feb 05 update

Weighing 1.3 million pounds and taking more than two months to be delivered, a new catalytic feed hydrotreater reactor recently arrived at Valero's refinery located in Ardmore.

The reactor, which is nearly 15 feet wide and 93 feet tall, will allow the refinery to process more sour crude oil and increase its production of low-sulfur fuels.

"We're proud of our reputation as a leader in producing clean-burning fuels," said Gary Simmons, vice president and general manager of the Ardmore refinery. "The addition of this reactor further demonstrates our commitment to environmental excellence."

Manufactured in Kobe, Japan, the reactor was shipped from Higashi, Japan, last November to the Port of New Orleans. Arriving nearly a month later, the vessel was then loaded on to a barge and transported from the Port of New Orleans to the Tulsa Port of Catoosa in northeast Oklahoma.

Montana Refining Co. Banking on $2 Million Tank Project

To people at the Montana Refining Co., a $2 million tank project could mean higher profits and a stable future for the smallest full-line oil refinery in North America.

It's also good news for the roughly 100 workers at the riverside refinery who occupy the most visible, and likely best-paying, manufacturing jobs in the Great Falls area.

At 115,000 barrels, the new tank is "the biggest ever built out here," noted Steve Stem, the chief refinery engineer.

Rather than storing gasoline or diesel, the most obvious products of an oil refinery, the new tank will allow Montana Refining to boost its storage of asphalt, which has become a more prominent part of the company's product mix.

The tank will increase the refinery's asphalt storage capacity by about 35 percent. The added storage will allow the company to hang on to more asphalt in the colder months, when demand from paving jobs is low. Without sufficient storage capacity, the refinery is forced to sell the asphalt at rock-bottom prices, said Leland Griffin, the refinery manager.

"We will probably be putting asphalt in by the beginning of March or maybe before," Griffin said.

Workers are scrambling to finish insulating the tank. The refinery also will add more spots for trucks to load asphalt as it prepares for the paving season, which typically runs from May to October.

Montana Refining typically bids against refineries in the Billings area and sometimes out-of-state suppliers to supply asphalt for paving projects around Montana.

In general, the asphalt business has been bumpy in recent years, Griffin says.

The demand for asphalt is largely tied to the availability of federal highway funding, which covers a big part of the cost of much of the road building across the state. Such funding has been hit-and-miss in recent years.

"Your biggest paving jobs are not coming out, because the Montana Department of Transportation doesn't know how much money it's going to get," Griffin said. "It's not been a very good business the last couple of years."

Why invest millions in a product line with uncertain return? The refinery has to do something with the asphalt, which is naturally a part of crude oil.

"It's just the way our crude has changed, it's gotten heavier with more asphalt in it," Griffin said.

Montana Refining, for the past dozen years or so, has bought Bow River crude from southern Alberta, relying on a pipeline to bring it south to Great Falls. At the refinery, workers add plastic and rubber substances to create "advanced asphalt," the stuff that ends on the road.

Asphalt amounts to about 35 percent of the product mix at Montana Refining, with gasoline totaling about 42 percent. Diesel fuel contributes about 16 percent, while jet fuel and fuel oil, account for 5 percent and 2 percent respectively.

Asphalt production has increased, while jet fuel production has trailed off.

"When we had the refueling wing here, about 15 percent of our production went to jet fuel," Griffin said. "Now, it's about 5."

The refueling wing at Malmstrom Air Force Base was moved to Florida after the 1995 Base Closure and Realignment process. About 700 jobs went south with the KC-135 tankers.

Investing in the asphalt business is an attempt to diversify into a non fuel product at a time when even the gasoline business has been tough.

. The fact that the price of crude oil has risen more dramatically than retail gas prices leaves many refiners scraping for profits.

Details about the performance of Montana Refining are not released by its corporate parent, the Dallas-based Holly Corp. Holly also operates a refinery in New Mexico and last year acquired a third operation near Salt Lake City.

With production capacity of about 8,000 barrels per day, Montana Refining Co. is the smallest of the refineries owned by Holly and a tiny blip on the national refining scene.

While there are about a dozen U.S. oil refineries that produce 10,000 barrels per day or less, most of those make just one or two products.

"They (Montana Refining) would be the smallest full-service refinery in the country," said Jeff Hazel, technical director for the National Petrochemical & Refiners Association.

Bigger is clearly better in the refining business these days. The largest U.S. refinery is an Exxon Mobil operation near Houston that cranks out 557,000 barrels per day.

"I don't think anybody would contemplate building a refinery that's smaller than 100,000 barrels in today's market conditions," said Hazel.

The refinery in Great Falls has been in continuous operation for 82 years.

The Great Falls refinery is one of just four in Montana, with the others in the Billings area.

Hazel says a geographic niche and range of products probably help Montana Refining survive in a very competitive business. Griffin also credits a lean operating style.

Cherry Point Refinery to Add $75 Million Diesel Facility

BP Amoco PLC will invest $75 million in its Cherry Point refinery to help produce cleaner-burning diesel fuel.

The investment, announced February 4, would bring a Clean Diesel Facility to the refinery. The facility would use heat and a chemical catalyst to pull sulfur out of refined diesel fuel.

The diesel fuel would burn cleaner in engines, releasing less sulfur into the environment. Sulfur is linked to causing acid rain.

"We're all really excited that BP has the confidence in us to build the facility," said Mike Abendhoff, a spokesman for the Cherry Point refinery. "It shows our further commitment to bringing cleaner fuels to market as soon as possible."

Currently, the Cherry Point refinery produces 2.2 million gallons of diesel fuel a day. Abendhoff said the new fuel process wouldn't slow production.

The refinery is the 10th biggest employer in Whatcom County, with more than 560 workers.

While the new facility may bring six new jobs to the refinery, Abendhoff predicted more than 300 people will be employed to build it.

Bellingham's Anvil Corp. and a Texas-based firm will design the new facility.

Officials plan to break ground for the project in May and hope to have construction finished by the middle of next year.

BP's plans to produce cleaner diesel fuel at Cherry Point came as good news to Western Washington University chemistry professor Mark Bussell.

Bussell, who researches catalysts to find a way to pull sulfur from diesel fuel with less energy, called BP's move "impressive."

"Usually, people respond when regulations go into effect," he said. "It is nice to see them respond sooner because it will result in cleaner air."

While Abendhoff said the move was part of a companywide push to produce cleaner diesel fuel, it is also a response to stricter Environmental Protection Agency diesel fuel rules that will go into effect in 2006.

While less sulfur coming out of diesel engines will help cut down on acid rain, the sulfur cut will also help automobile emission devices. Sulfur can ruin the devices, meaning more pollutants can enter the air.

Though the process BP will use to clean the diesel fuel has been around for 50 years, Bussell said recent advances would help make the process pull even more sulfur from the fuel.

"It's a win-win situation," he said.

This is the second big project announced for Whatcom County's two refineries in recent days. During the first week of February, as part of a settlement in U.S. District Court in Southern Texas, ConocoPhillips agreed to spend $525 million to install pollution control devices at nine of its refineries - including its Neptune Beach facility west of Ferndale.

Oil giant Atlantic Richfield Co., known as ARCO, opened the Cherry Point refinery in 1971. In 1999, BP purchased ARCO, including the refinery, for about $26 billion.

Yuma Oil Refinery Permit Takes Next Step for Approval

The federal Environmental Protection Agency received the draft permit for a proposed oil refinery in Yuma County on February 4, pushing the project closer to final approval.

The Arizona Department of Environmental Quality sent the permit that, if approved, would bring Arizona Clean Fuels LLC to become the first oil refinery to be constructed in the United States in more than 30 years.

"We are confident that the EPA will approve this permit and we can really get things rolling," said Ian Calkins, spokesman for the Arizona Clean Fuels. "This is the single most challenging permit to get in the whole process."

EPA has 45 days to review the permit and approve or reject it. If approved, ADEQ will issue the final permit.

The Phoenix-based company would construct the $2.5 billion refinery 40 miles east of Yuma near Tacna on vacant desert land currently owned by the federal government.

"We're hopeful that the EPA will be expedite the review of the permit and that we will be able to issue a final permit," said ADEQ Director Steve Owens in a phone interview.

The permit, several hundred pages long, contains public comments for and against the refinery's construction, monitoring and reporting requirements, and pollution emissions standards.

"We feel they will find it is a very strong permit," said Gayle Rusing, Greater Yuma Economic Development Corporation president.

"I think it is going well. Considering the scope of the project, the community is very much in favor of it, and there seems to be not a problem in general with their locating in Yuma County. And certainly the business community is very much behind them."

Not everyone supports the refinery. Citizens for Clean Air, a grass-roots group opposing the refinery, petitioned against the refinery and collected 230 signatures.

Arizona Clean Fuels initially applied for an air permit in 1999, intending to build the refinery in Mobile, a small town in Maricopa County.

The company wanted looser pollution standards that the ADEQ did not approve. The company withdrew their application and reapplied in 2004 to operate in Yuma County. After several revisions the application was approved with more stringent emission standards.

Both ADEQ and Arizona Clean Fuels have said the refinery would be the cleanest-operating one of its kind, using the "best-available control technology" to regulate emissions.

"We believe it is a very good permit," Owens said. "This is the toughest air quality permit that has ever been written."

Owens said ADEQ has worked closely with EPA through the process and the department does not "have any reason to believe this permit won't be approved."

"I think people are impressed with what we have been able to do," he said.

New Brunswick’s Irving Refinery Fined for Pollution Violations

A new air quality report says Irving Oil exceeded the province's air pollution limits 47 times in 2003.

The company paid a single fine of $3,000 dollars for allowing excessive discharges of sulphur dioxide.

Robert Hughes is the manager of assessment and reporting for the environment department.

Hughes isn't sure whether the levels of pollution were high enough to affect anyone's health.

"Well, it's a tricky thing to say. The guidelines are set to provide protection to human health and other things. On a given occasion, it's possible that it could," Hughes said.

Hughes says the problems at the refinery were solved last year.

A pollution monitor just south of the refinery recorded the high levels of sulfur dioxide.

Jennifer Parker a spokesperson for Irving Oil says people should put the air quality results in context.

"There are five monitors around the refinery area and this is one of them … and it's located in an industrial park. That's not to say we don't take the exceedance seriously, obviously we do, that's why we've been working with the department of environment and that's why we've taken the appropriate measures that we have."

Parker says the emissions were high because a tail-gas unit that prevents sulfur dioxide from being released was off-line and had to be repaired.

"The tail-gas unit was one of the things we installed as an environmental measure," she said. "It was down for a couple months and that's when we had the emissions."

Parker says further problems in early 2004 convinced the company to make improvements to its pollution-control equipment, which had been installed at a cost of $100 million.

The refinery also promised the environment department it would switch to burning a low-sulfur fuel if the monitors picked up any other pollution warnings.

Meanwhile, environmentalists in New Brunswick say the emission problems at the refinery are another sign of New Brunswick's lax approach to air pollution.

David Coon of the Conservation Council says the province's new report on air quality reveals some disturbing trends.

"Clearly our approach to regulating air pollution in New Brunswick is not resulting in healthier air and in Saint John it seems to be deteriorating," Coon said.

$9 million Paid for Lake Charles Refinery

Pelican Refining, a partnership formed by Wyatt's NuCoastal Refining and Marketing and BayOil USA, an oil trading firm owned by David Chalmers Jr., paid $9 million for a small Lake Charles, La., refinery best known for producing jet fuel and asphalt.

A spokeswoman for Wyatt said he plans to "rejuvenate" the facility and employ between 50 and 90 people.

He has hired Ron Lewis, a well-known operator and manager of refineries, for the project.

Turning a mothballed facility into a profitable operation that can produce the high-grade products now selling for top prices seems like a long shot.

One observer called the 30,000-barrel-per-day refinery "a bailing wire facility" that can only receive oil by barge through the shallow Calcasieu River.

But Wyatt has made a career of defying conventional wisdom.

"Oscar is a natural-born moneymaker when it comes to the energy industry," one longtime energy industry observer said. "If anyone can do it, it's him."

The Lake Charles plant was owned by American International Petroleum Corp., a Houston company in bankruptcy that is involved in oil and gas exploration in Kazakhstan.

It was run mainly as an asphalt plant and sold some of its byproducts to other refiners for further processing.

For much of the 1990s it was leased to Gold Line Refining, a firm run by former University of Houston and Houston Oilers football player Earl Thomas, which produced jet fuel to sell to the U.S. Department of Defense. Gold Line stopped operating the facility in 1997.

Since then the refinery has been leased out occasionally to individual oil traders and used only sporadically, according to American International spokesman Michael Dodge. It's been at least two years since the refinery has operated.

"At first glance, this facility doesn't have any redeeming qualities," Dallas-based oil consultant Malcolm Turner said.

The U.S. has plenty of asphalt manufacturing capacity, Turner noted, and turning such a small facility into one that could produce more higher-value refined products would be expensive.

But refinery capacity in general is in short supply in the United States. New facilities haven't been built in decades, partly because of tougher environmental regulations. Existing facilities typically run at close to full output.

Navajo Refinery to get Hydrotreater

Holly Corp. subsidiary Navajo Refining Co. LP, has let a turnkey engineering, procurement, and construction (EPC) contract to Koch Partners LP, Tyler, Tex., to design and build a 15,000 b/sd gas oil hydrotreater at its 60,000 b/d refinery at Artesia, NM.

The $14-million project is to be completed early in 2006.

Koch Partners, a subsidiary of Koch Chemical Technology Group Inc., will provide process design, detailed engineering, project management, procurement, fabrication, and field construction for the unit.

Watchdog Groups Seeks Tougher Refinery Flare Regulations in Bay Area

A new report from oil refinery watchdog groups alleges Bay Area Air Quality Management District officials are not doing enough to reduce flare emissions and are succumbing to pressures from the industry.

"We don't believe the district has told the whole truth about what's going on with flaring, and we want them to do so in a way that can be verified,'' Denny Larson, spokesman for the National Refinery Reform Campaign, said February 23.

The refinery reform campaign and the West County Toxics Coalition are asking the district to develop a rule that would "clearly" prohibit any flaring, which vents excess gases, and that would impose fines on refineries that do flare.

The district is currently developing a flare rule, which would prohibit flaring except as necessary for the safe operation of the petroleum refinery, district spokeswoman Luna Salaver said.

"If you don't release some of the product, it would create unsafe conditions at the refinery. There are instances when the refinery has no choice,'' Salaver said.

The district's proposed rule would also require all refineries to create a plan to curtail and minimize flaring at their facilities, according to Salaver.

If the flare rule were adopted, it would be the first of its kind in the world, Salaver said.

But Larson said the proposed regulation is not strong enough.

"This is more than a regulatory issue. It's a civil rights and environmental one that requires the strongest possible action,'' Larson said.

In the report, the groups accuse the district of underestimating the amount of gases being released. In 2002, the district estimated that there were 22 tons of emissions daily, according to the report. Today, air district staff estimates that an average of 8 tons of flare emissions are released daily, according to Salaver.

"These latest shaky recalculations are at odds with the body of science of flare reports and the district's report going back to 1989,'' Larson said. He alleges that the district denied his organization the information it would need to verify emissions.

But Salaver said the revised numbers are the result of more accurate gauge techniques and new compressors at refineries that reduce flaring.

She said the district plans to discuss the numbers and the proposed flaring rule at two public workshops. The first is scheduled for March 16 at the Contra Costa County Board of Supervisors chambers and the second will be held March 24 at the Richmond City Council chambers. Both meetings are scheduled to begin at 6:30 p.m.

CANADA

Ultramar Ltd. studying $200 Million Pipeline from Quebec City to Montreal

Oil company Ultramar Ltd. said February 14 it has plans to build a $200-million pipeline from its refinery near Quebec City to its distribution terminal in Montreal.

The company said it is will submit its proposal for approval from municipal, provincial and federal authorities for the pipeline it said would create 2,000 direct and indirect jobs during the construction period and 12 permanent jobs once in operation.

Ultramar also has to get the approval of residents who live within the possible corridors. The previously floated idea has already raised concerns among residents along the proposed pipeline route on the south shore of the St. Lawrence River.

Currently, the refinery's products like gasoline are transported to Montreal by Canadian National Railway, as well as by ships and trucks.

If the project gets all required approvals, construction of the 250-km pipeline could start in late summer 2007 and come on stream at the end of 2008, the company said.

Ultramar president Jean Bernier said higher demand for refined petroleum products over the last few years and a projected increase in the near future translate into larger volumes between its refinery in Levis, near Quebec City, and the Montreal East terminal.

"We want to inform residents as well as their elected representatives, about our project and obtain their comments on the alternatives under consideration," Bernier said.

"Their observations, as well as the various environmental studies that we will be conducting, will allow us to determine the best route as well as its overall feasibility."

Bernier said Ultramar would continue to use trains, trucks and ships along with the pipeline.

"Unlike the other means of transportation, the pipeline has the advantage of not being exposed to weather conditions, particularly in winter when demand is high."

Ultramar Ltd., a subsidiary of Valero Energy Corp. (NYSE : VLO) of San Antonio, Tex., owns and operates the Levis refinery with a production capacity of 215,000 barrels of oil per day.

It markets gasoline and diesel through a network of some 1,000 retail outlets and sells heating oil to some 155,000 customers. Ultramar, headquartered in Montreal, employs more than 3,500 people.

Last year it announced investments of $650 million in the Levis refinery to reduce sulfur emissions from gasoline and diesel.

JAMAICA

Venezuela Looking to Upgrade Jamaica Refinery

Venezuela will look into upgrading a refinery in the Jamaican capital as part of a multifaceted oil agreement between the two countries, Venezuela's state-run oil company said.

A letter of intent signed by Venezuelan Oil Minister Rafael Ramirez and Jamaican Minister of Trade, Science and Technology Phillip Paulwell, said Venezuela will evaluate cooperation in the upgrading of a 36,000 barrel per day oil refinery in Kingston, Jamaica, said the statement by Petroleos de Venezuela, or PDVSA.

The upgrade would raise capacity to 60,000 barrels per day, with Venezuela supplying the extra crude, Ramirez, who also serves as PDVSA's president, was quoted as saying by the state-run Bolivarian Press Agency.

Ramirez also said that Venezuela would back an OPEC output cut if prices fall this spring.

Venezuela, the world's fifth largest oil exporter, is one of the main price-hawks in the Organization of Petroleum Exporting Countries. Venezuelan officials have repeatedly come out against OPEC output cuts, saying that the current price levels are supported by market fundamentals.

"If the price plummets now, after winter, we will propose and support a cut in production," Ramirez said.

As part of the agreement with Jamaica, PDVSA will also evaluate a joint venture in Petcom Limited, a subsidiary of Petroleum Corporation of Jamaica, to expand Petcom's chain of gas stations in Jamaica and into other countries.

Venezuela has signed deals with Caribbean countries to sell oil at preferential prices.

Venezuela is also negotiating the creation of a new company, PetroCaribe, which would sell oil at cheaper prices in the region.

MEXICO

Samsung Engineering Wins US$150 Mil Oil-Refinery Order

Samsung Engineering Co., South Korea's leading industrial plant construction company, said February13 that it has won a US$150-million order to construct an oil-refining plant in an industry complex in Mexico.

The plant will be located in the State of Veracruz, 700 kilometers southeast of Mexico City, the company said. The order was placed by state-run Petroleos Mexicanos.