Clouds of sooty black smoke rose from a major refining unit at Premcor's Delaware City Refinery on April 6, the latest in a series of problems that could mean tougher sanctions for the plant.

Premcor spokeswoman Mary Jen Beach said the increased emissions were caused by a mechanical problem in a system that burns waste gases from the refinery's petroleum coke process. Beach said a backup disposal incinerator reached operating temperatures late in the day, ending the worst of the discharges.

Delaware Natural Resources and Environmental Control Secretary John A. Hughes said that Premcor's record of past and potential violations could lead to a "chronic violator" review under year-old regulations that allow tougher penalties and stricter operating rules for repeat offenders.

Uncontrolled emissions from the waste-gas burner can release a soup of chemicals and compounds, including hydrogen sulfide, a gas with a hint of rotten eggs known by the nickname brimstone; ammonia; hydrogen cyanide; and sulfur dioxide.

Hughes said DNREC was more tolerant of Premcor's problems during "a short window of acclimation" after the company purchased the refinery from Motiva Enterprises in May 2004.

"At this stage, both Premcor and DNREC have to realistically assess where we are and where they are," said Hughes. He described his agency's assessment of Premcor's problems as meticulous.

"We're not there yet at all, but we are elaborately recording, recordkeeping and scrutinizing violations," Hughes said.

Beach said Premcor officials were unaware of any move to assign Premcor to a chronic violator list.

State lawmakers ordered DNREC to develop a chronic violator program in mid-2001, after reports that some pollution releases and penalties had gone unreported. The designation allows the secretary to impose penalties of $10,000 per day per violation, up from a $10,000 per day maximum for all violations.

Even when operating properly, the petroleum coke producing unit involved in the release can put out more than 50 tons of irritating sulfur dioxide a day, along with more than 3,000 pounds of soot, 1,500 pounds of sulfuric acid and other compounds. A federal court consent decree requires the company to install systems to reduce those pollution levels by next year.

Coking operations extract gasoline and other fuels from the heaviest remnants of other crude oil refining processes. The refinery ordinarily burns carbon monoxide from the 57,000 barrel-per-day coker in a specialized boiler, allowing Premcor to recover energy while controlling a pollutant.

Under a longstanding DNREC permit, Premcor avoids penalties for extra carbon monoxide and particle pollution by diverting the unburned gases into a 1,300-degree incinerator within 24 hours of a breakdown.

State officials have said they may re-examine that no-penalty window in the future.

Despite the exemption for some of the bypassed boiler pollutants, DNREC issued Premcor a violation notice in February for a similar carbon monoxide boiler shutdown in another large refining unit. During that incident, Premcor estimated it released nearly six tons of hydrogen sulfide gas, 2,865 pounds of ammonia, 260 pounds of hydrogen cyanide and 199 pounds of carbonyl sulfide.

Tri-state Residents File Lawsuit against Chevron

More than 200 people have filed a lawsuit against a now closed Chevron refinery.

It called for the clean-up of contaminated soils and sludges at Chevron’s, previously Gulf Western’s, refinery.

The lawsuit seeks $70 million in damages and involves residents of several communities along the Ohio and Great Miami rivers.

Chevron is accused of negligence. The lawsuit also claims company officials conspired to mislead residents about the refinery's impact on their health and the environment.

According to a report from the US EPA, a voluntary performance agreement with Chevron Environmental Management Company was finalized on March 4, 2004.

Arizona Regulators Approves New $2.5 Billion Yuma Oil Refinery

Arizona environmental regulators approved an air-pollution permit for an investor group planning a new $2.5 billion oil refinery, a milestone no other U.S. project has reached in three decades.

On April 14 the state's Department of Environmental Quality issued the permit to Arizona Clean Fuels LLC, which is developing the refinery 40 miles east of Yuma, Arizona. The permit certifies that emissions from the refinery won't exceed federal Clean Air Act regulations.

The air permit is the most difficult to get among more than two-dozen approvals the project needs, Arizona Clean Fuels Chief Executive Glenn McGinnis said. It will help the group find investors for the project, which is expected to begin operating in late 2009, he said.

Prior to securing the permit, ``it was pretty hard to have any kind of definitive discussions with people about financing,'' McGinnis said. ``I expect a lot more activity on our part to close up on some of the early contacts we made.'' He declined to name any potential investors.

The number of U.S. refineries dropped by half during the past 25 years as low profit margins and stricter environmental rules prompted the closings of older, less-efficient plants. Public opposition to new, large industrial plants and difficulty obtaining permits deterred new construction, along with the high cost and years of poor returns in the industry.

The last refinery built was Marathon Oil Corp.'s facility in Garyville, Louisiana, dedicated in 1976. While the capacity of existing refineries has been expanded to keep pace with rising demand, a shortage of refining capacity helped push U.S. gasoline prices to records.

Arizona issued the permit after making modifications requested by the U.S. Environmental Protection Agency, the state's environmental quality director Steve Owens said.

BP Refinery Accused of Safety Violations

There’s a new allegation involving the deadly blast that rocked a BP refinery in Texas City: a contract safety supervisor at the refinery claims workers hadn't been warned that a unit undergoing maintenance was resuming operation.

Fifteen people were killed and more than a hundred injured in last month's blast.

Charles Ramirez, a JE Merritt safety representative, said BP's failure to disclose the refinery's octane boosting unit was starting up contributed to the deaths and injuries.

Ramirez hired attorneys and plans to join a lawsuit against BP and its contractors over the explosion.

He says conditions at the refinery were poor and problems have continued.

A fire broke out last week at a unit.

Crews were on alert April 13 after a light petroleum product leaked out.

Another Texas Refinery Fined by TCEQ

The Texas Commission on Environmental Quality (TCEQ) April 13 approved penalties assessed at $986,139 against 43 regulated entities for air, water, and waste environmental violations.

Agreed orders were issued for the following enforcement categories: eight air quality, one Edwards Aquifer, one multi-media, seven municipal waste discharge, 11 petroleum storage tank, and four public water system enforcement cases. In addition, one water quality, one on site sewage facility, six petroleum storage tank, and three municipal solid waste default orders were issued.

Included in the total fine figure is a penalty of $656,397 assessed against Motiva Enterprises LLC in Port Arthur for air violations. The fine resulted from three investigations in 2003. Violations include failure to prevent unauthorized emissions and failure to properly operate pollution control equipment; opacity violations; failure to properly submit initial notification for reportable emission events; and failure to properly submit final reports for emission events. Half of the penalty amount will go to environmental projects in Jefferson County.

Philadelphia Area Residents File Pollution Lawsuit against Sunoco Refinery

After waiting for almost half a decade for the U.S. Environmental Protection Agency (EPA) to settle with Sunoco over years of environmental violations that have exposed area residents to pollution emissions, flaring, and foul odors, the Community Labor Refinery Tracking Committee (CLRTC) filed a lawsuit April 11 against the Sunoco refinery in Philadelphia.

The suit details serious abuses at the refinery, including illegal releases of excess hazardous air pollutants such as the carcinogens benzene and ethylbenzene. Over 1,000 violations of federal law, the Pennsylvania code and Sunoco's own permits are detailed in the suit.

"We're filing this suit today because Sunoco has violated city, state and federal environmental regulations dozens of times in the past five years, and yet they have not faced punishment or fixed the problem," said Joanne Rossi, president of the Community Labor Refinery Tracking Committee. "It's unfortunate that the community has to be the ones to stand up to them and force change."

Violations identified in the suit include the following: unit malfunctions that have caused releases of thousands of pounds of sulfur dioxide and hydrogen sulfide at a time; excessive flaring of refinery gases that has resulted in gray and black smoke sending harmful emissions into the surrounding neighborhoods; and a major, unplanned shutdown at the fluidized catalytic cracking unit that caused a release to the neighborhoods of "catalyst" -- very fine particles that can contain harmful elements.

CLRTC is seeking fines and major upgrades to the facility to eliminate the causes of many of these violations.

The CLRTC has brought legal action against Sunoco before. A 1997 suit by the group resulted in a $5.5 million consent decree that required plant improvements yielding significant reductions in emissions. Major violations continued to occur, however, and the CLRTC again filed an intent to sue Sunoco in October of 2000. At that time, the Environmental Protection Agency, the Justice Department and the Pennsylvania Department of Environmental Protection asked the CLRTC to hold off on filing a lawsuit so that EPA could negotiate with Sunoco as part of a national company-wide settlement. Those negotiations are still taking place.

Since that time, the CLRTC has not been invited to participate in any discussions between Sunoco and EPA regarding the settlement. Requests for information pertaining to clauses of the draft settlement were also rebuffed, leaving the CLRTC with little information about how or if community concerns were being addressed properly. In light of the severity of Sunoco's illegal air pollution and its effect on the surrounding neighborhoods, CLRTC believes it should be involved in any discussions about settlement with Sunoco. Additionally, while CLRTC would be happy to see a reasonable settlement with Sunoco, any acceptable settlement must remedy the numerous violations CLRTC has identified and ensure they do not happen again.

The Environmental Integrity Project (EIP) aided CLRTC in documenting some of the pollution abuses at the Sunoco plant.

BP Refinery Explosion Probe Continues

Investigations continue into the causes of a Mar. 23 explosion and fire in an isomerization unit at BP America Inc.'s Texas City, Tex., refinery that killed 15 contractors and injured more than 100 other persons.

Preliminary data point to the ignition of excess vapors from a blowdown drum's vent stack—possibly by a vehicle parked too close to the unit. Many of the victims killed were attending a meeting in a contractor's office trailer located within 150 ft of the isomerization unit, which was being restarted after a maintenance turnaround.

A spokesman from the US Chemical Safety and Hazard Investigation Board (CSB), which is investigating the accident, said, "In this case we know that there was a catastrophic release of hydrocarbons from a vent stack." He also said that trailers have been "considered a major issue since day one."

The location of the trailers was in violation of BP best practices, which in this case apparently were not enforced.

BP said the investigation is far from complete.

"The explosion and fire at the isomerization unit was a result of a very complex process upset that BP America is still striving to understand," the company said in a statement Apr. 10 outlining progress of its own internal investigation.

The BP PLC unit said it has turned over to CSB and the US Occupational Safety and Health Administration (OSHA) more than 8,500 pages of information related to the accident, including maintenance records, engineering documents, computerized plant control data, and eyewitness accounts of the incident.

BP said it "has thoroughly inspected the isomerization unit to verify positions of key valves and other visible indicators." It said it will obtain fluid samples and complete further inspections of the unit "in order to actively manage safety concerns related to benzene, asbestos, and other potential hazards."

BP said it is building process data and information gleaned from the investigation site to model the accident and the subsequent explosion, a process expected to take several weeks.

In the interim, the company has taken measures to reinforce safety at the refinery. BP said it has completed a comprehensive review of every process unit's safety protection system and has immediately addressed any issues it identified or has shut down work until those issues can be resolved.

By Apr. 8, BP had moved all personnel to locations more than 500 ft from any blowdown stack or flare. It also is in the process of removing any temporary trailers that may be within these areas.

BP said it "also is beginning a review of all safety emergency systems, including blowdown drums and flares."

Refiners Face Major Challenges, EIA Conference Told

US refiners will need to supply motorists with increasingly clean fuels produced from increasingly sour crude oil, and it won't be easy, experts warned during an US Energy Information Administration conference Apr. 12 in Washington, DC.

"There are alternatives. Unfortunately, all require substantial capital," said William Brown, an operations research analyst in EIA's integrated analysis and forecasting office. Brown spoke during a session on adapting US refineries to meet marketing challenges at EIA's 2005 Midterm Energy Outlook and Modeling conference.

The problem is not so much a shortage of crude oil as an increasingly sour slate, suggested Jay Saunders, vice-president of oil and gas equity research at Deutsche Bank Securities Inc. in Baltimore. "We have plenty of crude around, but more of it is heavy than before," he said.

"The real problem is not the gravity, but the sulfur content. There's been more investment to improve the quality of each barrel of product than to increase capacity," Saunders noted.

Saunders said that he forecast a $14 spread between West Texas Intermediate and Maya crude oil prices for the first quarter. It actually was closer to $17.

"With underinvested US refining needing sweeter crudes, an increasingly sour slate widens the differentials further," Saunders said, noting that European light product demand during 2005's first 3 months reduced US distillate availability because there were fewer imports possible.

"Increasingly, we have to look at what's going on in the United States in the world's context," he said. "During the first quarter, we got a little over 300,000 b/d of distillate imports. In even mild weather, we need around 500,000 b/d."

Michael Leister, fuels technology manager at Marathon Ashland Petroleum LLC, predicted that imports would be the primary alternative in meeting growing US oil product demand. "They're very flexible. They can be easily diverted in response to economics," he observed.

US product distribution is so sophisticated that shortages in the US Midwest can be met with increased imports on the East and Gulf coasts, he continued. "Product can move east, west, north, or south across most of the country," Leister said.

Long-term import availability offers a more economic alternative to constructing new refineries or expanding existing plants, he added. "Caribbean and European refineries have made investments to produce Tier II gasoline," he said. "Whether that will happen with ultralow-sulfur diesel fuel is less certain. Overseas refiners could wait for a shortage to appear before moving ahead."

Saunders said that refiners apparently have started to increase their stocks. "My sense is that they're backing away from just-in-time inventories that were popular a few years ago and are building stocks as insurance against price spikes," he said.

But he also said it will take time for US refiners to increase capacity if it's needed. "It takes at least 2 years and roughly $10 million/1,000 bbl to add coking capacity," Saunders said. Such refining investments have slowed down because of onerous near-term clean fuel requirements, he added.

One positive development, said Leister, is that refining continues to grow more efficient. "There certainly has been a trend for US refining to be shut down, yet capacity has grown," he said. "That means that other refineries have grown more economic. Further expansion would make more sense than restarting a closed, less-efficient refinery. Constructing a grassroots refinery is 3-4 times more expensive than expanding an existing plant."

Brown concluded, "Refiners are faced with major challenges. Fortunately, there are solutions. Unfortunately, all of them will be costly."

N.J. Refinery Fined $793,000 for Air Violations

Valero Refining Co. will pay $793,000 in fines and install $3.5 million in emission controls to settle alleged clean air violations at its Paulsboro, N.J., refinery.

The New Jersey Department of Environmental Protection alleged that the company violated permit limits for emissions between 2001 and 2004. The pollution controls will reduce emissions of volatile organic compounds, nitrogen oxides and sulfur dioxide.

The $3.5 million pollution control system at the refinery´s wastewater treatment plant will reduce VOC emissions, which included benzene, by 95 percent.

BP to Invest $130 Million on Clean Fuels Production

BP on April 19 announced plans to invest more than $130 million on new clean diesel facilities at its Whiting, Indiana refinery.

With the addition of a new Distillate Hydrotreater (DHT), the refinery will produce additional supplies of ultra low sulfur diesel fuel that meets or exceeds all on-road diesel regulations. The new unit will have the capacity to produce approximately 36,000 barrels per day of the ultra low sulfur diesel product.

"BP remains committed to leading the industry in the production of cleaner fuels and remaining the leader in making our products safer for the environment," said Dan Sajkowski, BP Whiting Refinery Business Unit Leader. "We are pleased to be able to make this investment, which will increase the quantity of cleaner diesel product available in the Midwest."

"BP's low sulfur fuels are cleaner burning fuels," said Brad Johnson, BP clean fuels project manager based at the Whiting refinery. "The lower sulfur enables new diesel engine technology to reduce fine particulate emissions along with sulfur emissions. These new diesel engines can only work with the ultra low sulfur diesel fuel. Ultra low sulfur diesel will also help existing engines reduce undesirable emissions,"

Locally, the project will employ approximately 400 skilled workers during the peak construction period. BP has already begun preliminary work on the project and expects to complete construction in mid-2006.

BP is the largest oil and gas producer and one of the largest gasoline retailers in the U.S. and has more than $40 billion in fixed assets with operations in almost every state and over 43,000 employees. In 2003, BP invested more than $7 billion in its U.S. businesses.

The BP Whiting refinery is the fourth largest refinery in the U.S. based upon refining capacity and the largest in the Midwest region. It is the only operating refinery in the State of Indiana

The U.S. EPA will require 15 ppm sulfur on-road diesel production beginning in June 2006 at which time 80% of the BP Whiting refinery's on-road diesel fuel must meet the new EPA specification

By January 2010 all on-road diesel must contain no more than 15 ppm sulfur. Off road diesel transitions to the 15 ppm specification in 2010, and locomotive and marine diesel follow in 2012

The Whiting refinery produces approximately 3.4 million gallons of diesel fuel per day

The refinery currently produces limited quantities of ultra low sulfur diesel fuel and supplies the fuel to the Chicago Transit Authority and a limited amount of other valued customers

The BP Whiting refinery produces approximately 16 million gallons of product daily. Half of it is gasoline. Other major products produced beside diesel fuel include, furnace oil, asphalt, propane, xylene and petroleum coke

Chalmette Refinery is Urged to add Air Monitor

With an Internet-accessible air monitoring system leased by two environmental groups going online April 21, St. Bernard Parish officials have encouraged Chalmette Refining LLC to buy similar $60,000 devices so the public can have more information about the air quality.

State Rep. Ken Odinet, D-Arabi, and Parish Council Chairman Joseph DiFatta also said they support asking the refinery to buy at least one of the air monitoring devices and make the information available to the public.

Odinet has filed a bill seeking to require companies found by a court to have violated the federal Clean Air Act in St. Bernard Parish to install four new air monitors. The bill would create the St. Bernard Air Advisory Committee, made up of state and local officials and residents, with the power to determine where the monitors would be placed and the type and amount of chemicals the machines would sample. "I'd like them (Chalmette Refining officials) to get on board" and support the bill, Odinet said.

However, Nora Scheller, spokeswoman for Chalmette Refining, said, "Right now we have no plans" to purchase a monitor to put information online.

CITGO Boosts Louisiana Refinery Capacity

Citgo Petroleum Corp., Houston, has completed a crude vacuum expansion project at its Lake Charles, La., refinery, increasing the facility's crude oil processing capacity to 425,000-440,000 b/d from 325,000 b/d. The additional capacity makes the complex the fourth largest refinery in the US, Citgo said.

The $293-million project involved installation of a crude vacuum distillation tower—the largest in the world set in one.

Valero Energy Corp.'s $6.9 Billion Purchase of Premcor Inc. Reflects Optimism

Valero Energy Corp.'s $6.9 billion purchase of Premcor Inc. comes as high prices drive up the industry's profit margins.

Analysts said Valero's move — which would create the largest oil refiner in North America — is unlikely to offer immediate help to motorists weary of paying more than $2 a gallon for gasoline.

But company officials pledged to improve efficiency and capacity at the four refineries it is buying, which could eventually ease pressure on prices.

Valero hopes to complete the cash-and-stock deal by Dec. 31, but it could face regulatory hurdles, because both companies operate large refineries in the Northeast.

Shares of Premcor jumped 18 percent, up $10.70 to $69.70, and Valero shares gained 83 cents to $75.87 on the New York Stock Exchange.

Valero Chairman and Chief Executive Officer William Greehey predicted that antitrust regulators will approve the acquisition because they let Sunoco Inc., the largest refiner in the region, buy a New Jersey refinery from El Paso Corp. last year.

If not, Valero could walk away from the deal, Greehey suggested.

San Antonio-based Valero said April 25 it would buy Premcor's four refineries in a move that will increase the capacity of its refinery network by nearly one-third.

The transaction would boost Valero's annual revenue to nearly $70 billion, enough to rank No. 15 on the Fortune 500 list of the nation's biggest companies.

Valero, whose first-quarter earnings more than doubled from a year earlier, said the deal would be good for itself and consumers, because the company would increase the capacity of the Premcor refineries.

However, Cal Hodge, an energy consultant in Houston who used to work at Valero, said the deal wouldn't make much difference to motorists for a long time.

Hodge and industry officials said supplies will remain tight until the easing of environmental regulations, which they blame for the lack of new refineries.

The Valero deal is the latest in a long run of mergers and takeovers in the industry and reflects growing optimism that refiners, once considered a low-profit business, will be helped for several years by strong energy demand.

“It's a terrific deal if refining margins don't collapse,” said Fadel Gheit, an analyst with Oppenheimer & Co. He said refiners' return on capital has risen from mid-single digits to above 15 percent with no signs of slowing.

The boards of directors of both companies unanimously approved the acquisition, which is subject to the approval of Premcor's shareholders and of regulators.

CITGO’s Lake Charles Refinery now 4th largest in the United States of America

With an additional 105,000 barrels per day (bpd) of crude processing capacity now on line, CITGO Petroleum Corporation's Lake Charles manufacturing complex is now the 4th largest refinery in the United States.

The company announced April 21that a US$293 million crude vacuum expansion (CVE) project increases the refinery's crude processing capacity from 325,000 bpd to 425,000-440,000 bpd.

Lake Charles manufacturing complex vice president Al Prebula says it is exciting news for CITGO and the economy of southwest Louisiana ... "Bringing this project on line is a major accomplishment for the Lake Charles complex," said CITGO president and CEO Felix Rodriguez ... The CVE project allows this facility to operate more efficiently and that will have a positive impact on production and on our bottom line."

The project features a crude vacuum distillation tower ... the largest vacuum tower in the world set in one piece ... where feedstock is recovered from the crude and residuum, which is further processed in existing downstream units. Additional gasoline and diesel fuel are then produced from the incremental feedstock.

Approximately 43 contractor companies are employed on the project as well as 1,000 peak construction jobs and 16 permanent jobs ... the work was completed in 4.25 million hours with only one OSHA recordable injury.

CANADA

Suncor Completes Planned Maintenance Activities

On, April 14 Suncor Energy Products Inc. announced that the planned maintenance work at its Sarnia Refinery has been completed. Those portions of the refinery that were shut down during these maintenance activities were returned to service over several days.

During the start up phase of this work, increased flaring is possible. Plans and procedures in place have continued to minimize the environmental, health and safety impacts to the surrounding community.

Bush to Propose Using Old Bases for Refinery Sites

President George W. Bush, whose energy plan has been stalled in Congress for four years, will propose using closed military bases as sites for oil refineries as one of five initiatives to expand U.S. energy production.

Bush also wants Congress and the Department of Energy to streamline the process for licensing new nuclear power plants and to give federal regulators full authority over selecting sites for liquefied natural gas terminals, three administration officials told reporters in a telephone briefing. Bush discussed the plan in a Washington speech April 27.

Rising fuel costs have discouraged U.S. consumer spending. Bush's plan is a positive step, said Michael Fitzpatrick, vice president of energy risk management at Fimat Futures in New York. Oil companies aren't keen to construct new refineries ``because of the regulatory hassles,'' he said. Still, Bush's plan wouldn't help increase supplies this summer, Fitzpatrick said. ``Even if it comes to fruition, you're talking about years,'' before there's any price impact.

The American Petroleum Institute had no immediate comment, spokesman Michael Shanahan said.

Bush offered an energy policy and legislative recommendations in May 2001. His proposals have been stalled in the Senate by Democrats who objected to a measure allowing drilling in Alaska's Arctic National Wildlife Refuge and to some of the tax incentives for producers added by congressional Republicans.

Senate Energy Committee Chairman Pete Domenici, a New Mexico Republican, said in a statement April 26 that he will include some of Bush's suggestions into legislation he's crafting next month. ``The president has called for Congress to deliver an energy bill to him by Aug. 1,'' Domenici said. ``I am working toward that deadline.''

The administration aides, speaking on condition of anonymity, gave no estimate for what Bush's proposals would cost or how long they would take to put in place. Bush also will propose extending an existing tax credit for hybrid and fuel cell vehicles to so-called clean diesel vehicles because they are fuel- efficient. He also will call for more international cooperation on developing energy technologies, they said.

Following a meeting between Bush and Saudi Crown Prince Abdullah on April 25 at the president's ranch in Crawford, Texas, Saudi foreign policy adviser Adel al-Jubeir said high gas prices were partly the result of a lack of refining capacity in oil- importing nations rather than a shortage of supply.

``We believe that supplies, as we speak, are adequate,'' al- Jubeir said. Saudi Arabia offered the U.S. no immediate steps to relieve high gasoline prices, pitching instead a months-old plan to boost oil production capacity by 1.5 million barrels a day by the end of the decade.

Daily production by the Organization of Petroleum Exporting Countries rose 700,000 barrels to 30.4 million this month, most coming from Saudi Arabia, according to estimates by PetroLogistics Ltd. A U.S. government report is expected to show the country's crude-oil inventories rose for the 10th time in 11 weeks.

The last refinery built in the U.S. was completed in 1976. The cost of construction for a new 150,000 barrel-a-day U.S. refinery to process heavy crude is about $2.4 billion, according to an analysis by Turner Mason & Co.

An administration official who briefed reporters said the government has no plan to offer oil companies any kind of tax incentive to build refineries on closed military bases.

BRAZIL

EIB Supports Upgrading Refinery in Brazil

The European Investment Bank is providing EUR 54 million (USD 70 million) for the upgrading of an oil refinery in Southern Brazil is for Repsol YPF Brasil S.A.. The loan will support the technical and environmental upgrading of the Alberto Pasqualini refinery in the State of Rio Grande do Sul, next to Porto Alegre.

The Bank’s finance is earmarked for the civil works and mechanical erection contracts related to the construction of the hydrotreater, the sulfur recovery installations and the required off-site installations. All units are expected to become operational during 2005.

The project will raise the refinery’s capacity by some 40 %. It will help to meet growing domestic demand for oil products. Particularly, it will enhance the higher quality fuels to satisfy the new trends in market demand. The investment aims as well at reducing the specific emissions from the refinery to alleviate local air quality problems. The refinery represents some 8% of the total refinery capacity in Brazil, which is currently made up of 13 refineries.

VENEZUELA

Output at Amuay Oil Refinery Reaches 200K

Venezuela's giant Amuay oil refinery is currently processing 200,000 barrels of crude per day as it recovers from a power blackout March 31, an official from the state-run oil company said.

Alejandro Granado, the director of refining at Petroleos de Venezuela S.A., or PDVSA, said output at Amuay would reach 360,000 barrels a day by April 7.

Amuay was shut down due to the power failure.

Granado said the refinery should be producing 400,000 to 450,000 barrels of day by April 8.

Amuay is part of the giant Paraguana complex and has a capacity of refining 635,000 barrels of heavy crude into light, sweet synthetic oil a day, but normally the refinery runs at about 450,000 barrels a day.

Venezuela is the world's No. 5 oil exporter and produces about 3 million barrels of oil a day, according to government statistics.

PDVSA, Cadafe to Build 300 MW Plant in Venezuela

Venezuela’s state oil firm PDVSA and state-owned transmission and distribution firm Cadafe will jointly build a new 300 MW thermoelectric plant to supply PDVSA’s refining facilities in the western state of Falcon, according to a report from Business News Americas. Oil minister Rafael Ramirez blamed unreliable electricity supply for the recent troubles at PDVSA's CRP refinery complex, which was completely shut down last week due to a power failure and is slowly coming back on line this week. "Obsolete, very old machines were servicing Amuay (one of the three refineries that make up CRP)," Ramirez said. As Ramirez was explaining CRP's electricity woes at a meeting in Falcon state, the lights went out in the room and the minister, Falcon governor Jesus Montilla and hydrocarbons vice minister Bernard Mommer sat in the dark for several minutes, before the emergency generator kicked in. After power was restored, Ramirez said it is clear that a new generator is needed "to supply the electric requirements of the refinery and the region."

2. ASIA

AUSTRALIA

Refinery Workers Back on the Job at Caltex Refinery

Contract maintenance workers at a Brisbane refinery have returned to their jobs after concerns about safety issues were met.

The workers, employed by Transfield Services which does maintenance under contract at the Caltex oil refinery at suburban Lytton, presented the company with a list of safety concerns after a toxic chemical spill at the refinery during the first week of April.

More than 40 people were affected and 24 taken to hospital after hydrogen fluoride gas was released when a pipe ruptured.

Talks on April 13 between unions and management stalled until an industrial relations commissioner intervened, leading to agreement from management to fix the safety concerns. Production at the refinery was not affected.

CHINA

Chinese Petroleum Corp. Plans to Relocate Main Refinery by 2015

Acting Kaohsiung Mayor Chen Chi-mai said April 15 that he hopes the state-owned Chinese Petroleum Corp. (CPC) will deliver on its promise to relocate its main refinery by 2015.

Chen made the remarks in front of the Kaohsiung City Council after reviewing the soil and underground water samples collected from near the CPC's main refinery in Nantze district, Kaohsiung City.

Bureau of Environmental Protection Director Chang Feng-teng said that the bureau reported five polluted sites near the CPC's Kaohsiung Refinery last month and that the bureau has begun comprehensive sample collection and monitoring work at the sites. Chen promised that the city government will continue the collection and monitoring work and keep the public informed of developments and improvements in the situation. He added that in the longer term, he hopes the CPC will deliver on its promise to relocate the refinery.

INDIA

Aramco to Acquire Stake in HPCL's Vizag Refinery

More than 30 years after foreign oil companies exited India’s refinery industry, leading Saudi oil companies are now gearing up to pick up stake in HPCL’s Vizag and IOC’s Paradip refineries.

Leading the race is Saudi Aramco, the world’s largest oil company, which may soon be the new stake holder in HPCL’s Vizag refinery. The government has offered a stake in HPCL’s Vizag refinery in Andhra Pradesh and IOC’s Paradip refinery in Orissa to Saudi oil companies.

Speaking to newspersons from Riyadh, petroleum minister Mani Shankar Aiyar said Saudi oil companies will soon make a decision on the commercial aspects of the deal.

“We have offered stakes in Vizag and Paradip for exports to Eastern markets,” Mr Aiyar said. Saudi Aramco has been a key contender for picking up stake in Indian refineries to establish its presence in the downstream sector. The company had earlier evinced interest in coming as a strategic partner for HPCL when the government was planning to privatize the company.

Abdallah S Jum’ah, president and CEO of Saudi Aramco, had earlier said that his company was keen on picking up a stake in an existing refinery and then partnering the Indian company in other downstream ventures. In what could be a barter deal, HPCL has been invited by Saudi Aramco to pick up stake in the upcoming Yanbu export-oriented refinery in the Red Sea.

“We have reached an in-principle agreement for HPCL taking stake in the (20mt) Yanbu refinery that is planned for export of petroleum products to the West and Saudi Arabia’s investment in the Visakhapatnam refinery that will be oriented for export to the East,” Mr Aiyar said.

Saudi Arabia will supply crude oil to the Vizag refinery and possibly also to Paradip, which will export refined petroleum products to markets in the East. The details of the deal — the percentage of stake to be picked up and the value — would be sorted out in soon.

Saudi Arabia, which is the single largest oil exporter to India, accounting for 24mt of crude oil exports, has also invited GAIL and ONGC Videsh to bid for gas blocks, which will be up for bidding by the year-end. Saudi Arabia has been looking for exploration partners to develop some gas fields.

On the possibility of increased imports of crude oil from Saudi, Mr Aiyar said India will increasingly import more crude oil from the kingdom. Although the two countries will continue with their “evergreen”, automatically renewed, annual contracts, Saudi Arabia has assured India of coming in with extra supplies if there is a need.

It is estimated that oil imports from Saudi Arabia will increase to almost 50mt in another 20 years.

MRPL Shuts Down Crude Unit Due to Water Shortage

Mangalore Refinery & Petrochemicals Ltd. (MRPL) has shut down a 74,000 barrel-per-day (bpd) crude distillation unit (CDU) since April 14 due to water shortage, a company official said.

Industry sources said the No. 1 CDU might resume operations within a week, while the 120,000-bpd crude unit No. 2 continued to run at full tilt.

MRPL might also shut one of two 24,000-bpd hydrotreating units, which produces lighter products such as kerosene, liquefied petroleum gas (LPG) and diesel, if the situation worsened, one source said. The shutdown may last for 15 days," said the source.

The operations of MRPL, a subsidiary of Oil and Natural Gas Corp., has been affected because the water level in the local Netravati river has fallen significantly.

The district authorities had diverted MRPL's share of water to Mangalore to avoid a shortage of drinking water, the MRPL official said.

"Water is critical for our operation. Steam is used in almost every stage of the refining process.” The CDU was shut down said the official.

The No.1 CDU was also operating at maximum capacity before the shutdown, sources said.

The official said the second CDU would also be "severely affected" if the shortage persisted.

MPRL has cancelled a tender to export 50,000 tonnes of gas oil for prompt loading because the refiner diverted supplies to the domestic market, traders said.

HPCL to Upgrade Vizag Refinery if Aramco Invests

Hindustan Petroleum Corporation Ltd (HPCL) has drawn up plans to double the capacity of its Vizag refinery from 7.5 million tonnes to 15 million tonnes if Saudi Aramco picks up a stake in the venture.

HPCL chairman M. B. Lal said the proposal was presented to Saudi Aramco during petroleum minister Mani Shankar Aiyar’s recent visit to Riyadh.

However, Saudi Aramco is also weighing the option of investing in IOC’s 12-million-tonne grassroots refinery that is coming up at Paradip.

A senior petroleum ministry official said, Saudi Aramco could invest in either or both the projects. Detailed proposals for both the projects have been presented to Saudi Aramco and the talks will resume in Dubai on April 7.

Both refineries are on the east coast and will open up markets in the eastern and far eastern countries for selling value-added petroleum products.

HPCL has offered to make reciprocal investment in the Yanbu refinery on the Red Sea coast in Saudi Arabia. A senior official said HPCL could pick up anywhere between 26 per cent and 50 per cent stake in the refinery depending on the way the negotiations work out.

Such a stake will enable HPCL to have a say in the management of the company. A smaller stake will reduce the Indian company into making a mere portfolio investment in the overseas refinery. Since Indian companies have sufficient management experience in the downstream refining and marketing business, they are in a position to make a useful contribution to the refinery.

Besides, highly skilled and relatively cheap workforce could also be sourced from the Indian hydrocarbon sector to run the refinery.

The refinery is envisaged to become a major exporter to the western markets. It will also enable Saudi Arabia to move up the hydrocarbon value chain and raise the share of petroleum products in its export basket vis-à-vis crude oil.

According to Aiyar’s vision plan, these reciprocal investments between the Saudi Arabian and Indian companies would lead to assured supplies of crude from Saudi Arabia. The Gulf kingdom is India’s largest supplier of crude, accounting for as much as 26 per cent of total imports. While around 25 million tonnes of crude was being imported from Saudi Arabia at present, Aiyar has obtained an assurance that this could be increased to 50 million tonnes in the next 10 years if the need arises.

Indian Oil will also hold talks with Saudi Aramco to explore the possibility of setting up commercial storage facilities on a joint venture basis in India. The proposal was mooted earlier but Saudi Arabia did not evince sufficient interest at the time.

Saudis Plan Indian Refineries as U.S. Effort Fails

Saudi Arabia plans to invest in oil refineries in India as part of its push to expand capacity in Asia, home to the world's fastest growing energy markets, after failing to secure licenses to build new refineries in the U.S.

``We can invest in many of the far eastern countries in refining and marketing, but it is not easy to build grass-root refineries in the U.S. and most of the industrialized countries,'' Ali al-Naimi, 69, told reporters on April 22 in Paris. Al-Naimi said he had ``no pickup'' on his U.S. offer. ``Why? Nobody wants a refinery in his backyard: Nimby.''

Lack of refining capacity in the U.S. helped propel oil prices to a record $58.28 on April 4, the highest since the contract began trading in 1983. Higher fuel prices pushed the global airline industry to a combined loss of $4.8 billion in 2004, the International Air Transport Association has said.

Saudi Arabia's leader, Crown Prince Abdullah, met April 25 with George W. Bush at his ranch in Crawford, Texas. ``The price of crude oil is driving the price of gasoline,'' Bush said before the meeting. Adel al-Jubeir, Abdullah's foreign policy adviser, said global oil supplies are adequate right now.

On a Texas trip a year ago, al-Naimi offered to build two 200,000-barrel-per-day refineries in the U.S. if a state would grant a permit. The state-owned Saudi Aramco has forecast that there will be a global shortfall in refining capacity of 1 million barrels a day by 2015.

Saudi Arabia, the world's biggest oil exporter, is boosting investments in Asian refineries to increase sales in countries such as China, where oil use has more than doubled during the past decade. Last year, China imported 35 percent more oil to meet needs of an economy that expanded 9.5 percent, the fastest pace in eight years.

China Petroleum & Chemical Corp., Asia's biggest oil refiner, said last month it may complete talks with Saudi Aramco by the end of the year on plans to set up a $1.17 billion refinery in China's eastern province of Shandong.

A new refinery hasn't been built in the U.S. in about 30 years because of the difficulty of getting environmental approvals. Arizona regulators on April 14 approved an air pollution permit for a $2.5 billion refinery planned by a group of investors, Arizona Clean Fuels Yuma, getting the project past its biggest permitting hurdle.

The U.S. unit of Saudi Aramco discussed the possibility of investing in the Arizona refinery and other U.S. projects, Mike Erspamer, who handles refinery joint ventures for the Houston- based unit, said in an interview in August 2004.

``It's probably going to take them another five years to get all the permits,'' al-Naimi said in Paris last week. ``The environmental agencies, state agencies, municipal agencies, it goes down to the smallest size.''

The oil minister of India, Asia's third-largest oil consumer, said last month that he had offered stakes in two refineries run by state-run companies to Saudi Arabia. The refineries located in Visakhapatnam in south India and Paradip on the country's east coast.

``They seem to be more than willing,'' said al-Naimi, who acknowledged he had met with India's oil minister.

Refiners in the U.S. and China lack capacity to process low- quality oil that the Organization of Petroleum Export Countries is expected to add to the market in coming months and years to meet soaring global demand, especially in Asia.

Global oil infrastructure is beginning to ``max out,'' Saudi Arabia's al-Jubeir said in Crawford.

OPEC's future additional capacity will come mainly from heavy, high sulfur ``sour'' crude, which is more difficult to refine into fuels than low-sulfur, ``sweet'' crude. Of the 9.5 million barrels of oil a day that Saudi Arabia now produces, al- Naimi estimated that about one quarter of those barrels would be so-called sour crudes.

``Consuming countries need to respond to the availability of sour crude,'' al-Naimi said. ``Having seen slow movement from consuming countries, we decided to go ahead and consider building refineries, conversion refineries to be able to process these sour heavy crudes and move product.''

Saudi Arabia plans to spend about $50 billion in the next five years on new projects to expand oil production and refining capacity, along with other energy related projects, almost double spending in the previous five years, al-Naimi said.

Aramco last year formed a joint venture with Japan's Sumitomo Chemical Co. to upgrade a 400,000-barrel-day Rabigh refinery for the dual purpose of producing oil products and petrochemicals. The company also plans to upgrade the 525,000- barrel-a-day Ras Tanura refinery on the Persian Gulf, and an existing 235,000-barrel-a-day Yanbu refinery to produce high- value products and petrochemicals.

With five wholly owned domestic refineries and two joint ventures with Shell and Exxon Mobil Corp., the kingdom processes almost 2.5 million barrels of oil a day into fuels such as Diesel.

Europe's production of light crude from reservoirs like the North Sea is expected to fall by 2020 to a third of its current levels while Russian crude, which is higher in sulfur, will rise by 40 percent, the International Energy Agency in Paris estimates.

BPCL Starts Work on Bina Refinery

After a lapse of 10 years, Bharat Petroleum Corporation Ltd (BPCL) has begun the groundwork for the six-million-tonne Bina Refinery once again. The company has appointed Engineers India Ltd (EIL) for a cost estimate and a detailed process configuration study.

The reports are expected by next month-end. The proposed refinery project originally promoted through Bharat Oman Refineries Ltd has undergone a cost escalation from Rs 5,277 crore (in 1995) to Rs 6,354 crore (2001).

Conceived in 1995, the project is now scheduled to be commissioned by April 2009.

Sources said that the project would now undergo some changes in the process configuration as BPCL has invested in a lubricants base oil-manufacturing unit at Mumbai. The unit was originally designed to be a part of Bina.

Expecting finalization of the project later this year, the BPCL sources said despite the delay the project cost might not undergo much of an increase as some components (like base oil production) have been dropped.

Having begun work on the tendering process, the company is considering breaking up the project into components instead of opting for the single turnkey contract route.

Meanwhile, the much-awaited agreement with the Madhya Pradesh Government on fiscal benefits granted to the project, is expected to be signed next month. The Government has cleared the roadblocks for the project by announcing deferment of commercial tax of Rs 250 crore per year.

The concession will be available for a period of 15 years from the year of commercial production. It has also expressed an interest in picking up a stake in the project to the extent of the market value of land given at a concessional rate to the refinery.

MALAYSIA

High-value Oil Affects Proposal for Malaysia Refinery

The high-value crude oil found off Sabah could likely be a dampening factor on the state’s hopes of seeing the setting up of a refinery or petrochemical complex here.

Petroliam Nasional Bhd (Petronas) vice-president for corporate planning and development Nasarudin Md Idris said the national oil company would have to decide whether it was more viable to sell its high-value crude or to refine the crude in the state.

He said Petronas would also have to consider the economies of scale and the domestic demand for oil and gas products as well as the cost of land and support services before deciding on whether it should set up a refinery or petrochemical plant in Sabah.

“But we also recognize that there is a worldwide shortage of refinery facilities,” he said, when asked whether it would be viable for Petronas to set up a refinery in Sabah following the discovery of new oil and gas fields off the state.

Nasarudin was replying to a question after presenting a paper on the oil and gas industry at the investment seminar.

He said some of the new oil fields off Sabah are Sumandak with reserves of 75 million barrels that would begin production next year, Kikeh with 200 million barrels that would begin production in 2007, Gumusut with 250 million barrels with production scheduled for 2010 and Malikai with 100 million barrels with production expected by 2011.

He said Petronas had invested in a refinery and petrochemical complex at Kertih, Terengganu, as there was an annual demand for about 2 billion standard cubic feet of gas from the industries there.

State Economic Planning Unit director Datuk Mohd Noor Mokhtar said the Sabah Government had approached Petronas last year for the national oil company to set up refinery or petrochemical complex in the state.

“We are asking them to set up a refinery or a petrochemical complex and we hope they will be sympathetic and invest here.

“They have not come back to us yet and I think they are looking at it.''

3. EUROPE / AFRICA / MIDDLE EAST

FINLAND

Refinery Upgrade Uses Rotork as ‘One-Stop’ Valve Actuation Source

Rotork is the single source of supply for pneumatic actuators, electric actuators and gearbox operators, with a combined value in excess of US$ 2 million, for new valves on “Project Diesel” at the Fortum Porvoo Refinery in Finland. The valves will be an integral part of enhancements to the refinery’s residue hydrocracking unit, consisting of an integrated LC-finer and mild hydrocracker. The main objective of “Project Diesel” is to guarantee the delivery of sulfur-free (<10ppm) diesel fuel and intermediate feeds to other refinery units.

Rotork’s contract has been awarded by Mogas Industries, the leading severe service metal seated ball valve manufacturer, based in Houston, Texas. Mogas Industries has won orders for over 700 high and low pressure ball valves in sizes up to 16” for “Project Diesel”. Rotork is supplying a total of 311 automated packages, comprising 190 Alecto and Exeeco gearboxes, 52 intelligent IQ electric actuators and 69 spring-return and double-acting CP and GP range pneumatic actuators.

Fortum Porvoo Refinery is one of Europe’s most modern refineries, with nearly 40 different process units. The refinery produces light and heavy fuel oil, base oils for lubrication, diesel oils, aviation fuels, motor fuels and liquefied petroleum gas (LPG). These products are used in Scandinavia, parts of Europe and the USA.

The contract for actuators and gearboxes was co-ordinated and won by Rotork Fluid System’s Houston factory store. Keith Phillips, Rotork project leader, attributes the success of the project to the Rotork international sales team’s ability to support the efforts of Mogas.

The Porvoo Refinery project is being engineered and constructed by Chevron Lummus Global and Neste Jacobs OY, with the startup planned for the end of 2006.

LITHUANIA

Yukos Ready to Sell Lithuanian Refinery for $800M

The embattled Yukos Oil Company is ready to sell its controlling stake in Lithuanian oil refinery Mazeikiu Nafta, Russia’s business daily Vedomosti reported on Tuesday, April 26. However, the price that has been announced by Yukos greatly exceeds all expectations.

The Russian oil company bought the stake for $160 million, but now it values this asset at no less than $800 million. The price tag that was put on the Mazeikiu Nafta stake by market experts amounted to $500 million.

The Mazeikiu Nafta concern is made up of the oil refinery, the Butinge sea terminal and the Birzai oil pipeline. The Russian tax authorities did not place the refinery under arrest because the owner of the controlling stake in the Lithuanian company is Yukos Finance, a Yukos subsidiary registered in the Netherlands.

Vedomosti reported that on April 25 Yukos announced that it was ready to sell the controlling stake in Mazeikiu Nafta for $800-900 million. Yukos representatives noted that the market capitalization of the Lithuanian refinery amounts to $2 billion, which means that in reality the controlling stake costs about $1 billion. Due to the complex situation surrounding the company Yukos is ready to somewhat lower its claim, but considers the price of $800-900 million a fair one.

As MosNews reported earlier, possible contenders for Yukos’ Lithuanian asset are oil majors Lukoil and TNK-BP. Recently Lukoil’s CEO Vagit Alekperov confirmed his company’s interest in Mazeikiu Nafta, while TNK-BP’s president Robert Dudley announced that his company had no interest in the asset at the present time.

Market experts say that the price announced by Yukos could be acceptable to both sides despite the fact that it is higher than expected. The deficit of oil processing capacities greatly exceeds their price and it is a well-known fact that Lukoil is looking for oil processing plants outside of Russia.

SERBIA

ABB to Begin Extended Automation Project for Refinery in Serbia

ABB has been awarded a project to provide the automation and instrumentation suite for RNS-NIS refinery in Novi Sad, Serbia. This will be the first automation system in Serbia to use Profibus and the first ABB industrial IT extended automation system 800xA implemented in the country.

RNS-NIS Oil Refinery in Novi Sad was heavily damaged during the war there in the late 1990s. As part of the on going revamp works at the refinery in Novi Sad, ABB will deliver the automation and instrumentation system to control the secondary units and the LPG plant in the refinery.

ABB's composite solution for the refinery includes System 800xA extended automation with AC 800M controllers; Profibus for process control communication and HART for other control and I/O communications; as well as field instrumentation including pressure and temperature transmitters, mass flow meters, level transmitters, control valves and process analyzers. ABB will also provide detailed engineering, installation works, training and commissioning services.

"We are very proud and excited to be the first ABB company to supply System 800xA extended automation for a true refinery application in Serbia," said Malek Chebaro, Export Department Manager of ABB Automation GmbH.

SUDAN

OVL Likely to Commence Sudan Refinery Project in Aug

Petroleum Minister Mani Shankar Aiyar is expected to visit Sudan towards August end to inaugurate a 714-km petroleum product pipeline and possibly lay the foundation stone of a new refinery project offered to ONGC Videsh Ltd (OVL).

The project has been given to OVL, the overseas arm of exploration major Oil and Natural Gas Corporation, in view of the satisfactory performance of the company in Sudan's Greater Nile Oil Project and blocks 5A and 5B in which India holds participating interests.

"In view of the excellent relationship between the two countries, the Sudan government offered the Khartoum Port Sudan Pipeline Project and Port Sudan Refinery Project to ONGC/OVL in October 2003," petroleum ministry sources said.

Last year in June, OVL had signed the agreement with the Sudan Ministry of Energy and Mining to implement a 714-km petroleum products pipeline project, which is fast nearing completion.

ONGC is targeting completion of the pipeline project by Aug 14, coinciding with its founders' day, sources said.

"Aiyar is likely to visit Sudan towards Aug end or early Sept for the inauguration and commissioning of the petroleum product pipeline," official sources told IANS.

Work on the new refinery, proposed to be set up Port Sudan at an estimated to cost around $1.2 billion, is expected to start during Aiyar's visit.

It will have a refining capacity of 100,000 barrels per day for coker and cracker fluidised catalytic (FCC) configuration for conversion of heavier crude to lighter products.

"The plans and costing of the refinery is still being worked out. ONGC is expected to provide the funding for the project just as in the case of the product pipeline it has borne 90 percent of the project cost of $111 million, while Oil India Ltd (OIL) has provided 10 percent funding," sources said.

As ONGC is not a refining company, the petroleum ministry has directed it to undertake the project in technical support with Engineers India Ltd and ONGC's refining subsidiary Mangalore Refinery Petrochemicals Ltd.

MRPL is processing part of over three million tonnes of crude accruing to OVL annually for its equity stake in Greater Nile Oil Project.

UKRAINE

Ukraine Will Build Oil Refinery on Border

Ukraine will build a major oil refinery on its western border and connect it to a pipeline bringing Caspian Sea oil to Europe, a project that should increase revenues for the cash-strapped ex-Soviet republic, the country's prime minister said April 27.

Yulia Tymoshenko gave no details about the cost, capacity or timeframe for the refinery at Brody, telling a Cabinet session only that President Viktor Yushchenko had approved the plans. Refined petroleum products will then be sold to European markets, giving Ukraine the potential for higher revenues than if it was transporting only raw oil and gas.

"The construction of an oil refinery in Brody is a priority for the government," Tymoshenko said.

Ukraine built the 667-kilometer (413-mile) pipeline linking the Black Sea port of Odessa with Brody in 2001 but it has remained largely idle amid bickering over whether to accept oil from Russia or from other Caspian Sea countries.

Ukraine is a major transit point for oil flowing into Europe, but most of its business comes from Russia, which also supplies the majority of Ukraine's own energy resources.

Tymoshenko's government this year invited Kazakhstan and Azerbaijan to ship their oil westward to Europe, instead of pumping Russian crude in the opposite direction. The Odessa-Brody pipeline will eventually be extended through Poland.

During the meeting, Yushchenko said he wants to show in the next three years that "Ukrainian authorities have the levers and tools to make it possible to create and control energy supplies."

IRAN

Abadan Refinery Output Capacity to Increase to 180,000 bpd

Following implementation of the renovation operations in Abadan Oil Refinery, its output capacity would increase from the current 130,000 barrels per day (bpd) to 180,000 bpd as of June, noted project contractor Mohammad Reza Musavi.

He also referred to the two new units in the refinery that are planned to come on stream soon and said that the first unit was the vacuum distillation and the second one is viscosity reduction unit whose capacities would be 70,000 bpd and 25,000 bpd respectively.

He also explained that the products of the first unit would be used as the feedstock for viscosity reduction machineries and lubricant producing factories whereas, the second unit’s products would be used for reducing viscosity of the fuel oil, Iranian Students News Agency (ISNA) reported.

Elsewhere in his comments he referred to the 100-year history of Abadan Refinery and its endurance against the Iran-Iraq war (1980-88) and called for the renovation and optimization of the systems and equipments of the refinery.

Shell Advises Iran on Refineries

Shell is advising Iran on a $150m modernization of its oil refineries to raise output by 8m liters a day, reported Bloomberg. Shell is comparing productivity of Iran's ageing refineries to other plants worldwide as part of the study.

ISRAEL

Delek Completes Acquisition of US refinery, Oil pipeline for $78m

Delek Group (TASE: DLEKG), controlled by Yitzhak Tshuva, is continuing to develop its business in the US. Delek has announced that that it has completed the acquisition of a US oil refinery and crude oil pipeline for $78 million.

The deal was first reported in March 2005. Delek US Holdings, Inc., a wholly owned sub-subsidiary of Delek will carry out the deal. With this deal, Delek will become the second Israeli company operating a US refinery and oil pipeline. The other company is Alon Dor Group, controlled by David Weissman, Adv. Shraga Biran, and Africa-Israel Investments (TASE: AFIL).

Delek US will acquire La Gloria Refinery, based in Tyler, Texas. The refinery has an approximate throughput capacity of 54,000 barrels per day. For the sake of comparison, this amounts to 2.5 million barrel a year, a fifth of Israel's refining capacity.

Delek US is also acquiring the 104-kilometer McMurrey crude oil pipeline. Delek previously said that it intended to operate the refinery and pipeline in accordance with their original purpose.

Delek US is financing the acquisition through $35.5 million in shareholders' equity and $42.5 million in credit from foreign banks. Total bank financing, including credit for buying oil, is about $300 million. Delek added that it would provide Delek US with a $35 million loan and $55 million in collateral and loan guarantees for the deal.

Delek's announcement indicates that it will have to invest $70-90 million in the property over the next five years to improve its operations, including adapting the refinery and pipeline to US environmental standards.

KUWAIT

KNPC goes for Its Fourth Refinery for $4bn

Kuwait National Petroleum will open bids for its fourth oil refinery with a capacity of 600,000 bpd early next year, Chairman Sami Al-Rasheed told AFP. The new refinery will cost more than $4bn and boost refining capacity to about 1.5m bpd.

SAUDI ARABIA

Saudi Arabia to Build New Export Refinery

State-run Saudi Aramco, responsible for 95% of Saudi oil production, will build a new export -driven refinery on the Red Sea.

The refinery at Yanbu would produce 400,000 barrels per day, and will cost $4bn-$5bn.

Saudi Aramco vice president Khalid al-Buainai said the facility could supply high-quality gasoline to the U.S., low-sulfur diesel to Europe and naphtha to East Asia.

The company plans to find two international partners, who would possess a total 30% share in the new project.

"We are talking across the globe to all refiners," al-Buainai said, adding that the agreements should be finalized within the next 12 months.

Hindustan Petroleum of India held "preliminary talks" for a stake, HPCL Chairman MB Lal said.

Meanwhile, Oil Minister Ali al-Nuaimi said that Saudi Arabia is willing to add 200 billion barrels of crude reserves to its existing 261 billion barrels, which make up a quarter of the world's total production.

"There is a possibility that the kingdom will increase its reserves by around 200 billion barrels, either through new finds or by increasing what it produces from existing fields," Nuaimi said.

Saudi Aramco to Establish New Refinery in Yanbu

Saudi Aramco plans to build a multibillion dollar export-oriented refinery with a 400,000 barrel-per-day (bpd) capacity in the Red Sea city of Yanbu. Investment for the plant will run to $ 4 billion-$ 5 billion. This was disclosed by Khalid Al-Buainain, vice president of refining at Saudi Aramco.

Speaking to reporters on the sidelines of the recently held energy conference in Dubai, he unveiled Saudi Aramco's plan to form a joint venture with one or more international partners for the facility. "We are talking across the globe to all refiners," he said, adding that the deal should be finalized "within a year or so."

According to Al-Buainain, Yanbu is strategically located and the new refinery could supply the US East Coast with high-quality gasoline, low-sulfur diesel to Europe and naphtha to East Asia. The proposed refinery will run on a diet of heavier quality crude, he pointed out. "Saudi Aramco wants to grant 30% stake in the new refinery of Yanbu to international partners," he said.

Meanwhile, M.B. Lal, chairman of India's Hindustan Petroleum Corp. Ltd. (HPCL), said that his company has held preliminary talk for a stake in the new Yanbu refinery. "We offered Saudi Aramco a stake in HPCL's Vishakhapatnam refinery which will double capacity to 300,000 bpd in three years," he said. Lal visited Saudi Arabia with India's Oil Minister Mani Shankar Aiyar late last month.

Aramco has two joint-venture partners in the Kingdom's refining sector. It operates the 320,000-bpd Sasref refinery at Jubail with Royal Dutch Shell, and the 400,000-bpd Samref refining complex at Yanbu with ExxonMobil Corp.

The Kingdom is planning to invest billions of dollars in its refinery sector, which can process 2.1 million bpd of crude oil. "Saudi Arabia's existing refineries can handle 450,000 bpd of heavy crude, although the system is actually running less than 100,000 bpd of heavier grades," Al-Buainain pointed out. Total capital expenditure for expanding and upgrading existing plants over the next five years is around $ 1.5 billion-$ 2.0 billion. Aramco was also considering revamping its Ras Tanura refinery at a cost of around $ 4 billion-$ 5 billion and adding a petrochemical complex, he said.

Aramco and Japan's Sumitomo Chemical Co. Ltd. are investing $ 6 billion-$ 7 billion to upgrade the Rabigh refinery and also build a petrochemical plant by 2008. The increase in the cost of upgrading the Rabigh refinery attributed to the rise in the prices of building materials.

Saudi Aramco also wants to expand its activities to other countries. Indian Oil Ministry officials say Aramco is in talks with state-run Indian Oil Corporation for a stake in IOC's 180,000-bpd Paradip refinery, which is likely to be built by 2010. "They are very keen to involve Indian firms in the new refinery and we want to invest in Saudi Arabia to strengthen our relationship. We depend heavily on Saudi crude oil," an official added.

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