july 05 update

An agreement between Tyco Valves & Controls and Chevron Texaco to manage the performance of pressure relief valves at ChevronTexaco’s Pembrokeshire oil refinery has improved valve reliability on site, increased the intervals between valve servicing by two-thirds, and produced cost savings on plant availability and production.

The joint project has also achieved 100% valve compliancy with health and safety regulations and Tyco’s contract has been now renewed for a further three years. Tyco was selected by Chevron Texaco in 1998 to instigate a root based inspection program to ensure the reliability of pressure relief valves on site, as well as providing full time on-site coordination and spares for all 2,729 pressure safety relief valves at the plant.

By implementing Tyco’s performance history database software (PhD) the partnership has had success in collating performance history data on each valve, and sc. This has increased efficiency on site and led to a significant reduction in maintenance costs and in spares stock.

A root based inspection (RBI) program has improved valve reliability at the plant and has resulted in far fewer failures between service intervals. The program covers complete disassembly of each valve and inspection to OEM standards.

The partnership also instigated a root cause failure analysis (RCFA) program to identify the cause of valve non-conformity. This has enabled plant engineers to identify and remove problem valves, and has highlighted areas for improved installation practices in order to prevent recurrence.

Project coordinator, Andrew Evans says: “Since the first quarter of 2004 we have successfully maintained a zero overdue pressure relief valve listing site wide, which is an excellent achievement. This means that every single pressure relief valve is now fully compliant with the health and safety executive regulations.”

Tyco’s valve management contract deals primarily with pressure relief, thermal relief, pressure vacuum and vacuum safety valves. Tyco also provides new, replacement valves, including instrumentation, gate and ball valves to Texaco Chevron.

In addition to the valve asset management services that have been implemented, Tyco Valves & Control has provided ChevronTexaco staff with detailed guidance on safety codes and practices, and comprehensive training on pressure relief valve repair.

$325 Million Laurel Refinery Project Planned

Work on $325 million in improvements is expected to begin next year at the CHS Refinery in Laurel, MT, manager Pat Kimmet said.

Refinery officials hope construction will be complete by early 2008, Kimmet said, but the date has not been firmly established because they are still seeking the proper permits.

Most of the money for the project will be spent on the construction of a coker, which breaks down heavier oils into lighter petroleum products. Petroleum coke is usually sold for power generation.

The coker will allow the refinery to convert more crude oil faster, Kimmet said.

"We determined that a coker will better meet our customers' needs," Kimmet said. "This will create additional jobs for Montanans and produce additional gasoline and diesel fuel without increasing crude processing capacity."

CHS Inc. is owned by farmers, ranchers and cooperatives in the Midwest and Western United States, and they are funding the project, he said.

The addition will be built on existing property and old trailers and buildings will be removed before construction begins, Kimmet said.

The Exxon and ConocoPhillips refineries in Billings have a coker, and this will make the CHS refinery more compatible, he said.

Refinery officials said this is the largest project in the history of the Laurel refinery. It follows a recently completed $87.5 million environmental upgrade that produces a federally required ultra-low-sulfur diesel, Kimmet said.

"We have a longstanding history of involvement in both environmental upgrades and technological upgrades in our refinery," Kimmet said.

The refinery has more than 250 employees, and Kimmet said he expects more positions to be added.

Bay Area Air District Expected to Adopt Regulation on Refinery Flares

The Bay Area is expected to become the first region in the nation to regulate refinery flaring, the highly controversial discharge of toxic gases through an open flame.

Los Angeles-area refineries could fall under similar regulations before the end of the year, and environmentalists say other areas of the country might follow suit because California frequently takes the lead in environmental protection measures.

"We are encouraging other local districts to take similar (measures)," said Amy Zimpfer, the U.S. Environmental Protection Agency's regional associate air division director.

Refinery flares are designed as safety devices to burn off gases during emergency pressure buildups and other unusual events. But for years, community activists argued that the fiery, smoky flaring events are too easily triggered by refineries looking to cut costs.

This has been particularly true in Richmond, where environmental and citizen activist groups have long advocated for changes based on fears about refinery pollution and resulting respiratory illnesses for residents who live near the industrial facilities.

Those claims were reinforced in 2000, when the EPA issued an enforcement alert saying that flaring was occurring frequently in "routine, non-emergency situations or ... to bypass pollution control equipment."

"The concern was that flaring was happening too frequently throughout the country, in particular in the Bay Area," said Zimpfer. "A lot of refineries in the Bay Area are close to where people live."

The Bay Area Air Quality Management District was expected to adopt the regulations July 20 at its meeting in San Francisco.

The proposed rules, which would go into effect in November 2006, would require refineries to develop plans to minimize flaring. Those plans are to be updated each year, and regulators would require refineries to implement all feasible flare-prevention measures.

Taken together, the Bay Area refineries, owned by Shell, Tesoro, ConocoPhillips, Valero and Chevron, represent nearly 40 percent of the refining capacity in California, enough to process 33 million gallons of crude oil each day.

Environmentalists and refinery officials are generally supportive of the proposed regulations, with caveats.

"If this rule goes forward as written -- and it's not tinkered with -- we believe we can move forward to implementation," said Dennis Bolt, the Bay Area coordinator for the Western States Petroleum Association, a trade group.

Environmentalists are asking for adjustments that would make the rule more stringent.

"We basically consider the proposed rule a victory, but the rule definitely could be stronger," said Adrienne Bloch, attorney for Communities for a Better Environment.

On July 19, Bloch's organization released a report based on data from air quality monitors around the region's refineries. The report shows that flaring causes sulfur pollution to spike in communities around four of the region's five refineries, with the Shell refinery in Martinez being the exception, said CBE scientist Greg Karras.

Karras said his group's report shows that Bay Area regulators should limit the sulfur content of gas that flows to flares. Such a measure is being considered in Southern California but so far appears unlikely to be included in the Bay Area's rules.

For years, flares were the subject of major concern among county health officials and activists in Richmond and other refinery communities.

Still, flares received little attention from regulators here until the Bay Area air district was embarrassed by state regulators who rejected the district's 2001 smog-cutting plan. State regulators at the time agreed with environmentalists that the district had improperly ignored refinery flares and other pollution sources that might be targeted for emission reductions.

In response, the air district agreed to study flaring at the region's refineries to check its assumption that flares were, in the big picture, insignificant sources of smog-forming pollution. The December 2002 study showed huge emissions from flares, but the district now says that study overestimated flaring, in part because of faulty data submitted by the refineries.

Since then, flaring has declined dramatically because the Tesoro Golden Eagle refinery east of Martinez installed new compressors that reduced the need for flaring and because refinery managers were responding to public pressure.

Settlements and Fines are Price of Vigilance after Delaware Refinery's Failings

The latest news about problems at the refinery at Delaware City involves an apparent settlement since the fatal July 2001 explosion that killed a contract worker. The settlement could be a $70 million penalty for corporate negligence and pollution.

Motiva Enterprises, then the owner of the refinery, has already paid that much in individual lawsuits and fines. And those penalties are more than justified.

Delaware has strengthened laws to impose criminal penalties for willful disregard of environmental regulations. One can only hope refinery operators are being increasingly watchful.

The complicated nature of the refinery operations will doubtlessly result in some noxious releases into the air and water. One cannot expect a completely error-free plant. The state Department of Natural Resources and Environmental Control needs to keep watching and impose penalties when negligence is found. It should not waive any penalties related to previous problems.

Now, Valero Energy, is buying the refinery. The federal government, DNREC and other agencies and private groups should make sure the new owners complete the agreed-upon improvements that should reduce the possibility of an accident.

Valero, like other operators of the refinery over the years, has promised it will be a good neighbor.

Nipomo Refinery Billed $900,000 for Air Pollution

ConocoPhillips will pay $900,000 in fines for exceeding air pollution limits at its Nipomo Mesa refinery.

The refinery emitted more than 33 tons of excess particulate matter from the plant's petroleum coke refinement facility from April to August 2004, an investigation by county air pollution control officials found.

The majority of the $900,000 settlement will be used to fund pollution control programs to reduce emissions and improve air quality in areas near the refinery and around the South County, where the pollution had the greatest effect. The closer people live or work to the Nipomo Mesa plant, the more likely they are to have been affected by the pollution.

Particulate pollution is a harmful air contaminant that can be inhaled deeply into the lungs and cause tissue damage and respiratory ailments.

Problems like the one at the refinery concern air quality officials because the county exceeds state standards for particulates, the sources of which include construction and demolition, green-waste burning and windblown dust.

The problem at the refinery occurred in a facility that processes petroleum coke, a refining by-product that is similar to coal, said Jim Anderson, the plant's environmental manager. The refining process remained within its pollution limits, the investigation found. But a large fan used in the facility was corroding, and the rust particles it was shedding caused the violation.

Anderson said he is confident the problem is fixed, and the oil company is working with county officials to prevent the violations from recurring. Air officials also have required increased testing on a quarterly basis to better track emissions from the plant.

The refinery takes crude oil from local onshore and offshore sources and performs initial refinement. The semi-refined produce is then piped to Northern California, where it is turned into various types of gasoline and fuel products.

The plant refines an average of 44,440 barrels, or more than 1.8 million gallons, of crude oil a day.

BP Texas City Refinery Unit Shut with Limited Impact

A fire at BP Plc.'s giant Texas City refinery, the country's third-largest, was put under control on July 28, forcing down a secondary unit but unlikely to disrupt production elsewhere at the plant, the company said.

The reason for the blast at the 60,000 barrel-per-day (bpd) residual hydrotreating unit, which caused no known injuries, was not known, said a company spokeswoman. But it appeared to be an internal event and not an act of terrorism.

"I doubt that it would affect production. At this time I can't say that for sure," BP <BP.L> spokeswoman Annie Smith said, adding it was impossible to say when the unit might be returned to service.

The fire came four months after an explosion at a different unit killed 15 workers and injured 170 others. The March incident came a year after an explosion and fire at the 460,000-bpd refinery, which did not cause any deaths or serious injuries.

Oil prices vaulted over $60 a barrel after the latest blast, adding to earlier gains on news of an unrelated fire at a Murphy Oil <MUR.N> refining unit in Louisiana, which fanned fears that refiners already running at nearly maximum rates might be hard pressed to meet rising fuel demand.

U.S. crude oil was up 41 cents at $60.35 a barrel at 0529 GMT.

Firefighters from Texas City and the nearby Marathon Oil <MRO.N> and Valero Energy <VLO.N> refineries were battling the blaze along with BP workers.

The fire was brought under control by 8 p.m. CDT (0100 GMT), just two hours after the explosion.

Smith said the fire was still burning as of 12 midnight CDT (0500 GMT), adding that the fire would have to be out before BP could check to see if the site was safe enough to enter to assess damage.

The fire was being allowed to burn out as of 10 p.m. CDT (0300 GMT). The flow of residue, a heavy, gunky oil, to the unit was stopped shortly after the blast and the remaining fuel in the unit was in a "a controlled burn."

A residue hydrotreater uses hydrogen under high pressure and high heat to reduce sulphur content in fuel oil and recover refinable feedstocks from what is normally considered the waste of the refining process.

The blast on March 23 had minimal impact on operations, but forced BP, the world's second-largest oil company by market capitalisation, to take a $700 million charge on its second-quarter earnings.

It blamed that accident on junior employees but labor unions said it was due to procedural errors and design.

The March explosion happened as workers were restarting an octane-enhancing unit after an overhaul.

Texas City officials had ordered residents to remain indoors as the fire was emitting large amounts of black smoke, possibly containing hydrogen sulfide, which irritates the lungs in small quantities and can cause unconsciousness in large quantities.

BP said air monitoring revealed no indications that harmful substances were being released by the fire, but a sulfur smell was noticed.

CANADA

InterOil Corp. Adds Exploration, Refinery Staff

InterOil Corp., Toronto, appointed Gerry Gilbert as general manager exploration. His 37-year career includes stints with Transworld Exploration & Production, Western Atlas, Baker Hughes, and Halliburton.

Rebecca Alivio was appointed general manager of the 32,500 b/d Port Moresby, Papua New Guinea, refinery. She was with the Caltex Group, having served in the Philippines, Singapore, Bahrain, and Dallas during 25 years.

VENEZUELA

Venezuela Looks to Revamp Uruguay Refinery

Venezuela's state oil company Petroleos de Venezuela S.A. (PDVSA) is looking to upgrade Uruguay's La Teja refinery to process Venezuelan oil in the most recent step to increase oil sales to Latin America, a company official said.

PDVSA refining Chief Alejandro Granado revealed the talks with Uruguay in comments to the state-run Bolivarian News Agency on Wednesday.

"We are having discussions about expanding the (La Teja) refinery and moving to a deep conversion process for heavy Venezuelan crude," Granado was quoted as saying.

The Uruguay refinery talks come as Venezuela's government seeks to strengthen its political influence in Latin America through preferential oil deals.

President Hugo Chavez, a fierce critic of U.S. hegemony in the region, says the oil supply deals will help neighboring countries cut energy costs and improve living standards.

Critics say Chavez is using oil to win political support in the region amid growing tensions with the United States.

Refineries need special units to process Venezuelan crude, which is heavy in sulfur and difficult to process. La Teja has an installed capacity of 50,000 barrels a day.

Earlier this year, Venezuela agreed to supply Uruguay 43,800 barrels of crude oil a day under preferential terms.

Venezuela, the world's No. 5 oil exporter, remains a major supplier of fuel to the United States but has made clear it is looking to diversify its market.

Apart from increasing sales in Latin America, Venezuela's government has discussed plans to build a pipeline through Colombia or rehabilitate a pipeline across the Panama Canal to reach the Pacific for exports to China.

2. ASIA

AUSTRALIA

Australia’s Caltex Plant back at Full Power after Accident

Power to Australia's second largest refinery has been fully restored after it was interrupted when a tower buckled during maintenance.

The Caltex oil refinery at Kurnell, which supplies the bulk of Sydney's petrol, was cut off on the night of July 12 when the steel electricity tower folded over, bringing down transmission lines.

The company said a series of new poles were erected alongside the damaged tower, with power lines transferred by crane to the replacement poles.

Caltex had already been able to resume partial fuel production following the restart of some of the units that were shut down.

EnergyAustralia is in the final stages of carrying out a $5 million upgrade to secure electricity supply to the Kurnell peninsula.

An investigation is being carried out into the accident.

CHINA

Work Starts on Fujian Oil Refinery, Ethylene Cracker

Work on the Fujian oil refinery and ethylene joint venture project, the largest of its kind in China, has commenced in Quanzhou, a port city located in East China's Fujian Province.

The project is being jointly built by the Fujian Refinery and Chemical Co Ltd, Exxon Mobil (China) Petrochemical Co Ltd, and Saudi Arabian Overseas Oil Company. The world-standard petrochemical integral project is scheduled for completion and production in 2008.

Upon completion, the Fujian Refinery and Chemical Co Ltd, a 50%-50% joint venture between Sinopec and Fujian Provincial Petroleum and Chemical Industry Co Ltd with an annual oil refining capacity of four million tons, will add eight million tons of oil refining capacity, bringing the total up to 12 million tons. With crude oil supplied by Saudi Arabian Oil Company, the project will be capable of refining sulfur-bearing crude.

Meanwhile, the project will build an 800,000-ton ethylene cracking device, a 650,000-ton polyethylene device, a 400,000-ton polypropylene device, and a one million-ton arene device. In addition, it will also build a 300,000-ton crude oil wharf and other supporting public facilities.

Sinopec, Exxon Mobil (China) Petrochemical Co Ltd and Saudi Arabian Overseas Oil Company are making preparations for setting up an oil product marketing joint venture in Fujian Province, which will mainly market the oil products produced by the refinery and ethylene integrated joint venture.

Building of the refinery and ethylene integrated project indicates that one more large petrochemical base is rising rapidly in southeastern Fujian Province of China, after Qilu Petrochemical, Yanshan Petrochemical, Shanghai Petrochemical, Jinling Petrochemical and Yangzi Petrochemical.

As the largest investment project in Fujian, the project is expected to bolster the development of middle- and down-stream petrochemical, resin, plastic, new-type materials, light industry, textile, electronics, automobile and food industries in the province.

Saudi Aramco, Exxon and Sinopec Ink $3.5b Refinery Deal

Saudi Aramco, ExxonMobil Corp and top Asian refiner Sinopec signed a $3.5 billion deal to expand a refinery in south China, sealing what they called the country's largest oil project.

The deal gives Exxon, the world's top oil firm, and Saudi Aramco a foothold in China's insular 6.2 million bpd refining sector, now dominated by state giants Sinopec and PetroChina.

China, the world's number two oil consumer is trying to raise its refining capacity to feed a racing economy that grew 9.4 percent in the first quarter after expanding 9.5 percent in 2004.

Beijing also has to address surging imports, now exceeding 40 percent of its crude oil demand, prompting it to tie up with oil producing nations.

The agreement will triple the capacity of a refinery in Fujian province to 12 million tons per year (tpy) the equivalent of 230,000 barrels per day and add an 800,000-tpy ethylene cracker, the companies said in a statement.

Several downstream facilities would be built as part of the deal, including a 650,000-tpy polyethylene plant, a 400,000-tpy polypropylene unit and a one million tpy aromatics plant.

Polyethylene and polypropylene are commonly used to produce plastics, while aromatics are used as blending agents in the production of gasoline.

The agreement also gives the foreign partners access to China's protected retail sector, where rivals such as Royal Dutch/Shell Group and France's Total are already active.

"The retail portion is an important part of the project," Exxon chief executive Lee Raymond told reporters on the sidelines of the signing ceremony.

"This is an integrated project in the sense of refining, chemicals and marketing, which makes it unusual," he added

Sinochem Bids again for Incheon Refinery

China National Chemical Import & Export Co. (Sinochem) is again bidding on South Korea's Incheon Oil Refinery Co. Ltd. Other bidders include subsidiaries of Citigroup Venture Capital, Morgan Stanley Emerging Markets Inc., and local refiners SK Corp, GS Caltex, and S-Oil.

The renewed auction for Incheon, which is under court receivership, comes 5 months after its creditors, led by Citigroup, rejected as too small a 680 billion won ($5.09 billion) offer from Sinochem for the refiner in January. Creditors reportedly expected at least 750 billion won.

Incheon went into receivership in 2001. Sales at the 270,000 b/d refinery rose 28% to 2.5 trillion won in 2004, while operating profit reached 164.5 billion won.

The court plans to select a preferred bidder for exclusive talks by Aug. 18 and grant 1-month due diligence before closing the deal by September.

INDIA

Rajasthan to have Rs.9000 Cr refinery

With the identification of 50 hydrocarbon wells, the Rajasthan Government would soon set up a 1.5 million tonne capacity oil refinery, the State's Industries Minister Narpat Singh Rajvi said July 19.

Rajvi said the rs.9000 crore refinery would have ancillary units to the tune of rs.5000 crore, since the wells have abundant oil reserves in Parmar district, creating a wave of interest among big investors.

Shell may build Refinery in India

Royal Dutch/Shell may build a refinery in India while Essar Oil will construct a 210,000 barrels-a-day unit next year, adding to the country's exportable surplus of oil products, company officials said on July 7.

Domestic demand has contracted in recent months while several companies such as Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd are expanding capacity in step with the government's aim to make India a large exporter.

India's oil product exports rose 20 per cent in 2004/05. In May, the country exported 1.26 million tonnes of refined products, 11 per cent lower than a year ago.

"We will export 30-40 per cent of our output," Esaar Oil's director, Prashant Ruia, told an oil and gas conference.

The possible new refinery by Royal Dutch/Shell, which built India's second terminal to import liquefied natural gas and is setting up petrol stations, would be the first by a global oil giant in India.

"Clearly, India is a priority. There is no reason to say we won't be looking at a manufacturing asset either on our own or a joint venture," said Vikram Mehta, Shell India's country head.

Analysts’ say new capacities are encouraged by India's pricing policy, which allows refiners large refining margins but squeezes retailers with low state-administered fuel prices.

"As long as we give these world-beating margins, anybody can set up a refinery here," said T N R Rao, an energy specialist and former secretary in India's oil ministry.

He said India's oil demand was tilted heavily towards middle distillates such as diesel but production of these products also increased the output of light and heavy products, which had to be exported.

"There is a mismatch between India's supply barrel and demand barrel. No crude barrel can satisfy our demand barrel. So there is a surplus of products," Rao said.

Oil futures prices have climbed above $62 a barrel as surging demand growth in Asian countries and the United States strains global refining capacity for transport fuels.

No new refineries have been built in the United States for nearly 30 years, while environmental and planning constraints are also likely to limit refining expansion in Europe.

But India's refining capacity has doubled in the last six years and is expected to rise another 12 per cent by 2007.

IOC to Begin Work in Orissa Refinery Soon

Indian Oil Corporation has said that a detailed feasibility study on its proposed 15 million tonnes per annum refinery and petrochemicals complex at Paradip in Orissa would be ready by August and it hopes to commence construction soon.

"We will get the feasibility study by August. We are committed to completing the project by 2009. The project is expected to cost nearly Rs 15,000 crore," the IOC Director (Refineries), Jaspal Singh, said on July 13.

The company is aiming at the export markets in China and South-East Asia for both refined products and petrochemicals from the proposed refinery. Interestingly, IOC has been going slow on the Paradip project for the last four years in view of a glut in the refining industry in the country. But with continued demand, the company has decided to go ahead with the project with funds coming mostly from internal accruals. The company's focus right now is on the Panipat refinery, where it has several streams of products.

At Panipat, an integrated paraxylene and purified terephthallic acid (PX/PTA) unit is expected to go on stream by October at a cost of Rs 5,100 crore. In addition, a naphtha cracker and downstream polymer units at a cost of Rs 6,300 crore would be ready by 2008, Singh said.

"We propose to invest Rs 25,000 crore over the next eight years in our petrochemicals business. At the same time, we want to focus more on refining the heavy grade, high sulphur crude oil that has the potential to increase refining margins," Singh said.

The average refining margins for IOC have gone up from $5.3 per barrel last year to $6.3 at present and are expected to stay "robust" in the future.

With the difference between heavy and sweet crude ranging at $5-6 per barrel, the company feels it can further increase its refining margins by processing more of the cheaper high-sulphur, heavy crude.

Till the recent upward revision in petrol and diesel prices, all refiners had been taking a hit on their profitability in spite of higher refining margins.

"But I feel that (depressed petrol and diesel prices) was a temporary phenomenon and we will soon have product prices that reflect international price movements of crude," he said.

IOC Clears Rs 3,940 cr for Gujarat Refinery Upgrade

IOC has accorded ‘in principle’ approval for Rs 3,940 crore upgradation project at Gujarat Refinery at Koyali, near here, including Motor Spirit (MS) and high speed diesel (HSD) quality improvement to Euro-III and Euro-IV equivalent specification.

The capital cost of the project would be Rs 3,940 crore, including about Rs 1,665 crore towards MS/HSD quality improvement, Director (Refineries) of IOC, Jaspal Singh said here.

Speaking about the Linear Alky Benzene (LAB) project undertaken at the Gujarat Refinery, Singh said the project, worth Rs 1,200 crore, will be completed in 23 months time schedule.

In its first phase of the project, only 60 per cent of the total production capacity has been reached and by the end of this year, production levels are expected to reach its full capacity, added Singh.

India’s Govt to Train Refiners to Generate more Kerosene Output

The Government of India plans to send a missive to all oil refiners, Reliance Industries and Mangalore Refinery and Petrochemicals Ltd in particular, to produce more kerosene to meet public distribution system (PDS) demand.

An order may to be issued in next few days "directing oil refining companies, including joint venture (MRPL) and private sector companies (Reliance), to produce seven per cent of their total refinery crude throughput as kerosene to maintain an adequate supply of kerosene in the country," an official said.

India had to import kerosene in 2005 as domestic output was short of demand. Indian Oil Corporation had accused Reliance and MRPL of not supplying enough fuel to meet the PDS requirement and instead exporting jet kero and aviation turbine fuel (ATF), which are similar to kerosene.

The petroleum ministry first sought a ban on export of jet kero and ATF but with commerce ministry not obliging, it sought the opinion of law ministry for issuing specific instructions under Essential Commodities Act to refiners.

As per the legal opinion, the Government had the powers to issue directions on maintaining production levels in the public interest, the official said.

INDONESIA

Indonesia to Build New Oil Refinery to overcome Fuel Shortage

The Indonesian government has decided to build a new oil refinery in Tuban, East Java province, in order to overcome possible oil shortages in the future, President Susilo Bambang Yudhoyono said in Jakarta July 11.

"We have decided to build a new refinery in Tuban if the exploration and exploitation activities can be carried out both in Cepu, Central Java province and Jeruk field in Madura," Susilo was quoted by the Antara news agency as saying.

He said that the construction of a new refinery would be one of the solutions to overcome oil shortages in the future.

He said that if the new refinery was built in Tuban, more fuel depots would also be set up to support the fuel distribution system.

The government has issued 17 permits to build oil refineries. The potential investors, however, have put off the plan due to the uncompetitive price of oil at home.

"We want to push them to construct the refinery," he said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro estimated that Tuban's capacity would be about 150,000 to 200,000 barrels per day.

Sinopec in Refinery Invest Talks With Pertamina

China Petrochemical Corp., or Sinopec Group, is in talks with Indonesian state oil company Pertamina (PTM.YY) to win the right to explore for oil and gas in the archipelago in return for Chinese investment in a proposed refinery in east Java, reports The Standard, quoting a Sinopec source.

The report says it is uncertain whether Sinopec Group or its Hong Kong-listed arm, China Petroleum & Chemical Corp. (SNP), would be the entity making the investment.

Sinopec Group, which carries out most of the company's exploration and production overseas, hopes to participate in exploring areas where Pertamina holds concessions, which could include Sumatra, Java and Sulawesi, the Standard says.

"Pertamina needs capital to build its refineries and we want to participate in exploration projects in Indonesia," the report quotes the Sinopec source as saying. "But we are not likely to invest in the project itself if we can't obtain production-sharing contracts in some of these blocks."

The source said, "The Indonesian investment climate can be tough...We want some sort of guarantee, perhaps in the form of equity oil, in return for our investment in the refinery."

PAKISTAN

Pakistan Refinery to Review Naphtha Export Plans

Pakistan Refinery Limited (PRL) is going to review its plans next month to either export naphtha separately or join the duo of Attock Refinery Ltd (ARL) and National Refinery Ltd (NRL).

A source in the refinery told The News that the PRL would be reviewing its partnership arrangement in the first week of August following the privatization of the NRL.

He said ARL and NRL would jointly export naphtha while the position of PRL would be decided next month.

The source said that recently NRL/ARL floated a sale tender of naphtha after increasing the parcel size to 35,000 and 42,000 tonnes instead of previous size of 25,000 tonnes.

Prior to the privatization of NRL, PRL was exporting naphtha with NRL with a 70:30 ratio in which the major chunk was exported by the NRL.

Now, he said, with the joining of ARL, which was also a big exporter, it would be seen as what ratio the PRL would be getting if it decides to join the two.

There are certain technical aspects involved with regard to joining the two giants, he said, adding that the first is the cargo/parcel size which has to be decided by the PRL management.

Second is the timing of the cargo as ARL is in Rawalpindi and PRL is in Karachi, furthermore time of production of naphtha is different, he said adding that it would be evaluated and aligned in case the PRL opts for joining the band of ARL-NRL.

Also, the production level of ARL and PRL is not the same, which will also be looked into before reaching any decision, the source said.

The PRL has the tankage facility so it can export separately in case the management decides to go solo in exports, he said adding that presently the joint exports arrangement with the NRL was intact and the cargoes were shipped out as per schedule.

The arrangement would last till August and then it would be seen as to what would be the new arrangement, he said.

PHILIPPINES

Philippine Petron Refinery Workers File Strike Notice

Petron Corp. (PCOR.PH), the largest oil refiner in the Philippines, on July 12 said its labor union, composed of rank and file employees, at its refinery in Bataan province has filed a strike notice with the government's National Conciliation and Mediation Board, or NLRC.

The company said the strike may push through July 14, even after the Department of Labor and Employment tabled the dispute for compulsory arbitration by the NLRC, an agency under the Labor Department. As such, Petron workers on strike would have to return to work until the issue is resolved.

Petron workers cited unfair labor practice, union busting and arbitrary dismissal as reasons for their decision to go on strike.

The company, however, pointed out that with the successful completion of its offsite automation project, which entails the installation of labor saving devices at its refinery, certain positions becoming redundant is both a "natural and legal consequence."

"While the incident will continue to be heard by the Labor Department, we wish to assure our shareholders and customers of uninterrupted supply," said Petron.

NEW ZEALAND

New Zealand Considers Refinery Expansion

New Zealand's oil refinery is considering a big expansion as a world-wide shortage of refining capacity drives fuel prices to new heights.

"The fundamental factor is how much refining capacity is available and how much demand is there," says NZ Refining CEO Thomas Zengerly.

Demand was strong in China, India and the US, but the supply of fuel from refineries was barely sufficient.

As a result, the strong margins earned by refineries would continue.

"The data so far doesn't show a dampening in demand. And it takes time to build new refining capacity. For the next year or the year after, the outlook for refineries is very good."

Refining, near Whangerei, has been reporting exceptional margins since January last year and is on track for a record half-year revenue of at least $120 million, some estimates show.

Last year, the company reported a record profit of $97.5m.

Zengerly said investment being considered would enable the plant to process 20% more crude.

"We intend to go to the board of directors this year with hopefully a good project," he said.

If it got the go-ahead, the extra capacity would be working within three years.

It took a long time to build new refining capacity, he said, but the rest of the world was also busy with expansion.

"It's quite frightening to think how many new refineries have been announced. It could lead to an overpumped market. (The market) is always in cycles."

NZX-listed NZ Refining is majority owned by the four big oil companies - Caltex, BP, Shell and Mobil - and the Marsden Pt operation has helped boost their profits.

Last year, BP made $53.7m, more than double its previous year's profit of $22.6m. Revenue rose 13% to $1.9 billion.

Mobil reported profit of $61.6m, nearly double 2003's $33m. Its revenue rose 7% to $1.5b.

Caltex and Shell are yet to file their latest figures.

Shares in NZ Refining have rocketed from 20 cents a year ago to 46c the first week of July, doubling the company's market value to $1.1b.

THAILAND

Rayong Refinery IPO Deal Likely In November

PTT PCL (PTT.TH), Thailand's largest oil and gas conglomerate, said July 18 its unit Rayong Refinery Co. is likely to launch an initial public offering in November after it takes over Star Petroleum Refining Co.

PTT President Prasert Bunsumpun told reporters that he expects the market capitalization of the enlarged Rayong Refinery to be close to that of Thai Oil PCL (TOP.TH), PTT's other refinery unit which launched an IPO late last year.

"They will likely have a similar market capitalization, as their production capacity will be eventually about the same," Prasert said.

Thai Oil's market capitalization is currently close to THB120 billion.

Star Petroleum and Rayong Refinery each have a daily capacity of around 150,000 barrels of crude. Meanwhile, Thai Oil's production capacity is expected to reach 270,000 barrels a day within two years, Prasert said.

According to the acquisition plan announced last month, PTT's wholly-owned unit Rayong Refinery will take over Star Petroleum Refining, 64%-owned by ChevronTexaco Corp. (CVX) and 36%-owned by PTT.

Prasert said that PTT and ChevronTexaco have signed a memorandum of understanding on the takeover plan, and expect to finalize other details by August.

After the takeover, PTT and ChevronTexaco will each own 35% of the enlarged Rayong Refinery, while the remaining 30% will be offered to the public via an IPO.

A senior PTT official said the financial adviser to the IPO deal is likely to be picked this month.

3. EUROPE / AFRICA / MIDDLE EAST

BULGARIA

Bulgaria’s Plama Pleven Oil Refinery Bankrupts 2nd Time

The oil refinery Plama Pleven was declared bankrupt for the second time, media reported.

Pleve-based petroleum refinery Plama, bankrupted back in 1998 when a reviving plan was implemented and the company was stabilized, but under the new regulations such plan could not be used now.

The creditors approached the Pleven court over debts worth over BGN 5 M that have been calculated for the period 1999-2001.

The company's assets will be evaluated by experts and then sold out.

The refinery was opened in 1971. Over the years the installations of the Plama refinery are reconstructed and modernized in view of the production of quality goods for the changing international expectations and new technologies.

LITHUANIA

Lithuania, Yukos Complete Talks over Disputed Stake in Mazeikiu Refinery

Lithuania said on July 18 it had concluded talks with Russian oil company Yukos over a disputed 10 percent key stake in the Mazeikiu Nafta refinery, although the outcome of deliberations is yet to be made public, the Reuters news agency reports.

Lithuania holds 40.66 percent of Mazeikiu shares, while Yukos has a controlling 53.7 percent of the shares in the Baltic’s only refinery.

Both sides say they had the right to buy an extra 10 percent from each other — in a protracted dispute whose outcome could potentially hand the control of Mazeikiu to the Lithuanian government.

Mazeikiu Nafta board chairman Nerijus Eidukevicius, who is also the Baltic state’s Deputy Economy Minister, told Reuters that talks had ended but he would not comment on their outcome until the government sees them.

“We will present the results to the government and wider comments will be available in two to three weeks,” the deputy economy minister said.

Lithuanian Prime Minister Algirdas Brazauskas is on vacation until the end of July and no cabinet meetings were scheduled before August.

A bevy of suitors have expressed interest in acquiring the Yukos stake in the firm, including BP’s Russian vehicle TNK-BP, Russian gas giant Gazprom and U.S. oil group ConocoPhillips.

FRANCE / ITALY

Shell Announces European Refinery Share Swap with Total

The Royal Dutch/Shell Group of Companies (Shell) announced July 12 they have signed a Memorandum of Understanding (Memorandum) with Total relating to a share swap between two European refineries in France and Italy.

The Memorandum involves Shell exchanging a 20 per cent interest in its Rome refinery (Raffineria Di Roma, Italy) for Total's 18 per cent interest in Reichstett Refinery (Compagnie Rhénane de Raffinage, France). The share swap would be subject to approval of the relevant authorities and conditional upon the exercise of pre-emptive rights by other joint venture partners.

Completion of this transaction would result in Shell's shareholding in Reichstett Refinery increasing to 83 per cent.

The commercial details of this Memorandum are confidential and completion of the transaction is expected in 2005.

Rob Routs, Shell Executive Director Downstream said "The transaction is consistent with our strategy of active portfolio management, which aims to create maximum value for customers and shareholders. This deal would allow us to consolidate our investment in the Reichstett site while continuing to grow the oil products business in Italy having secured supply agreements with Total to continue to meet the demands of our retail and commercial fuels customers," said Mr. Routs.

Reichstett refinery has a capacity of 4 million metric tons a year and is located near the city of Strasbourg, close to the German border. Shell's downstream activities in France also include marketing automotive fuel through a network of around 500 service stations, as well as petroleum products, such as lubricants, bitumen, aviation fuel, liquefied petroleum gas (LPG), fuel oil and heating oil.

NETHERLANDS

Royal Dutch/Shell Declines Comment on Financial Costs of Rotterdam Refinery Shutdown

A spokesman for Royal Dutch/Shell Group declined to disclose any financial costs it may have suffered because of the shutdown of its Rotterdam refinery.

The Pernis refinery, the largest in Europe and one of the biggest in the world, had to be shut down the morning of July 14 because of a power outage.

The spokesman said that the refinery was expected to be fully restarted within a day or two, but refused to talk about any financial consequences.

According to the Shell website, the Pernis Refinery has a capacity of 416,000 barrels of crude oil per day. The spokesman could not yet say whether Shell would claim any damages from companies responsible for the supply of electricity.

NIGERIA

Nigeria’s Ascon Oil earmarks N6.7bn for petroleum refinery...Targets oil block in 2005 bid round

The Ascon Oil Group, a wholly owned indigenous oil marketing, servicing, engineering and procurement company has earmarked $50 million (about N6.7 billion) investment in the first phase of the construction of a 55,000 - barrels per day capacity modular refinery.

Mr. George Enenmoh, the Managing Director and Chief Executive Officer of the Group made the disclosure while speaking at the official commissioning ceremony of the Group’s 70,000 Metric Tonnes capacity ultra modern fuel depots in Lagos, recently.

Mr. Enenmoh, a mechanical engineer said the Group has applied for a license to construct and operate a refinery, adding that a presentation has also been to the Department of Petroleum Resources (DPR).

"The company has acquired a 138,400m2 parcel of land at one of the port cites of Delta State for the first phase of a 55,000-barrels/day refinery. We have also paid the statutory $50,000 application fee and have earmarked $50 million as initial investment, for the first phase of 5,000 barrels/day," he disclosed.

He said the refinery will be expanded in phases of 25,000 barrels per day to a nameplate capacity of 55,000 barrels/day on completion, adding that conception of the refinery is ongoing and that the Final Investment Decision (FID) is expected by January 2006.

"The ground breaking is expected in January 2007. Since it is a modular refinery, we expect construction to be completed before December 2007, all things being equal," he pointed out.

He also disclosed that Ascon oil Group has applied for the construction of a 55,000MT storage depot in Delta State to facilitate products off-take from the refinery.

"The Company has acquired another 140,000m2 parcel of land in the same location as the refinery for the construction of the depot, which will cost about $10 million. It s planned that construction of the depot will start early in 2006 and will be completed in December 2006," he disclosed.

Mr. Enenmoh said that the company has also acquired a 30,000m2 parcel of land in Port Harcourt for the construction of a 30,000MT petroleum products storage facility to receive products from the Port Harcourt port. He disclosed that the Port Harcourt facility is a water-fed tank farm and that the rail network will also be used to transport petroleum products from this depot in Port Harcourt to locations all over the country.

"Construction of this depot is expected to start in October 2005 with the first phase planned for completion 6 months after."

In response to the Federal Government’s drive towards the improvement of local input in the upstream oil and gas industry, Ascon Oil Exploration and Production Company is participating in the Nigeria 2005 licensing round.

"The Company has submitted bids as a Strategic Downstream partner as well as a Local Content Vehicle. With its technical and financial partners, Ascon Oil has put together an integrated Technical Team made up of individuals with vast experience in various fields of expertise in oil & gas exploration and production.

"Crude oil from the oil fields is expected to feed the refinery, from where refined products will be transported to the storage depot for onward distribution nationwide. This way, the company intends to make petroleum products readily available Nationwide. It is our hope that with ready availability of petroleum products, prices will stabilize thus bringing the benefits of deregulation to the people," he said.

The Group’s helmsman also disclosed that Ascogas a subsidiary of the company has also concluded plans to produce liquefied petroleum gas and propane, while also pursuing plans to build an aviation fuel depot to service the fuel supply needs of air traffic in the country.

He pointed out that the Group plans to become a fully integrated oil and gas company providing services and meeting Federal Government aspirations for Nigeria in the short and long run.

Obat Oil to Build Refinery

The Directorate of Petroleum Resources (DPR) has given Obat Oil and Petroleum Limited approval to construct (ATC) 120,000 barrels per day (bpd) refinery in the country.

The Chairman of the company, Prince Fredrick Akinruntan said, the multi-million dollar private refinery (Obat Refinery Limited) will be located in a strategic area of Erunna, Ilaje Ese Odo, Ondo state.

According to him, he chose the site of the refinery due to the fact that it is located front of the Atlantic Ocean and would ease access for the evacuation of refined products to different markets around the world.

He said that the cost of the project would be borne through loan facility from local banks including First Bank, and two other international banks.

In the meantime, the chairman disclosed that his technical partners, Energy Commission, Swiss and UK Salton Limited have made technical presentation on the 120,000 bpd refinery which is designed to be constructed in two phases to the DPR before the ATC was granted.

The first phase of the project will likely be on stream late 2007, he said.

SOUTH AFRICA

Engen Refinery Faces Court Action over Emissions

The Durban health department intends taking Engen to court after sulfur-dioxide emissions at its Durban oil refinery were found to be "excessive".

Sulfur dioxide irritates the respiratory system and can aggravate asthma.

"We've served the necessary notices; we are moving ahead with the legal processes," the deputy head of the department for subdistrict south, Selva Mudaly, said on July 19.

The oil refinery exceeded its sulfur-dioxide emissions 64 times in just more than a month, according to a World Health Organisation (WHO) report.

Mudaly said the decision came after an "extensive process of auditing" and monitoring the air quality at the refinery.

An "elaborate monitoring system" has been studying the plant's emissions for the past two to three years.

Mudaly said the department is not charging the company under the Air Quality Act, but by using the city's by-laws.

The refinery's general manager, Wayne Hartmann, said the company is surprised the emissions exceeded permitted limits.

"Trying to understand what is behind it is a little problematic ... it could be weather related."

He said the new limits were introduced when the company adopted its new scheduled trade permit.

A sophisticated monitoring system measured the air quality every 10 minutes. An "exceedence" was registered every time the sulfur dioxide in the air surpassed 191 parts per billion.

"The quality of the air here is close to WHO guidelines. It's the difference between good and almost good, not between poor and shocking," Hartmann said.

He said the matter has been blown out of proportion, given the refinery's small number of "exceedences".

"In May, there were 17 total exceedences in the area, to which our contribution was nil."

The plant's total annual "exceedences" number about 35, and its environmental standards are on a par with those worldwide.

The refinery manufactures diesel, fuel oils, gases, asphalt and kerosene.

ZAMBIA

Zambia’s Indeni Petroleum Refinery Has Been Temporarily Shut Down

Indeni managing director Luis Urbano confirmed the closure of the country's only petroleum refinery on July 18.

Urbano said the closure was to enable the refinery to regenerate a catalyst, a special component that promotes chemical reactions during the processing of crude oil into finished products.

Urbano said a catalyst needed to be regenerated from time to time.

He said the plant would be closed for 25 days.

Indeni was last shut down in October last year to allow for major rehabilitation work after some distillery components broke down.

The rehabilitation work cost the company US$3 million.

Zambia had to import 30 million liters of diesel at a cost of US$10 million to plug the deficit that occurred as a result of the shut down.

BELARUS

Belarus Refinery to get Hydrogen Unit

JSC Mozyr Oil Refinery has awarded Foster Wheeler Italiana SPA a contract for basic design of a grassroots hydrogen production unit at its 323,300 b/d refinery in Belarus. Terms of the award were not disclosed.

Foster Wheeler also will supply materials for the steam methane reformer and provide technical assistance during construction, commissioning, and start-up.

The unit, scheduled to be in operation by 2007, will produce 25,000 normal cu m/hr of high-purity hydrogen.

RUSSIA

Lukoil to Make $500M Refinery Upgrade

Russia's No.1 oil producer, Lukoil, will pump US$500 million (euro414.8 million) into upgrading a refinery east of Moscow, the company said July 19.

Lukoil said the modernization, to be completed over the next four years, will enable the plant in Nizhny Novgorod, about 400 kilometers (250 miles) east of Moscow, to produce more light oil products such as gasoline and diesel fuel.

The company also said it will build light oil product terminals and other units at the refinery.

"The program is being implemented to improve the economics of the enterprise .... and to lessen the refinery's burden on the environment," Lukoil said in the statement.

The announcement comes at a time when tough taxes on crude exports are making Russian oil companies focus on exporting more profitable refined products.

Lukoil Stops Odessa Oil Refinery for Modernization

The Odessa oil refinery will stop working for three years. “The owner is halting the refinery and investing in modernization. The government can only welcome this step,” Secretary of the Ukrainian National Security Council Pyotr Poroshenko said on July 26.

The refinery belongs to Russia’s Lukoil, which will invest $320 million in the modernization project. Lukoil has promised to supply oil to Ukraine for refinery at other facilities. Poroshenko hopes that the modernization will not result in petroleum products’ deficit in Ukraine.

IRAN

Project on Renovating Iran’s Abadan Refinery to be Implemented

The project on renovation and optimization of the capacity of Abadan refinery with an allocated credit of 48 million dollars plus 280 billion rials is ready to be implemented the official in charge of the project, Mohammad-Reza Mousavi said July 10.

Mohammad-Reza Mousavi, said that once it is implemented, the daily production capacity of the refinery's distillation unit will increase from 130,000 barrels per day to 180,000.

"In addition, a vacuum distillation unit with a production capacity of 20,000 barrels per day is ready to be implemented. The entire project has been designed and implemented by domestic experts," he added.

IRAQ

Iraq to Tender $1bn New Refinery

Iraq is to ask foreign companies to bid for a $1bn new oil refinery project later this month which is 70km north-west of Baghdad, reported Bloomberg. The Al Nahrain or two rivers project is for a 140,000 bpd refinery to process Basra crude. Iraq presently has to spend $2bn a year on importing fuel products.

KUWAIT

Kuwait Raises Cost Estimate of New Oil Refinery to over US$6 Billion

Kuwait has raised the cost of its new oil refinery to more than 1.85 bln dinars (6.3 bln usd), to increase its capacity to more than 600,000 barrels per day from the initial 460,000 bpd and to allow the use of state of the art technology, said project manager Ahmad Al-Jeemaz.

Another reason for the rise is the recent increase in the prices of raw materials to be used in the construction of the refinery, he said.

Jeemaz said the decision on the new cost was taken by Kuwait's Supreme Petroleum Council (SPC), the emirate's highest authority on oil affairs.

When the decision to build a new refinery was first taken several years ago, the initial cost was put at 3.4 bln usd.

KNPC expects to start inviting bids for the refinery in February 2006, after completing the front-end engineering stage and negotiations with technology providers, Rasheed said in May.

The giant project, planned to be completed in early 2010, will be handed to at least three contractors, he said.

Kuwait currently has three refineries, at Al-Ahmadi, Mina Abdullah and Shuaiba, with a combined refining capacity of 915,000 bpd. KPNC plans to modernize the first two refineries. Once the new refinery and the modernization are completed, KPNC plans to shut down Shuaiba, leaving it with three refineries with production capacity of more than 1.2 mln bpd.

McIlvaine Company,

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