june 05 update

Saudi Arabia believes that OPEC must increase its production ceiling, Saudi Arabian Oil Minister Ali al-Nuaimi said as he arrived in Vienna ahead of the June 8 ministerial meeting of the cartel.

Al-Nuaimi argued during a visit to Norway that OPEC should increase its production quota by 500,000 barrels per day.

On June 11, Dubai-based Al-Arabiya television had quoted him as saying an output hike of 500,000 barrels per day (bpd) at this week's meeting was 'taken for granted,' and Norway's NTB news agency cited him as saying there is room for some increase.

Arriving in Vienna, Al-Nuaimi also blamed high oil prices on a global lack of refinery facilities.

'You know and I know that what is driving the price is not supply. What is driving the price is the lack of refining capacity worldwide,' he said.

1. AMERICAS

U.S.

Baton Rouge Refinery Tank Leaks Chemical

Emergency response officials closed a portion of Scenic Highway June 13 after an ExxonMobil Baton Rouge Refinery tank leaked the gasoline additive, naphtha.

A spokesperson said foam was sprayed on top of the leaking tank to keep the vapors from escaping and there also was a liquid leak from the tank, but it was contained within the fire wall around the tank and routed into the facilities' sewer system.

The facility's industrial hygiene staff were monitoring the area and not finding any significant off-site impacts from the leaks, according to an ExxonMobil news release.

It's unknown exactly how much material leaked from the tank, but initial company reports to the Louisiana Department of Environmental Quality estimated that it could be 1,000 barrels -- 42,000 gallons, said Rodney Mallet, a spokesman for DEQ.

The company reported that the leak was discovered at a storage tank about 2:10 p.m., Mallet said.

Meanwhile, Howard Ward, a spokesman for the Baton Rouge Fire Department, said monitoring indicated that material wasn't getting off site. However, to err on the side of caution, a shelter was created for people living within a half-mile of the facility, Ward said. In addition, he said a portion of Scenic Highway was closed for several hours.

Oil Refinery Fears Roil U.S. Market

Portions of refineries in the Virgin Islands and Texas were shut down the first week of June, leading to concern that gasoline and diesel fuel producers are risking breakdowns.

Flint Hills Resources, which operates Minnesota’s largest refinery in Rosemount, and Marathon Ashland Petroleum, owner of a smaller plant in St. Paul Park, declined to discuss daily operations. But they indicated they are in line with the industry.

"In general, we've been running our refineries full out, and that also has been the industry trend," said Angela Graves, director of public and state government affairs for Marathon Ashland Petroleum. The Ohio-based company's St. Paul Park refinery can process 70,000 barrels of crude oil per day.

Flint Hills spokesman John Hofland said that that refinery is "running according to our plan, which is at this point of the year to run well and meet the demand." The Flint Hills refinery can process 280,000 barrels per day. The company intends to spend $100 million to boost capacity to 330,000 barrels by 2007. Flint Hills reduced daily output this spring to prepare the plant for summer demand, Hofland said.

Crude oil for July delivery closed down 54 cents, or 1 percent, at $54.49 a barrel on the New York Mercantile Exchange June 6. But earlier in the day, futures touched $55.55, the highest intraday price since April 25. Prices are up 42 percent from a year ago.

Demand for all grades of gasoline in Minnesota has been higher this year than in 2004.

Federal data shows gasoline sales were up nearly 6 percent in March from a year earlier, the latest information available from the Energy Information Administration. Demand for premium gas and aviation gasoline declined slightly. Minnesota uses about 7.2 million gallons of gasoline per day. In addition to Flint Hills and Marathon Ashland, state gas stations get fuel from refineries in Superior, Wis., and North Dakota.

Nationally, gasoline demand has been up nearly 2 percent in May, averaging 9.3 million barrels per day, the Energy Information Agency said. Demand for other motor fuels, such as diesel, was up 5.2 percent to approximately 4.1 million barrels daily during the same period.

Refineries have been operating at better than 96 percent of capacity during that period. The fear is that the pace may be causing breakdowns.

Honvesa LLC shut down one unit of a refinery in the U.S. Virgin Islands, reducing the plant's daily capacity by 20 percent to 400,000 barrels on June 3. A day earlier, Exxon Mobil Corp. shut down a boiler in a gasoline unit at the largest U.S. refinery, a 557,000 barrel per day facility in Baytown, Texas.

Such seemingly slight decreases in refining tend to have big effects, however, because the United States does not have excess capacity. Arizona Clean Fuels Yuma recently obtained air permits for a new refinery, which would process 150,000 barrels daily and cost $2.5 billion to construct but it is not scheduled to open for four more years.

ConocoPhillips' Westlake Refinery under New Management

John Gott has been named the new plant manager at the ConocoPhillips Westlake refinery.

He replaces Fred Stiers, plant manager for the past five years. Stiers will head the company’s downstream projects division in Houston.

Gott served as general manager of the local refinery, in the refining, marketing, supply and transportation business unit of ConocoPhillips.

ConocoPhillips spokesman Michelle Woodyear said Stiers will oversee large capital projects that will increase heavy and sour-crude-processing capability in the global ConocoPhillips refining system.

He earned a Bachelor of Science degree in chemical and petroleum refining engineering, with a minor in mineral economics, from the Colorado School of Mines in 1977.

Suncor Purchases Valero Oil Refinery

Suncor Energy Inc. has purchased Valero Energy Corp.'s Commerce City oil refinery, placing Colorado's only two refineries under single ownership.

Suncor paid $45 million for the refinery and its inventory. The Valero refinery is across Brighton Boulevard from Suncor's refinery.

Combined, the two refineries provide about 37 percent of Colorado's gasoline and diesel fuel.

Colorado consumers won't be harmed by the consolidation because out-of-state refineries that supply the state help keep wholesale prices competitive, said Mike Ashar, executive vice president of refining and marketing for Suncor Energy USA.

"Yes, two players have merged, but there are a lot of other big players to serve the Colorado market," Ashar said.

The other refineries that ship to Colorado are in southern Wyoming, Kansas, Oklahoma and the Texas panhandle, he said.

No federal regulatory approval of the deal is required because its value falls below the $53 million minimum transaction cost that triggers review by the Federal Trade Commission, Ashar said.

The deal may be good for Colorado consumers because it ensures the continued operation of both refineries, said Stan Dempsey Jr. of the Colorado Petroleum Association.

"It guarantees the future of the Valero refinery," he said. "That's important because it's really hard to run a small refinery that is inland, far from the coast."

Calgary, Alberta-based Suncor plans to combine some functions from its 62,000 barrel-a-day refinery with Valero's 30,000-barrel facility.

For example, some of Valero's refining equipment produces hydrogen as a byproduct, which Suncor can use at its refinery to remove sulfur, a pollutant, from fuel.

In addition, Suncor's rail-car loading facility is operating at capacity, while Valero's has excess capacity.

"Clearly, we will see synergies that we can take advantage of," Ashar said.

Suncor in 2003 bought the former Conoco refinery in Commerce City and 43 Phillips 66 gas stations in Colorado in a $150 million deal.

No changes are expected among Valero's 140 employees or the 260 workers at the Suncor refinery, Ashar said.

Chevron to Invest in $150 Million Pascagoula Refinery Expansion

Chevron Global Refining is to invest $150 million to increase the capacity of its Mississippi located Pascagoula Refinery by 25%.The Pascagoula expansion will result in increased gasoline production by 500,000 gallons per day. Environmental permits are in place and the $150 million construction of the new Pascagoula Refinery's Fluid Catalytic Cracking Unit (FCCU) will begin next month. Completion is expected in late 2006.

"We are pleased to see significant investments being made here that help the Pascagoula Refinery maintain its long term viability and competitiveness," Chevron Global Refining president Jeet Bindra said. "This FCC Project will upgrade the unit's technology, resulting in improved reliability and energy efficiency."

The Pascagoula Refinery is Chevron's largest wholly owned petroleum refinery processing an average 325,000 barrels of crude oil a day and producing a variety of products including 5 million gallons of gasoline a day. The new investment at Pascagoula takes Chevron's total expenditure on the refinery to over $2 billion.

BOC Group Plans Facility at Salt Lake Refinery

The BOC Group plans to build a facility to provide hydrogen and steam to two Salt Lake City-area oil refineries.

The British industrial gases, vacuum technologies and distribution services company said, June 23 that it will invest nearly $50 million over the next year in the operation.

The facility is to be built at the Chevron refinery in Salt Lake City. The plant will supply hydrogen and steam to the Chevron refinery and to Holly Corp. refinery in Woods Cross.

Construction is expected to begin in early July, with production starting by mid-2006, said BOC spokeswoman Kristina Schurr.

The plant likely will employ seven or eight people, Schurr said.

Chevron and Holly are upgrading their refineries to comply with U.S. Environmental Protection Agency requirements, which call for decreased sulfur emissions and cleaner-burning fuels.

Hydrogen aids in meeting the EPA's requirements, said Alan Iantosca, global vice president of BOC Process Systems. Hydrogen combines with sulfur compounds in the crude oil, which enables the compounds to be removed, thereby reducing the levels of sulfur dioxide released into the atmosphere, Iantosca said.

Worldwide, BOC employs more than 30,000 people. In 2004, it reported over $8.3 billion in sales.

Refinery in Port Arthur may Double Its Capacity

The U.S. refinery venture owned by Saudi Aramco and Royal Dutch/Shell Group is studying a plan to double the size of its plant in Port Arthur that would be the biggest expansion in the United States in a quarter-century.

The venture, Motiva Enterprises, might increase the oil-processing capacity at Port Arthur to as much as 600,000 barrels a day from 275,000 barrels, people familiar with the matter said. That would make Port Arthur the biggest U.S. refinery, surpassing Exxon Mobil Corp.'s Baytown plant, which can run 557,000 barrels a day.

"It makes sense to do it there just because they're tied into all the pipelines," said Jeff Hazle, technical director for the National Petrochemical and Refiners Association in Washington. The site also has the necessary land and port facilities, said Hazle.

A shortage of refining capacity has pushed fuel prices, and refinery profits, to all-time highs. The average U.S. gasoline pump price reached a record $2.28 a gallon in April.

The expansion of existing facilities has not kept pace with demand. While the country's refining capacity has risen 0.7 percent per year during the past five years, consumption of gasoline and diesel has grown by 1.8 percent a year, according to the Energy Department.

For more than a year, Ali al-Naimi, the Saudi Arabian oil minister, has said that the ability of the Organization of Petroleum Exporting Countries to keep prices in check has been undermined by the inability of refineries to process more crude oil.

Al-Naimi said in Dallas in April 2004 that Saudi Arabia stood ready to finance and build new refineries in the United States. On June 16 in Vienna, Austria, after an OPEC meeting, al-Naimi said he had no information about what Motiva might be considering and declined to comment further.

Steve Sawyer, a spokesman for Aramco Services Co., the Houston-based subsidiary of Aramco, said a study of expansion possibilities was requested by Motiva's board early this year and will be completed in September.

The largest single expansion of a U.S. refinery in the past 26 years was a 111,000-barrel-a-day increase at a ConocoPhillips plant in Sweeny, according to the refiners association. The last refinery built was Marathon Oil Corp.'s Garyville, La., plant, which opened in 1976.

BP Texas Refinery Blast Probe Finds Faulty Alarms

Alarms malfunctioned before an explosion killed 15 people and injured more than a hundred others at BP's Texas City, Texas, oil refinery in March, according to a statement released by the U.S. Chemical Safety and Hazard Investigation

"The high-level alarms did eventually sound, but only after the explosions had begun, likely as a result of the blast pressure," according to the statement. "Had the alarms sounded properly as the blowdown drum was flooding, it could have alerted operators to the emergency situation."

The CSB, a federal body that investigates industrial accidents but does not issue penalties, said it was continuing its probe into the explosion at the nation's fourth largest refinery, and was requesting maintenance records for the alarms and related equipment.

London-based BP Plc <BP.L> has negotiated "extremely big" settlements with families of workers killed in the March 23 explosion, lawyers for the families said.

A BP spokesman has confirmed that talks with families and victims of the blast are underway, but declined to discuss the specifics of any discussions.

BP has said the explosion occurred because refinery employees failed to follow correct procedures in restarting an octane-enhancing processing unit, which leaked volatile hydrocarbons spilled and then ignited.

Two employees fired from the refinery after the blast have filed a defamation suit against BP, claiming their dismissal and the explanation offered for the deadly explosion caused them to be blamed for the deaths and injuries.

Ashland Sells Joint Venture for $3.7 Billion

Ashland Inc. shareholders voted June 29 to approve the sale of the company's minority stake in Marathon Ashland Petroleum LLC to partner Marathon Oil Corp.

The approximately $3.7 billion cash and stock transaction deal is clearing its final hurdle.

Ashland's top executive, James J. O'Brien, called the sale a "momentous occasion" as the company readied to cut its historic ties to gasoline refining and marketing.

The deal includes the Marathon Ashland refinery in Catlettsburg and a plant in nearby Wayne County, W.Va.

Under the sale, Marathon would acquire the maleic anhydride plant, which produces resins, plastics, lube oil additives and agricultural and textile chemicals. About 50 employees at the Neal plant will be offered jobs by Marathon.

Ashland owns 38 percent of MAP, the nation's fifth-largest gasoline refiner and marketer. Houston-based Marathon owns the rest.

The transaction was expected to close June 30.

Federal Court Allows Less-Stringent Refinery Rule

A federal appeals court June 24 largely upheld a Bush administration rule that allows thousands of power plants and refineries to avoid installing newer pollution control equipment when they modernize, rejecting arguments by California and 12 other states that the rule violated the Clean Air Act.

The mixed ruling -- parts won praise from environmentalists, while others were cheered by industry groups -- was the latest in a long legal and political battle over the federal government's approach to cleaning up the nation's oldest and dirtiest factories and power plants.

An existing rule, known as "new source review," long has required steel mills, power plants, refineries and other large sources of smog and acid rain pollution to upgrade their emissions control equipment when they modernize or expand. The rule was intended to bring the aging facilities, which are responsible for a disproportionate share of the nation's air pollution, gradually up to current standards.

But as Environmental Protection Agency officials have sought to enforce the law in recent years, many companies have fought the requirements -- calling them unpredictable and unfair -- while environmental groups have filed lawsuits of their own, demanding stricter pollution controls.

Bush administration officials have argued that attempting to enforce the rules on a case-by-case basis is a poor way to cut air pollution. They have proposed that the entire system be abolished and replaced with a simpler but weaker set of standards as part of the president's "Clear Skies" initiative, arguing that it would actually reduce air pollution faster by ending legal squabbles. But environmentalists and many state air pollution officials countered that faithful enforcement of the current law would yield more reductions.

In the meantime, the Bush administration has made revisions to the rule that have weakened its reach, angering environmentalists and state officials - - who have filed a series of lawsuits challenging the changes -- but pleasing industry groups.

The administration argued that its decision to let older power and other industrial plants modernize without making them install expensive new pollution controls would remove barriers to innovation and increase productivity -- and not worsen air quality.

However, the ruling by the U.S. Court of Appeals for the District of Columbia concluded that elements of the controversial 2002 rule change "rest on impermissible interpretations" of the Clean Air Act.

The three-judge panel ruled that the EPA had "acted arbitrarily and capriciously" by deciding that power plants and other large polluters did not have to keep records of their emissions, concluding that without the documentation there was no way for regulators to know whether the facilities were breaking the law.

EPA officials said June 24 that they planned to review the court's decision to determine whether to challenge it.

Critics of the changes said they were pleased at least some of the weaker requirements were tossed out.

"The thing we are most pleased about is the rejection of an idea industry has been floating, which is that they get to increase the pollution people breathe as long as plants do not increase their capacity," said Howard Fox, an attorney for Earthjustice who represented environmental groups in the case. "That makes no sense."

Emissions rule

Old regulation: Steel mills, power plants, refineries and other large sources of smog and acid rain pollution must upgrade their emissions control equipment when they modernize or expand.

Administration revision: Industrial plants can modernize without buying new pollution controls, even if that upgrade increases pollution, as long as the cost of new equipment falls below a 20 percent threshold.

Coffeyville Refinery Brings Impressive Price

Pegasus Partners will sell the Coffeyville Resources refinery and other properties for around $1 billion, sources say.

Coffeyville Resources, the refinery that a Kansas City bankruptcy court called an "albatross" during the final days of Farmland Industries in 2003, has turned into a golden goose.

Pegasus Partners, which bought the refinery in March, has now struck a deal to sell it to the private equity arm of Goldman Sachs and the leveraged buyout firm Kelso & Co.

A spokesman for Goldman Sachs said the company had no comment. Sources close to the deal, however, confirmed the deal has been made.

The sale figure being reported is in the neighborhood of $1 billion -- about 10 times what Pegasus paid 15 months ago, according to its filing with the Securities and Exchange Commission, which pegged the Farmland-Pegasus deal at $129.9 million.

If, however, figures put out by the bankruptcy trustee at the time of the sale are correct, the sale is a 100-fold profit. The liquidating trustee reported $11 million in receipts for all of Farmland's Coffeyville assets.

Goldman Sachs is arranging financing with Credit Suisse First Boston and is expected to close on the deal in less than a week, the source said Thursday.

Farmland had initially begun the effort to sell the refinery as early as the summer of 2001. It posted a $465 million loss in 2002. Pegasus, which specializes in distressed assets, began negotiations of the refinery in July of 2003 and closed the deal in March 2004.

Several factors combined to help turn the tide after Pegasus took over. The oil industry recovered dramatically and the price of natural gas skyrocketed, making Coffeyville's coke-gasification fertilizer-producing process highly profitable.

Pegasus was able to negotiate an extension to meet environmental regulations, and surging demand for gasoline helped restore profitability.

By the end of 2004, Coffeyville Resources reported revenue of $1.7 billion.

The plant, which employs 460 people, is one of Coffeyville's largest employers. It makes gasoline, diesel fuel and a variety of petroleum distillates, as well as ammonia and urea nitrogen fertilizers. Its largest customers are QuikTrip, Growmark, CHS and SemFuel.

Assets of the Coffeyville complex include the oil refinery, the fertilizer plant, oil-gathering pipelines, and asphalt and refined-products terminals.

Coffeyville City Clerk Cindy Price said the city will not have an official comment until the sale is announced publicly.

MEXICO

Mexico Eyes New Refinery as Gasoline Demand Rises

Mexico needs to spend $19 billion over eight years on a new oil refinery and infrastructure upgrades to stop the gap between refining capacity and gasoline demand widening further, oil monopoly Pemex said on June 2.

State-owned Pemex -- which has to import a quarter of the nation's gasoline needs from the United States -- will build at least one new refinery to ramp up capacity as gasoline demand grows 3 percent a year on average, said Nicolas Rodriguez, vice president of production at Pemex's refining division.

Gasoline demand so far in 2005 is up 5 percent from 2004.

A new refinery could cost $2 billion to $3 billion, and the rest of the investment would go on refinery upgrades and upping quality.

But even with this ambitious expansion plan, there is no date in sight for Mexico, the world's No.5 oil producer by volume, to be self-sufficient in gasoline or an exporter of fuel and distilled products, Rodriguez said in an interview.

"What this new refinery will do is maintain the gap because demand is not static, it's growing continually," he said.

"This investment is necessary to guarantee supply. But there is not a date in sight when demand will be in balance."

Mexico drinks up around 650,000 barrels of gasoline per day (bpd), but has to import a quarter of that from the United States, Mexico's own gasoline output being only 500,000 bpd.

To do that, Pemex exports heavy Maya crude oil to U.S. refineries, and then buys back the resulting gasoline.

A new refinery, along with extra capacity being added to an existing refinery, could lift Mexico's gasoline output toward 700,000 bpd by 2013, but by then demand could have risen to 800,000 bpd, keeping the supply gap constant, Rodriguez said.

Pemex's refining division, which still has to secure the $19 billion from the government, has a hard time competing for investments with the company's oil exploration and production projects where the return can be much higher.

Overall Pemex, whose spending is controlled by Congress, has to compete for public resources with more politically pressing areas like education, health and infrastructure.

A reluctance by the government to spend more on refining is short-sighted, as Pemex could make more money exporting gasoline and other products than plain oil, Rodriguez said.

"It's paradoxical that we are exporting crude and importing gasoline when we should have minimum imports and maximum conversion of crude into value-added products like gasoline and diesel which would bring higher revenues," he said.

The gas-guzzling United States could be a huge market for Mexican gasoline in future years.

"Crude oil is an important means of income but processed it's worth more," Rodriguez said, likening Mexico to the owner of a forest selling lumber instead of making furniture with the wood and selling it for a higher mark-up.

Mexico has an overall refining capacity of 1.54 million bpd, of which it is using 1.388 million, or 90 percent.

A program under way to modernize its six refineries has had little effect on overall capacity, but has improved the plants' ability to process the heavy Maya crude that makes up 70 percent of the oil produced in Mexico.

This year, 42 percent of the oil Mexico's refineries are processing is Maya crude, up from 34 percent in 2000.

Pemex has so far upgraded four refineries -- Tula, Madero, Salamanca and Cadereyta -- at a cost of around $4 billion under a modernization program started in 1998.

It recently began upgrading its 185,000 bpd Minatitlan facility and is preparing to start work on the sixth and final refinery, its 330,000 bpd Salina Cruz plant.

The Minatitlan upgrade, due to be completed by 2008, should boost that plant's refining capacity by around 100,000 bpd.

Pemex has not decided where it could put a new refinery, but Rodriguez said it would likely be close to both Pemex's crude oil operations, around the Gulf of Mexico, and central Mexico, where gasoline demand is strongest.

Separately, Mexico is talking to Arizona Clean Fuels (ACF) and Saudi Arabia about building a 150,000 bpd refinery in Yuma, Arizona, that would process piped-in Mexican crude oil.

CHILE

Group to Finance Coker at Chilean Refinery

A consortium led by Chile's Empresa Nacional del Petroleo (Enap) agreed to finance, build, and operate a 20,000 b/d delayed coker at the 94,350 b/cd Aconcagua refinery at Concon, Chile.

The $430 million project will be financed by a $410 million, 15-year syndicated bank loan. Enap and its partners, Germany's Ferrostaal and Spanish firms Foster Wheeler Iberia and Técnicas Reunidas, will provide the remaining $20.4 million.

Construction will start this year. Operations are to begin in the first half of 2008.

Enap and its refining unit Enap Refínerias will have a combined 49% stake in the special-purpose company Energía Concón, and Ferrostaal, Foster Wheeler, and Técnicas will each hold 17%.

2. ASIA

AUSTRALIA

Shell Australia’s Refinery Shutdowns Hit Profit

A series of planned and unplanned refinery shutdowns hit Shell Australia's performance last year, driving down profit, but the company remains positive about the next 12 months.

Shell Australia chairman Tim Warren said the downstream business - refining and marketing - was hit by the increased reliance on imported product to supplement the lower than expected refinery production.

He said total profit before tax and interest (PBIT) fell to $587 million in 2004 compared to $815 million the previous year.

The slump was most significant in the downstream division where PBIT slumped to $4 million from $183 million in 2003.

Mr Warren said although refinery margins were strong, extensions of planned shutdowns in the Clyde and Geelong refineries, as well as some unplanned shutdowns, "limited Shell's ability to capture the benefits of the strong margins".

The upstream division, the major driver of profits which includes exploration, production and gas, generated a $583 million PBIT, down from the previous year's $632 million.

CHINA

CNPC Acquires HQCEC to Develop Refinery Sector

China National Petroleum Corporation (CNPC), China's largest oil producer, announced June 14 that it has absorbed China Huanqiu Contracting and Engineering Corporation (HQCEC).

HQCEC was under the administration of the State-owned Assets Supervision and Administration Commission (SASAC). It is a transnational engineering company boasting the EPC (Engineering-Procurement-Construction) capability and strong ability in oil refining and chemical engineering fields.

A leading oil and natural gas exploration and production company, CNPC has seen its refinery and chemical sector growing rapidly in recent years. Acquiring the HQCEC will help the CNPC raise its competence in oil refining and chemical production and develop its overseas market, said Jiang Jiemin, vice president of CNPC.

Terminal Planned for Qingdao Refinery

The Port of Qingdao in eastern China has signed an agreement with China Petrochemical Corp. (Sinopec) to form a crude oil terminal joint venture.

The 50-50 joint venture, to be called Qingdao Shihua Crude Oil Terminal Co. Ltd., will build and operate a terminal to handle vessels as large as 300,000 dwt.

The terminal will handle oil for a refinery being built in Qingdao, which is to start operations in 2007.

Port officials said crude oil handled at Qingdao totaled 31 million tonnes in 2004. But throughput will increase following construction of the refinery by Sinopec unit China Petroleum & Chemical Corp. and two local partners.

The refinery will be able to process 10 million tonnes/year (tpy) of oil and yield about 7.6 million tpy of oil products.

INDIA

BPCL Asked to Set up a Refinery in Amethi

The petroleum ministry has given its tacit endorsement to a proposal in which state-owned Bharat Petroleum Corporation (BPCL) will be asked to start work on a crude oil refinery project at Kathora in Amethi, the high-profile Lok Sabha constituency represented by Rahul Gandhi.

A preliminary report for the refinery was recently forwarded by Petroleum Minister Mani Shankar Aiyar’s office to Pulok Chatterjee, joint secretary in the Prime Minister’s Office, and to the officer on special duty in the National Advisory Council with a request to forward it to Congress President Sonia Gandhi and her son Rahul.

The study, conducted by an individual, Suhel Haider, says Kathora is a central location to service major eastern Uttar Pradesh cities. The report does not have any reference to the likely benefits that the company may get out of setting up a refinery at Kathora or any other location of Amethi constituency.

BPCL Acting Chairman and Managing Director Ashok Sinha has been asked to take necessary action in this regard. “BPCL may be forced to spike its plan for the Bina refinery in Madhya Pradesh if it is forced to look at Amethi,” said a company executive.

The report claims that a refinery at Kathora, which is close to major commercial towns of eastern Uttar Pradesh and western Bihar, will help save on transportation cost for finished products but oil company executives argue that the carriage cost for crude oil will be huge.

“Crude oil will need to be imported at Gujarat ports which will mean an additional cost of Rs 1,500-2,000 crore for laying a crude oil pipeline,” said an oil company executive. A 1 million tonne refining capacity costs around Rs 1,000 crore.

Inland refineries are not considered viable even in places like Rajasthan where crude oil has been discovered. Oil companies prefer to set up refineries in coastal areas since more than 70 per cent of the country’s crude oil requirement is imported.

But the report makes a case for the refinery to come up at Kathora and gives a backgrounder on the members of Parliament and members of the state assemble representing Amethi and Rae Bareli in 1995 and now.

It also reasons that there is not only good road, rail and air connectivity to the place but about 3,000 acres are readily available. Besides, additional land can be made available through relocation of about 360 households.

The proposed site is close to the river Gomti, from where the refinery can extract huge amounts of water, the report says. Water is crucial for location of a refinery and its lack is one of the arguments against a refinery coming up in Rajasthan despite oil discoveries by Cairn Energy.

The report also says that space along Gas Authority of India Limited’s Hazira-Vijaipur-Jagdishpur pipeline can be utilized at several points to save land and infrastructural cost for the crude oil pipeline.

The project was originally conceived in the 1990s when PV Narasimha Rao was the prime minister and Satish Sharma was the petroleum minister and member of Parliament from Amethi. But the project did not take off because it was found unfeasible.

UP Adamant on Refinery at Allahabad

The Uttar Pradesh government has taken a tough stand on the proposed oil refinery and has written to the Center that it was opposed to its shifting to any other location.

It was learned that chief minister Mulayam Singh Yadav wrote a letter to Union petroleum and natural gas minister Mani Shankar Aiyar after the later’s visit to the state last month when he reportedly tried to “convince the CM to agree to the shifting of the proposed refinery from Allahabad to Amethi”.

While the chief minister immediately gave his nod to setting up of the proposed Petroleum Technology Institute at Rae Bareli, he showed his reluctance to the move to shift refinery project to Amethi.

Significantly, Rae Bareli is the parliamentary constituency of Congress president Sonia Gandhi and Amethi, the constituency of young MP and scion of Gandhi family, Rahul Gandhi.

The young MP has made it known on several occasions during his visits to his constituency in the past that he did not expect much from the Mulayam Singh government and that he would “find other ways” to develop Amethi. The move to shift refinery project stems from that, party sources told FE.

It is learnt that Samajwadi Party MP from Allahabad, Reoti Raman Singh met the chief minister twice recently and apprised him of the consequences of shifting refinery from Allahabad to Amethi. Land has already been acquired for the proposed refinery near Logra village in Allahabad.

It was learned that the project was conceived way back in 1990 when PV Narasimha Rao was the prime minister. Interestingly, the land identified then was at Kathaura village on Lucknow-Sultanpur road which incidentally falls under Amethi constituency.

However, when Congress lost elections in 1996, the project went in for a fresh feasibility report. BPCL in its fresh feasibility report then observed that “Lucknow-Sultanpur road site was not suited because of water logging.”

Then in another development, Royal Dutch Shell company withdrew from the project which was to come up as a joint venture in 1998. Following the withdrawal of Shell, BPCL decided to go ahead with the project on its own but later announced that the project would be executed as joint venture with GAIL.

But the project has failed to make much headway in view of political pulls and pressures on the issue of location.

The project cost is now pegged at Rs 8,000 crore. The pipeline division needs another Rs 2,000 crore and the cost of jetty at around Rs 600 crore puts the total project outlay at more than Rs 10,000 crore.

Indian Oil Commissions Low-Sulfur Petrol Unit

State-run Indian Oil Corp. Ltd. (IOC) has commissioned a new unit at its 150,000-barrels-per-day Mathura refinery to help it make low-sulfur petrol, the company said in a statement on June 23.

"With the commissioning of the isomerization unit, Mathura refinery is the first refinery in the country to achieve the capability of producing all its petrol with Euro III specifications," it said.

Last month, IOC, India's largest refiner, commissioned a diesel hydrotreating unit to produce low-sulfur diesel.

India introduced strict rules for low-sulfur transport fuels in April, forcing refiners to import petrol and diesel since January as quality upgrades on projects were delayed.

Guwahati Refinery Demands Road Repair

Guwahati Refinery on June 23 accused the National Building Construction Corporation (NBCC) of failing to keep its commitment to repair the refinery’s NB Road, which the corporation had dug up to construct a tunnel.

The 100-metre-long tunnel, which is under construction, stretches from near the Indian Oil Corporation-owned Guwahati Refinery to Soonsali Ghat at Noonmati to channel rainwater into the Brahmaputra.

Senior manager (corporate communication) of the refinery, Anjana B. Sarmah, said in a statement that the NBCC had promised to repair the road and clear it of the dug-up earth after the digging was over.

“But the NBCC has not done its job, as a result of which the road is in a deplorable condition. The road has become non-motorable and is causing much hardship to the general public residing across the road, including employees of the refinery. This was pointed out many times to the NBCC and the government officials,” she said.

The accusation comes after the NBCC charged the Guwahati Refinery with not relocating the quarters of the Central Industrial Security Force (CISF), resulting in inordinate delay in the completion of the tunnel.

Sarmah, however, said the realignment of the tunnel, for which a part of the CISF quarters built by the refinery must be demolished, was not in the original plan. The question of demolition had arisen with the diversion of a drain around a temple on the roadside at Gopalnagar, Sarmah said. “It is true that the NBCC has failed to keep its commitment,” an official said. He said the road would be repaired once construction of the tunnel was complete.

The tunnel is aimed at flushing out rainwater from the Noonmati, New Guwahati, Bonda and Guwahati Refinery areas to the Brahmaputra, through Soonsali Ghat.

Rainwater from these areas now flows into the Bharalu River, creating artificial floods in the Zoo Road area, Nabin Nagar, Lachit Nagar and other parts of East Guwahati.

MRPL may set Up Kakinada refinery

The petroleum ministry wants Mangalore Refineries and Petrochemicals (MRPL) to implement the proposed Rs 5,000 crore refinery at Kakinada in Andhra Pradesh instead of Oil and Natural Gas Corporation (ONGC).

ONGC wanted to join IL&FS and the Andhra Pradesh Industrial Development Corporation (APIDC) to build an export-oriented refinery at Kakinada, and had sought the ministry's permission to put in its equity, an official said.

The ministry, however, opined that ONGC should stick to its core business of exploration and production, and leave allied activities such as refining to its subsidiary MRPL.

"With the increasing trend in our oil and gas production in western as well as eastern offshore, there is an opportunity to create refining capacity on the east coast - supplementing the refining capacity of MRPL on the west coast," ONGC CMD Subir Raha had said in a letter earlier this month to the petroleum ministry.

"This will help optimize the product marketing logistics and thereby offer competitive advantage," he added, while indicating that equity participation by ONGC and APIDC would be restricted to a maximum of 50%.

The oil ministry, however, said MRPL was best suited for the project.

IL&FS has an MoU with APIDC for developing a refinery in a proposed special economic zone at Kakinada.

JAPAN

Nippon Oil Says Fire at Refinery Shut Secondary Unit

Nippon Oil Corp., Japan's biggest oil refiner, said a fire June 13 at its Sendai refinery in northern Japan shut a secondary unit.

The fire started at 6:55 a.m. local time, closing a sulfur collection facility used by a fuel oil desulfurization unit, the Tokyo-based company said. Nippon Oil said the blaze was put out at 7:12 a.m. and nobody was injured.

The 145,000 barrels-per-day main crude distillation unit at the refinery in Miyagi prefecture, 190 miles north of Tokyo, was running normally after the fire, the company said.

Nippon Oil said operation of the affected 52,000 barrels-per- day fuel oil desulfurization unit is under review.

Nippon Oil to build Petrochemical Refinery in Japan Worth 60 Bln Yen

Nippon Oil Corp, Japan's largest oil refiner, said it will invest some 60 bln yen in building a petrochemical refinery in Miyagi prefecture in northeast Japan.

The new facility, which will be built on a site at its Sendai plant, will allow Nippon Oil to upgrade its production capacity for products, such as propylene and xylene, the company said in a statement.

It expects to start producing products from the refinery in the year to March 2008.

The refinery will also have the capacity to generate electricity, which could be provided to retail customers going forward, the firm said.

MALAYSIA

Sierra Petroleum to Build World’s Biggest Refinery Hub

Privately-owned Sierra Petroleum (M) Sdn Bhd has proposed to build a mammoth integrated petroleum complex in Kedah.

To be located in Kuala Kedah, the RM38 billion complex will be the world’s biggest oil refinery hub upon completion.

Sierra Petroleum president and chief executive officer Kamal Ashnawi said if approved by the State Government, the complex would be built along a 23km stretch of beach between Kuala Kedah and Kuala Sanglang.

He said the first phase of the project, costing RM19 billion, would take 36 months to complete.

“It will involve the construction of a marine terminal, crude storage tanks and trans-peninsula pipelines,” Kamal said.

“We will start work on the complex once we receive the nod from the State Government.”

He said the second phase of the project would involve the construction of a refinery and a power plant, and the final stage would see the construction of petrochemical plant. He did not say how long the entire complex would take to complete.

Speaking after briefing Menteri Besar Datuk Seri Syed Razak Syed Zain at Wisma Darul Aman in Alor Star, Kamal said the project would provide 7,000 jobs and another 30,000 job opportunities in more than 100 supporting industries.

Syed Razak, said the state executive council would discuss Sierra Petroleum’s proposal at its weekly meeting June15.

He said the sites chosen by Sierra Petroleum, a 100 per cent Bumiputera company with its headquarters in Holland, seemed to fit well with the State Government’s plans to develop Kuala Kedah and its surrounding areas.

SOUTH KOREA

Bid for Inchon Oil Refinery Reopens

The race to take over Inchon Oil Refinery, the smallest of the country's five oil refineries, has begun again as the Inchon District Court reopened a bid May 9.

``We will accept letters of intent from candidates between June 20 and July 12 and select a preferred bidder by Aug. 18 based on factors such as the price offer and management capability,’’ the court said.

If the bidding processes goes as planned, the deal will be finalized in September, it added.

The first takeover bid for the bankrupt refinery failed in the final stage in January after Citigroup, the main creditor of the company, rejected an offer of 681 billion won by China’s largest chemicals trader Sinochem, saying the proposed price was too low.

Citigroup is the largest shareholder of Inchon Oil, with a 25.7 percent stake, and is also the main creditor, holding 30.2 percent of the refiner's 371 billion won in unsecured debt.

``In the course of the first bid, Citigroup did not issue an official estimate for the bidding price, but analysts say that the creditor expected at least 750 billion won,’’ an Inchon Oil company official said.

It is too early to predict which companies will join the bid but industry sources say the second bid will be led by Citigroup and Sinochem.

Sinochem will try to take over the Korean refinery again with improved refining technology as demand in China will outstrip supply for many years to come, the sources said.

Demand for oil in China is likely to rise 7 percent annually until 2008, when China hosts the Olympics in Beijing.

The location of Inchon Oil, the nearest to China among South Korea's five oil refiners, is also attractive to Sinochem.

Inchon Oil, with refinery capacity of 275,000 barrels per day, has been in court receivership since it defaulted 20 billion won in loans in 2001.

The refiner's sales rose 28 percent to 2.5 trillion won in 2004, while operating profit soared to 164.5 billion won thanks to the oil price hike.

THAILAND

Thai PTT’s Rayong Refinery to take over Star Pete, Plans IPO

Thai oil & gas conglomerate PTT PCL (PTT.TH) said June 7 its wholly-owned unit Rayong Refinery Co. will take over Star Petroleum Refining Co. in line with PTT's strategy to streamline its refinery business.

PTT President Prasert Bunsumpun said Rayong Refinery will buy all the shares of Star Petroleum and the shareholding structure will be reorganized along with a planned initial public offering of the enlarged Rayong Refinery.

PTT is discussing details of the deal with a Thai unit of ChevronTexaco Corp. (CVX) that holds a 64% stake in Star Petroleum. PTT owns other 36% of Star Petroleum.

Prasert said the consolidation of the two refineries is expected to be completed by the year-end.

After the take over, PTT and ChevronTexaco are expected to each own 35% in the enlarged Rayong Refinery, while the rest will be offered to the public via IPO, he added.

Star Petroleum and Rayong Refining each have a capacity of around 150,000 barrels of crude a day at their refineries.

Apart from these two refineries, PTT also owns 50% in the country's largest refinery Thai Oil PCL.

VIETNAM

Vietnam’s NA Faces Questioning over Oil Refinery Project

The Vietnamese Government recently was plied with questions about the feasibility of the country’s first-ever oil refinery as the National Assembly opened a televised debate on the troubled Dung Quat project.

Addressing the session, chaiman of the National Assembly (NA) Science, Technology and Environment Committee Ho Duc Viet admitted that inadequate research, failure to bring in money, and poor organization had affected the project.

The project has, as a result, been delayed for seven years, costing the country millions of dollars.

The refinery, to be built in central Quang Ngai Province, was approved by the NA in 1997 and originally scheduled to go on stream in 2002.

But it has been haunted by a series of mishaps ranging from the withdrawal of foreign partners, financial problems, the Asian financial crisis and other technical issues.

Industry minister Hoang Trung Hai told the NA that the new deadline for the completion of the project was December 2008 and that it would begin operation the year after.

He said because of construction delays, changes in technical designs and exchange rate changes, the revised cost would be over US$2.5 billion, much more than the original estimate of $1.5 billion.

But most legislators continued to question the economic logic of the project, pointing out that the location for the plant was not ideal.

Legislators sought from the Government a more convincing explanation about the economic feasibility of the project.

Deputy Nguyen Ngoc Tran said: "If the internal rate of return (IRR) of the project is estimated to be just 6 per cent, we do need to review the project seriously."

The Dung Quat project was originally estimated to have an IRR of 15 per cent.

But, in a bid to attract foreign contractors, the project owners – the Viet Nam Oil and Gas Corporation (PetroVietnam) – had to give up distribution, the most profitable business segment, reducing the IRR as a consequence.

He argued that any project with an IRR of less than 10 per cent was likely to fail.

"The central region will only benefit from the project if it is economically effective," he said. "But that is not what we foresee here."

However, some deputies voiced support for the project saying the central region has been waiting for it for a long time and that the project would be a stimulant for the region’s economic development.

Viet Nam currently has no refining facilities, and imports almost all of its refined oil products for domestic consumption. The Dung Quat oil refinery will have a crude oil processing capacity of 6.5 million tonnes a year, and it is expected to save the country’s hard currency for import of petroleum.

Minister Hoang Trung Hai said that the country is estimated to import 12.5 million tonnes of petroleum this year at a price of almost $4 billion, and that figure would climb to about 17 million tonnes by 2010.

"This oil refinery will be able to meet 33 per cent of the domestic demand for oil, partly ensuring the country’s energy security," Hai said.

Regarding the location of the plant, Hai said that Dung Quat site was selected because it has a deep-sea port, easily access to National Highway No.1, and belongs to the East-West Economic Corridor.

He went on to say that the project’s IRR, which stands at 6.7 per cent, is acceptable as it is a large and strategic project which requires huge investment in infrastructure construction.

So far, $170 million has gone into the project but no losses have been found, the minister said.

But Minister Hai admitted that it would be difficult to guarantee the new deadline, as many uncertainties are still looming.

NA Chairman Nguyen Van An urged the Government and the assembly to be accountable to voters and said that the NA will issue a resolution on the project.

Committee chaiman Ho Duc Viet told the NA that to speed up the pace of construction, the National Assembly should require the Government to focus on increasing efficiency with the aim of completing the project by 2008.

It is necessary to make clear any increase in investment capital needed, and to sign contracts with bidders quickly to facilitate the execution of the project.

3. EUROPE / AFRICA / MIDDLE EAST

HUNGARY

WWTP Completed For Hungary‘s Duna Oil Refinery

Earth Tech Inc., a global provider of consulting, engineering and construction services, has completed work on a US $45 million expansion and the upgrade of the wastewater treatment facilities at Hungary's largest oil refinery.

Earth Tech served as the lead designer and constructor for the wastewater treatment project at the Duna Refinery of MOL Hungarian Oil and Gas Company located in Szazhalombatta, near Budapest. Earth Tech also modified the refinery's sewer system and upgraded the sludge and solid waste incinerator at the wastewater treatment facilities, which it will operate for 15 years.

As a result of these upgrades, the Duna Refinery has been brought into compliance with European Union and Hungarian environmental regulations. The new facilities will treat an average of 5.2 million gallons per day (1,000 cubic metres per hour).

"Throughout Europe, companies and government agencies have been challenged to meet the stringent European Union environmental regulations," said Alan Krusi, Earth Tech president. "As a global water and wastewater services company, Earth Tech was able to deliver a cost-effective solution to MOL that will help the company meet its operating and business objectives. We look forward to continuing to support the company during our 15-year operating agreement."

The project, one of the first privatization efforts in Hungary, was completed in two years and included the involvement of more than a dozen stakeholder organizations in order to ensure the protection of the Danube River.

LITHUANIA

ConocoPhillips Ponders Stake in Lithuania Refinery

ConocoPhillips is considering buying a stake in Lithuania's Mazeikiu Nafta refinery, which is controlled by Russia's embattled Yukos Company, the chairman of the U.S. oil and gas producer said June 29.

"It is possible that over some time we could acquire ownership interests in Mazeikiu Nafta," ConocoPhillips Chairman and Chief Executive James J. Mulva told reporters in Vilnius.

Yukos holds a 53.7 percent stake in Mazeikiu Nafta, Lithuania's only refinery, while the Lithuanian government holds a 40.6 percent stake. The refinery, which includes a pipeline and offshore oil terminal, accounts for around 10 percent of Lithuania's gross domestic product.

Russian oil giant Lukoil, in which Houston-based ConocoPhillips has a stake, has also expressed interest in buying stakes in the refinery from Yukos.

Mulva, who was speaking to reporters after a meeting with Lithuanian Prime Minister Algirdas Brazauskas, did not rule out that U.S. and Russian companies could be partners in running the Lithuanian refining complex.

ConocoPhillips' stake in Lukoil stands at 11.3 percent. The company has said it intends to exercise its option to raise that to 20 percent this year.

The Russian Justice Ministry asked that Yukos' share in Mazeikiu Nafta be frozen, the Interfax news agency reported.

Analysts noted that it would be unlikely for Conoco, Lukoil or any other potential buyer to continue negotiations with Yukos over shares that might be subject to a freeze.

"They would not want to be seen as taking aggressive action against the Russian government," Chris Weafer, chief strategist at Alfa Bank said.

Yukos saw its main oil producing subsidiary auctioned by the government last year against some $28 billion in back tax claims. But a court-ordered freeze on its assets in Russia since last year had not been applied to its controlling stake in Mazeikiu Nafta.

Interfax said the ministry asked the Netherlands and Lithuania to identify assets on their territory belonging to Yukos as it presses ahead with the collection of the tax debts.

Observers see the cases against Yukos as a Kremlin-orchestrated campaign to punish the company's founder Mikhail Khodorkovsky for his political ambitions, while the government insists they are a just enforcement of law.

UNITED KINGDOM

U.K.’s Branson Says Virgin Group May Build an Oil Refinery

U.K. billionaire Richard Branson is considering building an oil refinery to help relieve a shortfall in processing that's boosted fuel costs for his Virgin Atlantic Airways Ltd. business.

Branson's closely held Virgin Group Ltd., which controls Virgin Atlantic, will decide in two to three months whether to build a refinery after a study, Branson said in an interview. He didn't say where the refinery might be built.

The lack of spare refining capacity has contributed to record high prices for the crude oil used to make jet fuel, the cost of which has soared by 65 percent over the past year, based on prices for delivery in New York harbor. Fuel is the second- biggest expense for most airlines after labor.

``I've been considering building an oil refinery because there's an enormous shortage of oil-refinery capacity and, as an airline owner, the more oil-refinery capacity that can be created, hopefully we can drive prices down,'' Branson said.

There's a 50-50 chance of proceeding with construction, estimated to cost $1 billion, Branson said. Other airlines might consider joining the project, he said.

Virgin Atlantic may spend an extra 60 million pounds ($109 million) on fuel this year because of rising prices, Chief Executive Steve Ridgeway said.

There's little likelihood for a retreat in oil and fuel prices as growing economies in Asia put added pressure on supplies, Branson said.

``It does feel like with China expanding so rapidly and India expanding so rapidly, that oil prices could stay up for some time to come, if not indefinitely,'' Branson said. ``Airlines are going to have to adapt to a new world.''

Virgin Group has brought in outside experts to participate in the study, Branson said, without naming any of the consultants. No partners have been lined up for the possible project, he said.

Asked to identify a potential location for the refinery, Branson would only say that refineries aren't popular among their neighbors. In the U.S., there hasn't been a new refinery built in 29 years.

``People don't like oil refineries built around them because they're ugly things and they're maybe not the most environmentally friendly things to have on your doorstep, but we're looking at it,'' he said.

The last refinery built in the U.S. was Marathon Oil Corp.'s Garyville, Louisiana, plant, which opened in 1976.

Environmental regulations have discouraged construction of new refineries in the U.S. by driving up costs, Bruce Burke, vice president for refining at energy consultant Nexant Inc. in White Plains, New York, said in an interview.

It would cost $2.4 billion to $3 billion and take four years to build a new refinery in the U.S. with a capacity to process 200,000 barrels of crude oil a day, Burke said.

``Regulatory hurdles as of right now have been very effective in keeping out any new building,'' he said. ``Any new refinery really could not be a simple refinery. It would have to be a complex refinery that would meet all new standards.''

Virgin Group owns 51 percent of Virgin Atlantic. Singapore Airlines Ltd. owns the rest.

NIGERIA

Zenon Raises $100m for Refinery Project

The President/Chief Executive Officer of Zenon Petroleum and Gas Limted, Mr. Femi Otedola announced in Lagos on June 21 that his company has raised $100 million for the setting up of a refinery in the country.

He said that the signing of a Memorandum of Understanding (MOU) with Transnational Corporation of Nigeria Plc will lay the foundation for a joint venture to build a 400,000 barrels per day petroleum refinery which has been planned to be executed in two phases.

To ensure a successful project, Otedola said the joint venture will operate transparently through a project implementation committee and a technical management board which will consist of industry experts.

He said that "this venture typifies the government's efforts to deregulate the downstream sector of the Nigerian petroleum industry and its drive to encourage the creation of competitive indigenous companies to supply petroleum products capable of competing in the international markets."

According to Otedola, Zenon Petroleum may have to significantly reduce the importation of diesel into the country since the refineries have started working.

"I am the largest importer of diesel into Nigeria today, at about $50 million every month," he said.

He commended the efforts of the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Engineer Funsho Kupolokun for reviving the ailing refineries.

On whether he plans to go to the capital market to raise funds for the project, Otedola said: "By signing this MOU today with Transnational Corporation, that is indicative that Zenon would lose the picture of being a one man business. Because, to raise $100 million equity to invest in a refinery, of course, you need to bring in more people to invest in the project. I am still looking at coming to the capital market."

He added that Zenon hopes to raise additional $150 million equity for the refinery project.

He said that the establishment of a modern refinery under this venture will create new local jobs and increase economic activities through support services from local companies for the consideration of the plant.

"The refinery will enable us tackle the problems of shortages, erratic supply and high costs; while it boosts the out-turn of petroleum products and by-products to enable us achieve full capacity," said Otedola.

Earlier, in her introductory remarks, the Director General of the Nigerian Stock Exchange (NSE), Dr. Ndi Okereke-Onyiuke who is also the Chairman of Transnational Corporation said that the Corporation is a brain child of President Olusegun Obasanjo.

She however added that the Federal Government is not a shareholder, and would never be.

According to her, the Corporation is being encouraged by the government, while the incentives are meant to attract accomplished men and women to participate.

She said that "we have applied for eight incentives including "refineries, the power plants, and oil blocks." The corporation is sure of the refineries, the power plants and oil blocks.

She said the Corporation is currently preparing the prospectus for the Initial Public Offer which will give details of the price at which the public will buy when it eventually comes to the capital market in the first quarter of year 2006.

She said that the shares of the Corporation will also be quoted on the Stock Exchange.

In response to a question, Okereke-Onyiuke said: "Whether, Obasanjo is there or not, this is a PLC company. It is not the government that is giving us the money to float the company. All the government is going to give is the incentives by making the environment conducive. The government will not give us the money. It is these people who make up the core group shareholders of Transnational and some other shareholders that would bring the money."

She assured that Transnational will not compete with its members, rather it is going to complement the efforts of its members.

She said the Transnational project will commence with an initial share capital of N56 billion or $500 million.

IRAN

Costain Share of Iranian Gas Refinery Contract Worth $1.6 Billion

Costain Group PLC said its share of the $2.2 billion Iranian gas refinery contract awarded June 23 to a consortium led by its unit Costain Oil, Gas & Process (COGAP) is worth $1.6 billion.

In a statement June 24 the group, which is lead contractor in the joint venture, said the Bid Boland gas treatment facility will process up to 2 billion cubic feet per day of sweet and sour gas plus condensates and liquefied petroleum gas.

The Bid Boland project, which is known as Bid Boland 2, is located in the south-west of Iran, approximately 15 km from Behbahan City in Khuzestan province.

The consortium awarded the contract includes Actividades de Construccion y Servicios SA unit Dragados and two Iranian companies, Jahanpars and Sazeh.

Part of the refinery's output will be used for fuel for domestic consumption and the rest, gasoline and liquefied petroleum gas (LPG), will be exported, the consortium said. The exports will earn an estimated $500 million per year for Iran, the companies said.

Construction work is expected to take 43 months.

PetroPars to Supervise Bidboland Refinery Deal

Petropars oil company will supervise the implementation of the 2.4-bln-dollar agreement for constructing the Bidboland gas refinery, the related pipeline and storage facilities.

The project has been undertaken in two phases which includes building a gas refinery near the city of Behbahan in Khuzestan province in addition to laying a pipeline and setting up storage facilities in the Port of Mahshahr, ILNA reported.

It said the refinery will be built by a consortium consisting Spain's Dragados Company and Iranian Pars Energy which will carry out the project under the management of British Costain (Costain Oil and Gas Process Limited).

"A consortium consisting of the Central Bank of Iran and Tehran Jonoub Oil and Gas Company will jointly lay the pipeline and construct the storage facilities," said the report, adding that the project will be funded under a finance deal and is expected to be completed within 43 months.

Petropars Managing Director Gholamreza Manouchehri, told the news agency that in addition to processing sour gas, Bidboland refinery will feed Aghajari oilfield, produce sweet gas for delivery to the national grid, supply ethane to Arvan Petrochemical Complex and also produce LPG as well as natural benzene, 1.5 mln tons and 0.83 mln tons of which will be exported respectively. "The refinery will be built 15 km southeast of Abkenar village in the town of Behbahan, while the storages will be set up in the Port of Mahshahr."

Manouchehri said sale of its sweet gas products, ethane and natural benzene will earn the government an annual $500 million.

Earlier reports have said that once operational, Bidboland refinery will process 830,000 tons of gas liquids as well as 1.48 million tons of methane and 1.52 mln tons of liquefied gas per year.

KUWAIT

Kuwait KPC Still Eyeing India, China Refinery Invest

Kuwait Petroleum Corp. (KPC.YY) still plans to invest in refining stakes or new refineries in China and India despite an apparent lack of progress in discussions, a top company executive said June 13.

"We are talking lots of money, so we will need to be careful," Jamal Alnouri, KPC's managing director for international marketing, told Dow Jones Newswires on the sidelines of an industry conference being held here.

He added that there is no "timeframe" for those plans.

Alnouri earlier told delegates that Kuwait expects Middle East crude oil to make up 75% of Asia's imports within five years compared with 72% now.

While Asian countries such as South Korea will continue to import more, demand from China and India will make up the bulk of the incremental barrels.

Kuwait produces 2.65 million barrels a day of crude, or 450,000 b/d above its Organization of Petroleum Exporting Countries quota

OMAN

Al Romhi Opens First Unit at Sohar Refinery

A celebration was held at Sohar Refinery Company June 7 under the patronage of Dr Mohammed bin Hamad Al Romhi, minister of oil and gas and Sohar Refinery Company’s board chairman, to launch the electricity emergency unit which is the first unit to be operated at the refinery.

Eng. Ahmed bin Mohammed Al Hadabbi, project director, gave a briefing about the unit.

The chief guest officially opened the unit and toured the main building of the refinery administration which is about to be completed.

He also toured the main control building and the Polypropylene Company which is one of the Sohar Refinery Company’s strategic establishments.

ORC to Expand Refining Capacity to 106,000bpd

State-owned Oman Refinery Company LLC is expanding its refining capacity from the present 85,000bpd (barrels per day) to 106,000bpd.

To part finance the $320 million expansion project, ORC, the leading oil refining company in Oman, June 14 signed a syndicated term loan facility agreement involving $140 million with a consortium of regional and local banks, led by Bahrain's Gulf International Bank (GIB).

"We hope to complete the expansion by the end of 2006 or early 2007. The term loan facility will be utilized to part finance the expansion project," ORC CEO Dr Adil A. Al Kindy told Times Business on the sidelines of the signing ceremony.

Al Kindy said work on the expansion began seven months ago. Sixty per cent of the project cost has been met by utilizing our internal resources. ORC, which has achieved a 90 per cent Omanization, is the single supply source of petroleum products in Oman. The refined products are made out of Oman crude, which is received from the Petroleum Development Oman, and supplied after refining to the marketing companies. Oman Arab Bank, BankDhofar and OIB are the local banks participating in the deal. Arab Bank Plc of Bahrain, National Bank of Dubai and Commercial Bank of Qatar were the other participants.

ORC's current expansion project also includes the MAF-Sohar crude pipeline to provide feedstock for Sohar Refinery Company (SRC). The new crude oil pipeline will connect ORC area at Mina Al Fahal (MAF) and the SRC in the port area. The estimated pipeline length is 266 kilometers, which makes it one of the biggest of its kind in Oman.

Established as a limited liability company in 1982, ORC started out with an initial refining capacity of 50,000bpd. This conversion of Oman's own crude oil into high value products has contributed remarkably to the economic and overall development of the country.

Consistent economic growth and an ever-increasing need for petroleum products in Oman led to new challenges to which ORC responded by expanding its process capacity to 80,000bpd in 1987 through a low cost modification in the plant.

Today, the refinery operates 24 hours a day to process 85,000bpd which comes close to meeting the nation's total demand for LPG, motor gasoline, aviation fuel, diesel and fuel oil.

QATAR

$668.7 Million Refinery at Ras Laffan to Start Ops in Mid-2008

A $668.7mn refinery capable of processing 146,000bpd of North Field condensate will go on stream at Ras Laffan in mid-2008, the Second Deputy Premier HE Abdullah bin Hamad al-Attiyah said June 20.

The refinery to be operated by Qatargas will be a joint venture of Qatar Petroleum (80%), ExxonMobil (10%) and Total (10%), he said, after concluding the engineering, procurement and construction (EPC) contract for the refinery project with a consortium of GS Engineering & Construction Corporation and Daewoo Engineering & Construction.

He said the EPC contract also involved the establishment of associated storage and export facilities at the Ras Laffan Industrial City (RLC).

From the North Field condensate the refinery would produce LPG, naphtha, kerosene and gas oil. The refinery project, he said, is 100% export oriented.

“There is a huge demand for LPG, naphtha, kerosene and gas oil all over the world,” al-Attiyah pointed out.

The major units of the refinery complex would be a condensate splitter, LNG/naphtha and kerosene hydrotreaters to desulphurise the products. These are aimed at meeting the stringent product quality specifications.

Qatargas vice-chairman Faisal M al-Suwaidi, S R Woo, chief executive officer and senior vice-president, and T W Chung, executive vice-president of the consortium, were also present at the EPC contract signing at the Sheraton.

TURKEY

IOC bids for Turkey's TUPRAS Refinery

Indian Oil Corporation (IOC) has bid to acquire Turkey's giant petroleum refinery TUPRAS, which has a combined processing capacity of 27.6 million tonnes per annum.

The company has submitted a letter of intent to the Turkish Privatisation Administration (PA) to acquire 51 per cent stake in TUPRAS, for which eleven other local and international oil firms are also in the fray.

It is the second time that block shares of TUPRAS have been put on sale.

The first time the tender was held for the block sale of some 65.76 per cent of shares, Efremov Kautschuk GmbH (Tatneft-Zorlu Group) made the highest offer at $1.3 billion and its sale was approved by the Supreme Privatisation Board, but the Council of State nullified it saying it goes against public interest, Turkish daily News reported.

Four local firms, Zorlu Group, Petrol Ofisi (POAU), OYAK and Opet, and seven international firms or consortiums, besides IOC, have applied to the PA to obtain the details and conditions for the tender, it said.

The international firms include Russia's Repsol, Poland's PKN, Italy's ENI Spa, Austria's OMV and some joint consortiums involving US firms and Shell.

Before the opening of the tender for TUPRAS, the PA requires pre-qualification criteria as a condition for any firm/consortium's bid, the deadline for this is June 22.

For the second phase, the data room process, to be held from July 1-29, the interested parties are required to pay $50,000 besides the $20,000 they paid for obtaining the details of the tender.

The final phase, which is the submission for the applications for the tender and whose deadline is September 2, will require a $30 million letter of guarantee.

TUPRAS owns four refineries of Izmit, Izmir, Kirikkale and Batman with a combined capacity of 27.6 million tonnes per annum.

With the total processing capacity of all refineries in Turkey amounting to 32 million tonnes a year, its share is a whopping 86 per cent of the country's total capacity.

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