Refinery Updates
January 2005
Table of Contents
INDUSTRY ANALYSIS
U.S.
CANADA
ECUADOR
VENEZUELA
INDIA
INDONESIA
JAPAN
PHILIPPINES
SOUTH KOREA
TAIWAN
LITHUANIA
NIGERIA
SUDAN
RUSSIA
IRAN
SAUDI ARABIA
INDUSTRY ANALYSIS
1. AMERICAS
U.S.
Completion of $9 Million Cash Sale of Lake Charles Refinery Announced
American International Petroleum Corporation ("AIPC") (OTC: AIPN) and American International Refinery, Inc. ("AIRI"), a wholly owned subsidiary of AIPC, announced January 6 that on December 31, 2004, AIRI consummated the sale of its Lake Charles Refinery and all associated real and personal property to Pelican Refining Company L.L.C. for $9 million in cash. Pelican Refining Company L.L.C. is owned by NuCoastal Refining and Marketing Company and BayOil (USA) Limited. The sale was conducted pursuant to an auction process under the supervision of the United States Bankruptcy Court for the Western District of Louisiana, Lake Charles Division. On December 9, 2004, the Bankruptcy Court approved the sale, subject to certain closing terms and conditions, including closing of the sale by the end of 2004. AIRI used the proceeds from the sale transaction to pay certain Bankruptcy Court approved obligations, including payment of its bankruptcy expenses, real property taxes, environmental fees, and payment of approximately $4.6 million to its secured lender, Halifax Fund LP, pursuant to a settlement agreement among AIRI, AIPC and Halifax approved by the Bankruptcy Court. This sale and settlement fully satisfies all obligations of AIRI and AIPC to Halifax. Neither AIPC nor AIRI expect proceeds from the sale to be available for distribution to their common stockholders.
American International Petroleum Corporation is a petroleum company that, through certain subsidiaries, is involved in oil and gas exploration and development in Kazakhstan.
Shell Reaches Agreement to Sell Bakersfield Refinery to Flying J
Shell Oil Company (SOC) announced on January 10 that its Shell Oil Products US subsidiary has signed a definitive agreement to sell its Bakersfield Refinery, located in Bakersfield, California, to a wholly owned subsidiary of Flying J Inc.
The Bakersfield Refinery, which began production in 1932 as the 1,500 barrel per day Mohawk Refinery, is located in California's Central Valley and today has the capacity to refine up to 70,000 barrels of crude oil per day.
The sale is expected to close in the first quarter of 2005 after all regulatory approvals are obtained. Terms of the sale were not disclosed.
"We're pleased to reach this sale agreement, which we recognize is important to many people in Bakersfield and beyond," said Lynn Laverty Elsenhans, President of SOC. "While the facility is no longer strategic to Shell and does not meet our criteria for continued investment, Flying J sees an opportunity. With this sale, the refinery will continue to make gasoline and diesel for the California Central Valley and provide employment opportunities in the region."
Environmental Groups Sue EPA for not Addressing Refinery Pollution
Two environmental groups filled lawsuits with a U.S. District Court the first week of January to force the Environmental Protection Agency to upgrade pollution standards for petroleum refineries. The lawsuit targets existing refineries that use, in some cases, 20-year-old technology, the filing from the Sierra Club and Our Children's Earth Foundation said. EPA has not updated standards for refineries since 1974 although the Clean Air Act requires the head of EPA to review standards every eight years, the filing said.
At Least 2 injured in Explosion at Lamont Refinery
An explosion at a Lamont oil refinery in Bakersfield CA, burned at least two employees January 19, and fire crews were on the scene trying to help victims and prevent another explosion.
The Kern Oil & Refining plant processes oil into gasoline and diesel fuel. A helicopter evacuated the burned employees. The explosion was reported at about 8:30 a.m.
Air Board Sues Carson Refinery for $183M
Local air regulators have filed a $183 million lawsuit in Los Angeles Superior Court against petroleum giant BP for thousands of alleged pollution violations at the company's Carson oil refinery.
The suit, filed by the South Coast Air Quality Management District, follows a similar $413 million action against BP in 2003 that chronicled an alleged pattern of negligence and willful violations regarding leaks of smog-forming chemicals. That suit is still pending.
AQMD officials allege that BP has systematically failed to inspect and repair parts, pipe joints and connections in the refinery. The new lawsuit also alleges that BP has not accounted for some 140,000 components.
"They've conceded and admitted that there are 140,000 components that have not been identified," said AQMD chief counsel Peter Mieras. "How can they certify that they have been inspected?"
"Obviously, we take these allegations extremely seriously," BP West Coast spokesman Phil Cochrane said. "But we respectfully disagree with the allegations."
About AQMD's assertion of the 140,000 unidentified components, Cochrane said "we disagree with them in terms of that."
AQMD requires oil refineries to be self-inspected quarterly, with the data turned over to the air agency. AQMD inspectors then do random, unannounced inspections of the facility and compare their data with the self-reported data.
That's where BP's alleged violations first came to light. The initial $413 million lawsuit was for alleged violations between 1994 and 2002. The latest suit details reported violations between 2002 and 2004, including some after the first lawsuit was filed.
The Carson refinery, one of the largest in the state, takes crude oil and turns it into gasoline, diesel fuel and jet fuel.
Mieras said the massive amount of money sought in the suits is based on AQMD's penalty formula for inspection failures. Refineries can be assessed $10,000 per day, per component that's not been properly inspected.
It would be up to the AQMD board to decide what to do with the money if the suit is successful, Mieras said.
The suit also alleges that BP:
• Failed to properly maintain more than three dozen petroleum storage tanks
• Failed to adequately maintain an industrial wastewater system
• Tampered with flare-monitoring equipment and made false statements to AQMD about the flares
AQMD has control of all stationary sources of air pollution in the South Coast Basin, which includes Orange County and major parts of Los Angeles, Riverside and San Bernardino counties.
Refineries are one of the region's biggest sources of volatile organic compounds, which react with nitrogen oxides and sunlight to form ozone, a key ingredient in smog.
Other sources of VOCs are power plants, gas stations and paints.
Exactly how much pollution escaped from the BP plant will be difficult to determine.
"I don't think we know what we don't know," AQMD spokesman Sam Atwood said. "There's no way we can try to quantify what could have leaked from these components."
Mieras said that during the litigation process, AQMD will bring in an expert to estimate how many VOCs escaped the plant.
The BP refinery is one of seven such major facilities in AQMD's jurisdiction. Others have been cited, but this is a severe case, Mieras said.
"There's been nothing quite on the scale that we've seen at the BP refinery."
KBR to Provide Fluid Cracking Catalytic Technology for Southern California Oil Refinery
KBR has been awarded a license and basic design engineering package to provide its proprietary Fluid Catalytic Cracking technology for the revamping of a 250 billion barrels-per-day oil refinery in Southern California.
FCC Counter-Current Regeneration is part of a technology portfolio offered by Houston-based KBR and ExxonMobil Research and Engineering Co. through their FCC technology, development, marketing and engineering alliance.
KBR and ExxonMobil's FCC Counter-Current Regeneration technology (LoNOx) is designed to improve the operating performance of FCC units while also reducing emissions of NOx and CO from the regenerator, allowing the refiner to meet air quality targets.
Martinez Residents Plagued by Tesoro Refinery Emissions since January 12 Boiler Tube Rupture
A ruptured boiler tube at the Tesoro refinery in Martinez has sent a steady stream of carbon particulates pouring into the air for the last two weeks of January, blanketing the surrounding Vine Hill neighborhood with soot.
Children at a nearby Las Juntas elementary school have been kept indoors during recess since Jan. 12, and residents demanded that the refinery clear away layers of particulates that have accumulated on cars and property.
Terry Lee with the Bay Area Air Quality Management District told KCBS the same boiler has broken down and caused harmful emissions four times in the past 18 months, prompting her agency to investigate other more forceful actions against Tesoro.
"It's not just this incident. It is repetition of the same boiler breaking down," Lee said. "The refinery has got to do more to avoid having this boiler break down again."
Tesoro spokesman John Ballesteros told KCBS the company "is sorry" for any inconvenience it has brought upon nearby residents, adding that the refinery has taken multiple actions to dramatically reduce the emissions.
Lee said air district officials have been collecting data about the emissions and met with refinery managers several times.
"We're exploring legal and other remedies to insure that this problem gets fixed and that it does not reoccur again," Lee said.
The boiler has been repaired and should be back in operation by January 31, according to Ballesteros.
California Opts out of $525 Million Pollution Settlement
California has declined to sign onto a $525 million Bush administration settlement with oil giant ConocoPhillips because the deal represents a step back from many of the states tight pollution rules, local regulators say.
Better to just avoid the whole thing was our take on it, said Bay Area Air Quality Management District spokeswoman Teresa Lee.
One example: Valves OK to operate while leaking 10,000 parts-per-million — 1 percent of the pipes volume — now can vent no more than 500 ppm under the settlement, Lee said. California’s standard is 100 ppm or less.
Touted by the Bush administration as a major milestone in reducing refinery pollution, the January 27 settlement requires ConocoPhillips to install $525 million worth of pollution controls on nine refineries in seven states — including California — and pay $4.5 million to settle a federal lawsuit alleging Clean Air Act violations.
In California, the company controls 13 percent of the states refining capacity, operating one refinery in Rodeo, one near Los Angeles and a third near San Luis Obispo
The settlement requires ConocoPhillips to upgrade leak-detection systems, minimize flaring and curtail sulfur emissions. While it will have an effect nationwide, the deal does little for California, Lee said.
There just was nothing tangible for public health or for reducing emissions from ConocoPhillips, Lee said. Most of it was moot ... and in many instances, it would put us in jeopardy, theoretically, of taking a step backwards.
Opting out comes with a cost. California and Texas, which declined to sign to preserve its negotiating powers, will not get a share of the civil penalty or $10 million in environmental projects ConocoPhillips agreed to fund. Illinois, Louisiana, New Jersey and Pennsylvania and Washington joined the January 27 agreement and will split those proceeds.
ConocoPhillips, the nation’s third largest oil producer with 10 percent of the nation’s refinery capacity, had record profits last year of $8.13 billion, up from $4.74 billion a year earlier.
ConocoPhillips Will Clean up Air, Pay Fine at Roxana, Hartford, Illinois Facilities
Refinery giant ConocoPhillips will cut 17,000 tons of toxic air pollution a
year at its Roxana and Hartford facilities as part of a $540 million national
settlement with the federal government announced January 27.
The nation's third-biggest oil company promised to reduce annual emissions of
smog-forming nitrogen oxides and soot-causing sulfur dioxide by 47,000 tons at
nine petroleum refineries nationwide. ConocoPhillips will spend $525 million on
pollution control technology and pay a $4.5 million fine to settle claims that
it had violated the Clean Air Act by failing to upgrade equipment and repair
leaks, among other charges.
The company also agreed to buy a $900,000 emergency response vehicle for the
Roxana and Hartford area as part of $10 million in community improvement
projects nationwide.
The state of Illinois, which participated in the agreement but has not yet
signed the settlement, will receive $200,000.
"This is a landmark achievement," said Tom Sansonetti, assistant attorney
general for the U.S. Justice Department's environment and natural resources
division.
The settlement, filed in federal district court in Texas, was the 13th reached
under an Environmental Protection Agency initiative to bring the refinery
industry into compliance with clean air rules. The refineries covered in the
agreement stretch from Washington to New Jersey.
Kathy Andria, an environmental activist with the American Bottom Conservancy in
East St. Louis, said the settlement was disappointing given that ConocoPhillips
posted a quarterly profit of $2.4 billion on January 27.
"While we are always grateful for any reductions, this consent decree has too
little reductions in emissions, not enough of a civil penalty, not enough money
in (supplemental environmental projects) and little benefit to those people who
live near ConocoPhillips' Wood River refinery," she said.
A spokeswoman for the Illinois Environmental Protection Agency said the agency
had no comment on the settlement.
The agreement covers the Wood River facility in Roxana and the old Premcor
Refinery in Hartford that ConocoPhillips bought in 2003. Only part of the old
Premcor facility is currently operating. The facilities are about 15 miles
north of St. Louis.
The settlement is not related to a controversy over an underground pool of fuel
that leaks fumes into the homes of Hartford residents. The state, Madison
County and individual homeowners have sued various refining, oil and pipeline
companies for damages.
The money in the ConocoPhillips case will be spent over eight years and is just
shy of the largest settlement reached over the past four years, a $550 million
agreement with Motiva Enterprises.
The company agreed to improve detection and repair of leaks and take steps to
minimize flaring of hazardous gases.
"ConocoPhillips is committed to achieving these significant emissions
reductions in conjunction with its ongoing business plans," company spokeswoman
Lara C. Dilley said.
Wood River Refinery to Install Scrubbers as Part of Federal Lawsuit Settlement
ConocoPhillips’ Wood River Refinery in Roxana will have "scrubbers" installed to reduce its emissions of nitrogen oxide and sulfur dioxide as part of the company’s settlement of a federal lawsuit alleging Clean Air Act violations, company officials said.
The Bush administration announced January 27 that ConocoPhillips will install $525 million in pollution controls at nine refineries and pay a $4.5 million fine to settle the suit.
Melissa Erker, a spokeswoman for the Wood River Refinery, said the settlement calls for the company to install sulfur dioxide and nitrogen oxide control devices on several pieces of the refinery’s equipment. She said the "scrubbers," will be installed on both of the refinery’s catalytic crackers. The nitrogen oxide control devices also will be installed on the plant’s heaters and boilers.
Under the terms of the settlement, the scrubbers will be installed during the next 10 years.
"First we need to do the engineering and design," Erker said. "The installation will be scheduled for the routine shutdowns of these units during the next 10 years, when we bring those units down for general maintenance."
She said the company probably would bring in contractors to help perform the work but that it probably will not result in new full-time positions being added in Roxana.
Erker also said the refinery would receive a supplemental environmental project under the settlement.
"We will be investing in an aerial fire truck, which will be used for the refinery’s emergency response team, as well as in the community if we are asked to provide mutual aid," she said.
The refineries covered in the agreement among the company, the U.S. Justice Department, the U.S. Environmental Protection Agency and five states, represent 10 percent of the nation’s refining capacity.
The refineries are in California, Illinois, Louisiana, New Jersey, Pennsylvania, Texas and Washington. California and Washington are not part of the settlement, Justice Department officials said.
The settlement is the 13th reached under an EPA initiative begun in December 2000. EPA officials have said the earlier agreements have cut air pollution by 200,000 tons a year at 48 refineries in 24 states.
The money for pollution control will be spent over eight years and is just shy of the largest settlement reached over the past four years, a $550 million agreement with Motiva Enterprises.
Along with the pollution controls and civil penalty, ConocoPhillips will spend another $10 million to further reduce emissions at its refineries in the five states that are part of the settlement. The agreement was filed in U.S. District Court in Texas and requires the approval of a federal judge.
Pasadena Refinery Sold to Astra Holding, Part of California’s Astra Oil
A California company has purchased the Crown Central Petroleum refinery in Pasadena, a 117,000 barrel-per-day capacity plant.
Pasadena Refining System, a new subsidiary of Astra Holding USA, announced the deal's closing January 22 with seller Crown Central Petroleum Corp. of Baltimore.
Astra Holding is part of Astra Oil, a privately held California trading company supplying crude to the Pasadena plant. Terms of the deal were not disclosed.
"We have big plans," said Chuck Dunlap, the new president and chief executive officer of Pasadena Refining.
One of the first goals of the new owners is to put $40 million, over the next two years, into meeting the new low-sulfur rules for gasoline.
The refinery is geared to making gasoline from light, sweet crude. It has an EPA waiver on the sulfur rules, especially for small refineries, that runs through 2006.
"The company management will focus considerable amounts of capital to improve the operating efficiency of the refinery and to produce high-quality products that meet federal and state regulations," said Chairman Robert Lavinia in a prepared statement.
There are no plans to expand the crude-handling capacity, Dunlap said. The refinery has 270 employees.
Lavinia most recently was president of marketing for Tosco, which was acquired by ConocoPhillips.
Dunlap, who started out more than 30 years ago with Clark Oil and Refining, has worked for Atlantic Richfield, was president of an independent refinery in Hawaii, and in 1991 went to Crown Central as president.
Crown Central Petroleum hired a consulting firm in 2001 to help sell the refinery because of the big investments needed to meet state and federal regulations in a business where profit was uncertain.
Crown still owns a smaller refinery in Tyler.
The sale took a long time, said refinery analyst Jacques Rousseau of Friedman, Billings, Ramsey & Co.
"It's something everybody took a look at and didn't get too excited about. It's not as large or complex as other Gulf Coast refineries. That was a big issue," he said.
Other refineries along the Gulf Coast have daily crude capacities two or three times as large.
Crown Central's Pasadena refinery has a controversial past. It was the site of a bitter labor dispute that included a lockout that lasted for years and had the dubious distinction in 1998 of agreeing to pay the highest fine ever imposed in Texas for air quality violations — $1.05 million.
CANADA
Jacobs Unit Wins Contract in Canada
A Jacobs Engineering Group Inc. subsidiary company has received a major environmental project as part of the refinery conversion project at Petro-Canada's refinery near Edmonton, Alberta, Canada.
This will enable the existing refinery to process bitumen and bitumen-derived crude in place of the currently processed conventional crude slate. The value of the contract was not disclosed.
Jacobs subsidiary, Jacobs Consultancy UK, is also leading a team of six companies and UK University to evaluate a novel concept for the capture of CO2 produced in power generation.
Officials did not disclose the contract value.
Genoil Hopes Hydrogen Will Help Boost Energy from Oil
Many energy analysts believe hydrogen fuel cells will play a big role in the future as an alternative energy in an increasingly fuel-needy world.
But in the near term at least, hydrogen could be more useful in traditional oil refineries and heavy oil fields than in creating a fleet of futuristic automobiles, said the chairman of Genoil, a Canadian energy technology services company.
Genoil Chairman and CEO David Lifshultz believes improving hydrogen use at conventional oil refineries can increase yields of oil products from heavy oil by as much as 25 percent.
"The truest and highest and best use of a hydrogen economy is really the hydrogenation of oil," said Lifshultz.
Oil refiners face a glut of low-quality, high sulfur oil, or heavy sour crude, as sweet oil production in the United States and the North Sea slips. Refiners around the world are investing billions of dollars to add cokers and desulfurization units to refineries that process the heavy crude at high temperatures and high pressure.
"We continue to be limited in refining capacity and with these types of technologies we get better use out of the oil that we do have," said Emil Pena, former Department of Energy deputy assistant secretary under Bill Clinton. Pena sits on Genoil's advisory board, but does not invest in the company, he said.
Genoil says it has improved a standard refinery practice known as hydrocracking, which mixes hydrogen separated from natural gas with the carbon that's in crude to make oil lighter and more usable.
The units, known as hydroconversion upgraders, refine oil more cheaply because they don't need the high pressure and high temperatures used in conventional units, said Lifshultz.
He said the units would cost $15 million to $150 million at a refinery, depending upon how heavy a crude it aimed to run, and whether the refinery already had hydrocracking capacity.
The units can also be used instead of cokers, which are fairly cheap but are also among the more dangerous units at refineries.
Genoil is testing its units on heavy crude from Russian oil company LUKOIL -- oil produced near Siberia that is so heavy it can't be transported through pipelines. If the Siberia tests are satisfactory, the two companies may enter agreements to install an upgrade at Lukoil's Yarega field near Siberia.
The process will be tested this year at the small Silver Eagle refinery in Utah, owned by Silver Eagle Refining. An explosion rocked the refinery last week, but Lifshultz said it was not related to the upgrader, which has not yet been installed.
He said alternatives such as hydrogen fuel cells and liquefied natural gas have potential, but their high start-up costs are delaying their use. "There's a real energy problem, all alternatives are interesting, but ours, I think, has the greatest immediate impact," said Lifshultz.
ECUADOR
Ecuador Seeks Indian Participation in Oil Sector with $2.5 Billion Investment
Ecuador, one of Latin America’s largest crude exporters, today invited Indian participation in hydrocarbon exploration and setting up a greenfield refinery.
The Latin American country, which relies heavily on petroleum economy, also sought Indian technical collaboration, particularly with state-owned Oil and Natural Gas Corporation (ONGC).
“We will be offering 11 blocks for exploration in May,” Ecuador Minister for Energy and Mines, Mr Eduardo Lopez Robayo said at the ongoing Petrotech 2005 energy conference here.
Inviting India’s participation, Mr Robayo said Ecuador has sizeable areas of unexplored oil reserves besides proven reserves of 4.6 billion barrels in five major fields.
Ecuador is seeking private investment to raise oil production to about 900,000 barrels per day (BPD) by 2010 from over 500,000 BPD in 2003.
Mr Robayo who visited various facilities of ONGC, including the Mumbai High facility, India’s largest oil producing block, expressed keenness to work jointly with Indian companies in research development, technological collaboration and training.
In a joint communiqué issued during Petrotech, the two countries decided to formalize cooperation in the petroleum sector and set up an inter-governmental mechanism for cooperation.
Keen to step up petroleum exports, Mr Robayo said Ecuador is seeking participation for setting up a new refinery with an investment of $ 2.5 billion.
“The new project would be a high conversion refinery with a capacity of 200,000 BPD. ONGC has shown interest in setting up this refinery. It will be a 100 per cent private refinery,” said Mr Robayo.
“The tender bid for the refinery will close by June. Besides India, companies from China, the Netherlands, Norway are also in the race to set up the refinery project,” said Mr Robayo.
In the case of exploration, India will once again be competing against China, the United States, Spain and Brazil among others for the Ecuador blocks.
On the bid by ONGC Videsh Ltd (OVL), the overseas arm of India’s exploration major ONGC, to get a stake of Canadian firm EnCana’s assets in Amazon blocks 14, 17 and Tarapoa, with a combined output of 66,891 BPD, Mr Robayo said they would look into the matter once the two companies have reached an agreement.
“Let the private companies play their role and then we will look into it,” he said.
OVL is competing with PetroChina for the EnCana assets, estimated to be worth $ 1.5 billion. OVL has already acquired stakes in 12 countries, including Sudan, Russia and Iran as part of efforts to secure supplies.
EnCana owns a 36.26 per cent stake in a new 450,000 BPD heavy crude pipeline from the Amazon oil blocks to the Pacific coast and has reserved space to ship more than 108,000 BPD. EnCana also owns 40 per cent stake in oil block 15, operated by Occidental Petroleum Corp.
VENEZUELA
Curacao Studies Future of Petróleos Venezuela’s Isla Refinery
Petróleos Venezuela may lose use of its Isla refinery, which is leased to the company through 2019.
Petróleos de Venezuela SA, South America's largest oil company, may lose use of its Isla Refinery on Curaçao as the Caribbean island starts a study on the facility's future.
Results of the study will probably be ready in three months, said Selwyn Maduro, project manager at the local government's refinery, which is leased to Petróleos de Venezuela through 2019. The review is ''not only an environmental study but it's also to decide what to do with the refinery after 2019,'' he said.
The review is partially in response to pressure from environmental groups on the island, who are seeking to close the refinery, alleging air pollution. Petróleos de Venezuela is paying about $18 million a year for use of the plant, which processes about 200,000 barrels of oil a day, a refinery spokeswoman said.
''The refinery complies with the laws,'' Maduro said. The review, however, may decide to reduce emissions of sulfur dioxide, which would require the installation of anti-pollution devices. ''That's a matter that has to be negotiated between the government and Petróleos de Venezuela,'' he said.
Isla processes heavy crude oil from Venezuela, which has a high sulfur and metal content. Most of Isla's products, including gasoline, are exported to the United States and the Caribbean. The refinery's installed capacity is 335,000 barrels a day.
Petróleos de Venezuela said in 2000 that it might invest as much as $200 million in Isla to enlarge its capacity to process heavy oil. That investment has never been made.
Petróleos de Venezuela began operations at Isla in 1985, when the refinery's previous owner, the Royal Dutch/Shell Group, left the facility. Shell began refining from Isla in 1918.
Curaçao's review coincides with one being undertaken by Petróleos de Venezuela to evaluate its foreign refineries, including Isla.
''We are studying all our overseas refineries, but no decision has been taken yet,'' Energy and Oil Minister Rafael Ramírez said at a press conference on Jan. 11 in Caracas.
The company has shares in refineries in the United States, the U.S. Virgin Islands, Germany, Sweden and the U.K. Ramírez gave no timetable for any decisions being made.
Isla offers Venezuela certain advantages, said David Voght, managing director of energy consultant IPD Latin America, which has offices in Caracas and Mexico City.
''Isla is important, especially if Venezuela wants to develop its PetroCaribe initiative,'' he said.
Under PetroCaribe, Venezuela would sell refined oil products through the Caribbean at a discount under government-to-government contracts.
Curaçao, part of the Netherlands Antilles, is about 36 miles north of Venezuela. The Antilles are part of the Netherlands.
2. ASIA
INDIA
IOC to Expand Capacity of Paradip Refinery
Indian Oil Corporation will increase the capacity of its proposed oil refinery at Paradip in Orissa to 15 million tonnes and build it as a petrochemical-cum-oil refinery by 2009-10 at an estimated cost of Rs 20,000 crore.
"We have decided to scale up the capacity of Paradip refinery to 15 million tonnes," IOC chairman M S Ramachandran said at a conference organized by PHDCCI here.
Paradip refinery would be built as an oil refinery cum petrochemical complex, he said.
"We have commissioned a detailed feasibility report and hope to finalize it in next two months," he said.
IOC, as a step towards forward integration, will start manufacturing petrochemical products like Purified Terephthalic Acid (PTA) and Paraxylene (PX) from High aromatics naphtha produced from Panipat and Mathura refineries from October 2005.
"With gas replacing naphtha, we are faced with surplus naphtha and to put it to best use is to make petrochemicals out of it," he said.
The PX/PTA project at Panipat refinery will cost Rs 4228 crore and will produce 3,57,000 tonnes per annum Paraxylene and 5,53,000 tonnes per annum PTA.
Besides, IOC is also building a Naphtha cracker and downstream polymer units (naphtha cracker complex) at Panipat at an estimated cost of Rs 6300 crore.
The naphtha cracker complex is scheduled for commissioning in the year 2007-08, Ramachandran said.
HPCL Walks out of IOC's Panipat Refinery
Hindustan Petroleum Corporation Ltd will not be taking part in the Indian Oil Corporation's Panipat refinery.
''HPCL will not be participating in the Panipat refinery,'' Petroleum Secretary S C Tripathy told UNI here.
IOC had signed an agreement with HPCL to invest capital and share in the refining capacity in the refinery.
The two companies were to form an unincorporated joint venture, in which HPCL will be a financial investor and have access of up to 3 mt of petroleum products.
IOC was to handle the operations and maintenance of the refinery.
The Panipat refinery is currently being expanded to 12 million tonnes and IOC has plans to raise it to 15 million tonnes.
IOC may now have to look for other partners for its proposed LPG pipeline from Jamnagar to Bhatinda as the 'strategic relationship' with HPCL is not working out.
Both IOC and HPCL had entered into a collaborative agreement, which included joint participation in exploration and production, refining, petrochemical projects and consultancy services.
According to IOC, the deal worked out for the Panipat refinery was ''unique'', where HPCL would invest capital and share in the refining capacity while IOC would operate the refinery.
Instead of capacity sharing in Panipat, HPCL plans to set up a 1,000 km Mundhra-Delhi pipeline to carry its petroleum products to feed markets in the north.
Petroleum and Natural Gas Minister Mani Shankar Aiyar recently said he had written a letter to Punjab Chief Minister Amarinder Singh stressing the need to achieve financial closure of the Bhatinda refinery.
HPCL, in fact, is planning a 9 mt refinery at Bhatinda in Punjab, whose future hinges on tax sops from the state government.
Cairn's Rajasthan Oil to go to IOC's Panipat Refinery
British energy firm Cairn Energy's Rajasthan oil find may go to Indian Oil Corp's (IOC) Panipat refinery in Haryana for processing.
Petroleum Ministry has nominated IOC for taking the crude oil found in Barmer district of Rajasthan and options of laying pipeline to its refineries were under evaluation, Cairn Energy director (exploration) Mike Watts said at the NELP-V roadshow, organized at the ongoing Petrotech 2005 conference.
IOC's Koyali refinery in Gujarat was also a possible destination of 80,000 to 100,000 barrels per day of crude oil planned to be produced from Mangala and Aishwariya oilfields in Rajasthan by 2007-end or early 2008 but Panipat was the "favored refinery", he said.
The roadshow was organized to attract investment in the 20 oil and gas blocks being offered for bidding under the fifth round of New Exploration Licensing Policy (NELP).
He said off the 55 wells drilled by Cairn in Barmer Basin, 11 have led to discoveries. The RJ-oN-90/1 block, where Cairn has 70 per cent stake and Oil and Natural Gas Corp the remaining 30 per cent, holds a potential of 400 million to 1.25 billion barrels.
The Mangala find, the largest oil discovery in more than two decade, holds 1 billion barrels of inplace oil, of which 110 to 320 million barrels is recoverable, he said.
Watts said other discoveries in the block can produce 3000 to 10,000 barrels per day.
HPCL May Invest Rs 6000 cr to up Vizag Refinery Capacity
Hindustan Petroleum Corporation Limited (Q, N,C,F)* (HPCL) is studying the feasibility of pumping in between Rs 5,000 and Rs 6,000 crore to increase the capacity of its Vizag refinery to 15 million tonnes apart from creating storage facility for another five lakh tonnes, reports Business Standard.
HPCL is at present operating a 7.5-million tonne refinery, and has about one million tonne capacity of crude and petroleum products` storage facility at Visakhapatnam. Implementation of the clear fuel project with an outlay of about Rs 1,600 crore is under progress at HPCL`s Vizag refinery.
HPCL would finalize the proposal only after the Visakhapatnam port gives a nod for land allotment.
However, HPCL is seeking another 300-400 acres of land to create additional storage facility near the existing refinery.
HPCL to Focus on Punjab Refinery
Hindustan Petroleum Corporation Ltd (HPCL) will resume work on its stalled Rs 10,000-crore Punjab refinery project soon, chairman M. B. Lal said January 18.
Lal said he expected the state government's approval for tax concessions to come through any time now and work on the project at Bhatinda would start immediately afterwards.
HPCL has already acquired land for the refinery and developed the site but work had come to a standstill after the Congress government, which came to power two years ago, said it would not approve tax concessions cleared by the earlier Akali Dal regime.
Punjab chief minister Amrinder Singh said the tax concessions would cause a huge drain on the revenues of the state, which it could not afford.
HPCL had found itself in a dilemma as refusal to grant the sales tax waiver on the lines that the Gujarat government has extended to Reliance Industries Jamnagar refinery, would have rendered the Punjab refinery unviable.
HPCL is short of refining capacity to feed its retail network in the northern region and is keen to build the refinery. The company had been running from pillar to post but the new government in Punjab had refused to budge.
The company had then been toying with the idea of picking up a stake in the IOC's Panipat refinery and Bharat Petroleum's proposed Bina refinery.
Swap Proposed for Merger of Kochi Refineries and BPCL
A swap ratio of 1:2.25 has been proposed for the merger of Kochi Refineries (KRL) with Bharat Petroleum Corporation (BPCL).
Kochi Refineries’ shareholders will get four shares of BPCL for every nine held by them. The swap proposal, which was cleared at the board meeting Janyuary 18, will have to be approved by the government, shareholders and creditors of the two companies, apart from other judicial and regulatory authorities.
On the BSE, the BPCL scrip opened at Rs 402, rose to an intra-day high of Rs 415.50 and closed at Rs 410.80. The KRL stoke opened at Rs 220.90, rose to a high of Rs 229.40 and finished the day at Rs 220.70.
In August last year, BPCL had indicated the possibility of merging KRL with itself. BPCL chairman S. Behuria had then said such an amalgamation would improve BPCL’s bottomline due to a high refining margin enjoyed by Kochi Refineries.
Snubbed Rajasthan Threatens to Block Proposed Bhatinda Refinery Pipeline
Miffed by the Centre’s decision to give Punjab preference over Rajasthan for setting up an oil refinery, the Vasundhara Raje government has threatened to block the pipeline for the proposed refinery in Bhatinda. ‘‘The Centre will have to lay down a 682-km-long pipeline in Rajasthan for the Bhatinda project. We will not let them lay even an inch of it,’’ Minister for Minerals and Oil, Laxmi Narain Dave said in a letter to Rajasthan MPs — seeking support for reclaiming the refinery for Rajasthan.
‘‘Ours is the biggest state in the country. The refinery belongs here. Injustice with interests of the state will not be tolerated,’’ he said. Rajasthan has been upset with the Centre ever since it lost out to Punjab in the race for setting up a project for refining the crude oil discovered by Cairn Energy in western Rajasthan.
So serious was Rajasthan about setting up the project that its government had begun talks with oil major HPCL for setting up a Rs 800-crore refinery in western Rajasthan. ‘‘We were on the verge of signing an agreement with HPCL,’’ said an official.
But Petroleum Minister Mani Shankar Aiyar, who visited the state in December, shattered Rajasthan’s dreams saying that HPCL had already invested Rs 300 crore for setting up the refinery in Punjab and it made no sense to make fresh investments in Rajasthan.
The state government has, however, not given up. ‘‘HPCL is interested in a refinery in Rajasthan. The state government is also prepared to provide every facility for the project and develop the required infrastructure,’’ Dave said. He argued that while Rajasthan has vast reserves of crude oil, there is not a single oil well in Punjab. Setting up the refinery there made no sense. According to the government, oil companies have invested more than Rs 2,500 crore for digging up 175 wells in the state.
‘‘Rajasthan has oil reserves in excess of 300 million tonne. They are adequate to supply oil and gas for 40 years,’’ Dave added.
Rajasthan is keen on the refinery also because it is hoping that the project would trigger investments of more than Rs 800 crore, leading to employment of 10,000 persons.
India Woos Mideast Firms for Refinery Stakes
India is courting Middle East oil producers for a possible deal in which foreign companies can invest in state-run refineries in return for a secure long-term oil supply, a top government official said on January 28.
"Companies like Saudi Aramco and National Iranian Oil Co. (NIOC) can pick up stakes in Hindustan Petroleum Corp Ltd. (HPCL) and Bharat Petroleum Corp Ltd. (BPCL)," said the official, who did not want to be named.
Shares in HPCL leapt 7 rupees on the news and ended 4 percent higher at 349.75 rupees, valuing the company at $2.7 billion. BPCL closed 6 percent higher at 415.15 rupees, valuing it at just under $2.9 billion.
The official said investments by top oil producers would help local firms as India's crude oil imports, now 70 percent of its requirements, are set to grow in step with its expanding economy.
"We have held preliminary talks. They can buy shares from the existing shareholders like the foreign institutional investors or small investors," he said, though he added that the government would retain majority control over the state-run firms.
He said discussions were held earlier this month when ministers and officials from the Middle East were in New Delhi for a meeting with Asia's biggest oil buyers.
"Their response is very positive," he said.
Analysts said such deals would enhance India's energy security.
"Supply security is very important. It will be useful for Indian companies to build such long-term relationships," said Karthik Ramachandran, an analyst with Bombay-based Sunidhi Consultancy.
The proposal, still at an early stage, would not violate Indian policy forbidding privatization of profitable state firms since that allows for changes in equity structure, as long as the government retains a majority holding, the official said.
Earlier this month, the president and CEO of Saudi Aramco, Abdallah Jumah, said in New Delhi his company was keen to enter India's refining sector and strengthen ties with its Indian customers.
He said Aramco had wanted to bid for a controlling stake in HPCL when the Indian government was planning to divest its stake in the refining and retailing firm two years ago.
Aramco has already invested in several Asian firms as it seeks stable outlets for its crude in the face of competition from other Middle East producers such as Iran and Oman.
Aramco sells more than 450,000 barrels per day of crude oil to Indian firms, including about 200,000 bpd to Reliance Industries, India's sole private refiner.
As for NIOC, it already holds about 14 percent of the equity in Madras-based Chennai Petroleum Corp Ltd. (CPCL).
CPCL was initially a joint venture between NIOC, U.S. group Amoco and the government of India, but in 1985 the American firm sold its equity and in 2001 state-run Indian Oil Corp bought the government's 51.8 percent stake in the firm.
Government officials say IOC had considered merging CPCL with itself, but its Iranian partner resisted the move as a merger with the Indian refining giant would have significantly diluted its stake.
INDONESIA
Pertamina's Cilacap Refinery Successfully Reloads Tatoray Unit with UOP's TA-20 Catalyst
Pertamina's Cilacap Refinery, Indonesia, successfully reloaded its Tatoray(TM) unit with TA-20(TM) catalyst following a refinery turnaround in August 2004. The Cilacap Refinery selected the TA-20 catalyst as part of its ongoing goal to maximize benefits from existing facilities and remain the major supplier of para-xylene and benzene to the Indonesian market.
The TA-20 catalyst has met all performance expectations and has enabled the Cilacap Refinery to increase para-xylene production by 20 percent.
The Tatoray unit was designed by UOP and has been in operation since 1990.
UOP LLC, headquartered in Des Plaines, Ill., USA, is a leading international supplier and licensor of process technology, catalysts, process plants, and consulting services to the petroleum refining, petrochemical, and gas processing industries.
Pertamina is Indonesia's national oil and gas company. Pertamina operates seven oil refineries, including the Cilicap Refinery, with a total processing capacity of 1,050,000 barrels per day.
JAPAN
Kyokuto Petroleum Restarts Refinery at Reduced Processing Rate
Kyokuto Petroleum Industries Ltd., the Japanese refining joint venture of Exxon Mobil Corp. and Mitsui Oil Co., restarted its Chiba refinery at a reduced processing rate after a fire on Dec. 30.
Kyokuto resumed operations at the 175,000 barrels-a-day refinery in Chiba Prefecture next to Tokyo on Dec. 31, spokesman Kenji Sakai said. The refinery is processing crude oil at a reduced rate, Sakai said. He declined to say what the refining rate is.
The Ichihara City-based refiner closed the refinery's crude distillation unit after the secondary unit, a vacuum distillation unit, caught fire. The CDU could not resume full operations until the local fire department gave approval to restart the secondary unit, Sakai said.
The refinery supplies middle distillates including gasoline and kerosene to Exxon Mobil and Mitsui Oil and it supplies naphtha to Mitsui Chemicals Inc., a Tokyo-based chemicals maker.
Nippon Oil to Shut Marifu Refinery's Main Unit for Inspection
Nippon Oil Corp., Japan's biggest refiner, said it will shut the crude distillation unit at its Marifu refinery in Japan's southern Yamaguchi prefecture for six days to conduct inspections.
Tokyo-based Nippon Oil will shut the 127,000 barrels-a-day unit between Jan. 26 and Jan. 31, a company spokesman said.
The shutdown won't cut the group's planned January processing rate of 5.1 million kiloliters, the spokesman said.
PHILIPPINES
Philippine Gov’t Urged to
Match Refinery Perks Offered by Other Asian Countries
The
Philippine government is being urged to start gaining decisiveness when it comes
to setting in place attractive incentives for oil refinery investments if the
country does not want to be left out in securing its long-term oil supply and to
partly shield itself from drastic price upswings.
The concerned agencies, primarily the Department of Energy (DoE) and Board of Investments (BoI) are reminded that if they would want to fortify current set of incentives it should be competitive with what the others can offer in the Asian region.
Firstly, it was noted that what the government needs to keep in mind is to realize on whether or not it should consider the oil sector as a "strategic industry" as has been the treatment being set by other countries.
For one, industry players opined that to make the Philippine refining sector competitive, "it should be able to compete with the set of incentives being offered by other countries," especially in terms of taxes.
At this stage, the Philippines is seen to be assured of at least one refinery to depend on over the long term, with Petron Corporation constantly reinforcing the continued existence of its refining facility in the domestic market.
Policymakers are being advised that what they should be watching closely is the ongoing regionalization and/or consolidation of refining operations of most of the world oil giants.
While Pilipinas Shell’s refinery is still being kept for the Philippine market, energy and investment officials are advised that they should already start re-thinking of policies that will entice the oil firm’s principal office to sustain its refining operations here.
It has not been a secret that this other oil giant has been relentlessly re-assessing its domestic refining operations, in view also of the global development of its business.
Already, the energy department has advanced word that it is keen on pushing amendments to the implementing guidelines of the Downstream Oil Deregulation Act to fortify incentives to lure new capital for oil refinery investments.
Former Energy Secretary Francisco L. Viray opined this could be a step in the right direction; but a concern remains on what viable incentives could be offered at this time.
He said the domestic oil market really needs to be shielded this early from potential uncertainty in future supply; moreso, because the world oil market is already observing a plateau of available supply; with oil producing countries not injecting much capital for new investments in oil exploration and development.
It was portended that the 4.0-percent tariff differential proposed in the first Oil Deregulation Law could have provided much-needed comfort level for new refinery investments; but since attacks were set on merits of providing uneven playing field for the new entrants, this provision was struck down by the Supreme Court.
As an initial step, the DoE disclosed that it is currently collaborating with the BoI as to proposed necessary revisions in the existing guidelines for registration and availment of incentives under Republic Act 8479, otherwise known as the Oil Deregulation Law.
Section 9 of the law fleshes out the following incentives for new investments in the oil industry, including refining activities: a) income tax holiday; b) additional deduction for labor expenses; c) minimum tax and duty of 3.0 percent (now raised to 5.0 percent) and value added tax on imported capital equipment; d) tax credit on domestic capital equipment; e) exemption from contractor’s tax; f) unrestricted use of consignment equipment; g) exemption from the real property tax on production equipment or machineries; and h) exemption from taxes and duties on imported spare parts; among others.
SOUTH KOREA
China's Sinochem Refuses Due Diligence of Inchon Oil
China's state oil trader
Sinochem Corp. has refused to conduct a due diligence of Inchon Oil Refinery Co.
for its planned purchase of the South Korean oil refiner as creditors want to
raise the sale price tag, a source close to the creditors said January 18.
Inchon Oil has recently received a notification from Sinochem that the Chinese
company rejected a request by creditors for the due diligence, the source said.
Sinochem signed a formal contract with creditors of the bankrupt Inchon Oil in
September to buy it for 635.1 billion won (US$612.8 million).
The creditors, which include state-run Korea Development Bank, Kookmin Bank and
Korea Exchange Bank, however expressed their desire for up to 200 billion won
more at a Dec. 20 meeting, citing the oil refiner's 2004 net profit of 120
billion won.
On Jan. 24, the creditors will hold a final meeting to discuss the sale of
Inchon Oil.
Sinochem $664 Million Deal to Buy S. Korea's Inchon Oil Collapses
A deal to sell South Korean refiner Inchon Oil to Chinese oil trader Sinochem collapsed after creditors rejected a 680 billion won ($664 million) offer, leaving the door open for a Citigroup (C.N: Quote, Profile, Research) bid.
The Sinochem deal would have marked the first takeover of a foreign oil firm by China, but a judge at Inchon District Court on January 31 called for a new round of bidding for the debt-ridden refiner.
Citigroup Inc., which holds 30 percent of Inchon's unsecured debt, had offered to pay 780 billion won for Inchon Oil if the Sinochem deal fell through, a source at the refiner told Reuters.
Sinochem said in a statement it remained committed to future acquisitions of foreign refineries. China has been seeking global oil and gas resources to ensure future supplies for its energy hungry economy.
Sinochem signed a final contract in September to buy Inchon Oil for about 630 billion won, but Citigroup and other creditor said they wanted a higher price.
"The court did not approve the sale because creditors failed to reach an agreement on the deal," said the judge at Inchon District Court by telephone.
"There will be no further meetings regarding the sale to Sinochem as the deal fell through. Instead, the court called for a fresh round of the sale process to seek new buyers," he added.
The judge said Sinochem had made a fresh offer of about 680 billion won, but Citigroup and other creditors opposed the deal for a third time. The agreement of creditors is required for the refiner to move out of court receivership.
The Inchon Court judge said Citigroup officials said on January 31, they hoped to be selected as the preferred bidder.
"The court wants the new bidding to begin as soon as possible, and aims to complete the sale of the refiner by the end of June," he added.
A spokesman for Inchon Oil said the refiner had no official comment yet and creditors were also not immediately available.
But Sinochem expressed regret over the decision.
"The acquisition of Inchon Oil should have been a win-win act to all parties concerned including the investors, creditors, the refinery itself and its employees and promoted the economic exchanges between China and South Korea and economic development of South Korea," the Chinese firm said in the statement.
Citigroup, the world's biggest financial institution, holds a combined 30 percent of unsecured debt, or 111.8 billion won, in the refiner through wholly-owned Blue Two Asset Securitization Specialty Ltd. and Citigroup Global Markets Korea Securities Ltd., creditor sources have said.
Citigroup already has a foot in the energy market through its international oil and commodities trading house, Phibro Inc.
The 275,000 barrels per day (bpd) refinery is located in Inchon, west of Seoul, and is closer to China than its bigger domestic rivals. The refinery would allow Citigroup to benefit from the strongest refining margins in a decade.
TAIWAN
Taiwan’s CPC and Formosa Plan Petchem, Steel Plants
Taiwan's state run Chinese Petroleum Corp (CPC) and the Formosa Plastics Group are both planning to build multi-billion dollar heavy industrial complexes on the same site in the central part of the island, executives said January 6.
CPC, the island's largest refiner, is hoping to spend T$370bil (US$11.6bil) on a 300,000 barrel-per-day refinery complex that includes a naphtha cracker with an annual capacity of 1.2 million tonnes of ethylene at a new development in the Yunlin technology industrial park, said executives.
The refinery within the complex, to be completed by 2010, would eventually be expanded to 450,000 bpd, and is planned as a replacement for CPC's 270,000bpd Kaoshiung refinery, which the government plans to close by 2015, executives said.
Formosa, which is a holding firm for companies including Formosa Plastics Corp. has also applied to invest T$130 bil (US$4.1bil) in a 7.5 million-tonne per year steel mill in the same industrial zone.
CPC is hoping to sign up a group of Taiwan companies to jointly invest in the complex by the end of January, and form the joint venture firm in February, said the executive.
So far 10 petrochemical firms have committed to the venture and two financial companies, said the executive, who declined to name the companies involved.
CPC operates three refineries around the island with a combined capacity of 770,000 bpd.
3. EUROPE / AFRICA / MIDDLE EAST
LITHUANIA
Vilnius Seeking Control of Yukos Refinery, Mazeikiu Nafta
Combined Reports Lithuania confirmed January 17 it wants to wrest control of its top energy asset from Yukos by raising its stake in refinery Mazeikiu Nafta, which is majority owned by the Russian oil company.
The two sides said they held preliminary talks in Vilnius at government offices. "We have to sit down and negotiate with Yukos," said Mazeikiu chairman and Lithuanian Deputy Economy Minister Nerijus Eidukevicius.
Asked when further details of the proposals would come out, he added, "Very quickly ... in about a week. In principle they are ready to go now. We just have to iron out a few details."
The Lithuanian government may pay $75 million for a 9.72 percent stake in Mazeikiu, the Baltic News Service reported, citing Economy Minister Viktor Uspaskich.
The government currently holds 40.6 percent and Yukos controls 53.7 percent.
Yukos said it was still very early days in the discussions.
"I want to clearly say that negotiations have not begun. This was only an exchange of views," Yukos representative Mikhail Yelfimov said at a news conference. He said Yukos executives had had a meeting in Moscow on January 21 to discuss the matter.
"Yukos is waiting for an offer from the Lithuanian government and then we will discuss it," he said.
Yukos took over the refinery from cash-strapped U.S. group Williams in 2002, returning it to profit in 2003.
Along with the Butinge oil terminal and a gas pipeline, it is Lithuania's main energy asset and its fate has always been a sensitive issue for the country.
Yukos also said that supplies to the Lithuanian refiner were continuing as normal -- despite reports in the Lithuanian media at the weekend.
"Talk that Yukos is having trouble providing supplies is untrue," Yelfimov said. "We can meet our commitments."
Lithuanian daily Lietuvos Rytas reported that Mazeikiu no longer received crude oil from Yukos but was importing it from other Russian suppliers.
Mazeikiu information director Giedrius Karsokas said, however, that supplies were being received and that the refinery was working at full strength.
The newspaper report said that Yukos subsidiary Samaraneftegaz was not implementing its contractual obligations to supply 4.8 million tons of crude oil to Mazeikiu annually. Mazeikiu expects to refine 9 million tons of oil this year.
Mazeikiu reported sharply higher nine-month profits in October, boosted by additional volumes from Russia and higher refining margins.
NIGERIA
First Private Refinery Set to Take-Off in Ogun State, Nigeria
Arrangements for the flagging off of Nigeria’s first private refinery will soon be concluded, as a high-powered team of American investors and state officials visits Nigeria from January 24 to February 2.
The visit is a follow-up to recent negotiations between Oil & Gas Consult International Limited, promoters of the refinery and its international and strategic and financial partners led by Premier Energy Group LLC.
The visiting delegation will comprise 14 members of the underwriters group of partners including a member of Premier’s Board of Directors.
The delegation will undertake site assessment of the proposed refinery, being the final stage prior to construction scheduled to begin in February 2005. The refinery will be sited near the town of Ipokia, Ipokia Local Government, Ogun State, and will have a minimum capacity of 100,000 barrels per day (bpd).
Premier Energy Group LLC is registered as a limited liability corporation in the state of Delaware, USA, and provides strategic support to the emergence of a modern and competitive energy sector in developing countries through the provision of private capital, technology and leadership.
It operates through strategic partnerships with other international firms to foster the exchange of technology, information and investment opportunities. The partnership between Oil & Gas Consult International Limited and Premier will lead to the transfer of private capital for the construction of an ultra-modern petrochemical complex consistent with government policies to liberalize the energy sector as a means of reducing dependency on imported fuel and facilitating greater stability in refined products for both industrial and domestic use.
In addition to the site visit at Ipokia, the delegation will visit the Governor of Ogun State, Otunba Gbenga Daniel as well as officials of the Nigeria National Petroleum Corporation (NNPC) and Department of Petroleum Resources (DPR). The team will also hold discussions with various stakeholders, including the Presidential Adviser on Petroleum Resources, the United States Ambassador in Nigeria as well as the Alake of Egbaland and the traditional ruler of Ipokia.
SUDAN
ONGC Lays $156 Million Petro Pipeline in Sudan
ONGC is laying a 741 kilometer pipeline to transport a variety of petroleum products to Port Sudan on the Red Sea. This is ONGC's first engineering project abroad.
A ground breaking ceremony at Khartoum in Sudan was also a path-breaker for ONGC. The company is laying a 741 kilometer pipeline to transport a variety of petroleum products to Port Sudan on the Red Sea. This is ONGC's first engineering project abroad. It got the job by financing the entire cost of $156 million.
Sanjeev Kakran, Project Coordinator, ONGC Videsh said, "Sudan approached India to finance the project and we did it as a good will gesture."
ONGC has subcontracted the pipeline-laying work to Dodsal, a Khilachand group company based in Dubai. It has to be completed in nine months but ONGC hopes to shave off some of the execution time. The Sudanese now want ONGC to expand a refinery in Port Sudan in partnership with the Chinese.
Omer Mohamed Kheir, Secretary General, Sudanese Petroleum Corp said, "Indian companies have good expertise and technology. And we think they need to come to Sudan. There are a lot of opportunities. India and Sudan have deep rooted relations."
An hour and a half from Khartoum by air in Southern Sudan are the Heglig oil fields, Sudan's biggest and the most productive so far. ONGC has invested close to a billion dollars for a 25% oil-sharing stake in a production company that has Sudanese, Malaysian and Chinese national petroleum companies as partners. The three blocks that ONGC jointly operates produce more oil than Bombay High.
Awad al-Jazz, Sudanese Minister for Energy and Mining said, "This country is open. Through your media we would like to throw open invitation to all India to invest here."
Sudan is in a hurry to make up for lost time. A civil war in Southern Sudan just across the Heglig Oil fields came to an end with an agreement with the rebels on Jan 9, after 21 years of fighting.
Sudan has large sedimentary basins that are unexplored yet and the presumption is that they contain huge deposits of oil. This year Sudan will produce half a million barrels. Because of its choppy relations with the West, Sudan has invited Asia's national oil companies, Petronas of Malaysia, China petroleum and ONGC to do the exploration and production. But Sudan says it has not closed the doors on anyone, everybody is free to compete.
ONGC to Build $1.2bn Refinery in Sudan
Malaysia's Petronas had given state-run ONGC a tough time while acquiring a stake in Sudan's Greater Nile Oil project. Nearly three years later, India's flagship explorer has taken sweet revenge by elbowing out Malaysian firms from a $1.2 billion refinery project in the African country.
ONGC will set up the refinery at Port au Sudan with a capacity to process 100,000 million barrels a day, aimed at exporting products to deficit south and east African economies.
The job had initially been given to Malaysian firms but Khartoum later changed its mind in favour of ONGC, which is also laying a 741-km product pipeline from the Khartoum refinery to Port au Sudan.
ONGC will finance the project on a non-recourse basis. This means that the investment risk will not impact the company's books and investors are putting in money because ONGC says it's a good project.
"This will be the largest non-recourse finance ever raised by an Indian company. We are getting Indian and European banking and financial institutions to fund the projects,": ONGC chairman Subir Raha said on the sidelines of a conference on corporate social responsibility. ONGC will build refinery on a BOT (build, operate, transfer) basis and is expected to complete the project in about 32 months from the signing of a formal concession agreement.
The pipeline will cost $200
million, and will wheel petrol, diesel and other white products like kerosene
and fuel oil for exports from the Khartoum refinery to Port au Sudan.
RUSSIA
Sibneft Retains Shell Global Solutions to Boost Omsk Refinery Performance
Sibneft and Shell Global Solutions have entered into a four-year agreement whereby Shell Global Solutions will provide operational and technical services support for the Omsk Refinery as part of an overall performance improvement program. This comprehensive program encompasses most aspects of managing and maintaining the refinery and follows the completion of a technical audit of the facility conducted by Shell Global Solutions in 2003.
The Omsk Refinery performance improvement program is designed to bolster the refinery’s operational and economic results while overhauling its management systems. Sibneft plans to implement a large number of technical and business solutions including Shell Global Solutions’ MERIT refinery maintenance program, all of which will increase efficiency and reduce operating costs and energy consumption. Sibneft will also use Shell Global Solutions’ proprietary software tools to help management more effectively control and monitor refinery performance and develop forward-looking investment plans.
“The Omsk Refinery is already regarded as one of the most efficient and technologically-advanced in Russia,” said Sibneft president Eugene Shvidler. “We expect this comprehensive program, with the involvement of Shell Global Solutions, will help to extend the Omsk Refinery’s industry leadership and competitiveness by finding new ways to reduce costs and streamline business practices.”
Greg Lewin, president, Shell Global Solutions International BV, commented: “This is the first time that such a program has been undertaken in the Russian downstream business, and we’re delighted to be integral to it. We are confident that our team will help Sibneft’s Omsk Refinery realize an improvement in overall operating performance and energy usage efficiency that, in turn, will lead to a significant reduction in operating costs and improvements on margins.”
Located in Western Siberia, the Omsk Refinery is among Russia’s largest fuel and petrochemical suppliers, refining over 14 million tons of oil per year (285,000 barrels per day).
IRAN
Development, Renovation of Abadan Oil Refinery to Come on Stream Soon
Abadan Oil Refinery Development and Renovation Project with the aim of boosting the output capacity of its Unit 85 from the current 130,000 barrels per day (bpd) to the 180,000 bpd target output will come on stream by the spring next year.
“Parts of the Phase I of the project aimed at increasing its capacity to up to 50,000 bpd will be operational by the end of the current Iranian year (ending March 20, 2005) the whole project however, will be operational by the spring next year”, noted Mohammad Reza Musavi, the project contractor.
He also added that, Phase I of the development and renovation of Abadan Oil Refinery which includes enhancing the output capacity of the vacuum distillation and viscosity reduction units by 70,000 and 25,000 bpd respectively will be also fully operational by the time.
Referring to the vehicle’s fuel shortage in the country and the quantity of its production in the refinery he stated, “Currently, production of the fuel oil in the refinery has decreased but, its gasoline output has increased instead.”
Elsewhere in his remarks, the contractor of the renovation of Abadan Oil Refinery referred to the passing of 100 years since its construction and the damages the plant suffered during the eight–year Iran–Iraq war (1980- 1988) and deemed the renovation, improvement and upgrading of the systems and equipments of the refinery as necessary.
SAUDI ARABIA
Saudi Arabia Invites Indian Companies to Set Up Oil Refineries
On January 5, Saudi Arabia invited Indian companies to set up oil refineries there, mainly for the export of petroleum products to third-world countries, and has cleared Oil and Natural Gas Corporation’s bidding for gas-field development projects.
Senior officials of Saudi Aramco, the Saudi Arabian national oil company, will visit New Delhi later in January for talks with ONGC and Indian Oil Corporation to finalize a joint venture for building a refinery in the world’s largest oil producing country.
The oil-rich Gulf nation is also keen on entering downstream oil refining and retailing market in India and will explore setting up of a refinery-cum-petrochemicals plant.
Saudi Arabian oil minister Ali Al Niami discussed Aiyar mutual investment opportunities with petroleum minister Mani Shankar.
“We discussed opportunities for investment in the two countries. We may invest in India and would welcome investment by Indian companies in Saudi Arabia,” he told reporters after the meeting with Aiyar.
Niami was there to attend a day-long roundtable of major Gulf oil producers and main Asian consumers.
“They (Saudi Arabia) are keen on setting up an export refinery with Indian companies,” said petroleum secretary S. C. Tripathi.
Officials attending the meeting said New Delhi also invited Saudi Aramco to set up a refinery in India that would refine crude oil produced by Gulf producers and the Indo-Saudi joint venture could retail petroleum and petrochemicals produced by the unit in India and neighboring countries.
Tripathi said the Saudi Arabian offer was interesting and details would be discussed with Saudi Aramco officials.
Saudi Arabia has also pre-qualified ONGC for developing its gas fields.
“ONGC has been invited to bid for development of a cluster of gas fields in Saudi Arabia,” a senior official said, adding the Saudi Arabian side did not indicate the dates when they would be inviting bids for the project.
Saudi Arabia sold 23.55 million tones of crude oil to India in 2003-04 and was keen to share the $15-billion oil market here.
Saudi Aramco was one of the bidders for acquiring the government’s stake in Hindustan Petroleum Corp Limited. However, the privatization of the country’s third largest refining and marketing company never took place.
Saudi Arabia is also willing to extend long-term crude supply contracts to India but wanted New Delhi to enter into strict take-or-pay contracts.
Saudi Aramco has offered Indian Petroleum Companies a Stake in Huge Refinery Plans
Company president and chief executive officer Abdullah S. Jumah told reporters at Petrotech-2005 that Saudi Aramco would set up a refinery to process 4,50,000 barrels of crude per day and to export higher value-added petroleum products. “We would like Indian companies to participate in the project,” he added.
Saudi Arabia is India’s largest supplier of crude, accounting for over 23 million tonnes of the 90 million tonnes imported in 2003-04. “We are supplying 4,50,000 barrels daily to India and want to increase it further. India is a very important market and we will continue to supply it,” Jumah said.
Asked if his company would settle for long-term contracts with India, Jumah said the existing one-year deals are “evergreen” arrangements that will be renewed.
Jumah said his company was also looking for opportunities to invest in India. “We were going to bid for the Hindustan Petroleum when it was being privatized but this did not happen,” he said, referring to the manner in which divestment was stalled.
The Saudi Aramco chief did not mention why his firm left Indian Oil in the lurch by backing out of Paradip refinery at the last minute.
The abrupt pullout delayed the project, which had to be reworked; even the clearance process started afresh.
According to Jumah, Saudi Aramco sells close to 50 per cent of the 9 million barrels of crude that it produces every day to Asian countries. “Our oil installations are prepared for all kinds of industrial incidents. We have built-in redundancies. Our own security forces and that of the Saudi Arabian government guard facilities against terrorist attacks,” he explained.
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