nov 04 update

Environmentalists who are suing a Louisiana refinery for alleged violations of the U.S Clean Air Act called on November 16 for the state's government to place additional monitoring equipment around the plant.

The environmentalists claim Chalmette Refining LLC's 183,000 barrel per day (bpd) refinery in Chalmette, Louisiana, continues to release emissions in violation of US and state standards.

"We're suing about the past," said Kenneth Ford, president of St. Bernard Citizens for Environmental Quality. "We're breathing this now. What are they going to do about the future? We want continuous real-time monitors on the fenceline."

Chalmette Refining, a 50-50 joint venture between Exxon Mobil Corp. and Venezuela's state oil company Petroleos de Venezuela SA (PDVSA), is located in St. Bernard Parish on east side of the New Orleans metropolitan area.

A refinery spokesman said Chalmette continues to work on reducing pollution from the plant, including a 40 percent cut in emissions from equipment malfunctions and the construction of $35 million wastewater treatment plant.

"We believe our environmental record continues to improve," said spokeswoman Nora Scheller in a statement. "Our policy is to meet all appropriate rules, regulations and standards."

The state Department of Environmental Quality is negotiating with Chalmette to settle alleged air and water pollution violations. Ford said he would like the monitors to be part of that agreement.

Monitoring equipment is placed at various locations around the Chalmette community.

ChevronTexaco Refinery Expansion

ChevronTexaco announced plans November 17 to submit federal and state permit applications for two major projects under consideration at its refinery in Pascagoula, Mississippi.

The first project would involve the increase of the company's gasoline production. The second involves locating a terminal on the site to import liquefied natural gas. Governor Haley Barbour joined officials for the announcement.

The projects are subject to economic evaluation and management approval by ChevronTexaco. According to officials, the company has submitted an environmental permit application for the increased gasoline project to the Mississippi Department of Environmental Control. Pending approval, construction on the project could begin by 2006.

Officials say the company plans to submit permit applications to various agencies for its proposed natural gas project.

The company has reportedly already begun meetings with federal and state regulators, U-S Coast Guard and marine officials, and community groups regarding both projects.

Opposition to $2.5 Billion Yuma Refinery Grows

Opposition to a proposed $2.5 billion refinery in Yuma County appears to be mounting, and efforts are under way among a recently organized grass-roots group to halt its construction.

A spokesman for Arizona Clean Fuels LLC, the Phoenix-based company that wants to build the refinery, said such opposition is not out of the ordinary and said more people will come to support the refinery once they get past commonly held misconceptions.

ACF and state environmental regulators have said the proposed refinery would be "the cleanest operating" one of its kind in the United States, owing to stringent emissions standards and the use of new technology developed over the years since the last refinery was built in the nation.

The proposed refinery; if approved and built, would be situated 40 miles east of Yuma near Tacna, and would process an estimated 150,000 barrels of crude oil per day from a yet-to-be built pipeline out of Mexico. The refinery would be the first ever built in Arizona and the first one built in the nation in nearly three decades.

At issue is the draft air permit, the document written by the Arizona Department of Environmental Quality that sets emissions standards and compliance rules for the refinery.

Just as automobiles and pollution standards have changed over the years, so has technology concerning oil refineries, said Ian Calkins, spokesman for ACF.

The cleaner burning fuels the proposed refinery would produce would contribute to an overall reduction of emissions and those fuels will exceed anticipated clean fuel standards in the future, Calkins said.

"What we need to do is shut down old refineries and build new ones like the one proposed for Yuma County," Calkins said.

Pascagoula Refinery Plans Air-Quality Improvements

Local ChevronTexaco Pascagoula Refinery officials at a briefing during the week of November 18 explained a number of environmental violations the company has been owning up to and taking care of locally. It also discussed a federal agreement it made to clean up emissions nationally.

The briefing included an explanation of air quality violations at the Pascagoula refinery, an agreement the refinery's parent company made with the EPA and the U.S. Justice Department and fines the company will pay to Mississippi and the federal government.

Information provided also said that nationwide the company would pay $3.5 million in civil penalties and would be required to spend $4 million on more controls and environmental projects in communities around ChevronTexaco's five U.S. refineries.

It's part of a consent decree announced in 2003 filed in U.S. District Court in Northern California that will require ChevronTexaco to spend an estimated $275 million to reduce emissions at its refineries by 9,600 tons a year.

Pascagoula's refinery is the company's largest in North America and will realize the bulk of the emission reductions, company officials said.

Flint Hills Gears up for $170 Million Modification Project at North Pole Refinery

Flint Hills Resources is gearing up for a $170 million modification project at its refinery at North Pole, near Fairbanks, that will produce ultra-low sulfur gasoline and diesel fuel.

Construction will be underway by late spring 2005 on the project, according to Jeff Cook, Alaska spokesman for Flint Hills.

The new clean fuels are mandated by U.S. Environmental Protection Agency rules. These rules have caused concern among trucking firms and others operating diesel engines that there may be problems getting the fuel in Alaska.

Flint Hills will have refinery modifications in place to meet a January 2007 deadline for making low-sulfur gasoline but getting the facilities to make clean diesel will take longer, Cook said.

Flint Hills committed to manufacturing the clean fuels in Alaska when it purchased the North Pole refinery from Williams Alaska Petroleum Co. in 2003. An important consideration is that Flint Hills will make an Arctic grade of the clean diesel that can be used in the extreme cold temperatures common in Interior and Northern Alaska.

Diesel engine operators in those regions cannot use conventional diesel fuel because it gels in cold temperatures.

The EPA rule regarding gasoline requires a limit of 30 parts per million sulfur content, while the rule affecting diesel will require 15 ppm or less.

Cook said the engineering for the ultra-clean diesel has turned out to be more complex than expected, and it may be late 2008 before the refinery modifications can be completed to produce the clean diesel at North Pole.

Until then, Flint Hills will import the fuel for use by truckers, he said. Tesoro Alaska Petroleum Co., which owns and operates a refinery at Nikiski, near Kenai, said it will import the fuel so that it is available for customers, but will not manufacture the fuel in the state.

The EPA rule affecting diesel truck engines goes into effect in mid-2006.

Refineries in the Pacific Northwest have told state of Alaska officials that their costs for making the fuel will be about 5 cents a gallon more than making conventional diesel.

However, estimates are that by the time the fuel is transported to Alaska it will cost 25 to 50 cents more than diesel now being sold. Ultra-clean conventional diesel will be made in Pacific Northwest refineries, from where it can be shipped by barge for use in Southeast and parts of Southcentral Alaska which experience milder winters.

Refineries and fuel transportation companies outside of Alaska are looking at how to handle the new fuels,.

According to Charles Drevna, executive director of the National Petroleum Refiners Association, the ultra-low sulfur diesel fuel will pose challenges in fuel storage and transportation. Refineries are gearing up to make the fuel, but transporting and storing it may create problems.

The ultra-clean diesel, from which the sulfur has been removed, has a tendency to reabsorb sulfur if it is stored in tanks or moved through pipelines in which other fuels with a greater sulfur content have been stored or transported, Drevna said.

EnCana Considering Joint Venture to Convert Refinery to Process Heavy Oil

Canadian energy giant EnCana Corp. is examining a potential joint-ownership of a retrofited refinery in Ohio to provide capacity for the company's quickly increasing oilsands production.

EnCana said November 29 it has signed a memorandum of understanding with Connecticut-based Premcor Inc. to examine the possibility of upgrading a refinery in Ohio to process the heavy oil.

The two companies said they will conduct a preliminary design and engineering study over the next six to nine months examining the possibility of upgrading Premcor's refinery at Lima, Ohio, to process an estimated 200,000 barrels per day of blended heavy oil supplied under a long-term sales contract.

"This initiative with Premcor is an exceptional opportunity to achieve an efficient and cost-effective market integration for our growing oilsands production," Gwyn Morgan, EnCana's president and chief executive, said in a release.

If the project goes ahead, the companies said a 50-50 joint venture, which would own and operate the upgraded refinery, would be established.

Premcor said the Lima refinery is currently worth more than $1 billion US, and EnCana would contribute an equivalent amount of money to upgrade the refinery to handle oilsands crude. If additional funds were needed, both companies would contribute 50 per cent.

Premcor said a similar, but larger upgrade of its refinery in Port Arthur, Texas, completed in 2001 cost $1 billion US.

"EnCana is the logical partner for Premcor in this effort, bringing a reliable, long-term, North American heavy crude oil supply and a strong balance sheet and cash flow for the upgrade project," Premcor's chief executive officer-elect, Jefferson Allen, said in a release.

"EnCana would be able to grow its oilsands production, and the upgraded Lima refinery would be able to process these incremental heavy, high-sulfur crude oil barrels.

If the project went ahead, the converted refinery would be on stream in 2008.

EnCana recently announced plans to sell all of its international production to focus on North American gas and its oilsands operations in northeastern Alberta.

The company is currently producing about 35,000 barrels of day of bitumen from its two operations that use steam technology to access bitumen reserves located too far underground for conventional open-pit mining.

EnCana has several expansion plans underway that will boost that production up to 60,000 barrels per day by 2006 and its reserves could enable the company to raise production substantially from there.

EnCana has been looking for a longer-term upgrading solution for several years now. And having an ownership stake in a U.S. refinery would "connect us directly to the market as opposed to having to sell our barrels at a discount in Canada," said spokesman Alan Boras.

Other Canadian oilsands producers have been facing the same issue of what to deal with their ever-expanding production.

Oilsands leader Suncor Energy bought a Denver-based refinery last year for $220 million and plans to spend $300 million US over the next three years upgrading it to handle oilsands crude.

Demolition of Coastal Refinery to Begin

The demolition of the old Coastal refinery is scheduled to begin at the end of November.

The refinery property is scheduled to be cleared for redevelopment by the end of 2005, Aaron Woods, a spokesman for the El Paso Corp. said November 29.

El Paso, a Houston-based company acquired the refinery in 2001. Although the refinery shut down more than a decade ago, the company continued to store petroleum products and blend asphalt there until this summer.

Woods declined to say how much the demolition would cost the company.

The Kansas Department of Health and Environment will oversee how the company disposes of the material.

Jacobs Group Receives Contract from Chevron Texaco for Modifications to Pascagoula Refinery

Jacobs Engineering Group Inc. (NYSE:JEC) announced November 30 that they have received a contract from ChevronTexaco to provide engineering services for the fluid catalytic cracking unit (FCCU) modification at ChevronTexaco's refinery in Pascagoula, Mississippi.

Officials did not disclose the contract value. Jacobs will provide engineering, design, and procurement services for major FCCU modifications to enhance the long-term reliability of the refinery

In making the announcement, Jacobs Group Vice President Pete Evans stated, "We are delighted to expand our relationship with ChevronTexaco and look forward to providing value-added services that help them meet their business objectives." Jacobs, with over 35,000 employees and revenues approaching $5.0 billion, provides technical, professional and construction services globally.

CANADA

Korea’s SK Refinery Eyes Canada Exploration and Drilling Project

SK Corp., South Korea's largest oil refiner, said it may buy a stake in an oil exploration and drilling project in Canada being developed by Hunt Oil Co., a Dallas-based oil company.

"We are reviewing a proposal made by Hunt Oil to buy a stake in the Canadian project,'' the Seoul-based company said in a regulatory filing to the Korea Stock Exchange. "We will announce details once a final decision is made."

South Korea, the world's fourth-largest oil importer, has been encouraging domestic companies to buy stakes in overseas oil and gas development projects to secure energy resources. SK Corp. has stakes in 17 crude oil and gas development projects in 11 countries, including Yemen, Vietnam, Peru and Egypt.

SK Corp. is in talks to buy a 50 percent stake in Hunt Oil's 50 oil fields in Canada, the Maeil Business Newspaper reported earlier, citing Shin Heon Cheol, SK Corp.'s president. The company may invest at least $250 million to buy the stake, the newspaper said. Vanguard Comment: Warri Refinery Tam Stopped: Matters Arising

Suncor Marks $800 Million Refinery Expansion

On November 26, Suncor Energy Products Inc. announced

final Board of Directors' approval for its refinery expansion project, and

unveiled a $500,000 gift to the Bluewater Health Foundation.

The gift was announced at a Suncor Refinery event to mark final approvals

for Project Genesis, an $800 million investment in Suncor's Sarnia refinery.

Guests had the opportunity to view first-hand the expansion's new 806-tonne

reactor vessel - a key component of the expansion project, which recently

arrived from Italy.

The expansion project includes constructing a new diesel desulphurization

unit in addition to upgrading and modifying its existing equipment to allow it

to process more crude oil. The first part of the project is in response to new

federal regulations that limit sulfur in diesel fuel to no more that 15 parts

per million by June 1, 2006. Last year, Suncor announced a long-term agreement

with Shell Canada Products Inc. to treat Shell's Sarnia refinery's diesel

fuel.

In combination with this desulphurization project, Suncor will also

modify the refinery to permit the processing of additional crude oil from

parent Suncor's Oil Sands Plant in Fort McMurray, Alberta. This modification

will increase refinery output by about 15 per cent, or approximately 10,000 to

13,000 barrels per day.

Air Products Canada to Supply Hydrogen to Imperial Oil's Strathcona Refinery for Production of Low-Sulfur Diesel

Air Products (NYSE:APD) announced November 15 that its subsidiary, Air Products Canada Ltd., has signed a letter of intent to provide hydrogen to Imperial Oil's Strathcona refinery near Edmonton, Alberta, Canada for the production of low-sulfur diesel. Air Products will supply the hydrogen via pipeline from its new 71 million standard-cubic-feet-per-day (MMSCFD) production plant under construction nearby, which was publicly announced in March 2004.

The hydrogen production facility, a natural gas-based steam methane reformer, will help Imperial's 187,000-barrel-per-day refinery to produce cleaner transportation fuels and other petroleum products. The two-mile pipeline is expected to be in place during the summer of 2005 in advance of the plant coming on-stream. The supply arrangement is one of over 30 that Air Products has undertaken with refiners worldwide.

"We are pleased to be working with Imperial to meet its increasing hydrogen needs and enhance our growing position in Canada as a reliable provider of hydrogen to multiple customers," said Scott Sherman, Air Products' vice president and general manager for Energy and Process Industries worldwide. In July 2004, Air Products also announced plans for construction of a new hydrogen plant producing in excess of 80 MMSCFD to be located in Sarnia, Ontario, Canada to be in operation in May 2006.

ARGENTINA

Repsol Taps KBR, ExxonMobil FCC Technology for Argentina Refinery Upgrades

Repsol YPF has selected a partnership of KBR and ExxonMobil Corp.'s research and engineering arm, EMRE, to perform basic engineering design for upgrading FCC units at its La Plata, Argentina, refinery and its Lujan de Cuyo refinery in Mendoza, Argentina.

The alliance also will apply licensed, advanced reaction system technology for Repsol's FCC units at the two refineries. KBR is the engineering and construction subsidiary of Halliburton.

The revamping of both refineries will include "Automax-2" feed nozzles and short contact time riser termination. In addition, Repsol will add a catalyst cooler, new regenerator cyclones, and regenerator debottlenecking at the La Plata refinery.

BRAZIL

New Plants Start up at Brazil's Replan, Repar Refineries

Brazil's state-run Petróleo Brasileiro SA (Petrobras), has begun operation of new plants at two of its refineries.

At its largest refinery, Replan in the 350,800 b/cd Paulínia complex at Sao Paulo, it started up a second coking unit with capacity of 31,000 b/d.

Petrobras also started up a 37,500 b/d diesel hydrodesulfurization unit at the 181,000 b/cd Presidente Getúlio Vargas (Repar) refinery at Curitiba in south Paraná state. The unit, with a hydrogen unit able to produce 270,000 cu m/day, reduces the sulfur content of diesel oil to less than 500 ppm.

Petrobras Awards Catalyst Cooler Contract for Sao Paula Refinery's RFCC Unit

Petróleo Brasileiro SA (Petrobras) awarded a license to KBR, Houston, to add a second catalyst cooler at its residue FCC unit in the 51,270 b/cd Capuava (Recap) refinery in Sao Paulo. FCC catalyst cooling is a technology offered by KBR and ExxonMobil Research & Engineering Co. (EMRE) through an FCC technology, development, marketing, and engineering alliance.

Petrobras previously licensed the same technology from KBR for six catalyst coolers at three refineries in Brazil.

The installations will provide Petrobras with the flexibility to process lower-cost atmospheric residue feedstocks in its newest FCC units.

SAINT CROIX

Hovensa Set to Close Part of Oil Refinery

The Western Hemisphere's second-largest oil refinery plans to close part of its plant early next year for cleaning and maintenance, officials said November 16.

The Hovensa oil refinery in St. Croix plans to close its fluid catalytic cracking complex for four to six weeks in late January, said Alex Moorhead, a vice president of Hovensa LLC.

Crude oil byproducts are refined into gasoline and other fuels at the cracking complex, Moorhead said.

He declined to say how the closure would affect fuel production or how much fuel the refinery produces each day.

The refinery is capable of producing 21 million gallons (79.5 million liters) daily of gasoline, diesel and other fuels, Moorhead said.

2. ASIA

More Investment in Asia and Elsewhere for Saudi Aramco

Saudi Aramco wants to invest in Asia and elsewhere to expand its market share. The company has holdings in refineries in the U.S., Japan, Greece, the Philippines and South Korea that process close to 2.3 million barrels of oil a day into fuels.

``We are looking to invest in other refineries with other partners, but we have a higher priority in the Far East because that's where the growth is,'' al-Khayyal said.

Aramco owns 35 percent of S-Oil Corp., South Korea's third- largest oil refinery; 40 percent of Petron Corp., the largest Philippine refiner; 42 percent of Motor Oil Hellas SA, Greece's second-largest oil refiner; and 15 percent of Showa Shell Sekiyu K.K., Royal Dutch/Shell Group's Japanese refining unit.

Aramco is also considering a stake in Hindustan Petroleum Corp., India's second-largest state refiner, and may get more Asian sales by taking part in China's plan to build an oil stockpile by 2005.

The company also may expand the capacity of Aramco's joint- venture refineries with Shell in the U.S., which process close to 840,000 barrels of oil a day from four facilities. Aramco supplied the U.S. with 1.5 million barrels of oil a day last year. Aramco also might invest in refineries outside the U.S. that can serve the market, al-Khayyal said.

Saudi Aramco is pumping about 9.5 million barrels of oil a day. It tries to maintain spare capacity of 1 million to 1.5 million barrels of oil a day.

Saudi Arabia is expected to replace the United Arab Emirates as the top oil exporter to Japan this year after Aramco acquired a stake in Shell's Japanese refining unit and agreed to supply it with at least 300,000 barrels of oil a day, he said.

``The joint venture has gone into effect and we have started to bring crude to Showa,'' al-Khayyal said.

Aramco agreed in July to buy a stake in Showa Shell, Japan's fourth-largest oil refiner, which processes about 545,000 barrels of oil a day, according to the company website.

Japan's imports of Saudi oil in the first half of Japan's fiscal year, which starts in April, rose 0.3 percent to 17.9 million kiloliters (112 million barrels) from a year earlier period, the Ministry of Economy, Trade and Industry said in a trade report last month.

About 43 percent of Aramco's oil exports, which reached 6.5 million barrels of oil a day last year, went to the Far East. Aramco produced about 8 million barrels of oil a day in 2003.

AUSTRALIA

Shell to Make Significant $28 Million Changes with “Water Plan” at Geelong Refinery

Shell hopes to go from environmental felon to marvel under a new $28 million water plan to eliminate the refinery's dependency on Corio Bay.

The new seven-year water master plan to be signed-off on November 24 is one of 150 projects for the next three years.

Plans for the water project began before an independent audit of the refinery 1-1/2 years ago.

The plan includes oil and water detectors which were among 45 recommendations identified after an independent audit last year. Auditor Mike Juleff criticized the detectors' lack of implementation during an update on the refinery's progress in August.

Mr Juleff suggested the detectors could have prevented Shell's latest oil spill in October.

Geelong Refinery manger Geoff Ellison said Shell was working hard to minimize environmental risks but could ``not guarantee that there will be no incidents.''

``We know that it will take time for these projects to be completed,'' Mr Ellison said.

He said the water plan was ``an extremely large project and when it is finished, it will result in the refinery having made significant changes to its cooling and process water systems.''

Shell Geelong produces fuel to most of Australia and supplies half of Victoria's fuel, all of Tasmania's fuel and exports to New Zealand.

CHINA

Future Uncertain for Sinopec-Exxon Refinery Venture

Yet another planned foreign investment in China's lucrative oil market may be in danger of foundering. Asia's biggest refiner, Sinopec, may go it alone in developing an integrated refining and petrochemical project in Guangdong province as talks with its would-be partner, ExxonMobil are bogged down, sources say.

Sinopec and Exxon began negotiating four years ago to jointly expand the refining capacity of Sinopec subsidiary, Guangzhou Petrochemical, to 200,000 barrels per day (bpd) by 2005 from 155,000 bpd currently. The project was also to include an expansion of Guangzhou's ethylene crackers to between 300,000 and one million tonnes a year from 2005, up from 200,000 tonnes a year currently, with a chain of retail gasoline stations. ``We have already started to expand the refinery and ethylene production without any foreign help,'' said a source at Sinopec.

If the negotiations collapse, it will mark the third time this year that a planned foreign investment in a major Chinese energy project has been abandoned. Earlier, several international oil groups, including Exxon, withdrew from the West-to-East natural gas pipeline, and Unocal and Royal Dutch Shell pulled out of a venture with China National Offshore Oil Corp to develop gas reserves in the East China Sea.

Still, several big Sino-foreign projects are proceeding, including China's first liquefied natural gas terminal in Guangdong, in which BP has a major interest, and China's largest integrated refining and petrochemical project, in Fujian.

The US$3.5 billion (HK$27.3 billion) Fujian project involves Exxon (25 per cent), Saudi Aramco (25 per cent) and Fujian Petrochemical Company, a 50-50 joint venture between Sinopec and the Fujian provincial government.

Industry watchers say the Guangdong project is in jeopardy because Sinopec is reluctant to share the market with other oil firms.

Exxon paid US$650 million for a 19 per cent stake in Sinopec's US$3.46 billion initial public offering in 2000. At the time, Sinopec agreed to allow the US oil giant's participation in two refining/petrochemical projects - Fujian and Guangdong.

Talks on the Fujian project also proved difficult, with disputes over the terms of the joint venture and source of crude emerging as major stumbling blocks. The same issues are said to have arisen in the Guangdong negotiations.

The Fujian provincial government, however, refused to proceed without foreign involvement in the project. ``The Fujian government was unwilling to invest unless Exxon agreed to foot part of the bill. Ethylene production also involves technology which the western majors have,'' said a Beijing source.

The same dynamics may not be at work in Guangdong. For one thing, foreign technological expertise isn't as crucial since the ethylene expansion plan is much less ambitious. And Guangdong, China's richest province, is a far bigger prize than Fujian in the eyes of both Sinopec and Exxon.

``Sinopec did not want to share the Fujian market for a start but it is less likely to want to share the Guangdong market,'' said one industry source.

Exxon declined to comment on the status of the Guangdong project, though a company source pointed out that the US oil giant is currently focusing only on the Fujian project. ``There are still issues to be resolved'' in Guangdong, he said.

Shell Still on Course to Invest $3-4 Billion in China

Royal Dutch/Shell Group aims to become a major supplier of liquefied natural gas to China and gain a foothold in the country's booming oil refinery sector, a senior company official says.

The Anglo-Dutch group RD.AS SHEL.L , which recently pulled out of two giant gas projects in China, is still on course to invest $3-4 billion in a variety of projects over the next four years, including exploration and production, marketing of oil products, petrochemicals and coal gasification.

Heng Hock Cheng, Chairman of Shell companies in China, said in an interview, that 2004 marked the year of Shell's largest investment in a single year in China at $1 billion.

Shell is negotiating with the second-largest state oil and gas firm Sinopec Group to export liquefied natural gas to east China from its gigantic $10-billion Sakhalin-2 project, off the far eastern coast of Russia.

The energy giant, the world's largest private LNG supplier, is also seeking to get involved in the construction of gas receiving terminals on China's east coast.

"We are very keen to see how we can be part of that process as an LNG supplier," Heng said.

China's gas use, currently less than 3 percent of the total energy mix, is expected to leap to 10 percent in 2020 as the economy continues to experience rapid growth.

Shell forecasts China's gas demand will rise to 210 billion cubic metres (bcm) by 2020, a quarter of which has to be supplied in the form of LNG, super-cooled natural gas for transport by tankers. Current annual gas demand is about 40 bcm.

China is poised to build at least four LNG terminals by 2010, when imports could amount 20 million tonnes, having committed to buy gas from Indonesia and Australia and also looking to import gas from Iran.

Shell, which will have spent $3 billion in China by the end of this year, would be a much bigger energy investor if it had not pulled out of the West-to-East gas pipeline in August and the East China Sea gas project last month.

"While interesting opportunities in themselves, they were part of a very large market which is actively developing on many fronts," Heng said.

Analysts said the exit could force Shell to re-evaluate its gas strategy in China as it had seen piped gas and LNG supply and gas marketing in China as part of an integrated approach.

Shell's other interests in China include the Changbei gas field in the country's northwest, its only production sharing contract in onshore China, with estimated reserves of 50 bcm and potential production of 3 bcm a year.

Heng said the company would decide next year whether to go ahead with developing the field.

Shell is also evaluating opportunities to invest in China's badly needed refinery capacity expansion and aspires to play a greater role in oil retailing.

Heng said Shell was in talks with China National Offshore Oil (CNOOC) for a stake in a planned $2 billion, 240,000 barrels per day refinery in the southern Guangdong province, where Shell and the Chinese company are already building a world-class petrochemical complex.

China is speeding up expanding and building new refineries to meet explosive oil demand growth that has forced most plants to pump at full tilt.

Heng said the $4.3 billion petrochemical venture, the largest energy joint venture in China, would start production by the end of 2005.

Shell is among a handful of early birds in China's retail business and expects to expand operations as the country opens its tightly state-controlled market to foreign firms, he said.

Demand Fuels New Oil Refinery Boom in China

China has finally taken the brakes off oil refinery expansion, and domestic producers are expected to spend up to 50 billion yuan (HK$47 billion) to build new refineries and expand existing ones in the next three years, industry sources said.

However, there is little hope that supply will catch up with demand any time soon.

New projects should increase annual refining capacity by 50 million tonnes or 15.6 per cent by 2007. Refining capacity currently stands at 320 million tonnes per year.

As late as last year, the central government was still afraid of a glut of refining capacity, but demand has continued to soar and refiners are operating flat out.

Despite a number of new projects being approved this year, the nation's refining capacity will not be sufficient to meet demand for some time, according to projections by the largest refiner, Sinopec Group, parent of Hong Kong-listed Sinopec Corp.

The government approved two refinery projects this year. One is Sinopec's 9.7 billion yuan Qingdao refinery, on which construction began last week. Work on the 10 million tonne-per-year project had originally been slated to begin next year.

The refinery, configured to process sour crude from Saudi Arabia, will not enter service until the first half of 2007.

Sinopec was at first reluctant to build the refinery, fearing overcapacity unless the government in Shandong spearheaded the shutdown of small ``teapot'' refineries in the province.

Now the company says that surging demand for oil projects justifies new refinery projects, and it is confident that small refineries will be squeezed out.

Meantime, hopes that foreign companies would be allowed to invest in the Qingdao project have been dashed. Sinopec said it will hold an 85 per cent equity stake in the refinery, with 10 per cent for Shandong International Trust and Investment holding 10 per cent and 5 per cent for Qingdao International Trust and Investment.

Sinopec says it looks increasingly likely that all of the new refinery projects will be built either solely by domestic companies or with local partners.

Due to protectionism, Chinese oil companies have never welcomed foreign investors into the refinery sector, and the temptation to go it alone is even stronger now when the oil companies are cash rich, a Sinopec source said.

Sinopec Group has said its first refinery project in Guangdong province, a 12 million-tonne venture that was recently approved, will go ahead with or without foreign investment.

Sinopec has also started building an eight million tonne refinery on Hainan Island. China expects to become a net importer of naphtha next year - another incentive for it to increase its refining capacity.

Refiners may be forced to process less petrol and more naphtha, a raw material used to produce plastics.

Since new refineries are costly - at least US$1 billion (HK$7.8 billion) - and the payback on investment is slow, only new projects of over eight million tonnes (160,660 barrels per day) are likely to be approved, industry sources said.

China imported 99.6 million tonnes of crude oil in the first 10 months of this year, 34.3 per cent higher than the same period last year.

Sinopec Setting up $1.2 Billion Qingdao Refinery

Sinopec, Asia's largest oil refiner, November 17 launched a subsidiary company, Sinopec Qingdao Refinery and Chemical Company, to construct and operate a US$1.2 billion refinery in Qingdao, East China's Shandong Province.

The refinery, which was first initiated 12 years ago, is an important move for Sinopec to complete its refinery deployment along the coast line to cash in on rapid market growth and better handle imports of crude oil.

The refinery, one of the largest of its kind in China, will be able to process 10 million tons of imported crude oil, and produce 7.6 million tons of oil products annually upon its completion in 2007. Construction will start in the first half of next year.

Sinopec expects the project will be world class one in terms of technology and management, and hopes it can contribute sales revenue of 20 billion yuan (US$2.4 billion) a year.

Saudi Arabian oil giant Saudi Aramco is negotiating with Sinopec to take a share in the refinery project.

"They are very interested in the project," said Wang Jiming, vice-general manager of Sinopec Group. "The negotiations are proceeding smoothly."

Analysts said the participation of Saudi Aramco, if finalized, could help secure crude oil supply and reduce risks for the refinery.

The establishment of the Qinghao refinery will complete Sinopec's refinery chain on the coast line.

The company is redeploying its refineries, scaling down small inefficient refineries in hinterlands, while expanding refinery capacity in coastal areas such as Jiangsu, Guangdong, Fujian and Zhejiang provinces, and Shanghai.

The coastal areas enjoy geological advantages in handling imported crude. And the areas are the most fast growing markets for oil products.

"Plus Qilu and Jinan refineries, the total refinery capacity of Shandong could reach 25 to 30 million tons a year," said Wang.

Most of the products of Qingdao refinery will supply Shandong Province and neighboring areas such as Henan, Anhui and Jiangsu provinces. The demands in East China areas accounts for one third of the total consumption in China.

To cut down on transportation costs, Sinopec is constructing a 500-kilometre refined oil pipeline from Shandong to Anhui Province.

Products could even be transported to Guangdong Province in the south where the demands are growing rapidly.

To avoid a market glut, local government in Shandong is working on shutting down 21 local small refineries which are polluting the environment and less efficient. The small refineries have a capacity of 9 million tons a year.

Most of them are expected to be shut down before 2006.

Exxon, Saudi Start Work on $3.5 Billion China Refinery

Exxon Mobil Corp., the world's biggest publicly traded oil company, and Saudi Aramco started engineering work on a $3.5 billion refinery in China's southern Fujian province, a Saudi official said.

``We have begun some basic engineering work on the refinery,'' Abdulaziz al-Khayyal, Saudi Aramco's senior vice president of refining and oil marketing, said in an interview in Dubai. ``We expect to sign a final joint venture agreement by next year.''

Exxon, Aramco and China Petroleum & Chemical Corp. plan to expand the refinery to process 240,000 barrels of oil a day from 80,000 barrels a day. Exxon and its partners are also building chemical plants, including an 800,000-ton-a-year ethylene plant among other chemical units.

Saudi Arabia, the world's biggest oil exporter, is investing in oil refineries to secure outlets for its crude oil exports, half of which are consumed in Asia. The kingdom may expand its oil output capacity by 14 percent to ease concern of shortages as demand rises in China and other markets.

China passed Japan as the world's second-largest oil consumer last year, after the U.S. It will need more than 10 million barrels of crude a day by 2030, up from 6.3 million now, according to the International Energy Agency, an adviser to 26 industrialized nations. China's crude imports rose 34 percent in October as domestic production failed to keep up with soaring demand.

Saudi Arabia was the second-largest overseas supplier of crude to China in October after Angola, supplying the Asian country with 1.5 million metric tons (10.6 million barrels), Beijing-based Customs General Administration said this month.

INDIA

Indian Oil increases Investment Package for Greenfield Paradip Refinery Project

Sources disclose that Indian Oil Corporation (IOC) has drawn up plans to increase its investment package for the greenfield Paradip refinery project from Rs 8,270 crore to Rs 19,000 crore to include a petrochemicals complex.

The size of the planned refinery is being increased from 9 million tonnes to 15 million tonnes so that enough feedstock is made available for the petrochemicals unit.

Sources disclose that the decision to go in for a bigger project at Paradip was cleared by the IOC board recently. “Work on drawing up a detailed feasibility report for the project will begin now,” a senior IOC official said.

The move assumes significance in view of the Bengal government not responding to the IOC proposal on developing Haldia as a petrochemicals hub. IOC was keen on the proposal as it has a refinery at Haldia, which has a strong synergy with the downstream petrochemicals unit.

With the green signal for Paradip coming through, another implication for Haldia Petrochemicals is that it will have to compete with IOC in the petrochemicals business in the future.

IOC has already given its commitment to complete the Paradip refinery by 2009-10 but is willing to bring the deadline forward to 2008-09 if the demand for petroleum products picks up to justify the move.

The formal agreement between IOC and the Orissa government was signed in February with the state agreeing to restore all the tax concessions that the oil major had asked for earlier. These include a deferring of the sales tax for 11 years and exemption of entry tax on crude oil to be processed at the refinery.

A new refinery for the eastern region has been on the cards for a long time but the extra capacity created in the west has resulted in a glut of petro goods and the oil companies have to export their surplus products. Similarly, the petrochemicals business, in which Reliance enjoys a near-monopoly after the acquisition of IPCL, is also concentrated in the western part of the country.

IOC has already started expanding the Panipat refinery in the north and a petrochemicals complex is also coming up at the refinery. The proposed Paradip refinery and petrochemicals complex is an extension of the same concept. Paradip has an added advantage in that it is a port and the products can be easily exported.

Bengal has still not responded to the oil major’s earlier offer of a Rs 5,000-crore package to develop Haldia as a petrochemicals hub in the east, provided it was given management control of Haldia Petrochemicals Ltd.

Koyali Refinery to take at Least a Month to Restart

Indian Oil said on November 1 it could take at least a month to restart the Fluidized Catalytic Cracking Unit (FCCU) of its 274,000 bpd Koyali refinery in the western state of Gujarat.

The FCCU of IOC’s largest refinery was shutdown the last week of October due to an explosion when it was being restarted after a scheduled annual maintenance.

HPCL to Expand Visakhapatnam Refinery

Hindustan Petroleum Corporation Ltd will expand its Visakhapatnam Refinery in Andhra Pradesh to 8.4 million tonnes from 7.5 million tonnes by 2006, company chairman and managing director M B Lal said November 18.

The expansion, he said, was part of the refinery revamp the company was doing to produce cleaner fuel. The total cost of the project is Rs 2,700 crore.

Lal said HPCL will also shut its 5.5 million tonnes Mumbai refinery in February for maintenance. We will shut the refinery for 25 days for maintenance, he said on the sidelines of a conference.

HPCL to Shut Mumbai Refinery in February

Hindustan Petroleum Corp. Ltd (HPCL) would shutdown its 5.5mn-metric-tons-a-year Mumbai refinery in February for maintenance, the state-run company's Chairman, M.B. Lal, said on November 18.

"We will shut the refinery for 25 days for maintenance," he told reporters on the sidelines of a news conference in New Delhi.

India's second-biggest oil refiner also runs a 7.5mn-tons-a-year refinery in Visakhapatnam, where capacity would be expanded to 8.5mn tons from 7.5mn tons.

The expansion would cost Rs27bn, and would be over by 2006, Lal said.

The company expects to earn refining margins of US$6 on each barrel of crude oil it processes into petroleum products in the year 2004-05, little changed from what it earns at present, Lal said.

HPCL controls about 25% of India's 2.2mn barrels-a-day petroleum products market. India's 18 refineries are able to process 116.5mn tons of crude oil a year.

Punjab CM Demands New Agreement for Bhatinda Oil Refinery

The Punjab government is not interested in setting up the Bhatinda oil refinery on the basis of the present agreement as the state exchequer would lose Rs 1000 crore annually due to the sale tax exemption given to HPCL for the next 15 years, Chief Minister Amarinder Singh said on November 23.

Rejecting the agreement signed between the earlier Badal government and HPCL in the year 2000, he said Punjab "cannot afford a loss of Rs 1000 crore annually for the next 15 years." Speaking on the occasion of 'Punjab Day' at India International Trade Fair, Singh said he had already written to Union Petroleum Minister Mani Shankar Aiyer that a new agreement should be framed on the lines of Mathura and Panipat refineries, where no tax holiday was given.

HPCL has already acquired land in Bhatinda for setting up the refinery. The construction work had also begun, but later stopped after the Congress government came to power in the state.

The estimated cost of the refinery was Rs 9,086 crore. It was to have an installed capacity of nine million tonnes per annum. The Akali government had given a number of incentives to the project at the conception stage in terms of sales tax deferment, octroi and cheap electricity.

"We are not for scrapping the project but for rewriting the agreement on the lines of Mathura and Panipat refineries, where no such incentives have been offered," Singh said.

3. EUROPE / AFRICA / MIDDLE EAST

GREECE

Greece’s Aspropirgos Refinery Becomes Operational Again

The Aspropirgos refinery is operating again after the conclusion of scheduled maintenance and upgrading works that lasted for about 1½ months. The total costs of the works reached c€74.5m.

The overhaul of Aspropirgos operations will negatively impact Hellenic Petroleum’s Q4:04 results, despite the company’s efforts to run higher oil stocks to compensate for the shutdown.

LITHUANIA

LUKoil Eyes Key Yukos Oil Refinery

LUKoil is interested in buying Mazeikiu Nafta, a strategic Baltic energy asset owned by Yukos, a senior LUKoil official told Lithuania's leading newspaper.

"We have oil and we have a retail market in this region. What we lack is a refinery," the paper, Lietuvos Zinios, quoted LUKoil Baltija head Ivan Paleichik as saying. "If Mazeikiu is being sold, why not buy it?" he said.

Assets of Mazeikiu Nafta, Lithuania's biggest company by revenue, include the only oil refinery in the three Baltic nations, a Baltic Sea crude oil terminal and pipelines. It is 53.7 percent owned by Yukos, which may go bankrupt as it struggles to pay more than $20 billion in back taxes. The Lithuanian government owns 40.66 percent.

Lithuania's government indicated that it may have a plan to get Yukos' stake and resell it, but it did not elaborate on the details.

LUKoil Baltija could not be reached for comment. Officials at LUKoil's headquarters in Moscow declined to comment on Paleichik's remarks.

Others companies who have expressed interest in acquiring Mazeikiu include the European Bank for Reconstruction and Development, one of the largest investors in Russia.

At one point, the EBRD was in talks to buy up to 15 percent of Mazeikiu, but those talks were shelved after the legal assault on Yukos began last year, a spokeswoman for the bank's London office said November 29.

SCOTLAND

BP Will Sell its Oldest Refinery, Grangemouth

BP is severing its links with its oldest refinery after announcing that it is selling off its Grangemouth plant in Scotland when it floats its underperforming oil products subsidiary next year.

The world's second biggest oil and gas company said it was including both Grangemouth and Lavera in southern France in the flotation of the olefins and derivatives business.

BP is in the process of setting up its products plants, most of which are sited next to the company's existing refineries, in a standalone business which will employ about 7,500 people in 24 locations around the world.

Grangemouth and Lavera can refine up to 21m tonnes of crude oil a year, as well as produce 2.2m tonnes of chemical raw materials such as hydrogen, ethylene and naphtha. Ralph Alexander, who will be chief executive of the new business, said: "These two complexes are highly efficient manufacturing sites and are already integrated with their neighboring petrochemicals plant.

"This gives us access to and security of feedstock (raw material) supply and integration benefits for two major assets in the new company."

BP said there will be no compulsory redundancies at the two refineries, which employ 2,500 staff between them. The company confirmed it is hoping to float the olefins and derivatives business, which has about $7billion of operating cashflow, in the second half of next year.

BP has been operating at Grangemouth since 1924, although the site's origins date back to 1850 when Dr James Young took out a patent for "treating bituminous coals to obtain paraffine therefrom". The business invested over $1billion in the site in the 1990s.

SCOTLAND / FRANCE

BP to Close Two European Oil Refineries

BP intends to include two European oil refineries in its new olefins and derivatives (O&D) petrochemicals entity which is due to be sold, possibly through an initial public offering, in the second half of 2005.

The refineries at Grangemouth, Scotland, and Lavera, southern France, have combined crude oil capacity of 21 million tonnes per year and chemical feedstock output of 2.2 million tonnes per year.

SPAIN

CEPSA Invests in New Refining and Petrochemical Projects

CEPSA will spend over 300 million euros to build a Light Naphtha Reformer (LNR) unit at its La Rábida Refinery and expand the facilities of its wholly-owned petrochemical affiliate ERTISA. Production capacity at ERTISA will be raised by 60%

Construction of the Light Naphtha Reformer (LNR) unit at the La Rábida Refinery will require capital expenditures of 160 million euros. The plant will employ 25 workers, contributing to the consolidation of 700 direct jobs and other indirect employment generated by the Refinery and will afford greater added value to its productive processes.

The Light Naphtha Reforming unit will deploy AROMAX® technology, patented by Chevron Phillips Chemical Company, which will provide consulting and support services to CEPSA during the design and construction process of the plant, slated to be completed in the second half of 2006, around the same time as work to expand ERTISA will also be finalized.

The new facility will produce 220,000 tons per year of benzene and 75 tons per day of hydrogen, in addition to other products.

This project will make a new source available for the production of hydrogen, an essential component for obtaining a lower content of sulfur in fuels, pursuant to European Union environmental specifications, and allow new developments in this line. The increase in benzene production will reduce CEPSA's current shortage for its key applications (cyclohexane, phenol and linear alkylbenzene) and cover the needs of ERTISA's new plant.

In ERTISA, planned investments amount to 145 million euros, which will be assigned towards building a new Cumene/Phenol plant in order to meet growing demand for its products, especially for the manufacture of polycarbonate, a high-quality engineering plastic widely used in the audio/video and automotive industries.

ERTISA's new facility will consist of a Cumene unit, with a capacity of 300,000 tons per year, and a Phenol/Acetone unit, with capacities of 200,000 and 125,000 tons per year, respectively. As a result of this expansion, ERTISA will become the second leading European phenol producer and maintain its level of competitiveness from the integration of its processes with those of the La Rábida Refinery.

The petrochemical feedstocks produced by ERTISA are earmarked towards the manufacture of products such as special plastics, synthetic fibers, polycarbonates and metacrylates, to name a few. These components are sold at home and in a variety of countries and markets abroad, such as France, Germany, the Netherlands, Great Britain, Portugal, Belgium, North America and the Far East.

As a result of these projects, the company's refining/petrochemicals synergies will be enhanced considerably. In addition to its facilities in Spain, CEPSA also has petrochemical plants in Canada and Brazil and markets its products on all five continents around the globe.

MADAGASCAR

Galana Petroleum on Trial in Madagascar over Oil Refinery Pollution

The operator of Madagascar's privatized Toamasina oil refinery went on trial on November 16, accused of polluting the environment around the Indian Ocean island's main international port, officials said.

Galana Petroleum, the Mauritius-based company that took over management of the refinery in July 2000, faces civil charges of contaminating water sources and the air in Toamasina, the island's second-biggest city and home to about 200,000 people.

The government is seeking undisclosed damages for the pollution.

In July, Madagascan authorities halted a shipment of 24,000 tons of the company's fuel oil to neighboring Mauritius, citing "major irregularities" in the export procedure.

A month later, they said Galana Petroleum was being investigated for possible pollution and other breaches of its license, including breaking rules on stocking and making false declarations about the origins of its petroleum products.

The Toamasina refinery, on the island's east coast, produces about 200,000 tons of fuel oil per year, with 30,000 tons for local consumption and 170,000 tons for export.

Galana is an independent oil company operating in East Africa and the Indian Ocean region. Its activities range from refining and marketing to storage and distribution.

NIGERIA

Available Funds and Competitive Advantages to Determine Refinery Construction in Nigeria’s Edo State

The Edo State Government signed an agreement with an Indian company for the establishment of a small modular refinery in a yet to be announced location in Edo State.

The refining business in Nigeria is fully controlled by the state-owned NNPC which runs the three domestic refineries located in Warri, Port Harcourt and Kaduna. In recent years products availability from the refineries have been insufficient to meet rising demand for products, and the NNPC has responded by issuing licenses to state governments and private companies for the establishment of additional refineries in Nigeria.

There has been a shortfall in the availability of petroleum products because the refineries have been working in "fits and starts" due to inadequate maintenance over the years. Analysts attribute the frequent breakdowns and downtime to two main factors.

1. Age: All the refineries except the new Port Harcourt refinery are over 20 years.

2. Low Product Price Margin: This has improved somewhat due to the deregulation of the products marketing business in October 2003.

Additional refineries need to be established in Nigeria. It is envisaged by the NNPC, that these so called private refineries would purchase NNPC crude at prevailing world market prices which are currently very high, while their products would meet any shortfall by the NNPC owned refineries. An ideal scenario for such a private refinery, would be for a U.S. based company to fund or outsource such a refinery in Nigeria and export most of its products to the U.S.

Edo State is a low volume crude oil producer. NPDC, an exploration and production subsidiary of the NNPC, produces about l0,000 barrels day, and Dubri oil produces about 1,000 barrels per day in Edo State. This amount of crude oil supply would be insufficient to run a medium sized refinery. Nevertheless, crude-oiI refinery based-in-the state can be sourced from the Warri- Auchi crude line. This would require the cooperation of the NNPC. It would also make sense for such a refinery to be located very close to the source of supply.

The Edo State refinery proposal also calls for a refinery comprised of small modular units. In modular units efficiency/yield is impaired, due to an inherent technical deficiency. They are not profitable when purchasing crude oil at international market prices. In fact, modular refineries are no longer built anywhere in the world.

The size/scale of the proposed refinery is also an important issue. Among other requirements, according to the World Bank prescription, to be profitable the refinery must be of world scale size. But the establishment of such a world-scale refinery would cost $1 billion or more. It would be necessary to examine closely the proposed size of the refinery as there can be a trade-off between efficiency and size.

Warri Refinery to be Shut Down and Tam Stopped

On the eve of another national strike, the NNPC has announced the shut down of the Warri refinery. Many Nigerians would regard the closure of a refinery as no longer news but for the failure once again to get the refinery working.

According to the news report, the TAM cannot be carried out because those supplying spare parts which have to be fabricated specifically for the Warri refinery have either refused or cannot supply the parts required. That is the universal problem of projects where many parts are custom-made.

Other well-managed establishments have overcome this problem by stocking up on such parts. But, the NNPC is enmeshed in corruption which runs a parallel line with good governance.

Even if the parts are available, there will be no expatriates to conduct the TAM because the Niger Delta is rapidly acquiring the status of a no-go area for foreign technicians on account of real and perceived violence.

The TAM period will also coincide with the next national strike and foreigners are apprehensive that it might turn out to be violent.

The result of all these is to put Nigeria in a bind. For fuel prices to be reduced the refineries need to be working at close to full capacity and that means TAMs must proceed as and when due. And the country, at least those areas around the refineries, must be secure for foreign technicians to come and conduct the TAMs. Yet with the mood of the country, neither peace nor security can be guaranteed; least of all in the areas where the refineries are situated.

IRAN

Iran to Build New Refinery in South Pars

A vast area has been leveled in the South Pars gas field site in preparation for a refinery that is to be built for the 9th and 10th phases of the project, the English-language daily 'Tehran Times' said on November 6.

The huge project, which includes excavation and ground leveling, construction operations, cementing of land, building of metal frameworks, laying of pipelines and cables, installation of equipment and mechanical parts and other preliminary operations, is being implemented by a five-party consortium.

The refinery is estimated to become operational in 29 months. the first of two phases, according to the project's development plan, is expected to be completed within the next two years.

The project is a joint venture (58 percent to be undertaken by Iranians and the rest by a foreign consortium) and will undertake both onshore and offshore operations. It is expected to fully go on stream in 52 months and will be the first gas project in Iran to be implemented on finance basis.

The National Iranian Oil Company, LG consortium, Oil Industries Engineering and Construction Company (OIEC) and Iranian Offshore Engineering Company (IOEC) are the project contractors.

The work is managed by Pars Oil and Gas Company (POGC).

Upon completion, the two phases (9 and 10) will have daily liquid gas liquid outputs of 80,000 barrels, one million tons of ethane and 1.50 million tons of LNG per year.

The project is also expected to produce 400 tons of sulfur per day.

Iran, China to Construct Gas Condensates Refinery in Southern Iran

Iran and China signed a memorandum of understanding in Beijing to construct a gas condensates refinery in Iran's southern city of Bandar Abbas.

The refinery will be constructed within the next three years aiming at producing extra gasoline which constitutes 56 percent of the refinery's output.

The refinery's capacity is estimated to be some 300,000-350,000 barrels per day. Total investment necessary for the joint project is projected to stand at some 1.5 billion dollars.

According to the MoU, Iran will own the gasoline produced at the refinery and China will export other outputs. Iran will take the ownership of the refinery after 25 years.

Visiting Iran's Oil Minister Bijan Namdar Zanganeh and the Chairman of China's Development and Reforms Commission Ma Kai on Thursday signed a memorandum of understanding (MoU) to award the project to develop Yadavaran oil field to China's Sinopec.

Under the MoU, Sinopec has agreed in return for Yadavaran project to purchase annually 10 million tons of Iranian liquefied natural gas (LNG) over a period of 25 years.

Sinopec will be commissioned to prepare a master development plan (MDP) for Yadavaran in cooperation with "creditable" international oil corporations.

The MDP will be implemented through buy-back scheme once approved by the National Iranian Oil Company (NIOC).

IRAQ

Insurgents Attack Iraqi Oil Pipeline West of Samarra

Iraqi police say insurgent forces have attacked a domestic oil pipeline west of the city of Samarra in the latest strike against Iraq's major industry.

Police spokesman Mohammad Mahmud said the saboteurs used explosives in what was the sixth such attack in as many months.

"At 8:00am, four kilometers west of Samarra, insurgents detonated explosives on a pipeline that links the Baiji refinery with the refinery in Dora [south of Baghdad]," he said.

In an audio tape posted on an Internet site on November 15, a man claiming to be Abu Musab al-Zarqawi, Iraq's most wanted man, exhorted insurgents around the country to rise up against US-led forces, brace for new battles and attack oil pipelines.

QATAR

$400 Million Qatar Refinery Project to be Awarded in Q1 Next Year

The $400mn condensate refinery project at Ras Laffan is most likely to be awarded in the first quarter of 2005. To be managed by Qatargas, the refinery is slated to come on stream in 2007. It will help both Qatargas and RasGas to process rising volumes of condensate produced by both the LNG firms.

Qatar Petroleum, Exxon Mobil and Total are jointly setting up the project. QP will hold an 80% stake in the joint venture with the remaining 20% equally split between the other two partners.

Sources said on November 4 that a train with a capacity to refine condensate between 80,000bpd and 100,000bpd was being considered now. There is an option to raise the output to 140,000bpd at a later stage. They said the refinery would produce about 17,000bpd of naphtha, 26,000bpd of heavy naphtha, 37,000bpd of kerosene, 1,700bpd of propane, 5,000bpd of butane and 17,000bpd.

The promoters are also considering a second train with a capacity of about 140,000bpd, sources said. "More LNG trains means more condensate. This needs to be refined and broken down into naphtha, heavy naphtha, kerosene, propane, butane and gas oil," they said.

The following are understood to have been pre-qualified as EPC contractors: Chiyoda Corp, Flour Daniel, Foster Wheeler with Hyundai Engineering and Construction Company, LG Engineering and Construction, Technicas Reunides and Technip.

YEMEN

Yemen’s Aden Refinery to Begin New Pipeline Project

Technical teams affiliated with Aden Oil Refinery have completed procedures for the beginning of a project to replace the old pipeline linking the Aden Refinery to Haswa Thermoelectricity Station and Aden Administration of Ship Supply.

A report issued by production marketing administration at the refinery said that the project, expected to be finished at the end of the next year, includes in its first phase the building of a pipeline for pumping refined oil products.

The line is composed of two pipelines; one is 16-inch diameter for pumping and carrying mazut from Aden Refinery and to Aden administration for the supply of ships. The second pipeline is 6-inch diameter for carrying and pumping diesel to the Hawa thermoelectricity station.

The report also mentions that the work in building the two pipelines would be at a speed of 50 meters per 48 hours, while the distance between the refinery and the thermoelectricity station is 7 km.

The project is one of the vital strategic projects the Aden refinery is executing under self-funding and the participation of a number of Arab experts under chairmanship of a Romanian expert.

He is director of a project for development of the refinery storages, whose capacity of storing local and external oil products has reached more than 135,000 cubic meters.

The pipelines that are going to be replaced were built when the refinery was built in 1952.

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