lots of things we can do together for the benefit of our companies and our countries, he said, and commended Total for its job in the TAM of KRPC.

The Bureau of Public Enterprises (BPE) has however been going back and forth on the privatization of the four refineries in the country. Director-general of the BPE, Dr. Julius J. Bala said in November last year, that the two refineries in Port Harcourt would be sold by January this year, while the KRPC was scheduled to be privatized in March 2004, and subsequently the Warri Refinery and Petrochemical Company (WRPC).

However, when it was obvious that the proposed privatization of the refineries was not feasible in the time frame scheduled, the BPE boss announced an adjustment in the timetable, saying that Port Harcourt would be sold in May, while KRPC and WRPC would follow later.

Shortly after Dr. Bala's pronouncement, a controversy set in, with the NNPC insisting on TAMs on the four refineries prior to their privatization, even as the BPE said they were to be sold as they were, while the Weekly Trust reported that Libya had expressed interest in acquiring the Kaduna refinery, but was allegedly advised by the presidency to bid for those in Port Harcourt.

The group managing director of the NNPC, Engr. Funsho Kupolokun told newsmen in March that it would be necessary to turn around the refineries before they are sold, hinting that they would operate efficiently by this month if TAMs were undertaken.

The NNPC boss, it would appear, has won the ears of the presidency as the KRPC advertised in late March for expressions of interest from experienced companies in the TAM, thus giving room for Total to carry out the contract.

As it is today, a cloud of uncertainty hovers over whether the National Council on Privatization (NCP), through the BPE, would sell the refineries or not.

Lagos to Build Refinery, Petro-Chemical Plant

Lagos State government has disclosed plans to partner with the private sector to construct a refinery and petro-chemical plant to stem the tide of incessant scarcity of petroleum products.

Special Adviser to Governor Bola Tinubu on Mineral Resources Development, Mr Olanrewaju Saka-Shenayon, disclosed this in May while briefing the press on the activities of his office in the last one year.

He said efforts are already being made to facilitate an enabling environment for the take-off of the private sector led refinery in Badagry.

Saka-Shenayon said part of the short term plans of the state government was to "pursue the establishment of at least two petroleum refineries in Lagos State", and petroleum resources development.

According to him, the mission statement of his office was "to make Lagos State a mineral producing and processing state in the shortest possible time and as cost effective as possible."

He said by exploiting its mineral base, the state hoped "to broaden its economic base and enhance the revenue accruable to it."

He said his office "is facilitating realization of the West African Gas Pipeline Project, a 617 kilometer project, to transport natural gas from Nigeria to neighboring West African countries of Benin Republic, Togo and Ghana.

"A segment of the infrastructure will pass through Tori-Lovi, Ilogbo-Eremi, Agunmo, Iworo, Imeke and Topo with a compressor station at Ajido, all in Badagry division of Lagos State," he said.

On the mineral potentials of the state, Saka-Shenayon said in addition to petroleum resources, there has been confirmation of the existence of six other mineral resources in the state "though not enough studies have been carried out to determine the quantum and spread in the areas they have been identified.

He said his office would ensure that it is favorably disposed to private sector participation in the mineral resources sector, "as such, a conductive environment will be created for serious private investments in the state."

Speaker of the House of Representatives, Aminu Bello Masari has called on the governors of the nineteen northern states to invest in the proposed privatization of the Kaduna refinery in order to bring the petroleum products closer to the people of the states. Receiving the chairman, patron as well as other members of the Dutsinma Consultative forum in his office yesterday, the Speaker said such investment would be one of the most lasting legacies that the governors would be leaving behind for the people of the region.

According to the Speaker, all stakeholders from the region especially organized sector should provide a forum whereby their elected representatives would be held accountable and would have the opportunity to interact with the people and to know their problems and difficulties.

ISRAEL

Refineries Privatization: Buyer of Ashdod Oil Refinery Must Commit for 20 Years

The government will require investors wishing to compete for the acquisition of the Ashdod oil refinery to guarantee the operation of the refinery for a period of 10-20 years, say senior government officials in response to claims by oil refinery employees that the partitioning of Israel's refineries is not feasible and would lead to a collapse of the oil refinery in Ashdod.

The government-appointed inter-ministerial team, headed by Ministry of Finance Director General Yossi Becher, who examined the issue of privatization of oil refineries, recommended to the Ministers of Finance and Infrastructure that the refineries in Haifa and Ashdod be separated and sold to private investors.

Government officials further noted that the government would ask for a long-term commitment from the entrepreneurs to operate the Ashdod refinery in order to ensure the formation of competition between the two refineries, which would result in lower fuel prices. In addition, the officials stated that the stipulation would prevent a situation in which investors would request to compete for the acquisition of the Ashdod refinery for real estate purposes. The Ashdod refinery is situated on large land reserves occupying approximately 600 hectares.

Opponents of the partitioning claim that the Ashdod refinery is relatively small and unable to operate independently. Chairman of the Employees Committee, Reuven Schwartzberg, said that the Ashdod refinery requires an investment of $100 million over the next several years. According to him, the decision to separate the refineries will lead to a declaration of a labor dispute.

The Minister of Infrastructures is expected to confer with the incoming Oil Refinery Chairman, Ohad Marani, former Director General of the Ministry of Finance, about the split. Marani has yet to express his opinion on the matter but the oil refinery’s board of directors had decided in the past to oppose the split.

A program of rehabilitation and reconstruction for the Iraqi refining industry is beginning to take shape.

A. Barifcani, advisor on downstream operations for Iraqi's Ministry of Oil described plans for the industry at the Middle East Petroleum & Gas Conference in Bahrain. He didn't discuss how the program would be financed other than to say a "prudent, thoughtful investment plan" is in place.

Also at the conference, Hazim Sultan, director general of the ministry's Reservoirs and Fields Development Directorate, said Iraqi production of crude oil would reach 3.3-3.5 million b/d by the end of 2005.

Progress both upstream and downstream comes despite the threat of sabotage and attacks on workers. Sultan said Iraqi oil professionals have learned from past difficulties to sustain operations under challenging conditions.

The oil ministry plans to add processing units to facilities in each of three refining companies.

For North Refinery Co. (NRC), anchored by the Beiji refinery built during the 1980s north of Baghdad, it plans to add two package units—which is what it calls 10,000 b/sd topping plants it operates throughout the country.

It also plans to add reforming units at the 20,000 b/sd Seria Refinery and 30,000 b/sd Kirkuk plant, as well as a 30,000 b/sd fluid catalytic cracker and 20,000 b/sd isomerization unit, apparently at Beiji.

The ministry also plans to rehabilitate the Beiji hydrocracker and upgrade a lube plant and all processing units.

NRC has total design crude capacity of 402,000 b/sd, of which 288,000 b/sd is in use.

Plans for South Refinery Co. (SRC), with main facilities at Basrah, call for rehabilitation of a 70,000 b/d crude unit and modernization of all processing units.

Construction plans for the company include a 10,000 b/d reforming unit; two 15,000 b/sd, light gas-oil hydrodesulfurization units, a 9,000 b/d isomerization unit, a cracking unit, a 2,500 b/sd reformer at Nassiriya, and three 10,000 b/sd crude units.

Design crude capacity in SRC, built in the 1970s, totals 190,000 b/sd, of which 150,000 b/sd is in use.

In Middle Refinery Co. (MRC), which includes the Daura refinery built during the 1950s outside Baghdad, the ministry plans to add a 70,000 b/sd distillation unit, a continuous catalytic reformer, a gas-oil hydrodesulfurization unit, and a 20,000 b/sd reformer in Najaf.

It further plans to replace two crude units with a 70,000 b/sd unit and modernize all processing units.

MRC has total distillation capacity of 122,000 b/sd. Barifcani didn't say how much was in use.

The ministry hopes soon to build two new refineries—one with capacity of 20,000 b/sd at Konya and another with 10,000 b/sd of capacity at Erbil. In the longer term it wants to build a 250,000-300,000 b/sd refinery oriented to gasoline output.

On progress in Iraq's upstream, Sultan said, "we have more or less picked up the pieces of our production rates prior to the last war."

Like the refining industry, Iraq's producing industry was ravaged by three wars since 1980 and economic sanctions following the former regime's invasion of Kuwait in 1990.

Direct damage from the most recent war, which expelled President Saddam Hussein from power a year ago, was limited to a pipeline pump station and a Tigris River bridge for crude, products, and natural gas pipelines.

Subsequent looting and sabotage were extensive, however, and caused equipment bought with funds from the United Nations Oil-for-Food program during the sanctions era to disappear.

Production has climbed back to about 2.5 million b/d, 400,000 b/d less than its level before last year's invasion of Iraq.

April exports, Sultan said, averaged 1.806 million b/d, of which 1.575 million b/d passed through the Basrah terminal on the Persian Gulf and 231,000 b/d through the recently restarted pipeline from northern fields through Turkey to the Mediterranean.

Export capacities are about 500,000 b/d through the north and 2 million b/d through the Basrah and partially restored Khor Al-Amaya terminals. Capacity of the northern pipeline might rise to 800,000 b/d by yearend if rehabilitation continues.

"Always we keep our fingers crossed, hoping that nothing will happen," Sultan said. "We get surprises all the time."

To raise production to 3.5 million by the end of next year, he said, "we do not have to do much." Recompletions and connections of wells already completed can boost output to that level with little drilling, he said.

The ministry soon will seek bids for reservoir studies of giant Kirkuk field in the north and Rumaila field in the south.

Iraq's longer-term production capacity goal remains 6 million b/d, which Sultan said is possible by the end of the current decade with "tremendous work."

Dubai-based Dodsal hopes to bag a contract to build Oman's crude oil pipeline to link the exporting terminal at Minal Al Fahal in Muscat to the Sohar Refinery project.

"We know that they have very stringent requirements for the pipeline and they will be looking for an experienced company for the contract," a Dodsal official said.

According to the tender board, Dodsal put a bid for 34.55 million rials ($89 million) for the 200-km pipeline from Muscat to the northeast city of Sohar to provide a feedstock to a 75,000 barrels a day refinery, which is under construction.

Dodsal had previously won a contract to build a gas pipeline from the central Oman to the Sohar industrial area, which was commissioned earlier this year.

There are five more companies left on the run bidding for the lucrative deal trimmed from over 30 firms. Local company TOCO put in a joint bid with William Brothers of US, Turkey's Tekfen Construction, Italian company Saipem, Punj Llyod of India and Stroytransgaz of Russia.

The pipeline will be able to transport up to 100,000 barrels per day of mixture of crude oil and long residue as a feedstock to the Sohar Refinery. The Sohar refinery project, which is expected to start production in mid-2006, will feed the Oman Polypropylene Plant (OPP) with raw material. The OPP project, a joint venture of state-run Oman Oil Company and South Korea's LG Engineering, is expected to cost $200 million.

Oil Refinery in Hadhramout

A number of Saudi and Emirates businessmen have agreed to fund the building of an oil refinery in Yemen at a cost of $225 million.

Hadhramout Refining Company, which is owned by a number of Saudi, Emirates and Yemeni investors, signed on May 6 an agreement with two South Korean companies to implement the project to establish an oil refinery at Al-Dhabah Port in Hadhramout.

This would be the first refinery to be built jointly by local and Arab private sectors in Yemen. The work will take 30 months before completion, with a production capacity in its first phase of 50 thousand barrels per day.

SAUDI ARABIA

Honeywell Unit Signs Deal to Automate Saudi Refinery

The Phoenix-based Process Solutions unit of Honeywell International Inc. on May 18 announced its reception of a contract with Saudi-European petrochemical company SABIC Ibn Zahr for an automation project at a facility in Al-Jubail, an industrial city in the Arabian gulf.

"We chose Honeywell for this project because they understand our business, our objectives, and our many different needs," said Mazyad Al-Khaldi, Technical General Manager at SABIC Ibn Zahr. "Honeywell technology will improve our operations by making us more efficient and will enable us to better serve our customers in the end."

This agreement, financial terms of which were not announced, continues the longstanding relationship between Honeywell -- as Honeywell Turki Arabia Ltd. (HTAL) -- and SABIC in the Middle East. Honeywell has worked on automation projects for a number of SABIC affiliates over the past 20 years in Saudi Arabia.

Based in Riyadh, Saudi Arabia, SABIC is one of the largest petrochemical companies in the world. Its strategic business units include basic chemicals, intermediates, polyolefins, PVC and polyester, fertilizers and metals. SABIC Ibn Zahr is an affiliate of SABIC and produces polypropylene and fuel additive MTBE.

Honeywell International is technology and manufacturing company with revenue last year of $23 billion. The company is based in Morris Township, N.J., with its Aerospace and Process Solutions divisions based in Phoenix.