Valero Energy Corp. announced its 2004 refinery maintenance schedule January14, including three plants with planned work scheduled in the next two months.

In January, the company will shut the 54,000 barrel per day (bpd) fluid catalytic cracker (FCC) at its Wilmington, California, refinery for 33 days, and the 55,000 bpd units at its Corpus Christi, Texas, plant for 18 days.

In February, the company will shut a 90,000 bpd crude unit, a 65,000 bpd FCC and a 13,000 bpd alkylation unit at its Houston refinery for 14 days.

Sunoco Inc. said January 14, that it completed its acquisition of the Eagle Point refinery from El Paso Corp.

The refinery is located in Westville, N.J., across the Delaware River from Sunoco's Philadelphia refining complex.

The Philadelphia-based oil refiner, gas retailer and chemical manufacturer paid $111 million for the refinery and assumed some liabilities, whose value it did not disclose, in conjunction with the transaction. Sunoco also paid $138 million for inventories on hand at the refinery when it closed.

The acquisition increases Sunoco's total refinery processing capacity by 20 percent to 880,000 barrels per day. Sunoco estimates the refinery will earn $65 million per year after taxes, based on the average refining margins from 2000 through 2003.

Sunoco said it expects its fourth quarter net income will be 50 cents to 60 cents per share. That's well below the 86 cents-per-share average estimate of 18 analysts polled by Thomson Financial Network.

Sunoco said results were hurt by significant planned maintenance at its Philadelphia refinery and weakening margins at the end of the quarter. Results also included certain charges for environmental incidents that occurred in prior years.

Shell Oil Co. is shutting the hydrocracker at its 340,000 barrel per day (bpd) refinery in Deer Park, Texas, a plant spokesman said.

Shutting the refinery's hydrocracker, fuel gas and other related units for 30 days will result in slightly reduced production rates, said spokesman Dave McKinney.

But Deer Park Refining L.P., the Shell unit which operates the refinery, has made preparations to meet contract commitments, McKinney said.

Royal Dutch/Shell on January 15 said Motiva, its U.S. refining venture with Saudi Aramco, sold a Delaware refinery to U.S. refiner Premcor Inc. for as much as $1.05 billion as part of broader plans to boost financial performance.

But Greenwich, Connecticut-based Premcor initiated the sales talks and carried the day by making an offer that presented "an acceptable value" for the asset, a Shell Products USA spokesman in Houston said.

"It's part of Motiva's continuing effort to restructure its portfolio and better balance its mix of refining and marketing assets in the U.S.," spokesman Johan Zaayman said.

On January 14, Premcor announced the purchase of the 180,000 barrels per day Delaware City Refining Complex.

Premcor will offer $435 million in cash and assume $365 million in tax-exempt bonds linked to a power plant and petroleum coke-gasification plant. Premcor also will buy fuel and crude oil inventories currently worth $100 million.

In addition Shell could receive contingent payments of up to $25 million a year for the next three years, based on future refining margins, and up to $25 million a year for two years related to the coke gasifier.

The sale marks Shell's latest divestment of U.S. downstream assets. Last year Shell sold crude pipelines and storage to Enbridge Energy Partners LP and Plains All-American Pipeline LP for a combined $289 million.

Shell also does not expect to further shrink its refinery portfolio. "There are currently no plans to sell or close plants in the U.S.," the spokesman said.

Motiva, he said, will reinvest proceeds into its three remaining refineries along the U.S. Gulf coast: Port Arthur, Texas, and Convent and Norco, Louisiana.

Shell also wholly owns four refineries in the western U.S.

For Premcor the deal furthers its growth-though-acquisition plans, increasing crude oil processing capability by about 30 percent. Delaware City also gives the company, concentrated in the mid-continent, a large refinery supplying the product-short U.S. northeast.

Premcor shares surged 8.8 percent to an all-time high of $29.10 a share in early-afternoon trade on the New York Stock Exchange.

The Department of Environmental Protection sued current and former owners of a defunct Big Bend refinery on January 15 to recover more than $12 million spent by the state cleaning up pollution.

The site of the closed St. Marks Refinery, in Wakulla County about 20 miles south of Tallahassee, was found to have high levels of dioxin and petroleum contamination that have polluted the nearby groundwater and the St. Marks River. Dioxin is linked to cancer.

DEP started a cleanup in 2002, after failing at trying to get the site's owners to clean it up. The agency said it had invested more than $12 million to dismantle storage tanks, remove contaminated soil and dispose of hazardous waste.

The plant hasn't operated as a refinery since 1985 but asphalt was manufactured there until 1998.

The lawsuit, filed in Leon County Circuit Court in Tallahassee, names the current owners, St. Mark Refinery Inc., a subsidiary of Houston-based American International Petroleum Corp., which has repeatedly said the contamination was present when it bought the refinery in 1998.

The suit also seeks reimbursement from Seminole Refining Corp., which owned the site from 1985 until 1992, and Seminole's former vice president Jim Young.

"The companies that caused the pollution should pay for the cleanup, not Florida's taxpayers," said DEP Secretary David Struhs.

Gary Early, an attorney for St. Marks Refinery Inc., said there may have been some minor spills after 1992, but if so, they were cleaned up by the company immediately.

"There's no evidence, that I know of, of anything that would have been a problem," still being there, Early said.

The lawsuit also asks a judge to order the owners of the 55-acre site to allow DEP to go into an area that agency workers haven't been able access to remove contamination.

St. Marks Refinery officials have sought to have a court order DEP to essentially absolve it from the cleanup, saying DEP officials signed a consent decree excusing the company of any responsibility for contaminants that were there before it bought the site. A judge last year agreed with the company on the issue, but the matter is on appeal.

The private-sector group that wants to build the state's first oil refinery has acquired land near Yuma for the $2.5 billion project.

It also is looking at a new pipeline route from Tijuana to Phoenix in order to get crude oil from Mexico, refine it into gasoline and get the product to Valley gas pumps.

Arizona Clean Fuels LLC originally proposed a refinery in rural southwestern Maricopa County. The group also looked at connecting the project to Mexico via a pipeline that would run to Guaymas on the Gulf of California.

However, those plans have changed. Refinery backers were worried there would be restrictions on the Maricopa County site because of its proximity to Phoenix -- which must meet federal clean air standards for ozone emissions.

The refinery must gain approvals from the state Department of Environmental Quality and the U.S. Environmental Protection Agency. Arizona currently has no oil refineries and a new refinery has not been built in the United States for more than three decades.

Arizona Clean Fuels acquired 1,400 acres off of Interstate 8 near the Welton area. Ian Calkins, spokesman of the refinery group, said the Yuma site also includes a 1,500-acre buffer zone that could be developed into an industrial park to service the massive facility.

The land was acquired from the Welton/Mohawk Irrigation District and sits adjacent to undeveloped federal and irrigation district lands in rural Yuma County.

"Today, it appears to be the most attractive option when you look at a number of things," said Calkins, whose lobbying firm, Copper State Consulting, is representing Arizona Clean Fuels. "There's an excellent corridor between the Rosarito area and Yuma."

The Rosarito port already has the infrastructure to handle big oil tankers and there is an existing natural-gas pipeline running from the Tijuana area to Yuma.

Calkins said natural gas firms are looking to expand that natural gas line to the Phoenix area and the refinery could construct its line in the same corridor.

Calkins said the Guaymas port would need to be significantly upgraded to handle oil tankers. A pipeline to Yuma and Phoenix would have to deal with federal preserves, the U.S. military's Goldwater Range and Indian lands.

Microscopic "bugs" are helping clean up a former oil refinery that was the city’s economic lifeline for more than 75 years.

When the Amoco refinery closed in 1981, many people thought the site would become a desolate wasteland, but city, state and federal officials -- along with private corporations -- are working hard to keep that from happening. Today, the focus is on removing tanks and contaminated soil from the refinery.

Demolition crews have finished tearing down a large oil tank along Madison Avenue, another step to rejuvenate the industrial brownfield into retail, commercial and industrial property.

During the past 10 years, most of the structures visible from downtown were removed -- except for large oil tanks and a marketing terminal. In October, BP, the company that bought out Amoco, announced it would further change the look of downtown.

The company is investing $8 million to remove and relocate the Amoco marketing terminal on Old St. Louis Road, which will lead to the demolition of 12 oil tanks along Madison Avenue. The terminal, which provides fuel for around 150 trucks a day and maintains dozens of storage tanks, will be relocated to the southeast corner of BP property.

The money is part of $70 million that BP has committed to remediation.

BP became one of the first major companies to volunteer cleanup of a former refinery site after the federal Environmental Protection Agency implemented reforms to clean up hazardous waste facilities so communities could capitalize on redevelopment potential.

The site became one of five brownfield pilot projects for the U.S. EPA’s Resource Conservation and Recovery Act.

Rick Jones, president of Triad Industries Inc. and RLJ L.L.C., is partnering with BP in redeveloping the site. His business specializes in environmental cleanup. The company works with state and federal agencies assisting clients in restoring contaminated areas.

Jeff Heintz, vice president of Triad, said the public will no longer see the tanks and the ground will be level but the work at that point will be far from finished.

The real work behind the cleanup is unseen intensive labor. It’s all called bioremediation -- a technique that uses the same biodegradation processes that occur in nature.

The process takes advantage of the microscopic "bugs" or microbes that live in the soil and eat the harmful chemicals. Jones’ company works to activate those bugs, using the right combination of temperatures, nutrients and oxygen.

The microbes surround a hydrocarbon molecule by wrapping themselves around it. Once the microbe completely digests the chemical, it then changes the substance into water and harmless gases, such as carbon dioxide.

Jones said the time it takes to bioremediate a site depends on several factors: the types and amounts of harmful chemicals present, size and depth of the polluted area, the type of soil and the condition present, the way the substance is removed and how much cleanup occurs above ground or underground.

Jones said that once actual construction starts, numerous jobs would be created, plus the new development would bring more of a tax base to the city.

The refinery occupies roughly 20 percent of the city’s land area and was at one time the area’s largest employer. It was first opened in 1908 by Standard Oil Co., which later became Amoco. Amoco and British Petroleum merged in 1998 to become BP Amoco, which is now referred to as just BP. BP is the largest oil and gas producer and one of the largest gasoline retailers in the United States.

Marathon Ashland Petroleum will perform planned maintenance at two of its refineries in January and February, a source with knowledge of the operations said.

The company brought down its 130,000 barrel per day (bpd) "No. 3" crude unit and a 57,000 bpd fluid catalytic cracker at its 222,000 bpd refinery in Catlettsburg, Kentucky, on Jan. 1, the source told Reuters. The units are scheduled to restart on Feb. 7.

The company will also bring down its 235,000 bpd crude unit and a coker at its 232,000 bpd refinery in Garyville, Louisiana, for overhaul from Jan. 25 to March 1, the source said.

Marathon Ashland is owned 62 percent by Marathon Oil Corp.

Independent U.S. refiner Sunoco Inc. plans an overhaul of the fluidic catalytic cracking unit at its 140,000 barrel per day (bpd) Toledo, Ohio, refinery.

The overhaul will take place in first quarter of 2004.

Western Refining Company, L.P. has announced that construction will be completed next month whereby Shell Oil Products US's refined products pipeline system that transports products originating from the Gulf Coast will terminate at Western's refinery in El Paso.

Pursuant to the agreements between Western, Shell Pipeline Company LP, and Shell Oil Products US, the Shell entities will continue to deliver refined products from the Gulf Coast to El Paso and will terminal those products at Western's facilities. Additionally, Western will ship substantial volumes of gasoline blendstocks from Gulf Coast refineries to El Paso, thus enabling Western to more than double its production of Phoenix grade (CBG) gasoline.

Western, already one of the largest suppliers of gasoline to markets throughout the Southwestern United States, will immediately increase its production of Phoenix grade gasoline. Additionally, Western will now have the flexibility to modify its production of other grades of gasoline such that the overall result will be to significantly increase gasoline production at El Paso.

When asked about the project, Paul Foster, President and CEO of Western, said, "We are very excited about expanding our relationship with Shell. This is a long-term arrangement and Shell is a very good partner."

Financial details of the agreement have not been disclosed.

Western and several other refiners in the Southwestern market have significantly increased their production capacities. It is expected that, even after Kinder Morgan completes its expansion of capacity from El Paso to Phoenix, existing refiner/suppliers will utilize all the available pipeline capacity.

When asked about recent announcements that Longhorn Pipeline was close to beginning deliveries from the Gulf Coast to El Paso, Foster said, "We have been reading these announcements from Longhorn for eight years and, if they ever begin operations, we welcome more competition from Gulf Coast refiners. But I have my doubts. People seem to forget that the Gulf Coast has had pipeline access to El Paso for over six years. I am not confident that Gulf Coast refiners will ever utilize the Longhorn system, but time will tell." Western markets its products in El Paso, Texas; Albuquerque, N.M.; Phoenix and Tucson, Ariz.; and in Ciudad Juarez, Chihuahua, Mexico. Western is also active on the West Coast and in Nevada.

Venezuelan state oil firm Petroleos de Venezuela (PDVSA) said Friday it had secured a $40.1 million loan from the Japan Bank for International Cooperation (JBIC) to upgrade its Puerto La Cruz refinery.

The upgrading project, known as Valcor, will allow the 200,000 barrel per day (bpd) refinery to produce higher quality products with a lower sulfur content.

Once the work is complete, Puerto La Cruz will produce 26,000 bpd of unleaded gasoline and 25,000 bpd of leaded gasoline for the domestic market, PDVSA said in a statement.

The United States, the top buyer of Venezuela's crude and products and the world's biggest oil market, has been tightening fuel standards in recent years to cut down on pollution.

2. ASIA

Iran plans to build and operate a US$1 billion oil refinery in the East Java province to accommodate Indonesia's increasing demand for oil-based fuel, Iran's ambassador said on January 15.

Iranian Ambassador to Indonesia Shaban Shahidi Moaddab said the planned project would be carried out jointly by the state-owned National Iranian Oil Co. and Indonesia's state-owned oil and gas company PT Pertamina.

"We have been observing developments for one year and the right investment is in oil and gas. We have discussed the idea with the government and Pertamina," Moaddab told reporters in a press conference after opening a seminar on the Indonesian-Iran oil and gas joint-venture.

"It is important for us to have Pertamina present in this project," he said. The project was also open to other investors.

Iran is gathering the capital and technology for the project.

Moaddab did not give details of the extent of Pertamina's presence in the project or its timeline.

He said the refinery, which is expected to process up to 150,000 barrels of crude oil a day, would help supply Indonesia's high demand for oil-based fuel.

"I understand that Indonesia presently still imports 20 percent of its oil-based fuel. (The refinery) is expected to compensate that," he said.

There are seven oil refineries in Indonesia with a combined capacity of about 1 million barrels of oil per day (bpd).

However, this capacity only covers 80 percent of the country's oil demand, which has reached 1.2 million bpd. Indonesia imports the remaining 20 percent from various countries, including Iran.

Indonesia imported 5,538 and 3,667 barrels of oil in 2001 and 2000 from Iran. The country's oil-based fuel consumption reached 57.4 million kiloliters last year.

Moaddab said the refinery was likely to be built near Pertamina's petrochemical industry PT Trans Pacific Petrochemical Indotama (TPPI) in Tuban, East Java.

The main reason for selecting the area was because there was no oil refinery yet in East Java. Turban was also an industrial area.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said constructing an oil refinery close to the petrochemical industry was a good decision, allowing synergies in production.

He didn't mention when the project might commence, but said the refinery is expected to have a capacity of 150,000 barrels a day.

Indonesia currently has seven oil refineries operated by Pertamina, but growing demand for fuels means the country needs greater refining capacity.

Reliance Industries Ltd (RIL) has increased the Jamnagar refining capacity to 33 million tons from 30 million tons.

Refining capacity increased to 33 million tons after Crude Distillation Unit (CDU) was revamped and debottlenecking in December last year, Mr P Raghavendran, President, Refining Business of RIL told reporters on the sidelines of a conference on Oil and Gas here.

While RIL sells some 13.1 million tons of its products to state retailing companies, it would export 5.5 million tons of diesel and three million tons of gasoline in 2003-04.

Last year, Reliance had exported 4.5 million tons of diesel and three million tons of gasoline.

The Rs 17,000 crore multi-diversified Essar group, which is the country’s first independent power producer (IPP), is now looking at the opportunities in the power trading and distribution business.

The group’s company, Essar Power Ltd (EPL), has applied for power trading license from the government of India.

The group’s director and managing director of the Essar Steel Ltd, Prashant Ruia, said the construction work on the group’s upcoming oil refinery at Vadinar in Jamnagar district which has been halted for more than one year, will restart during this quarter and the refinery will be fully operational by December, 2005.

Talking about Essar Oil’s future plans, Ruia said construction of the 12 million ton per annum (MTPA) capacity oil refinery at Vadinar in Jamnagar will restart during this quarter of the current fiscal year and the refinery will start operating from December, 2005.

"We are going to invest Rs 4,000 crore for completion of the refinery’s construction work which is in addition to our investment of Rs 6,500 crore which already has been made. We have initiated the work of revalidating contracts with our private contractors for the refinery work and manpower mobilization also has been started to meet the set target of completion of work at the site in next 23 months," Ruia said.

Essar Oil, which at present runs three retail petroleum outlets including one at Jamnagar, is importing petroleum products to cater to the needs of the retail outlets.

"We are planning to open 1,700 outlets during the next two years in which 300 outlets will be opened in Gujarat and work in this direction already is at an advanced stage. We are also going to invest Rs 300 crore during the next three years for our project in the coal bed methane (CBM) exploration segment which has a rich potential," Ruia said.

Essar Oil has its CBM sites at Mehsana which includes two blocks. Its Ratna and R series oil fields have an estimated 500 million barrels of oil in addition to its five exploration blocks.

EOL has so far been awarded six CBM blocks by the Union government in which two blocks, one at Rajasthan (RJ-ON-90/4) and another in the Saurashtra region of Gujarat (BB-OS-5) have already been relinquished by the company, while its CBM block at Cachar in Assam (CR-ON-90/1) has remained so far as a non-operated block.

It has been operating on three blocks including one in Gujarat and one each in Rajasthan (RJ-ON090/4) and at Ranigunj in West Bengal (RG/East-CBM-2001/1).

Reliance Industries Ltd (RIL) has increased the Jamnagar refining capacity to 33 million tons from 30 million tons.

Refining capacity increased to 33 million tons after Crude Distillation Unit (CDU) was revamped and debottlenecking in December last year, Mr P Raghavendran, President, Refining Business of RIL told reporters on the sidelines of a conference on Oil and Gas here.

While RIL sells some 13.1 million tons of its products to state retailing companies, it would export 5.5 million tons of diesel and three million tons of gasoline in 2003-04.

Last year, Reliance had exported 4.5 million tons of diesel and three million tons of gasoline.

Work on the Paradip Oil Refinery Project in Orissa will commence immediately to ensure its early completion.

This assurance was given by Prime Minister Atal Bihari Vajpayee, to Orissa Chief Minster Naveen Patnaik, when he called on him here, a State Government press release said today.

It said Patnaik informed the Prime Minister that the State Government was willing to restore sales tax incentive and exempt entry tax provided the project work commenced immediately and the refinery was commissioned early.

He said while the Indian Oil Corporation had agreed to try and complete the project by 2008-09, they were yet to incorporate the same in the draft MoU which could then become the basis for grant of tax incentives.

"The Prime Minister agreed with the views expressed by the Chief Minister and indicated that work on the Paradip Refinery Project would commence on an immediate basis so as to ensure its early completion," it said.

On the Chief Minister's demand for establishment of an IIT in the State, the release said Vajpayee agreed to consider the possibility of upgrading an existing engineering institution in Orissa after receipt of the recommendations of the Technical Search Committee set up for the purpose.

The Union government’s proposal to allow 100 per cent foreign direct investment is unlikely to have any impact on the refinery sector.

"None of the foreign oil companies are interested in setting up refineries in the country. Refining capacity is already surplus", say analysts tracking the oil sector. As on April 2003, the refining capacity stood at 114.6 million tons per annum.

"Who is interested in setting up a refinery? Even Royal/Dutch Shell has tied-up with ONGC to meet its petroleum product requirement for marketing of transportation fuels. ONGC will supply petroleum products through its MRPL refinery", analysts add.

A senior official with Bharat Petroleum Corporation (BPCL) said, "the government’s recent announcement on giving 100 per cent FDI in refining is unlikely to have any impact."

However, the state-owned companies like BPCL, HPCL and IOC have plans to set up refineries. BPCL has chalked out plans to set up a 6 mtpa refinery in Bina, Madhya Pradesh while HPCL has plans for Guru Gobind Singh refinery at Bhatinda in Punjab.

Almost all the refineries in the country are not only upgrading and modernizing their plants to meet the Euro -III norms for their products, but are also debottlenecking their units at a very marginal costs.

By debottlenecking and upgrading, almost 10 million tons of refining capacities will be added. Reliance Industries is debottlenecking its Jamnagar refinery to 33 million ton per annum (mtpa).

IOC is upgrading its refineries. It recently added one million tons at its Barauni refinery. It is also doubling capacity of Panipat refinery from six to 12 mtpa.

BPCL is augmenting capacity at its Mumbai refinery to 12 mtpa and Hindustan Petroleum Corporation is modernizing its Mumbai refinery which will enhance its capacity to 7.9 mtpa and Visakhapatnam refinery from 7.5 mtpa to 8.33 mtpa.

Soaring prices for refined fuel are supporting "healthy" margins for the New Zealand Refining Company.

General manager Thomas Zengerly said the company, which produces 70 per cent of New Zealand's petrol and 85 per cent of its diesel, was enjoying good margins despite higher crude oil prices and the effect of the strong New Zealand dollar.

"We have seen relatively healthy levels of refinery margin since the end of October," he said.

The company makes its money on the difference between the price of crude oil – up 16 per cent since June last year – and refined fuel prices. Gasoline prices have risen 54 per cent since June.

Consumers Institute chief executive David Russell said because petrol companies owned most of New Zealand Refining's shares, they were playing at "smoke and mirrors" by giving the price of refined fuel as a reason for higher petrol prices at the pump, without disclosing how it would also benefit them.

"They're keeping absolutely quiet about the windfall profits they are making from what is happening overseas," he said.

The four big petrol companies own 73 per cent of New Zealand Refining, according to the company's latest annual report.

But petrol companies rejected the comments. BP spokeswoman Diana Stretch said the New Zealand Refining investment was a "separate part" of the company's business.

3. EUROPE / AFRICA / MIDDLE EAST

The situation is close to critical these days at numerous West European oil refineries because of bad weather and the restrictive measures taken by Turkish authorities, as a result of which fewer tankers with Russian and Kazakh oil sail through the straits of Bosporus and Dardanelles.

A shortage of crude is now felt in Greece, Italy, France and Spain. Some of the refineries have already cut production, according to well-connected European business sources.

According to the sources, one of the Russian oil pipelines is now idling because of the lack of free storage facilities and the congestion of oil-filled tankers at Black Sea ports.

Turkish authorities recently forbade large tankers to sail through the Black Sea straits at night. European sources do not rule out that these measures were taken to expedite the construction of the trans-Caucasus Baku-Ceyhan oil pipeline.

The situation is further complicated by the fact that no oil from the northern parts of Iraq that is comparably in quality with Russian oil reaches the Mediterranean market at present. The oil fields in the area of Kirkuk and Mosul have not been operational since March 2003 because of numerous acts of subversion.

In a privatization bidding held for TUPRAS (state-owned Turkey Petroleum Refinery Inc.), the highest bid was offered by Efremov Kautschuk Company. While critics say the offer was below market price, the Supreme Board of Privatization (OIB) will make the final decision about the price.

Efremov Kautschuk is a Russin-German conglomerate that includes the Turkish Firm, Zorla Holding. If the OIB approves the sale, the company will pay half of the price in cash while the balance will be paid in two equal payments within a year.

With a total US$2,3 billion stock exchange value, TUPRAS has US$12 billion annual turnover.

Zorlu Holding CEO, Ahmet Nazif Zorl,u said that the bidding offer was calculated according to international market criteria. Not entertaining the critics, Zorlu said: "While it is said that the offer is low, it should be stated in comparison to what? This has to be discussed. The company has a market value and a world market value. We got together as two groups and made the offer. If privatization will be realized in Turkey, I do not agree with the critics. Today, the price is obvious. We have reached this point over a long period of time by working on it."

On the other hand, in evaluation of the price, some businessmen said it should not be below US$2 billion. Aytemiz Petroleum CEO, Ismail Aytemiz, said the offer is below the Refinery's real value. Turkey Employers of Petroleum and Gas Distributors and Companies Syndicate President, Atif Ketenci, also said that TUPRAS should be sold at a higher price than what was offered.

With four refineries in Izmit, Izmir, Batman, and Kirikkale, TUPRAS owns 86 percent of the total Turkish refinery capacity and meets 75 percent of Turkish oil product demands. It has 27.6 million tons in annual capacity and is the 7th largest refinery in Europe.

Serbia said that a feasibility study on a pipeline to deliver Caspian oil to the Adriatic via Romania, and planned to supply Serbia's Pancevo and Novi Sad refineries with crude, should be ready in February.

The proposed pipeline could link Romania's Constanta on the Black Sea and Croatia's Adriatic port Omisalj via the Danube port of Pancevo, the site of a Serbian refinery. Sections of the Serbian and Croatian route will use existing pipelines, officials said. The line could also go further to Trieste in Italy to connect to the Trans Alpine Pipeline system, which supplies Austria and Germany.

"This project is important for Serbia and its crude oil facilities, even if I do not expect it to be completed before 2007 or 2010," Slobodan Sokolovic, deputy to the outgoing mining and energy minister, told Reuters.

"The pipeline, to be built under INOGATE (the Interstate Oil and Gas Transport to Europe) project, is the shortest route for transporting Caspian oil to Europe," Sokolovic said.

The study is prepared by the U.S. firm Parsons and financed by the U.S. government Trade Development Agency, he added.

Earlier this month, Romania, Croatia and Serbia set up an inter-governmental body to promote the project to potential investors and possible users.

"We are entering a phase of setting up a consortium for the construction of the pipeline. Because Serbia, Romania or Croatia cannot finance it alone," Sokolovic said.

The European Union-funded INOGATE program seeks alternative routes for Russian energy supplies to Western Europe.

Another route is also under discussion, from Constanta to Trieste via Romania, Hungary and Slovenia.

Serbia's oil monopoly Naftna Industrija Srbije (NIS) said it planned to invest $300 million in the modernization of its two refineries over the next few years.

Rade Culum, NIS deputy general manager, said the two plants - one in the northern town of Novi Sad and the other in Pancevo near Belgrade - were inefficient.

"Both refineries are well-structured but the passage of time has led them to need a major modernization. We plan in the first phase to do this with some $300 million," Culum told a news conference.

The modernization is expected to be completed by 2007. Culum did not say how much the entire project would cost.

He said NIS could tap capital markets for the required funding, but gave no detail.

NIS General manager Dimitrije Vukcevic said the planned investment would make the plants competitive in the surrounding markets and that they would produce European quality products.

The investments are expected to help upgrade existing installations and build new plants for hydrosulfurization, hydrocracking, reforming, isomerization and visbreaking.

Culum said the two plants had processed 3.5 million tons of crude in 2002 and plan to increase output to 3.65 million tons next year or 4.3 per cent.

NIS refineries can process 6.5 million tons of crude a year, 5.0 million tons in Pancevo and 1.5 million in Novi Sad, the company said.

"We should use between 70-80 per cent of capacity in the primary processing," Culum said, noting that at present only 45 per cent of capacity was used.

The Pancevo plant produced 2.65 million tons of derivatives in the first 11 months of this year and expected the figure to reach 2.92 million tons by the end of 2002, compared to 2.25 million tons last year.

The Novi Sad refinery produced 390,000 tons of derivatives in 2001 and will produce 690,000 tons by the end of 2002.

Russian oil giant Lukoil has decided to invest in Serbia’s only oil refinery, according to the general director of a Lukoil-Beopetrol, a local subsidiary of the company.

Srdjan Dabic told B92 News that Lukoil was particularly interested in purchasing the Pancevo oil refinery but that this would depend on anti-monopoly legislation which has not yet been introduced.

Lukoil has already purchased twenty per cent of the local market with its investment in Beopetrol and plans to expand its sales network, so will be vulnerable to the new legislation.

A minister hinted that there are chances that the foundation stone for the construction of a refinery could be laid by the end 2004, after Cabinet Council approval.

According to him, with the construction of the refinery in the region, Benguela province will benefit from a regional growth point that will also create more jobs and improve people's living conditions.

The future oil refinery is to hold a production capacity for 200,000 barrels a day.

ONDO State Government, in partnership with private investors, is to set up an oil refinery to be located at Okitipupa, close to the coastal area of the state.

The initiative comes as the off shoot of the deregulation of the downsteam subsector of the oil industry by the Federal Government.

A meeting of stakeholders in the project was held at the Governor's office in Akure to finalize arrangements and modalities for the refinery.

Among dignitaries who attended the meeting are Otumba Solomon Oladunni and Prince Emiti Akinruntan, an oil magnate, while the secretary to the state government, Dr Segun Mimko, represented state government.

Briefing journalists after the meeting, prince Akinrumtan disclosed that the project is expected to cost about one billion dollars.

Prince Akinruntan, the chief executive of Obot Petroleum, pointed out that Okitipupa was chosen as the project location because of its closeness to crude oil field and to guide against any possible vandalizing.

According to him, the refinery is expected to go into operation within the next one year, during which technical partners would have been involved.

Prince Akinruntan explained that the state government would only be allowed to own nominal sharers in the refinery, while its operations would only be the sole responsibility of the private investors and technical partners.

The oil magistrate stated that more private participation in the oil industry would bring down the escalating prices of petroleum products.

The results of a study by the University of Cape Town Lung Institute show that the health concerns of Milnerton residents who live near the Caltex oil refinery are legitimate.

For years residents have complained that the airborne toxins from the plant are injurious to their health. The study, commissioned by residents' associations, shows that children in the city's northern suburbs have unusually high levels of asthma and allergies, associated with exposure to petrochemical emissions.

Oil groups are investing more than R10 billion in the next two years to upgrade their refineries to comply with the new unleaded petrol and low sulfur diesel emissions standards coming into effect in January 2006.

There are six fuel refineries: Caltex oil in Cape Town; the Engen and the Sapref oil refineries in Durban; the Natref oil refinery in Sasolburg; Sasol's oil-from-coal synfuels facilities in Secunda; and PetroSA's offshore gas-to-fuel facility in Mossel Bay.

Sasol's synfuels facilities and PetroSA's Mossel Bay produce sulphur-free diesel.

Simphiwe Mehlomakulu, a general manager at the state-owned oil group PetroSA who was recently elected the chairman of the SA Petroleum Industry Association (Sapia), said if the R10 billion investment was not made in the next two years, the cleaner products would have to be imported at an unfavourable cost.

In January 2006, service stations will be allowed to sell unleaded petrol only and diesel will have to have a sulphur content of less than 0.05 percent.

In parliament this week, the department of environment and tourism said oil refineries were a big contributor to air pollution and warned that the chief executives of oil companies found in contravention of emission laws could face up to 10 ywell under way with its plans.

Johan Rheede, Sasol's spokesperson, said R7 billion was being spent at Secunda to modify the liquid fuel refining and blending operations and to establish new plants to increase the octane rating of its synthetic petrol. Planning and conceptual work was also well under way at Sasol's Natref refinery.

Meanwhile, Fawzy Muhiyiddin, the chief executive of Engen, said at the announcement of plans to sell Engen's 56.5 percent stake in Energy Africa that the funds from this sale would be used to finance the Durban refinery's efforts to develop cleaner fuels and make additional environmental improvements.

Margaret Rowe, a spokesperson for the Sapref refinery, said it planned to spend "a lot of money" on Sapref so that its products met the clean air legislation standards. She was unable to provide further details at this stage. BP and Shell SA jointly own the Sapref refinery.

Colin McClelland, Sapia's director, said oil refiners could defer their decision to invest but they would probably have to spend the R10 billion eventually.

The Slavneft-owned stake in the Belarusian-based oil refinery Mozyr may be divided between TNK-BP and Sibneft, the companies that own Slavneft, according to General Director of the Mozyr refinery Anatoly Kupriyanov. "In this case, the stake will be owned by two Russian companies, instead of one", he pointed out. Kupriyanov added that the two companies had ample resources for oil production, and they would consider the refinery as a promising line of activity.

The Grozny oil refinery (previously called the Lenin refinery) resumes functioning in the Chechen capital. The repeated registration of staff members, who were unemployed for a long time, is coming to a close, a representative of the Regional Operational Staff for controlling the counterterrorist operation in the Northern Caucasus told Itar-Tass. The oil refinery will employ some 900 factory and office workers.

"They are all highly skilled specialists, which makes it possible to believe that the turning out of quality oil products will soon be resumed in the republic," chief executives of the Grozny oil refinery believe.

Baudi Khamidov, director-general of the Grozneftegaz stock company, said in an interview with Itar-Tass that some ten million dollars of investments are needed for the restoration of the destroyed oil refining complex of Chechnya. "In this case the annual capacity of the restored oil refining complex will be 500,000 tons of oil. This is enough, considering the fact that our enterprise, the only one in the republic, produces 1.5 to 1.7 million tons of oil," he said.

According to Khamidov, the oil producing complex of Chechnya was almost not damaged during the combat operations. "At the same time, the oil refining complex was destroyed almost totally, and it should be restored according to a modern technological scheme," he said.

MIDDLE EAST

The world's five leading oil powers, including the UAE, Saudi Arabia, Kuwait, Iraq and Iran, will be pumping an average $18-20 billion a year into expansion projects that will boost their output to more than 42 million barrels per day before 2007.

According to the Paris-based Arab Petroleum Research Centre (APRC), such a two-fold expansion is essential to meet the expected growth in world oil demand which is forecast to rise by around 45 million bpd to more than 120 million bpd by 2025. In the next four years, these five countries will be pumping some $100 billion into their hydrocarbon sector.

"The increase means that the share of these producers will rise from 28.4 per cent in 2002 to 35 per cent in 2025, while their share of worldwide natural gas production will jump from 12.4 to 20 per cent," according to an APRC bulletin.

Over the past four years, the UAE has invested over $8 billion into the oil sector as part of the long-term plan to maintain its current output and expand capacity to nearly four million barrels per day. "Such large scale expansion of capacity has been triggered by a steady growth in global demand and a gradual decline in crude resources in some areas outside the Middle East," an industry source said.

Government investments in the oil sector totaled around Dh30 billion between 1999 and 2002 while more than $2 billion was channeled into the sector last year. Most of the investments were made by the Abu Dhabi National Oil Company as it is implementing most of the expansion projects in the Emirates. According to statistics from the Ministry of Planning, oil investments during 1999-2002 accounted for nearly 13 per cent of the overall investments of Dh233 billion made by the public and private sectors in the UAE during that period.

Abu Dhabi was the main investor in oil as other emirates are not concentrating on this sector given their limited crude resources and their efforts to develop non-oil sector.

Abu Dhabi accounts for more than 90 per cent of the UAE's total proven oil reserves of around 98 billion barrels and nearly 85 per cent of the overall output. The UAE and the other four oil giants supply nearly a fifth of the world's crude consumption and according to estimates their combined capacity will exceed 50 per cent in two decades.

According to the Middle East Economic Survey, the UAE plans to increase its oil production capacity to 3.58 million barrels per day in the next couple of years. "A crucial element in its expansion plan is the development of the Upper Zakum from its present level of 550,000 bpd to 1.2 billion bpd," it said.

In tandem with the big leap in oil production, refining capacity in the region has also undergone significant growth. Steve Church, Communications Director, World Refining Association (WRA), pointed out that the Middle East's immense production cost advantage and the willingness of its governments to diversify their oil-based economies had fostered exponential growth of an industry that has over recent years changed the global face of refining and petrochemicals. "The region's industry has grown from being insignificant 20 years ago to being home to about 10 per cent of global ethylene capacity today. For Europe and the US, the region is both a threat and opportunity, gobbling up the export market on the one hand and presenting a profitable place to invest on the other," he said.

Meanwhile, WRA said the challenge of different crude oil supplies continues to grow as refiners look to reduce their dependence upon the Middle East. "However, it now appears that while some European refineries have invested in new technologies to cope with increasingly sour crudes, there continues to be a ready supply of sweeter crudes to replace dwindling supplies from the North Sea. The increasing number of new pipeline projects, particularly in southern Europe will also offer new sources of supply and hopefully improved security of supply for many refineries," WRA newsletter said.

"Thoughts are now turning to what lies ahead for the refining industry in 2004. For the most part, refining margins have improved this year and have shown up in better returns for many of the oil companies. With only one year to go until the new European Clean Fuel standards come into place, many refineries are working to complete their upgrading programs while some of those whose new equipment and technology is already in place are looking to see which markets will still accept motor fuels with higher sulfur contents," it said.

Parker Instrumentation, a division of Parker Hannifin Corp., Barnstaple, UK, has been selected to supply valves and compression tube fittings worth more than $250,000 for upgrading the 140,000 b/d Basra refinery in southern Iraq.

Parker expects to provide the components during the first quarter, including more than 1000 new ball valves to be used as isolation mechanisms for the refinery's instrumentation and control network.

South Refining Co. operates the 140,000 b/cd Basra facility.

In addition to repairs now required because of recent damage, all three of Iraq's major refineries were to have been upgraded according to a plan developed during the period of United Nations sanctions, which called for installation of isomerization units with capacities of 20,000 b/d at Baiji and 10,000 b/d each at Basra and Daura.

The plan further envisioned 40,000 b/d of fluid catalytic cracking capacity at Baiji and 30,000 b/d of hydrocracking capacity at Basra (OGJ Online, Sept. 9, 2003).

JGC Corporation (TSE: 1963) has been awarded a lump-sum contract by The Bahrain Petroleum Company (BAPCO) for the expansion of its refinery, including the construction of a new hydrocracking unit, the largest of its kind in the world. The contract signing was held on January 10.

JGC will provide design, procurement, construction management and commissioning assistance services. The contract is worth approximately US$430 million and completion is scheduled for the end of 2006.

This project has been planned by BAPCO in order to increase production of low-sulfur diesel that meets strict European environmental regulations, pursuant to a company policy of expanding diesel oil exports into European markets and emphasizing light oil products.

JGC will undertake the construction of facilities that include a hydrocracking unit with a 60,000 BPSD hydraulic processing capacity, a hydrogen unit, a sulfur recovery unit and off-site & utilities, as well as increasing processing capacity of the existing mild hydrocracking unit from 54,000 BPSD to 70,000 BPSD and revamping it to an ultra-deep desulfurization unit, achieving a sulfur reduction in the diesel product down to 10 ppm.

A study being carried out by an international consultancy firm to expand the production capacity of the Jordan Petroleum Refinery Company (JPRC) will be completed late this month, JPRC General Manager Ahmad Rifai told The Jordan Times on January 15.

According to Rifai, the feasibility study aims at enhancing the quality of the firm's production.

"For example, we hope to reach a point where the company is capable to turn its production of petrol to that only of the unleaded variety," he said.

The company is currently producing three types of petrol, mainly regular and super in addition to small quantities of unleaded which is an environmentally friendly fuel product and poses no threat to public health.

Rifai could not specify when exactly the company will embark on expanding the refinery, but said it will be soon. The project is expected to cost $700 million.

Expanding the country's sole refinery, located in the industrial Governorate of Zarqa, is seen by experts in the oil industry as necessary in view of the government plan to use natural gas imported from Egypt, as an energy source for the industry instead of heavy fuel.

The JPRC enjoys a concession until 2008 to purchase, refine and sell oil derivatives in the local market.