nov 05 update

Leland Gould, executive vice president of Giant, said while the refined gas stays local, saving transportation costs other companies must pay. Giant can't lower retail prices because it must pay to get the raw crude here.

"Even though you have a refinery in (Bloomfield), it's still a very small percentage of gas in the Four Corners. We have to buy crude in Utah or Northern Colorado," Gould said.

He noted the transportation cost of getting the crude to San Juan County offsets any savings the company may get by transporting the finished product to nearby stations.

Gould said Giant only participates in the refining and retail portions of the gas business and does not do any exploration or drilling. The result is that less than half of the gas used at the refinery is from the San Juan Basin, leading to the transportation costs.

"There's not enough crude to supply that refinery," he said.

The Bloomfield refinery is currently operating at 50 percent capacity, producing approximately 9,000 barrels of gasoline a day, according to Gould.

In an effort to up production at the plant, the company recently spent "tens of millions" of dollars in purchasing a pipeline from Shell that will supply gas from the Permian Basin in Texas.

Purchases such as that, as well as those required for environmental compliance, can quickly offset any profit made by an oil and gas company, noted Gould.

Gould said Giant will spend $150 million to $180 million over two years in order to reach new sulfur reduction standards set by the Environmental protection Agency.

Gould noted even though oil and gas companies recently reported record earnings, the average of 5- or 6-percent profit margin over the last several years does not always cover costs.

Stevens Introduces Bill to Allow Cherry Point Refinery Expansion

According to the Associated Press, U.S. Senator Ted Stevens wants to lift a long-standing restriction on a Puget Sound oil refinery to allow it to expand.

Current federal law prohibits BP's Cherry Point refinery from obtaining new dock permits unless new gasoline production associated with the expansion stays within the state of Washington. Stevens says he has introduced legislation to repeal what he calls an outdated and unfair law that results in limited supplies to other regions.

Washington Democratic Senator Maria Cantwell opposes the idea. She says she will do everything in her power to prevent giveaways to big oil companies that will increase the risk of a major oil spill in Washington's Puget Sound.

The dispute over Cherry Point has been brewing for some time. The Cherry Point refinery was built in 1971 to refine North Slope crude oil, which didn't start flowing until 1977.

A Washington senator at the time, Democratic Warren Magnuson, added the new dock restriction to limit potential oil spills by limiting the growth of tanker traffic.

Valero to Up Refining Capacity by 400,000 Barrels per Day

Valero Energy Corp. plans to invest some $5 billion to expand refinery capacity by some 400,000 barrels per day over the next five years.

Although improvements will likely be made at all of the company's 18 refineries, Valero officials say the bulk of the work will occur at refineries in Texas, Aruba, Canada, Louisiana and California.

Rich Marcogliese, senior vice president of refining operations for Valero, points out that the $5 billion cost projection figure includes some upgrades already under way. Valero declined to provide a specific cost beakout for each project.

"It's a combination of approved projects, some are things we have budgeted and some are just studies," Marcogliese explains. "But we do have a number of approved activities under way."

The company plans to fund the refinery expansion program internally with its cash flow.

Although the hurricanes that recently hit the Gulf Coast have drawn attention to U.S. refining capacity issues, Marcogliese stresses that Valero has been seeking to address potential shortages for some time.

With the rapid growth in China, and the Far East in general, Marcogliese says the demand for petroleum products, such as gasoline and diesel fuel, is continuing to expand rapidly.

"What we have been saying for a long time is refined capacity in the U.S. will eventually tighten, and we saw that in late 2004," he explains.

Improvements are already being made to one of Valero's four newly acquired refineries.

Valero merged with Premcor Inc. in September and acquired a refinery in Port Arthur, Texas, along with refineries in Lima, Ohio; Memphis, Tenn.; and Delaware City, Del.

Built in 1902, the Port Arthur refinery, located on 4,000 acres 90 miles east of Houston, produces 250,000 barrels per day (bpd) of refined products. The plant has undergone many upgrades, including an $850 million investment in 2001.

Plans for the refinery call for increasing its capacity to 325,000 bpd by the middle of 2006.

The Port Arthur Refinery, along with the refinery in St. Charles, La., Marcogliese says, are great locations for Valero to expand because of the amount of land they occupy and their locations -- close to major shipping ports.

He adds that the company is currently studying the possibility of expanding the Port Arthur refinery to 400,000 bpd in the future. The company also is looking at increasing the capacity of the St. Charles refinery, located on 1,000 acres 15 miles from New Orleans, to 300,000 bpd -- up from its current production output of 185,000 bpd.

Both the Aruba refinery and the refinery in Quebec, Canada, are slated to undergo a 50,000 bpd increase in capacity. Construction work on the Aruba refinery expansion is expected to begin early next year, and work on the Quebec refinery is slated to be under way by late 2007.

Marcogliese says today the Aruba refinery does not produce gasoline, but adds that Valero officials are studying the possibility of ramping the refinery up for gasoline production -- and possibly beginning production of ultra low-sulfur diesel at that location as well.

Further down the road, Valero plans to increase crude oil capacity at its refinery in Benicia, Calif., by 10,000 bpd and to up the crude oil capacity at its refinery in Wilmington, Calif., by 35,000 bpd. Marcogliese says these expansion plans are not scheduled to get underway until 2007 or 2008.

Valero's Texas City refinery is scheduled for a 20,000 bpd expansion in 2008. The expansion work slated for the refineries in Benicia, Wilmington and Texas City has been budgeted but has not yet been approved by the company's board, Marcogliese notes.

"It's in the budget" he says. "(The projects) are not board approved but it is something we are going to look at because we think we might do it."

Valero Refinery Experiences Power Failure

A power failure at an east Houston refinery prompted an evacuation when black smoke began billowing from the refinery's flares.

No one was injured, said Fred Newhouse, spokesman for the Valero Houston Refinery on the 9600 block of Manchester.

The flares activated automatically in response to a pressure build-up caused by the 1 p.m. power failure and began burning off that pressure into the air. But due to the outage, boilers that normally release steam into the flares to keep the burn clean did not activate, he said.

"As a safety precaution, we sounded the alarm and accounted for all employees," Newhouse said. "We are monitoring the area for anything that might be hazardous to the community."

The refinery activated backup boilers to clean the smoke, Newhouse said.

Some of the plant's operations shut down due to the power outage, Newhouse said.

Katrina Leaves One of Worst Residential Oil Spills in US History

A massive tank at the Murphy Oil Corp. refinery floated off its base and broke during Hurricane Katrina, spilling crude oil into about 1,700 homes. It's one of the worst residential oil spills in U.S. history and human error might be to blame.

South Louisiana is a landscape of tragedy, but the all-American neighborhoods in this oil spill zone stand out. While others in hurricane-hit communities are entertaining visions of rebuilding, the people of this part of St. Bernard Parish wonder if this piece of earth will ever be repopulated.

Stuart Smith, a lawyer suing Murphy over the spill, said "We think it will devastate the property market down there because of all the residuals in the soil. It's a mess."

In the storm's wake, 19 lawsuits were filed; they've been combined into one class-action suit claiming the tank broke because of negligence.

The question for victims of the spill is whether Murphy filled the tank that broke before the hurricane hit, a standard safety practice at refineries.

Oil refineries are not required by law to fill up their tanks, but the heavier the tank, the less of a chance it will float away. The government does not regulate spill prevention plans at refineries and the only mandate, U.S. Environmental Protection Agency officials said, is that a plan is written and approved by an engineer.

"You fill them up as much as you can to ensure the structural integrity and so they don't float away," said David McCollum, a spokesman for the CITGO oil company in Houston, which operates a refinery in Lake Charles.

Evidence is stacking up that something went awry at Murphy.

When Katrina hit, the Murphy tank contained 1.05 million gallons of oil, less than a tenth of its capacity, and all of that oil spilled out, according to Chief Paul Rhynard of the U.S. Coast Guard. He said the rest of the tank was not filled with water or any other liquid, as is sometimes done in anticipation of a storm.

Kenneth Henderson, a superintendent at Murphy and a St. Bernard Parish councilman, said the refinery's hurricane plan called for filling up 30 percent of the tank with gasoline. El Dorado, Ark.-based Murphy denies any wrongdoing and blames the disaster on an "act of God." Murphy refuses to comment on how much fuel was in the tank.

Rhynard said the Coast Guard has not started an investigation because its resources are still so stretched responding to dozens of oil spills caused by Katrina. The hurricane caused an estimated 9 million gallons of oil to leak into the environment, most of it spilling into unpopulated areas.

The spill at Murphy has become a hot button issue in this town loyal to the roughneck industry. With an ExxonMobil Corp. refinery located up the road, oil drives the economy.

"I think it's pretty cut and dry what happened," said Tony Ricky Melerine, a parish councilman. "The deal is, it's just like our levees: you can't build anything high enough to protect us against a storm like that."

That loyalty and lack of criticism is no surprise to environmentalists and oil industry critics who say oil companies have run roughshod over Louisiana, breaking its environment and taking advantage of poor communities.

On the one hand, trial lawyers have aired commercials and posted signs urging residents to join class-action suits against Murphy; on the other, Murphy has set up claims offices and is telling people they'd do well to take money the company is offering for the spill, and give up their right to sue.

Wood River Refinery to get S Zorb Unit

ConocoPhillips plans to install its S Zorb sulfur removal technology (SRT) at its 306,000 b/d Wood River, Ill., refinery.

ConocoPhillips will convert a kerosene hydrotreater into an S Zorb SRT unit for gasoline streams. The 32,000 b/d unit is to be completed in early 2007.

S Zorb SRT units also are planned at Pasadena Refining System Inc.'s 117,000 b/d Pasadena, Tex., Refinery and Sinopec Beijing Yanshan Co.'s 162,000 b/cd Yanshan Refinery. These units will be the first to be built outside of ConocoPhillips's refining system.

Yorktown Refinery Still Down as Probe Begins

It could still be days before officials at Giant Industries understand what caused the November 28 blaze at the Yorktown refinery, which has been shut down.

Because of continuing danger, an inspection team wasn't able to begin a preliminary investigation until November 30. The fire started in one of the refinery's combination units. “They are not able to get access to all of the unit,” said Charlie Yonker, vice president of administration for the refinery. “They have begun visual inspections in parts of the unit that have been secured.

“It's a slow process securing the area,” Yonker continued. “We are anticipating the team should have access to the entire unit by the end of the week.”

As they look for the cause of the fire and tabulate damage costs, the team will also be looking to see if any preventive measures need to be implemented, he said.

Production is at a standstill at the refinery while the area is secured in an effort to ensure the safety of all refinery personnel, he added.

The fire was the third in four years at the refinery. The other two occurred in June and in October 2001.

Yonker said he could not comment on the previous fires, but that he was pleased with the way the recent incident was dealt with.

“The response was great,” he said. “People did what they were supposed to do. Everyone did an excellent job.”

Yonker stressed that he was not alarmed by the fact it took 10 hours to put out the fire.

“In a fuel-fed fire you don't want to put the fire out too soon because you have the risk of secondary fires,” he explained. “The length of time it took to put out the fire was not unexpected. That's how the fire department deals with fuel-fed fires.”

Fires in refineries are more common than one might imagine.

According to a study by the National Fire Protection Association, between 1994 and 1998 an average of 228 fires or explosions were reported worldwide each year at petroleum refineries and natural gas plants. A yearly average of 44 structure fires was reported, causing an annual average of $2.6 million in property damage.

The study showed that 25% of the structure fires began in processing or manufacturing areas. All three fires at Yorktown have originated in processing units.

Shell Handles 4,000 Damage Claims from Oil Refinery Leak

A Martinez, Calif., Shell oil refinery leak that sprayed 150 gallons of oil over the downtown area could cost the company more than $1 million to clean buildings and vehicles.

As of Nov. 22, more than 3,500 claims had been made for vehicles and 500 claims for homes, according to Shell.

With cleanup costing $150 to $300 per car, the company could spend $525,000 to $1.05 million on the vehicles alone. Costs for the home cleanups haven't been determined yet, said Shell Spokesman Steve Lesher.

"It's still too premature to foresee the total cost," he said.

A mist of "oil slurry" covered several downtown neighborhoods after leaking from a catalytic cracking unit on Nov. 8. Shell officials claim the incident posed no health risks, although they've offered to foot medical bills for anyone affected by the mist.

Proposed Yuma Refinery Reports Agreement with Mexico on Pipeline

The first oil refinery scheduled to be built in the United States in nearly 30 years took a crucial step toward completion with an agreement with the Mexican government to build a pipeline in that country to transport crude oil to the refinery’s planned site east of Yuma.

Arizona Clean Fuels Yuma Vice President David Treanor, who led the negotiations in Mexico, said it was “an enormously important decision.” The company announced Nov. 22 it had reached an agreement with the Secretariat of Energy of Mexico (SENER) confirming that the company may carry out the construction, operation and maintenance, and ownership of a pipeline.

The company has plans to build a $3 billion, 150,000-barrel-a-day refinery near Wellton, about 30 miles east of Yuma that would process crude oil into gasoline, diesel and jet fuel.

The refinery would be the first built in the United States since 1976, due largely to regulatory barriers, low profit margins and a not-in-my-backyard mentality of communities across the country, industry experts say. As a result, nearly half of all U.S. refining capacity is located near the Gulf of Mexico, where the bulk of American oil is pumped.

Hurricanes Katrina and Rita have exposed that clustering as a vulnerability of the country’s energy supply system. In August of 2003, Arizona faced a gasoline shortage after a pipeline shuttling fuel to Phoenix from Tucson burst. Mr. Treanor says it is “crucial” for the state’s supply of fuel that the refinery is built.

“It’s going to bring on a reliable supply route now, in-state, where we’re not going to have to worry about antiquated pipelines… and it can displace imports and create a fuel supply within our own boundaries of high-quality fuel,” he said.

The Wellton refinery would produce about 85,000 barrels of gasoline, 35,000 barrels of diesel and 30,000 barrels of jet fuel per day. The bulk of the product would be shipped to Phoenix via the existing fuel pipeline that runs from California to Arizona, though approximately 25 percent of the gasoline and diesel would be returned to the Mexican state of Sonora.

Currently, Arizona Clean Fuels Yuma is in negotiations with Pemex, Mexico’s national energy company, to purchase crude oil from that country. Mr. Treanor said the agreement with SENER will likely hasten the completion of a deal between the company and Pemex.

Construction is expected to begin in 2006 or 2007, once negotiations with Pemex are completed and the final construction permits have been obtained. The first phase of the refinery is expected to take about three years to complete.

Arizona Clean Fuels has been trying to build a refinery in Arizona since 1989, when plans initially called for the site to be in Mobile, about 20 miles southwest of the Valley. The project died in the mid-1990s amid neighborhood and environmental opposition but was revived in 1999. In 2003, company officials opted to move the site to Wellton after a revision to the federal ozone non-attainment zone for the Valley was expanded to include Mobile.

CENTRAL AMERICA

International Funding Available for Mexico-Central America Refinery

International funding is available for a proposed oil refinery in Central America that would help reduce the cost of fuel for countries in the region, Mexico's energy secretary said November 9.

"We've already received offers from monetary institutions to finance 100 percent of the project," Secretary Fernando Canales said in an interview. Specifically, Canales mentioned the Inter-American Development Bank as a potential sponsor.

Mexican and Central American leaders formalized their agreement to build a refinery in an as-yet-undesignated Central American country during the Americas Summit in Argentina.

Mexican President Vicente Fox and Foreign Secretary Luis Ernesto Derbez also mentioned the project during a visit to Costa Rica prior to the summit.

Derbez said four energy projects were under consideration: the refinery, an electrical generation facility, a gasification plant and distribution facilities for Mexico's state-owned Pemex oil company.

He said the refinery alone could cost as much as US$3.5 billion (euro3 billion). Officials are hoping the projects will reduce costs for consumers in Central America, which lacks significant oil reserves.

The refinery will be designed to process from 250,000 to 300,000 barrels of heavy crude oil provided by Pemex daily. The oil will be converted into gasoline, diesel and other fuels that will be used entirely within Central America and Mexico.

VENEZUELA

Venezuela’s Chavez Wants a $6 bln Refinery Deep in a Backwater

Cabruta, Venezuela lies in the geographic center of the country, along the Orinoco River, but its 435 miles south of Caracas and isolated from the country's big cities.

Venezuela's president, Hugo Chavez, says this will soon be a prosperous city of 100,000. As part of a plan to repopulate Venezuela's isolated southern provinces, Chavez has chosen Cabruta as the site for a massive refinery capable of processing 400,000 barrels per day.

It is part of a sweeping development plan written by Chavez's economic team that is meant to draw the country's population away from the coast and possibly even relocate Venezuela's capital city from Caracas to this sweltering riverside town in the geographic heart of the world's fifth-largest oil exporter.

Residents seem positive about the idea of a refinery, largely because it would create jobs and spur public works spending, particularly on roads, which now are a combination of cracked pavement and dried mud.

Venezuela's state oil giant Petróleos de Venezuela, or PDVSA, is designing the refinery to receive a diet of extra-heavy crude oil from Venezuela's Orinoco Crude belt — a wide swath of tarry reserves that begins some 60 miles from Cabruta.

The $6 billion project will create conversion units using Venezuelan technology capable of cracking the tarry crude into export-quality gasoline. The plan is to begin construction in 2006 and begin operations by 2011.

This is one of several domestic refinery construction projects planned by PDVSA.

Venezuela has also recently announced a dizzying number of overseas refining investments meant to boost energy cooperation with politically sympathetic nations in Central and South America.

PDVSA has also said it is discussing the sale of other refining assets, including several of the eight refineries of its Houston-based Citgo subsidiary.

The plans for the Cabruta refinery say it will create 25,000 jobs, but the number directly employed building and operating it is far less. The plan predicts 8,000 people will be needed to build it and 2,500 people will be employed running the refinery.

Another 14,000 indirect jobs are expected — people who support the refining operation or work in the city expected to grow up around it.

The project is part of an effort to develop a wide, arid swath of the Venezuelan plains — the area where Chavez was born and raised. A national development plan written in 2000 specifically mentions Cabruta as the possible center of a project known as the "Orinco-Apure Axis," the zone connecting the thinly populated plains state of Apure with the Orinoco River.

Since the August announcement of plans to build the refinery, critics of the administration have slammed the idea as a starry-eyed social development venture.

This project would be located hundreds of miles from the Venezuelan coast, making product exports more complicated. It would also require major pipeline construction, including two up to 150 miles long connecting the Orinoco Belt fields to Cabruta, and a possible three more that would be 200 miles long to send products toward the coast for export.

Some are already wondering whether such an operation would lose money for PDVSA. Energy authorities do not even really contest this possibility.

"That's not the concept here," said Alejandro Granado, PDVSA vice president for refining, when asked if the venture would be profitable. "This project cannot be measured exclusively in terms of internal rate of return or net present value. No. There's something bigger going here, which is the integrated development of the country."

The nation's sweeping economic development plan was drawn up by Planning Minister Jorge Giordani, an economist who specialized in the study of Albania's centrally planned economy.

Just this year, as his administration rides on a flood of oil revenues, Chavez said the Cabruta refinery was going to be built.

The Cabruta project comes as Venezuela is boosting its refining capacity through investments both at home and abroad.

In addition to the mammoth Cabruta project, PDVSA is planning to build a 50,000 barrel-per-day refinery in Caripito and a 50,000 barrel-per-day refinery in Chavez's home state of Barinas, some 325 miles southwest of Caracas, meant to provide fuel to the local market.

PDVSA is also working to increase the market for Venezuela's extra-heavy oil in Latin America. The state oil company is planning to build a 200,000 barrel-per-day refinery in Brazil as a joint venture with Petrobras, and has already signed on for refinery expansions in Cuba, Jamaica, the Dominican Republic and Uruguay.

The government has much work to do before it can even lay the groundwork for major construction in this isolated area. For starters, the road that leads north out of town is so ridden with potholes that residents have taken to calling it "the guillotine" because of the number of traffic accidents that happen on it.

To feed this energy-hungry project the government would need to increase the production in the Orinoco oil fields and develop natural gas production to power the production and refining of this tar-like crude.

To increase production, the government has begun bidding out drilling rights to exploit huge tar-like deposits. Most have been going to state-owned oil companies in countries that have been sympathetic to Chavez, including such names as Gazprom and China National Petroleum Corp. But energy authorities have insisted there will be no new production for at least two years.

Venezuela Refinery Mishaps Spur Criticism

Venezuelan oil refineries were idled at least 10 times this year because of fires or breakdowns, raising concerns the state-owned oil company lacks experienced personnel and is skimping on maintenance.

Four workers have died from burns suffered in an explosion and fire Nov. 7 at the Cardon refinery in Falcon state. Two remain hospitalized. The mishaps are sparking criticism of Venezuelan President Hugo Chavez, who fired more than half the workforce at Petroleos de Venezuela SA in 2003 to break a two- month strike designed to cause his ouster.

``It seems that a week doesn't go by that you're not reading a headline about a fire or an explosion or a problem'' at the Venezuelan plants, said Tom Knight, director of trading for Truman Arnold Cos., a Texarkana, Texas, wholesale supplier and storage company. The accidents suggest ``something at work here that seems to be a systemic problem,'' he said.

Refiners are struggling to keep up with surging demand in the U.S., the biggest customer for Venezuela's refined fuel exports, and any loss of output may boost prices. The Paraguana refinery complex, made up of Cardon and the larger Amuay plant, is one of the biggest in the world. Paraguana's production has been curtailed six times this year.

``There are grave problems in Petroleos de Venezuela,'' said Julio Montoya, an opposition lawmaker and vice president of the National Assembly's Energy and Mines Commission. ``There's a lack of experienced personnel,'' Montoya said in a phone interview. ``The company hasn't invested enough in new technologies and replacing outdated equipment.''

Petroleos de Venezuela turned down requests for an interview with Alejandro Granado, head of refinery operations, and declined to comment on the safety concerns.

A refinery probably has a safety issue if it is off line five days a year for reasons other than scheduled maintenance, according to Clayton Mahaffey, president of Venture Research, a consulting firm in Stamford, Connecticut. There have been at least 50 down days among Petroleos de Venezuela's four domestic plants this year, according to company press releases.

``The number of accidents suggests serious underlying failures,'' Mahaffey said. ``And those things don't go away.''

The Nov. 7 accident happened as workers were changing a valve on an alkylation unit, which makes components for higher- octane fuels. They were working where a blaze had broken out two weeks earlier, the newspaper El Universal reported, citing police officials. They failed to drain a fuel line completely, and leaking fuel ignited, the newspaper said.

A power failure at the Puerto la Cruz refinery on Sept. 2 caused the plant to shut down, and six workers were injured in the process. When the refinery started again, a fire in the refinery's distillation unit delayed fuel production, the company said without giving any more specific information.

Paraguana can process 940,000 barrels a day, making it larger than any single refinery in the U.S., and Puerto La Cruz has a capacity of 203,000 barrels a day. El Palito in the central industrial state of Carabobo can process 130,000 barrels a day.

``If there was something that characterized Petroleos de Venezuela before, it was the lack of refinery accidents,'' said Jose Toro Hardy, a former Petroleos de Venezuela board member, and now an oil analyst. ``That's not the case today.''

Toro Hardy blames Chavez for the loss of expertise in the Petroleos de Venezuela workforce. ``The company lost 20,000 employees who had an average experience of 20 years apiece,'' Toro Hardy said.

More than 3,600 workers at Paraguana were among those fired by Chavez to help break the national strike that virtually stopped Venezuela's crude oil and fuel production in December 2002 and January 2003.

Spending on social programs may be diverting funds that Petroleos de Venezuela should be investing in improving its refineries, said Roger Tissot, an analyst with PFC Energy, a Washington-based energy consultant. .

A Petroleos de Venezuela spokesman declined to comment on the cause of the Nov. 7 fire or provide data on the number of accidents or shutdowns at its facilities in earlier years. The company had far fewer accidents before the strike, according to Ali Osteicoechea of Gente de Petroleo, a group of former Petroleos de Venezuela managers who lost their jobs because of the strike. Two workers were killed on the job from 2000 to 2003, he said.

``You have people being hired for their political loyalty to the revolution or for keeping their mouths shut at work, rather than for their experience,'' Osteicoechea said.

Venezuela's refineries account for about 1.4 percent of global fuel-making capacity, according to statistics compiled by London-based BP Plc.

The country's crude oil output is 2.7 million barrels a day, less than it was before the strike. The country is the third- largest oil producer in the Organization of Petroleum Exporting Countries. More than 20 international oil companies operate in Venezuela, including Exxon Mobil Corp. of Irving, Texas, Chevron Corp. of San Ramon, California, and Paris-based Total SA.

Petroleos de Venezuela isn't getting the kind of government scrutiny for its accidents that U.S. refiners typically get after a mishap, according to Mahaffey. Petroleos de Venezuela hasn't released reports on any of the accident investigations or announced any changes in procedure or equipment aimed at making the plants safer.

``You don't have any confidence that they're making the changes,'' Mahaffey said.

Osteicoechea agreed it is difficult to know what is being done to address the causes of recent accidents, because Petroleos de Venezuela releases little information. Still, he said, ``I think the company is taking steps to correct these things. I can't imagine them deliberately acting irresponsibly.''

2. ASIA

CHINA

CPC's Hainan Refinery to Start up by Mid-2006

China Petrochemical Corp. reported it will start operations at a new refinery in southern China by mid-2006, according to a senior official.

Wang Jiming, CPC deputy chairman, said the plant in Hainan Province will start operations in June 2006. The plant's production of 7 million tonnes/year of oil and chemical products will help to meet demand growth in Hainan and the Pearl River Delta region.

Construction of the refinery was launched in April 2004. Total investment for the plant is estimated at $1.23 billion.

China, Kuwait in Talks over 300,000 bpd Oil Refinery

State-owned Kuwait Petroleum Corp (KPC) said it is in talks with Sinopec, BP and Shell about building a joint-venture refinery with a daily crude processing capacity of 300,000 barrels in South China's Guangdong Province.

"The talks are expected to be finalized in the first half of next year," Hamzah Bakhash, a KPC spokesman, told China Daily on the sidelines of the Clean Technologies Conference Asia 2005 that concluded yesterday in Beijing.

Bakhash did not reveal details, such as the share structure of the joint venture or the investment involved, but said the Middle East oil producer expects to increase exports of crude oil and LPG (liquefied petroleum gas) to China.

The Guangdong joint venture may process crude oil imported from Kuwait, but that will all depend on prices, Bakhash said.

KPC, which established its Beijing representative office at the end of March, plans to double its crude exports to China to 400,000 barrels per day from the current level of 200,000 barrels in "months," the KPC official said.

Chen Ge, spokesman for Sinopec, Said November 10 he was not aware of the partnership negotiations, saying only that the Beijing-based oil refiner imports crude oil from Kuwait for refining.

KPC in March signed memorandums of understanding (MOUs) with BP and Shell, looking at partnership opportunities in countries including China, BP and Shell said.

BP and Kuwait Petroleum International, a subsidiary of KPC, agreed to investigate and develop opportunities for future joint investment in China and elsewhere in Asia. They agreed to co-operate in areas such as supply, refining, distribution and marketing in China and neighboring countries, BP said.

KPC and Shell reached an accord to explore opportunities worldwide to develop and implement joint downstream investments.

"The MOU builds upon the relationship that Shell and Kuwait have fostered over the past 50 years. We are looking at opportunities in many countries, including China," Lusha Li, corporate communications manager at Shell Companies China, said.

The Chinese Government is still encouraging foreign investment in the country's refinery business, despite a policy preventing foreign investors taking majority stakes in Chinese firms, Hu Jingyan, director of the foreign investment administration under the Ministry of Commerce, said in September.

Hu said many projects involving joint venture refinery construction were being discussed by Chinese and foreign oil companies, but he did not elaborate.

Chen Hongbing, senior broker with Singapore-based Ginga Petroleum Pte Ltd, said foreign oil companies are looking at China's surging oil demand, while their Chinese counterparts want to benefit from a secure crude oils supply.

"They (the foreign oil firms) are looking at the long term, despite the fact that China currently has a price cap on finished oil products, such as gasoline and diesel," said Chen. "But the Chinese Government is introducing more market elements to the country's refined oil market."

"Chinese oil demand has risen by around 1.6 million barrels of oil a day in the last two years, with almost 90 per cent of that increase supplied by imports. It expects demand to continue rising over the next decade," BP said in a company statement.

INDIA

Bharat Petro to Spend 20 bln Rupees on New Refinery in Central India

State-run Bharat Petroleum Corp. Ltd. will invest 20 billion rupees in a new 120,000-barrel-per-day refinery in central India, the company said on November 4.

Bharat Petroleum's board had cleared on Oct. 28 the increase in investment in the new refined by nearly 2 billion rupees from the previous 18 billion.

It will hold 50 percent of the refinery project, Bharat Oman Refineries Ltd., in which Oman Oil Company Ltd. holds 3 percent.

Bharat Petroleum is planning a 10-billion-rupee initial public offering of 25 percent for Bharat Oman in about two years, while the remaining 22 percent would be offered to financial institutions or a strategic partner.

The refinery will be built at a cost of 90 billion rupees at Bina in the central state of Madhya Pradesh and is likely to be commissioned by December 2009.

The project also includes a crude oil terminal at Vadinar in the western Indian state of Gujarat and a 935-km (580-mile) crude oil pipeline connecting Vadinar to Bina.

Bharat Oman has received tax concessions worth 2.5 billion rupees a year from the Madhya Pradesh government and also a 15-year sales tax waiver from the federal government.

Rajasthan Govt may Pick up Token Stake in RRL

The Rajasthan Government may pick up a participatory stake in the proposed 7.5-million-tonne Rajasthan Refinery Ltd (RRL)

The Rs 9,000-crore refinery will be set up as a 50:50 joint venture between ONGC and Cairn Energy.

MRPL has been identified as the implementing agency for the project.

According to ONGC sources, the State Government has expressed interest in picking up a token stake in the project.

The discussions, however, are still at an early stage.

The State Government has described the project as the single largest investment in the State so far and promised allocation of land and creation of infrastructure at the earliest.

RRL will refine 5 million tonnes of crude procured from the gas reserves of Barmer held jointly by Cairn Energy and ONGC.

Cairn Energy holds 70 per cent operating stake in the field with ONGC holding the rest.

The remaining 2.5 million tonnes refining capacity of RRL will be used for refining the crude produced by ONGC in its nearby fields.

ONGC has also signed an MoU with the Rajasthan Government for supplying 1.5 million standard cubic metre of gas for the proposed 330-MW power plant by Rajasthan Vidyut Utpadan Nigam Ltd at Dholpur.

Government Aiming to Make India Global Oil Refinery Hub

Aiming to make India a Global Oil Refinery hub, the Indian Government is conducting talks with global leaders for setting up three grassroot refineries - Bhatinda, Bina and Paradip - at an investment of Rs 40,000 crore, even while planning to expand the capacity of the Vizag refinery in Andhra Pradesh to 7.5 million tonnes annually.

Even as it was awaiting performance evaluation of 15 Public Sector Oil Units (PSOs) by the Dutch group Shell Global, expected by the year end, the Government is planning to increase export of petroleum products by ramping up the value chain, Union Petroleum Secretary S C Tripathi said November 14.

Though India was deficit in crude resources it planned to import more for upscaling products through value addition. This will mean changes in refinery operation, energy conservation and reduction in maintenance shut down, he told the media after inaugurating the 3-day 13th Refinery Technology Meet (RTM).

''We want to be benchmarked as the best in Asia Pacific'' and have plans for investment in ''grassroot'' refineries at Bhatinda by HPCL, valued at Rs 10,000 crore by BPCL at Bina of around Rs 9,000 crore and about Rs 18000 crore at Paradeep by Indian Oil.

Talks were on with Global Leaders Total for their involvement in these refineries including the expansion of HPCL's refinery at Visakhapatnam to 7.5 million tonnes per annum.

An IPO for BPCL's Bina refinery at a later stage was also being considered, BPCL Chairman and Managing Director Ashok Sinha said, adding, the company could initially start work on the nine million tonnes annual refinery with its own resources.

Sinopec to Privatize Zhenhai Refinery

China's largest oil refinery Sinopec announced November 14 it will privatize Sinopec Zhenhai Refining and Chemical Company Limited (ZRCC) through its wholly-owned Ningbo Yonglian.

China Petroleum and Chemical Corporation (Sinopec) and ZRCC held board meetings November 12 and approved Sinopec's privatization of ZRCC by way of "merger by absorption".

According to the merger agreement entered into between Ningbo Yonglian and ZRCC, Ningbo Yonglian will pay at 10.60 HK dollars each share in cash to the ZRCC H shareholders. The H shares will total about 7,672 million US dollars.

This transaction will contribute to the continued development of Sinopec. It also demonstrates efforts of Sinopec management to deliver their promises at IPO which include restructuring its assets in order to strengthen competence of its core business, said a top manager with Sinopec.

From a long-term perspective, the transaction will have a positive impact on Sinopec's profitability as well as shareholder value, he said.

According to him, the proposed merger can reinforce the business value chain of ZRCC through the vertical integration of ZRCC's refining assets with the upstream refining operation of Sinopec, consolidate Sinopec's resources and realize potential synergies and enable Sinopec to improve the utilization of the capital resources by centralizing capital allocation and enhancing capital expenditure management, eliminate related party transactions and intra-group competition as well as consolidate and simplify management structure and efficiency improvement.

Ondo Signs MoU on $1.5b Private Refinery

Work would soon begin on the 1.5 billion US dollar private oil refinery to be sited at Ode-Aye in Okitipupa Council area of the state following the arrival of the foreign partners to the state.

The Memorandum of Understanding (MoU) of the refinery was signed between the state government and the foreign partners last year.

Vanguard gathered that the foundation laying of the refinery would take place tentatively in March next year while production would commence before the year 2008.

The leader of the team Mr. Leroy Alves and his deputy Mr. Albert Adesanya said plans had been concluded on the multi-million-naira project.

A member of the team Chief Christopher Ikutiminu while speaking on behalf of the team said all the needed funds and the technical personnel are already available.

Chief Ikutiminu said the refinery when completed is expected to provide employment opportunities for over 2000 people while over 1000 people would move at its construction stage.

Ondo State government together with the Okitipupa and Ilaje Councils area of the state are expected to have minor shares while the foreign partners would have the major share of the refinery.

Speaking after a meeting with the foreign partners, the state governor, Dr. Olusegun Agagu expressed optimism that the project was nearing implementation stage.

Dr. Agagu assured that the refinery would improve the economy of the state while job opportunity would be provided for the youth of the state.

The governor lauded the investors for their keen interest in the state and promised that the state government was ready to contribute its own quota for the realization of the refinery.

Indian Oil Plans Hydrogen Unit at Panipat Refinery

Indian Oil Corp. (IOC) has commissioned a hydrogen unit at Panipat, where its refinery capacity will be doubled to 120,000 barrels per day (bpd) by March, the state-run company said on November 21.

The new unit will produce 140,000 tonnes of hydrogen a year, IOC, India's largest refiner, said in a statement.

IOC said it would install its diesel hydrotreating unit by the end of this month, as planned, but the $940-million refinery expansion project would be complete by March instead of January.

"The Crude and Vacuum Distillation Units and the Delayed Coker unit will also be kick-started progressively to enable the entire capacity-doubling project to go online in the next three to four months," it said.

The company is also building a $1.1-billion plant to produce paraxylene and purified terephthalic acid, scheduled to be completed early next year, and a naphtha cracker along with polymer units, which will be built in the year to March 2008.

IOC plans to build a new refinery and petrochemicals complex at Paradip in eastern India, but details of the project have not been finalized yet.

IOC aims to become one of India's top petrochemicals firms, which will help it use surplus naphtha now being exported by Indian companies.

Naphtha has been steadily replaced by gas in Indian power plants and fertilizer units since last year, when the country started importing liquefied natural gas from Qatar.

A planned increase in refining capacity of 2.54 million bpd is expected to add to the country's naphtha surplus.

State-run refiners will add capacity of 19.3 million tonnes a year, or about 386,000 bpd, by 2009, while Reliance Industries plans to double the capacity of its Jamnagar refinery to 1.2 million bpd by 2008.

INDONESIA

Pertamina Unit, Iran Co to Build $3B Oil Refinery

Indonesia's PT Elnusa, a unit of state-owned PT Pertamina (PTM.YY), and an Iranian company plan to build a $3 billion oil refinery in the country, Elnusa's chief operating officer said November 10.

The refinery will have a processing capacity of 300,000 barrels a day, Rudy Radjab told reporters.

Indonesia's current total processing capacity is 1.06 million b/d.

The Cilacap refinery in the southern coastal area of Central Java is the largest refinery in the country, with a 230,000 b/d capacity.

The planned refinery will likely export 200,000 bbl of its planned total output, Rudy said, without elaborating on which markets the products will be sold in.

Elnusa and its partner, Nafta Iran, will sign a preliminary agreement next month on the development of the refinery, Rudy said.

He didn't say when work will start on the refinery.

The refinery might be built either on Batam Island or in Banten Province, Rudy added.

It will process crude oil to be imported from Iran, he said, without elaborating.

The refinery will help to reduce Indonesia's dependence on petroleum products, which makes the country - the sole Southeast Asian member of the Organization of Petroleum Exporting Countries - a net oil importer.

Many refinery projects in Indonesia have previously fallen through because there wasn't any legal framework for private investors who wanted to operate oil refineries prior to the enactment of the 2001 Oil and Gas Law.

Indonesia’s Refinery Investors Seek Tax Cuts

Investors interested in building oil refineries in Indonesia are asking for fiscal incentives in the form of tax cuts, said Iin Arifin Takhyan, director general of oil and gas at the Energy and Mineral Resources Ministry.

After a meeting of Energy and Mineral Resources Minister Purnomo Yusgiantoro with a delegation of Nippon Export and Investment Insurance (Nexi) on November 21, Iin said he has sent a letter on request for fiscal incentives to the Finance Minister.

"The authority to provide fiscal incentives rests with the finance minister," Iin said.

Under the Tax Law, fiscal incentives are provided to the builders of strategic infrastructure projects, including oil refineries.

Meanwhile, Purnomo said his ministry has made efforts to speed up the building of new oil refineries to meet 70% of demands for locally produced fuel oil and 30% of imported fuel oil.

"Therefore, we need two more refineries with total capacity of 125,000 barrels per day in the next two to three years," Purnomo said.

S Korean SK Group to Set Up Lube Oil Refinery in Riau

South Korean SK Group, in cooperation with state oil and gas company PT Pertamina, will set up a lube base oil refinery in Dumai, Riau in 2007, an official of Pertamina said.

"The agreement for the cooperation was signed in South Korea recently," General Manager of the Lube Base Division Djaelani Sutomo said on November 29.

He said the refinery plant would produce grade three high qualified raw material for lube base oil.

"The product will be absorbed by Pertamina," he said.

Pertamina is now getting its raw material for lube base oil from its Cilacap refinery, Central Java. The refinery produces first grade raw material with a capacity of 400,000 kiloliters per day.

And some 300,000 kiloliters will be bought by Pertamina, he said, adding that the other 100,000 kiloliter would be exported.

VIETNAM

Work Begins on Viet Nam’s Dung Quat Refinery

Deputy Prime Minister Nguyen Tan Dung broke ground November 28 on the country’s first oil refinery in the central coastal province of Quang Ngai, Covering 338 ha of land and 471 ha of water in Quang Ngai Province’s Binh Son District, the refinery is set to begin operations in 2009. The refinery is expected to process 6.5 million tonnes of crude oil per year at 145,000 barrels of crude oil per day.

Total investment in the refinery has increased from the US$1.3 billion originally approved by the NA to $2.5 billion.

"This is a key national project that requires big investment. When complete, the refinery will play an important role in further developing several economic sectors," said Dung.

An Engineering-Procurement-Construction (EPC) contract worth $1.56 billion for the refinery project was signed in May between the Viet Nam Oil and Gas Corp. (PetroVietnam), which will manage the project, and a consortium comprising the French company Technip, the Malaysian company Technip Geoproduction, JGC of Japan, and Tecnicas Reunidas of Spain. It was followed by another EPC contract worth $425 million for supporting facilities.

Under these EPC contracts the Technip consortium will develop the complete refinery complex and hand it over to PetroVietnam in February 2009 after an eight-month trial run.

The refinery will turn out products including Mogas 90 and 92 gasoline, liquefied petroleum gas (LPG), kerosene, diesel oil, fuel oil and propylene. However, it will still only be able to satisfy 33 per cent of the country’s fuel demand, according to Truong Van Tuyen, PetroVietnam deputy general director and head of the project’s management.

Deputy PM Dung urged PetroVietnam to ensure that construction stayed on schedule without sacrificing quality.

Managing director of the Technip consortium Gerard de la Rosa said: "Dung Quat Refinery will meet international regulations on environmental protection. It will help to further develop Viet Nam’s economy during a time of acute economic competition."

The French ambassador to Viet Nam, Jean-Francois Blarel, added that Dung Quat Refinery would also help promote relations between Viet Nam and France.

The Government approved Viet Nam’s first oil refinery project, worth $1.3 billion, in 1997.

Following the Government’s official decision to build the refinery in central Quang Ngai Province, many foreign oil companies were initially reluctant to take up the project, claiming the site made little economic sense.

Finally, in 1998, PetroVietnam got the project underway, signing an agreement with the Russian External Economic Relations Organisation Zabubezheneft for building the refinery. Under the agreement, the joint venture Vietross was set up, with both partners investing equally in the project.

In 2002, the consortium led by France’s Technip Conflexip won the $700-800 million construction bid to equip the refinery.

However, negotiations for the EPC dragged on for six months without any result, causing the project to be delayed until 2004. On October 9, 2002, the management board announced a further delay for a year, with the new completion date set for 2005.

Meanwhile, the Russian partner withdrew from the Vietross joint venture in November 2002 due to doubts about the project’s efficiency.

In response, the Government decided to end the Vietross joint venture and became the sole investor in the refinery, despite financial and logistical challenges.

After long negotiations with France’s Technip Conflexip, PetroVietnam signed the two EPCs with the four-party consortium this year.

3. EUROPE / AFRICA / MIDDLE EAST

GERMANY

ConocoPhillips to Purchase German Refinery in Wilhelmshaven

ConocoPhillips plans to buy a refinery in Wilhelmshaven, Germany, from Louis Dreyfus Energy Holdings Ltd. along with the UK's Louis Dreyfus Refining and Marketing Ltd. Terms were not disclosed.

The refinery purchase includes the 275,000 b/d refinery, a marine terminal, rail and truck loading facilities, and a tank farm. The refining and marketing company provides commercial and administrative support to the refinery.

Subject to governmental approval and regulatory permits, closing is expected during the first half of 2006. The Wilhelmshaven refinery would increase ConocoPhillips' overall European refining capacity to 647,000 b/d, the company said.

Jim Nokes, ConocoPhillips executive vice-president for refining, marketing, supply, and transportation, said upgrades are planned to cut operating costs and to enable the refinery to process more crude slates, including Russian blends.

The anticipated deep conversion is subject to German approvals and permits.

ConocoPhillips expects to increase its planned 2006 capital expenditures by $1.4 billion to provide for the acquisition, the planned deep conversion project, and other miscellaneous capital improvements. The company will release its 2006 capital expenditure plans in mid-December.

KENYA

IndianOil Looks to Acquire BP’s Petro Assets in Kenya

Petro-market leader IOC, has put in a bid to acquire British Petroleum’s stake in its petro-marketing ventures in Kenya. BP Africa is in partnership with Shell in three petro-marketing companies and also has a stake in a coastal refinery in Mombasa.

BP is planning to exit the Kenya market and has put its stake on the block. Several companies including, partner, Shell is in the race to acquire BP’s stake too.

IOC’s move comes close on the heels of its failed attempt to acquire Tupras Refinery in Turkey. IOC, has drawn up an expansive strategy to move into new markets, particularly in the African continent.

Senior IOC officials have recently said that the company was hoping to raise money by selling a part of its holding in ONGC to fund their acquisition of marketing and retail assets abroad.

British Petroleum, which holds a stake through its subsidiary BP Africa in the three petro-marketing companies, is set to offload its 50% shareholding held in a joint venture with the Dutch company Shell.

BP, which has shareholding in three local companies, BP Kenya, Kenya Shell and BP Malindi, will also be offloading its 17.1% shareholding in Kenya Petroleum refineries. The other stake holders in this company include Shell, Caltex and the Kenyan National Oil Company.

Hindustan Petroleum, which has recently tied up with BP for developing a refinery in Punjab and a JV retail market in India, was also learnt to be keen on these assets. BP’s agreement with HPCL also provides for HPCL to farm in some of BP’s assets globally.

However, senior officials at HPCL said that there was no decision as yet on this particular asset. Four companies have submitted bids for BP’s stake including two locally incorporated companies.

Sources in investment banking circles confirmed that IOC has held parleys with BP and a tentative bid has been put in.

Unlike recent sellouts in the oil sector, BP has not called for open bids to sell its stake. IOC’s negotiations is a hush-hush affair and no details were available on the deal size. IOC declined to comment on the development.

The Kenyan petro-retail market was partially controlled but had immense growth opportunities. For IOC, this market could provide a toehold to other markets in East Africa such as Zimbabwe and Tanzania among others.

The coastal refinery also would give IOC an opportunity to sell products to other neighboring African markets, if it wins the deal.

NIGERIA

Joint Venture to Build Nigerian Refinery

India's top oil exploration firm, Oil & Natural Gas Corp., and the world's largest steel maker, the Nether- lands-based Mittal Group, plan to build an oil refinery in Nigeria and have offered to invest another $6 billion in a power plant and railroads in the African nation.

The proposals were made as part of a deal last week that allows ONGC Mittal Energy, a joint venture between the Indian energy company and Mittal, to explore and develop Nigerian oil blocks that could produce an average 650,000 barrels of oil over 25 years, a statement posted on the ONGC Web site said.

The joint venture was set up in July as part of energy-hungry India's efforts to secure supplies from overseas. The company focuses on opportunities in countries such as Indonesia, Kazakhstan, Azerbaijan, Trinidad and Tobago, and Angola.

SYRIA

Russia’s Stroytransgaz Mulls $2Bln Oil Refinery in Syria

Russian company Stroytransgaz has proposed constructing an oil refinery and petrochemicals plant in Syria at an estimated cost of $2 billion, Syrian oil minister Ibrahim Haddad said on Sunday, Nov. 6.

Haddad told the official news agency after talks with officials from Stroytransgaz Oil Progress in Damascus that the Russian firm will carry out a feasibility study for the 140,000 barrel per day refinery.

“The Ministry of Oil has responded (positively) to the request and offered all it takes to support the launch of the project in Syria,” the official news agency of Syria quoted Haddad as saying.

Syria —- a non-OPEC oil producer —- has two state-owned oil refineries with a combined output capacity of 250,000 barrels per day. Industry sources estimate Syria’s crude oil production capacity at about 400,000 barrels per day with exports of about 250,000 barrels per day including refined oil products.

Haddad said Syria would sell crude oil to the new refinery and buy refined products from it at international prices, but did not give further details.

ZAMBIA

Zambia Oil Refinery Says Ops Suspended after Fire

Zambia's sole Indeni Oil Refinery has suspended petrol-refining operations after a fire, Managing Director Luis Urbano said, in a move that will put further pressure on the country's lifeblood copper mining.

"There was a product that fell into the furnace and caused an explosion. As a result of this we've suspended fuel refining," Urbano told reporters at the refinery near the copperbelt city of Ndola. He gave no further details.

The Indeni Oil Refinery produces more than 350,000 litres of petrol per day -- enough to meet Zambia's daily consumption. It also produces more than 1 million liters of diesel fuel, although this had not been affected, the refinery said.

Indeni, co-owned by French oil major Total and the Zambian government, has been plagued by breakdowns because of obsolete equipment and was shut for almost four weeks in September before reopening in mid-October.

The closure led to severe fuel shortages that forced Nkana copper smelter, owned by a unit of Vedanta Resources and Mufulira smelter -- owned by a unit of Canada's First Quantum Minerals and Swiss firm Glencore International, to drastically scale down production.

GEORGIA

Turkish Company to Build Refinery in Georgia

Turkish company Gunay will build an oil refinery with annual capacity of five million tonnes in west Georgia, Georgia’s economic development ministry said. The Georgian government recently approved Gunay’s request for a plot of land to build the refinery, a source from the ministry said.

According to a special instruction from the Georgian president, Gunay will receive trust management for 49 years of a plot of government-owned non-farming land to the north of Poti. The Turkish company will pay 500,000 Euro per year for this right. Gunay plans to build the refinery over four years and invest 500 million Euro in it. If the refinery is not built in time, Georgia has the right to review its agreement with the Turkish company.

The idea for a large refinery on the Black Sea coast of Georgia arose after the Azerbaijan International Operating Company (AIOC), the operator of the Azeri-Chirag-Gunashli fields, built the Baku-Supsa pipeline in April 1999.

The project envisaged the refining of oil arriving to Supsa from Azerbaijan, Kazakhstan and Turkmenistan in Supsa for exports of oil products to the world market.

RUSSIA

Russia Asks Cooperation in Refinery and Pipelines

Russia and Italy lead the countries that Turkey conducts the highest level of export with. At the top of the list bringing these three countries together is the Blue Stream carrying Russian natural gas to Turkey using Italian technology for the pipeline laid under the Black Sea.

Russian President Vladimir Putin, coming to Turkey for the official opening of the Blue Stream pipeline, will bring plans for joint investments in Ceyhan, the region that Turkey creates projects for in order to transform it into an “energy terminal”. Oil refineries to be built by the Russian Gazprom company in either Mersin or Ceyhan, an oil pipeline construction stretching from Samsun to Antalya, (from the north to the south of Turkey), and underground natural gas storage facilities are among Putin’s plans. Russians are also extremely interested in tourism investments in Turkey. Putin is to ask for “facilitation” but not “special treatment” from Turkish Prime Minister Recep Tayyip Erdogan.

Turkey is highly disturbed by the level of tanker traffic in the Istanbul straits and seeks to find an alternative route with the Samsun-Ceyhan oil pipeline. The Baku-Tbilisi-Ceyhan oil pipeline will carry Caspian crude to Turkey that will be processed at the Ceyhan facilities. Building natural gas storage facilities to prevent interruptions during the winter months is also another project being assessed. Putin meets with Erdogan and Italian Prime Minister Silvio Berlusconi November 17 to officially open the Blue Stream oil pipeline in Samsun, a northern Black Sea region city.

The Blue Stream project agreement signed in December 1997 between Turkey and Russia proposes the transfer of 16 billion cube meters Russian crude yearly for 25 years. Its total cost is given as $3.5 billion and was completed in three years. The 1,265 kilometers long pipeline first pumped the gas in February 2003 and it is the first pipeline laid 2,150 meters under the sea.

Following the completion of the Blue Stream project, Turkey-Russian trade relations have started to dwindle, this is a negative sign for Turkey in particular. To boost bilateral economic relations, Turkey has invited Russian businessmen to invest in Turkey. The Turkish construction sector invested more than eight billion dollars in this Russia.

RussNeft may Construct Refinery in Bryansk Region.

RussNeft Oil Company considers an opportunity of construction of refinery in Bryansk region with attraction of project financing, Company said.

In June 2005 RussNeft launched an oil loading terminal in the Bryansk region. The new facility has a transshipment capacity of 5 million tons of crude oil per year.

RussNeft was established two years ago by the former head of the state oil company Slavneft Mikhail Gutseriev and his partners. In the structure of RussNeft there are 25 production enterprises, a transport company and Moscow's second largest retail network. RussNeft's recoverable reserves exceed 600 million tons and its yearly production volume totals 14 million tons of crude oil.

UKRAINE

32.8 Percent Stake in Galychyna Oil Refinery to be Auctioned Off

A 32.8% stake in Ukrainian oil refinery Galychyna will be auctioned off on Dec. 15, Sokrat, a Kiev-based brokerage, said November 3, citing an agreement with owners of the stake.

The stake, at a starting price of 572 mln hryvnias, or $113 mln, will be sold at the Ukrainian Interbank Currency Exchange to a bidder that will offer the highest bid, Sokrat said.

Sokrat did not disclose the name of the current owner of the stake, but analysts said it is probably Privatbank, Ukraine's largest bank by assets, who is selling the stake.

Privatbank refused to comment on the sell-off.

Galychyna, the sixth biggest oil refinery out of seven operating in Ukraine, reduced oil refining by 46% on the year to 916,200 metric tons in January-September, according to the Energy and Fuel Ministry.

High prices make it more difficult for Galychyna, which mostly uses outdated equipment, to compete with other Eastern European oil refineries, analysts said. This partially explains the decline in oil refining volumes, analysts said.

Other big shareholders in the refinery include Ihor Yeremeyev, a lawmaker and a close ally of Parliament Speaker Volodymyr Lytvyn. Yeremeyev is believed to own 41% of the refinery and is thought to control top managers at Galychyna.

The government owns 25% stake in the refinery, but has been deciding whether to sell the stake to investors or incorporate it into an ownership by Naftogaz Ukrayiny, the state oil and gas company.

BAHRAIN

$150m Bapco Project to Expand Gas Production and Modernize the Bahrain Refinery

Bapco is embarking on an ambitious project to expand the gas production and distribution system to meet the growing need for power generation at a cost of more than $150 million, it was revealed November 14. The project involves drilling of eight Khuff gas wells plus the installation of eight gas dehydration units, said President Dr Mustafa Al Sayed. He was speaking at the Water Middle East 2005 conference at the Bahrain International Exhibition Centre.

In addition, the company will undertake a major upgrade of the gas distribution network to cope with the increased demand for gas projected for 2010 and beyond.

The three-day event is being held under the patronage of Prime Minister Shaikh Khalifa bin Salman Al Khalifa.

Dr Al Sayed highlighted the strategic plans and the activities currently in progress at Bapco.

These undertakings include plans to upgrade and modernize the Bahrain Refinery and to expand the gas production system in the field.

"The above projects will have a significant impact on the Bahrain industrial sector," said Dr Al Sayed.

"It will also play an important role in opening opportunities to the private sector to participate hand in hand with Bapco to implement our strategic objectives.

"Bapco operates the Bahrain Oil Field and the Bahrain refinery on behalf of the government.

The refinery, which was built in the 1930's, has seen numerous expansions and modifications over the years."

The nominal capacity of the refinery is 267,000 BPD (barrels per day) and it consists of a variety of process units that upgrade crude oil to more valuable products.

"The first priority of the refinery is to meet the demand of our local market," said Dr Al Sayed.

"However, our refinery is primarily an export oriented refinery with over 90 per cent of production being exported to GCC countries, East Africa, Asia and Japan."

The refinery produces a full range of products, the most valuable product being middle distillates at about 55pc of refinery production.

Other products are LPG, Naphtha, Gasoline, Fuel Oil and Asphalt.

To enable Bapco to respond to market needs and to modernize its facilities Bapco is embarking on an ambitious investment program to upgrade the refinery.

The move aims to meet the more stringent product specifications of the future, improve profitability and comply with environmental legislation.

The company is also introducing project management initiatives that will ensure successful implementation of its strategic investment program.

Bapco had demonstrated a strong commitment for the protection of the environment and the health and safety of its employees, contractors, customers, and the community, said Dr Al Sayed.

Considerable financial resources were committed to upgrade the refinery and to meet the more stringent product specifications of the future, said Dr Al Sayed.

The total estimated cost under this program amounts to $810 million and includes modernizing the refinery to produce higher value products and to meet future market requirements.

The project also covers improving environmental compliance, installing Low Sulfur Diesel (LSD) facilities in 2007 to produce 10ppm diesel as well as other facilities to reduce costs, improve yields, and reduce pollution. Energy is crucial for the economic and social development of all countries and Bapco is contributing to supplying part of the world demand in a responsible and efficient manner, said Dr Al Sayed. "With support of the government, Bapco continues to move forward with a vision to achieve further progress for the country and we look forward to the successful project implementation and commissioning in 2007," he added.

KUWAIT

KNPC, $6.2bn Refinery Plans

Kuwait National Petroleum Company plans to pre-qualify international contractors next month for a $6.3bn, 615,000-bpd refinery, according to Reuters. Up to $4bn of upgrade works at the state's two other refineries is also due to begin in a year. The construction will boost Kuwait's refining capacity to 1.2m bpd from 930,000 bpd.

UAE

UAE to Build 300,000 bpd Refinery

The UAE plans to build a new oil refinery with a capacity of 300,000 barrels per day (bpd) in the Gulf Opec producer, Oil Minister Mohammed Al Hamli said.

He also said world oil markets were well supplied and that stock levels were higher than their averages in recent years.

'A new refinery is planned to be built at Fujairah with a capacity to process 300,000 bpd of crude oil,' Al Hamli said in a speech at an energy forum in Abu Dhabi.

He said the UAE also planned expansion at existing plants but gave no details.

In October a UAE newspaper had reported that Abu Dhabi plans to build a 300,000 bpd refinery in Fujairah -- which is becoming a major bunkering hub -- with an investment of $4 billion.

Mohammed Al Hamli also said the UAE would increase its oil production capacity to more than 3.5 million bpd in the 'next few years' through investments in upstream projects.

The UAE is producing at a rate of around 2.5 million bpd and plans to add 200,000 bpd by the end of 2005 or beginning 2006.

The head of state oil firm Abu Dhabi National Oil Company, Yousef Omair bin Yousef, said in May that Abu Dhabi, the UAE's main oil producer, plans to raise output capacity to 3 million bpd within three to five years to ease concerns over global oil supplies.

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