aug 06 update

Global crude distillation capacity is expected to increase by 11.7 million barrels a day during the 2006 to 2011 period, the International Energy Agency said in its new medium-term oil market report July 12.

The Paris-based agency expects new refinery investments to add 10.3m b/d of crude distillation capacity from known startups and the expansion of existing facilities. A further 1.4m b/d of growth is expected to show capacity creep in North America, Europe and the Pacific.

"The Middle East and Asia Pacific regions will account for 7.2m b/d of new refining projects. Investment in the U.S. and Europe will focus on refinery expansions and upgrading capacity, with no new-build refineries expected on-stream during the period," the IEA said.

The IEA noted that the Middle East is the largest contributor to refinery expansions over the next 5 years.

"Driven by the aggressive expansion plans of national oil companies, such as Saudi Aramco, we expect a net addition of around 2.6m b/d," it said.

In terms of the implications for the product markets, the IEA said gasoline markets should see the current tight supply situation ease before the end of the decade.

"The supply potential from new-build refineries and upgrading capacity should exceed demand growth over the 2006-2011 period," the IEA said.

Equally important is the fact that the refining industry should have adapted by then to the tighter quality specifications and the removal of methyl tertiary butyl ether (MTBE) from U.S. reformulated gasoline.

"North America will see some improvement in gasoline supply during 2006-2007, as upgrading projects start to come on-stream. However, the need for imports will remain and may increase in the short-term," the IEA said.

Middle distillate markets are likely to remain comparatively tight over the 2006-2011 period.

Jet fuel supply looks set to broadly match the rise in demand, although in the short term, jet yields will remain under pressure, because of gasoline and diesel production, the IEA said in its report.

In terms of fuel oil, demand isn't expected to see the same growth as light products, which are driven by transportation requirements.

"With static demand and a probable decline in fuel oil production over the balance of the decade, fuel oil markets will probably tighten," the IEA said.

1. AMERICAS

U.S.

Valero to Cut Emissions at Delaware City Refinery
U.S. oil refiner Valero Energy Corp. has agreed to cut emissions of nitrogen oxides at its Delaware City refinery as part of a settlement with the Delaware Department of Natural Resources and Environmental Control (DNREC).

"(The settlement) will result in reductions of nearly 800 tons per year of nitrogen oxides (NOX) from the refinery in Delaware City," DNREC said in a statement. Nitrogen oxides contribute to ground level ozone, DNREC added.

The refinery, owned by Valero's subsidiary Premcor, will be required to install a wet gas scrubber at its fluid catalytic cracking (FCC) unit, according to the Administrative Order issued by DNREC.

NOX emissions must be reduced to 20 parts per million from the FCC by May 1, 2009.

"In the interim, Premcor will begin implementing measures expected to reduce NOX emission by 300 to 500 tons per year by the turnaround of 2006 and no later than May 1, 2008," DNREC said.

The order also resolves the company's potential liability for operating the FCC "in an impermissible manner due to changes undertaken by Motiva which resulted in increased NOX emission."

Premcor purchased the Delaware City refinery from Motiva in 2004, before Premcor was bought by Valero.

Tesoro Cancels Expansion Plans at Washington Refinery

Tesoro Corp., an independent refiner and marketer of petroleum products, has scrapped plans to build a coker at its Anacortes, Wash., refinery due to significant cost increases.

The proposed 25,000-barrel-a-day coker was originally estimated to cost $250 million and would have allowed the refinery to process heavier crude oil. The proposed facility was slated to begin production in the fourth quarter of 2007.

Instead, Tesoro officials say they will continue to move forward with a plan to increase the refinery's sulfur-handling capabilities while maintaining its compliance with environmental regulations.

"The decision to cancel the Anacortes coker project is consistent with what we told investors about our capital strategy's project-assessment process and our commitment to high-return projects," says Bruce Smith, president, chairman and CEO of Tesoro. "As we reviewed the cost of the entire project, it no longer met our rate-of-return objectives for economic projects because the cost of engineering, materials and labor had increased similar to escalations that have been announced on other projects, both within and outside the energy sector."

The total cost to terminate the Anacortes coker project is expected to be approximately $31 million, officials said.

Total Shuts Units at Port Arthur Texas Refinery

Several units, including part of the sulfur recovery system, were shut on July 9 at Total Petrochemicals USA's 232,000 barrel per day (bpd) refinery in Port Arthur, Texas, according to a notice filed July 10 with the Texas pollution regulation agency.

The units may remain shut until July 11, according to the notice filed with the Texas Commission on Environmental Quality.

A blower on the SCOT unit, which increases sulfur recovery, was shut down, that in turn triggered the closure of the entire SCOT unit, according to the notice.

In addition to the SCOT unit, units 817, 836 and 822 at the refinery were also shut on July 9, but Unit 836 has been brought back up and Unit 822 was being restarted.

Exxon Shuts L.A. Refinery FCC for Overhaul

Exxon Mobil Corp. shut a gasoline-producing fluidic catalytic cracking unit late on July 8 at its 150,000 barrel per day (bpd) Los Angeles-area refinery in Torrance, California, according to reports filed with California public safety agencies.

Trade sources have said the refinery was planning to shut the FCC for an overhaul expected to last between 10 days and two weeks.

BP Texas City Refinery has Sulfur Recovery Unit Leak

BP Plc's Texas City, Texas, refinery suffered a leak at its sulfur recovery unit, according to a state regulatory filing July 11.

A line at the SRU leaked sour water to a concrete pad, with emissions lasting one hour, the filing with the Texas Commission on Environmental Quality said.

There was no information in the filing about any effects on production at the refinery, which is the third largest in the United States based on its rated crude throughput capacity.

A spokesman was not immediately available for comment.

The refinery, which is continuing the restart process after Hurricane Rita shut it last year, has said the restart will last until at least the end of this year.

It is currently operating at a crude intake of about 200,000 barrels per day, down from its rated capacity of 460,000 bpd.

Longview Oil Refinery to get New Life for $20 million

A Longview oil refinery that has been unused for more than a decade could be brought back into operation by a Beaumont man and a group of investors.

Kenneth Dean Williams said Gregg County Refining is the new owner of what was Longview Refining Associates on Premier Road, off U.S. 80 in the Pine Tree area. Williams, who is from this area and has family here, said he is president of the company.

"Longview has a lot of opportunities," Williams said of the potential for the refinery. Williams said his group also owns pipelines, an electricity generating wind farm in West Texas and other businesses.

The Longview facility last was Longview Refining Associates when it closed in about 1993, he said.

Williams said his group considered different options for the property, including dismantling the refinery and moving it to locations outside the United States that need refining capacity.

But now Williams said the focus is on operating the refinery in Longview because of the potential business opportunities. A final decision hasn't been made, he said, but leaving it in place makes the most sense financially.

"Longview is a real hub for crude. Not everyone realizes how much crude goes through there from the Gulf Coast," he said, describing a pipeline infrastructure that distributes the foreign crude oil that is shipped to the Gulf Coast. "We have plenty of crude not only coming through the area, but also there's a lot of production in East Texas."

The refinery has the ability to produce 15,000 barrels a day of various products, including all three grades of gasoline and diesel fuel. Williams said that would be beneficial in a country that is short on refining capacity.

The refinery would be "small potatoes" compared with Gulf Coast refineries that process hundreds of thousands of barrels a day. It would have been helpful, though, when Hurricane Rita shut down Gulf Coast refineries in 2005, he said.

It also has the ability to make jet fuel and has ethanol blending facilities, which would open up other markets, Williams said. Also, carbon dioxide from the plant could be used to enhance local oil production.

Williams envisions most of the products being sold locally or in the Dallas-Fort Worth area. The refinery probably would employ about 70 people.

He said the company is in the beginning stages of applying for permits to operate the plant and hopes to be up and running in 18 months.

The former chief executive officer of Longview Refining previously told the News-Journal that the plant closed in 1993 after a German company financing it had financial problems.

The property eventually fell under the ownership of the city of Longview, Gregg County and the Pine Tree school district because of unpaid taxes, according to John Bolster, an attorney with the firm Linebarger, Goggan, Blair and Sampson, which worked with the county and city on the property. He said between $500,000 and $600,000 in taxes was owed in total to the three entities by the time they foreclosed on the property about two years ago.

The entities found, though, that no one was willing to buy the property for the full taxes owed when it was put up for sale at auction. When no one bid what was owed, that allowed the entities to negotiate the sale, and they began taking offers.

There was a lot of interest from groups that wanted to purchase the machinery only and move it, with the county, city and school maintaining ownership of the property, Bolster said.

"We wanted bidders to come forward who were willing to purchase the whole thing lock stock and barrel," he said, and the best offer came from Williams.

The purchase price was $262,000, which means the entities didn't recover the full amount of taxes owed.

"But it's more money than we ever thought we'd collect on it," Bolster said, and the property will be back on the tax rolls.

While Williams said the refinery doesn't need any major repairs, he said it would cost about $20 million to get it up and running in what he said would be a typical "turnaround" to open the refinery.

"All the equipment is there in place," he said. It's a "first-class facility," he said, although there does need to be a lot of cosmetic work done.

He said there have been concerns about potential environmental issues at the plant, but he said the Environmental Protection Agency has given the refinery a clean bill of health.

And he said the company will make sure that odor problems once reported at the refinery, for instance, are not a problem.

"We just really want to make sure that we do something that's worthwhile for the community," Williams said.

The environmental agency did conduct a cleanup at the refinery in May and June, according to an agency report and Dave Bary, a spokesman for the agency. The cleanup included removing about 100 barrels of hazardous waste, mostly flammable liquids used in the refinery process.

Bary said there was no concern about any off-site migration of problems at the plant, and nothing was found that would indicate any ongoing problems. He said less than $200,000 was spent on the cleanup, money that the agency will try to recover.

Gregg County Judge Bill Stoudt said there would be opportunities for public comment on the refinery during the permitting process. The county wants to be certain any issues are addressed before the refinery begins operations, he said.

"I think I'm certainly glad someone came into take over the property, and their plans are to refurbish it and to make it a productive refinery," he said.

Six Companies Interested in Lyondell-Citgo Refinery

Six contenders have come forward as potentially serious bidders for a Houston refinery jointly owned by Lyondell Chemical Corp. (LYO) and Venezuela's state-owned oil company, two people familiar with the negotiations say.

Petroleos de Venezuela SA and Houston-based Lyondell put the 268,000-barrel-a-day plant up for sale in April after deciding to end an acrimonious partnership. PdVSA co-owns the refinery - the first of its scale to come on the auction block in years - through its Citgo Petroleum Corp. unit. Analysts have estimated the refinery could fetch as much as $5 billion.

Possible buyers for the plant, which specializes in processing heavy crude, include Canada's Husky Energy Inc. (HSE.T) and Houston-based ConocoPhillips (COP), the two people said. ConocoPhillips repeatedly has declined to comment on the sale, and Husky also declined to comment, although it has previously said that it might look to a U.S. refining partner for its Sunrise oil sands project. Tesoro Corp. (TSO) has said in the past that it is looking at the refinery.

While a majority of those interested are refinery companies, at least one is a private equity group, the people familiar with the situation said. They cautioned that the auction was still in its early stages and that the mix of bidders may change.

Lyondell, the majority owner, declined to comment on the sale's progress, citing confidentiality agreements.

"There are multiple parties that are still in the process and are still competitively assessing and bidding at the refinery," Lyondell spokesman David Harpole said. Citgo also declined to comment.

Lyondell, however, said it expects the process will move quickly. "The process is on schedule, it's a very ambitious schedule, and we expect to continue to move forward," Harpole said.

The six finalists were whittled down from an initial group of 20 companies that signed confidentiality agreements with Lyondell-Citgo, according to people familiar with the auction process. After taking a closer look at the plant, several companies such as independent refinery Valero Energy Corp. (VLO) pulled out. Valero was seen as the leading contender, but Chief Executive Bill Klesse told analysts in June that it decided against pursuing a purchase.

PdVSA supplies the refinery with 230,000 barrels a day of crude under a long-term contract, and it remains unclear whether a new owner would be obligated to continue buying crude from PdVSA. Lyondell has said that the terms of the refinery's current supply contract suppresses profits.

Lyondell's Chief Operating Officer, Morris Gelb, said in early June the current contract would be voided if the refinery is sold. However, his comments came after Venezuela's oil minister had said any buyer would be forced to sign on to a similar agreement.

PdVSA itself is uncertain over how to deal with the crude supply issue, one of the people familiar with the refinery said. PdVSA hasn't yet decided whether a new owner will be able to change the source of the refinery's crude.

The status of the crude supply could be a deal-breaker for an interested party looking to take on the refinery as an outlet for processing its own heavy crude.

In addition, eleven citations from the Occupational Safety and Health Administration could also be a stumbling block, a person familiar with the refinery's safety record said. The citations came after OSHA investigated a September fire at the refinery's fluid catalytic cracker that seriously injured one contract worker.

Lyondell's Harpole said there weren't any obstacles to proceeding with the sale.

"There are no outstanding issues that would complicate a potential transaction," he said.

BP says Texas Refinery Restart to Span 2006

The restart of BP Plc.'s giant Texas refinery will last until at least the end of 2006, according to a company spokesman and a recent regulatory filing.

The Texas City, Texas, refinery is operating at a crude intake of about 200,000 barrels per day (bpd), down from its rated capacity of 460,000 bpd, as it continues to restart after being shut on Sept. 21 when Hurricane Rita menaced the Texas coast.

BP resumed gasoline production in April with the restart of its 125,000 No. 3 fluidic catalytic cracking unit. BP is working to restart the 80,000 bpd FCC No. 1.

Rapid cooling of 27 miles of steam piping were damaged when the cogeneration facility at the refinery, operated by BP and Cinergy Corp. was shut as a precaution prior to Hurricane Rita, according to a filing with the U.S. Securities and Exchange Commission.

"This damage required extensive repair and maintenance to the steam system and on many gasoline production units," the filing said.

BP plans for crude throughput to reach 400,000 bpd by the end of the year, said spokesman Ronnie Chappell.

Chapell said he didn't know if the remaining 60,000 bpd in capacity would be permanently shut or restarted in 2007.

The Texas City, Texas, refinery is the third-largest in the United States based on its rated crude throughput capacity.

Exxon L.A. Refinery Reports Flaring over July 4 Holiday

Exxon Mobil Corp. reported flaring between July 3 and July 7at its 150,000 barrel per day (bpd) Los Angeles-area refinery in Torrance, California, to California public safety agencies.

Over the course of several days according to the reports, a sulfur recovery system malfunctioned, a catalyst dust blew out of a steam exhaust because of an equipment failure, flaring occurred because of a malfunction and, a compressor relief valve activated, causing flaring.

A refinery usually uses its flare when equipment malfunctions unexpectedly and the hydrocarbons being refined under high pressure and high heat have to be burned to prevent an explosion that could injure workers and damage equipment.

Overpressure Causes Total to Cut Output on Texas Refinery Unit

Total Petrochemicals USA reduced production on Unit 835 at its 232,000 barrel per day (bpd) refinery in Port Arthur, Texas, on July 17 after over-pressure triggered the refinery's flare system, according to a notice filed with the state pollution regulation agency.

An estimated 17,390 pounds of sulfur dioxide were pumped into the air as refinery workers struggled the restore the unit to normal operations, according to the notice filed with the Texas Commission on Environmental Quality.

Citgo Releases Hazardous Chemicals

Citgo Refinery's environmental regulators say the recent oil spill at its plant in Lake Charles may have also led to the release of hazardous chemicals.

A letter written to the State Department of Environmental Quality suggests the refinery released several dangerous substances at levels greater than state permits allow.

Those substances include sulfur dioxide, toluene and flammable gas.

Citgo officials say they're still investigating the incident.

CB&I Bags $50 Million Engineering Contract from Air Liquide

Air Liquide Large Industries U.S. LP has tapped CB&I to provide a large-scale hydrogen production facility to be built at ConocoPhillips Co.'s refinery in Rodeo, Calif., for $50 million.

The plant will supply high-purity hydrogen to meet the existing and future requirements of the Rodeo refinery and also will support future opportunities for hydrogen supply in the San Francisco area.

CB&I's scope of work for the project consists of the engineering, procurement and fabrication of a 120-million-standard-cubic-feet-per-day hydrogen plant that will be built using highly modularized fabrication techniques.

The plant will use CB&I's proprietary HYFORMING box furnace technology for steam methane reforming. The project is scheduled for completion in the third quarter of 2008.

CB&I has Contract to Supply $50 Million Diesel Hydrotreater to U.S. Refinery

CB&I has a lump-sum turnkey contract with a major U.S. refiner to supply a diesel hydrotreater for a U.S. refinery. Project value is in excess of $50 million. CB&I’s project work scope includes engineering, procuring, fabricating, and constructing a 16,000 bpd diesel hydrotreater plus related ancillary equipment and systems. The unit will enable the refinery to produce ultra-low-sulfur diesel to meet U.S. EPA and state specifications.

Mechanical completion is scheduled for spring of 2007.

Lyondell takes its Houston Refinery off Market

After pulling its Houston refinery off the market, Lyondell Chemical Co. went from seller to a potential buyer.

The Houston company said it is talking to its partner about purchasing the part of the facility owned by Citgo Petroleum, which owns nearly 42 percent of the joint venture, with the balance held by Lyondell.

The two companies announced on April 6 that they were willing to sell the refinery, but the facility was officially taken off the market July 20.

Lyondell spokesman David Harpole said bids higher than $5 billion were made for the refinery, but Lyondell determined the facility was an asset it wanted to retain. The company put the facility on the market at a time when refiners have been earning high profits due to rising fuel prices and limited refining capacity.

"It really comes down to what is the best way to unlock the value of that refinery," Harpole said. "When we began the process, it was at a time, and this really hasn't changed, when markets for refined products have been very tight. ... We have the expectation of that continuing."

Lyondell didn't provide any further details about talks to end the partnership between Houston-based Lyondell and Citgo, a subsidiary of the official Venezuelan oil company.

David McCollum, a spokesman for Houston-based Citgo, said he couldn't comment on ongoing negotiations but said Lyondell's purchase of his company's interest in the refinery "has been a possibility from the time the refinery was put up for sale."

The southeast Houston facility, the first parts of which were built in 1918 by the Sinclair Refining Co., can process 268,000 barrels of crude oil per day, Harpole said. It's set up to handle heavy crude oil, which is a plus right now because these low-quality grades are more profitable to refine because they cost less than the higher-grade crudes.

George Morris, an analyst at Petrie Parkman, said the two companies might not have received bids as high as they expected because some groups could find it hard to determine the refinery's value.

"It's a really big refinery, it's one of the best in the nation," Morris said. "But if you look at the historic cash flows of it, it doesn't match the value of the refinery, so there's a huge mismatch in everyone's valuation of it from the outside.

"People are looking at the cash flow and coming up with one valuation, and people are looking at hardware and coming up with a higher number, and there's a $1-2 billion difference in those valuations."

Harpole said the bidding process helped his company realize the advantages of hanging on to the refinery. "We see there's a significant value, and as a result, we're now exploring benefits of acquiring 100 percent ownership," Harpole said.

ConocoPhillips' Wood River Refinery Disrupted by Storm

ConocoPhillips' biggest refinery remained idled July 21, two days after being caught up in a punishing storm that left it and hundreds of thousands of other St. Louis-area homes and businesses without electricity.

The Houston-based company could not immediately say when operations - halted since the site lost electricity about 7:30 p.m. July 19, could resume or what effect, if any, it may have on gasoline supplies.

"We need to be careful about speculation on things like that," said Philip Blackburn, a ConocoPhillips spokesman. "That question is in the mix."

Blackburn said the company would release additional details about its Wood River site, about 20 miles northeast of St. Louis, July 21. He deferred to the previous day's written statement saying that the timing for the refinery's possible restart was being assessed.

The company, among the nation's biggest oil and gas companies, said the shutdown was done safely and had "no known community impacts." None of the workers at the site were injured.

As ConocoPhillips' largest refinery, the Wood River site can process 306,000 barrels of crude oil per day, receiving the fossil fuel by pipeline by various sources including the Gulf of Mexico, Canada and domestic sources, according to the company's Web site.

It was not immediately clear whether the site was operating at full capacity when the shutdown happened.

Hunt Announces $500 Million Expansion Project in Tuscaloosa

Hunt Refining Company may expand its Tuscaloosa refinery. The expansion would cost between $450 - $500 million and double the refinery's gasoline and diesel production.

Hunt executives said they expect to make a final decision within the next 90 days whether to move ahead. It would be the largest private investment in Tuscaloosa County since Mercedes-Benz announced in August 2000 plans for a $600 million expansion of its Vance plant.

A development authority board has granted Hunt just over $16 million in sales and property tax abatements as an incentive.

The expansion will create about 40 jobs. Hunt currently employs 280 people, 232 of them at its Tuscaloosa refinery and headquarters.

Premcor Refinery Ordered to Clean up Tanks

Premcor Refining Group, Inc., has been ordered to pay a $500,000 to the state of Illinois as a civil penalty for allowing petroleum to leak from underground storage tanks.

Eight of the sites are in Madison and St. Clair counties.

Illinois Attorney General Lisa Madigan announced July 19 that an agreement entered in Cook County Circuit Court applies to 51 sites in 41 cities in the state. The money is to be used on a state-approved project that is beneficial to the environment.

Premcor, formerly known as Clark Refining & Marketing, Inc., was given five years to clean up the contaminated groundwater and soil at all 51 sites. Each is to be verified by the Illinois Environmental Protection Agency upon completion of the clean-up.

Part of the settlement requires Premcor to remove 35 underground storage tanks at nine separate service stations by 2011 at a cost of $562,343. Currently, Premcor is not required by law to remove the tanks, but the project is expected to prevent even further potential releases of petroleum into the environment.

If all of the money isn't spent in the removal of the 35 underground tanks, Premcor is required to spend the rest on another state-approved project or pay it to the state's Environmental Protection Trust Fund.

"We are pleased that Premcor will clean up petroleum contamination at these 51 sites within five years," Madigan stated. "This timely clean-up will improve the quality of the soil and groundwater and will protect the health of the people who live near these sites."

Madigan filed suit against Premcor in May of 2005 alleging that leaking underground storage tanks had contaminated the groundwater and soil at 27 former Clark sites throughout Illinois. The suit alleged that the release of gasoline and other petroleum products resulted in elevated levels of benzene, a known cancer-causing agent.

According to Madigan, the agreement adds 24 of the former Clark station locations to the 27 that were originally identified in the May 2005 complaint.

Sites of former Clark stations in the Chicago area that are included in the July 19 order are: Glemwood, Romeoville, Crystal Lake, Bartlett, McHenry, Bensenville, Evanston, Elgin and Waukegan.

Southern Illinois sites include: Edwardsville, Pontoon Beach, Granite City , Rosewood Heights, East St. Louis, Washington Park, Cahokia, Carbondale, Centralia, Benton, Salem, Shelbyville, Harrisburg and Effingham.

Valero Starts Maintenance Work at Three Rivers Refinery in Texas

Valero Energy Corp. (VLO) began six days of maintenance Sunday, July 23 at sulfur recovery unit no. 1 at its Diamond Shamrock refinery in Three Rivers, Texas, according to a filing with a state agency.

The maintenance event started July 23 and is expected to end July 29, the report to the Texas Commission on Environmental Quality said.

Emissions associated with the event are based on a worst-case scenario that will involve the replacement of an oxygen injection quill in sulfur recovery unit no. 1 and sour water containment, if necessary, the report said.

A fluid catalytic cracking unit flare will be utilized to vent emissions which will include hydrogen sulfide, nitrogen monoxide and sulfur dioxide.

During the maintenance, sulfur recovery unit no. 2 would be optimized, the filing said, and an ATS unit will be on hot standby.

The impact on production was not clear. The company wasn't immediately available for comment.

BP Contractor Killed in Accident at Refinery

A contract worker died July 21after an industrial accident at BP's Texas City refinery.

The worker, who was employed by JV Piping, died when the lift bucket he was in got pinned against some structural steel, said BP spokesman Ronnie Chappell.

" BP alerted local, state and federal authorities about the accident, including the Occupational Safety and Health Administration.

A massive explosion at the same facility in March 2005 killed 15 people — mostly contractors — and injured scores more in the worst U.S. refinery accident in more than a decade.

Less than three weeks before the explosion, BP officials produced an internal planning document that identified the plant as a "key risk" for the year. "TCS (Texas City site) kills someone in the next 12-18 months," the document predicted.

OSHA imposed a record $21.3 million fine against BP in September and cited the company for more than 300 so-called willful violations. Families of those killed and seriously maimed in last year's explosion have received tens of millions each to settle lawsuits against the company.

BP says it has done much to improve safety at the refinery in the past year. As part of a $1 billion, five-year plan for improvement, BP has updated equipment, enhanced training and revamped the management structure.

"This is very sad, and also disappointing, because we have made so much progress at that facility," Chappell said.

All work that is nonessential for the plant's safe operation has been suspended, he said.

Illinois Governor tells EPA to Expedite Permits to Repair Refinery

Governor Rod Blagojevich says he's ordered the Illinois Environmental Protection Agency to expedite construction permits to repair an oil refinery near St. Louis damaged in the July 19 storms.

He says the permits will let Conoco-Phillips install portable cooling towers so the refinery at the Wood River site in Roxana can resume production.

The site provides fuel to the Metro East. Blagojevich says it would be devastating for the area to go through a fuel shortage on top of the power outages and property damage.

The refinery was shut down after its cooling towers were damaged. Blagojevich has declared Madison and St. Clair counties state disaster areas.

Storm Halts Refining at ConocoPhillips in Hartford, IL

Power outages following the July 19 storms shut down oil refining at the ConnocoPhillips plant in Hartford, IL.

On a normal day, the 10th busiest such plant in the nation refines 306,000 barrels of crude into gasoline, jet fuel, diesel, propane and other products that it ships by pipeline to St. Louis, Chicago and Indianapolis.

Plant spokeswoman Melissa Erker said the refinery had hired additional contractors to assist AmerenUE in repairing numerous downed lines and other damage to the plant.

Erker said she did not know when power would be restored.

Fort Berthold Reservation Debates Proposed $250 Million Refinery

There is a division between those who think an oil refinery on the Fort Berthold Indian Reservation is a good idea and those who don’t.

The Environmental Protection Agency was holding public hearings across the reservation on a draft environmental impact statement released June 30.

Public comments will be folded into a final impact statement, which could lead to a formal decision by springtime.

The Three Affiliated Tribes would spend an estimated $250 million to build a relatively small refinery — with less than one-third the capacity of the Mandan Refinery — near Makoti on the north side of Lake Sakakawea.

The refinery would process Canadian sand tar oil, which is stripped of heavy pollutants to the color of clear amber before it’s piped down the Enbridge line.

They’re also asking the Bureau of Indian Affairs to put the refinery land into trust so it’s sovereign and not subject to state and local taxes and regulations.

In its environmental draft, the EPA said the 15,000 barrel-per-day refinery would not significantly deteriorate the air quality, a critical base measure for any pollution source.

The minimal air pollution is due to the stripped-down nature of the Canadian oil product.

The biggest pollution issue with the refinery is the wastewater stream, because it would carry almost two dozen toxins and chemicals, including benzene, the most carcinogenic of them all.

The EPA’s preferred alternative for the wastewater is under a National Pollutant Discharge Elimination System permit.

Bruce Kent, who wrote the draft wastewater permit, said the tribes would be required to treat the wastewater before it could be discharged.

The water would have to be treated to the standard of drinking water before it could be released through a small existing wetlands area, into a tributary, then into the east fork of Shell Creek and 15 miles downstream into Lake Sakakawea.

Kent said the EPA looked at state, federal and tribal criteria and used the most stringent of them all before writing the draft discharge permit.

“Stuff” that’s removed from the water during treatment would be buried at a solid, or hazardous waste facility, Kent said.

Kent said it’s not up to the EPA to decide whether a refinery is a good or bad thing, but to let the tribes in this case decide if they can meet and build to the permit requirements.

“The rules make it difficult and expensive,” Kent said.

It's been years since a refinery was built in the U.S. and Kent said the EPA is only considering one other, a project in Arizona that would be 10 times larger than the tribes' and still needs investors.

Chairman Tex Hall didn't attend the hearing, but he sent a statement saying that time and technology is in the tribes' favor to build a refinery that would have minimal environmental impact and major economic impact.

It’s expected to bring 65 fulltime jobs and $100 million in annual revenue.

Hall faces re-election this fall and it’s unknown whether the political will to invest tribal money in a refinery would survive without him.

Todd Hall, a tribal member, said the project meets and exceeds environmental regulations and he urged the EPA and the BIA to expedite the process.

Travis Hallam said he’s puzzled by the chairman’s statement that the refinery would help reduce the county’s dependence on foreign oil when it would use Canadian oil anyway.

Hallam said the reservation needs jobs, but it also needs to protect the environment and not turn a blind eye to violations.

Exxon Reports Malfunction at L.A. Area Refinery

Exxon Mobil Corp. said an equipment malfunction triggered flaring on July 29 at its 150,000 barrel per day (bpd) Los Angeles-area refinery in Torrance, California, according to notices with local and state public safety agencies.

The refinery recently completed an overhaul of its 100,000 bpd gasoline-producing fluidic catalytic cracking unit.

MEXICO

Emerson is Main Contractor for Altamira LNG Terminal

Emerson Process Management is the main automation contractor (MAC) for the Altamira LNG Regasification Terminal, under construction near Tampico Mexico. Emerson will provide automation systems and services for the first import terminal which will receive LNG shipments in Mexico, and convert them back to natural gas to be distributed by Comisión Federal de Electricidad and PEMEX, Mexico’s state-owned, nationalized petroleum company. An additional four terminals are planned for the near future in Mexico; a MAC provider will be selected for these projects.

Overall engineering and construction is provided by ICA Fluor and IHI, who are building the Altamira Terminal for the consortium of Terminal de LNG de Altamila, which is jointly owned by Shell Gas B.V., Total Group, and Mitsui & Coo. Ltd.

The regasification terminal will process up to 3.75 million tpy of LNG base load when in full commercial operation in October 2006. Emerson is responsible for developing, installing, configuring, testing and commissioning all elements of the system to control the process from the point of receipt through regasification, and into transmission pipelines.

PERU

Petroleos de Peru to Seek Bids on $400 Million Refinery Project

Petroleos de Peru, the state-owned oil company, plans to begin a bidding process on a $400 million project to expand capacity and modernize its largest refinery, Chief Executive Officer Roger Arevalo said.

Petroperu, as the Lima-based company is known, will seek feasibility studies from groups interested in partnering with the state-owned oil company to boost capacity at its Talara refinery by almost half and to cut sulfur content in fuels, Arevalo, said in a July 19 interview. Building may start in about a year, he said.

The Talara refinery project is part of plan to modernize all Petroperu's facilities by forming alliances with private companies after Peru's Congress approved legislation allowing the company to be managed independently of the government.

``In three or four months at the most we're going to begin with the contract,'' Arevalo said in an interview at an energy conference in Cancun, Mexico. ``We're not going to sell, we're going to form partnerships.''

The company no longer has to seek permission from ``second- or third-level officials'' for decisions such as selling debt and seeking foreign partners, Arevalo said. Though the board of directors is still headed by government ministers, the company now only needs to submit reports laying out its goals, he said.

With near-record gasoline prices boosting refining profits, companies are searching for opportunities to invest in new refineries around the world, said Jed Bailey, director of research for Latin America at Cambridge Energy Research Associates in Cambridge, Massachusetts.

``There's certainly growing interest in building new refining given the very large refining margins we've seen recently and the pressure that the lack of sufficient refining capacity is having on global oil markets,'' Bailey said.

Petroperu will have to make the contracts attractive to private companies because of the competition from other refining projects in search of funding, he said.

He said there were a lot of refinery projects being proposed in many different areas.

Arevalo said that the incoming administration of President- elect Alan Garcia supported the legislation passed by the country's congress week over the veto of outgoing President Alejandro Toledo.

“The new law for Petroperu has been promoted by the new government,'' Arevalo said. ``It has been them who promoted and favored its approval.'' Arvealo was deputy energy minister from 1985-90 in Garcia's first government.

Petroperu sold its oilfields with output of 40,000 barrels a day in 1996 in a government effort to pay the state-owned oil company's $1 billion in debt. The company still has four refineries with combined capacity of 80,000 barrels a day and a 200,000 barrel-a-day oil pipeline.

The complete modernization of Petroperu could cost up to $900 million, Arevalo said. Financing may be provided by private partners, he said.

The Talara refinery now has an output capacity of about 62,500 barrels of fuel and the modernization project proposed by Arevalo would boost that to 90,000 barrels.

The Talara refinery project was originally estimated to cost about $250 million and had to be adjusted up because of stricter standards on sulfur content. By 2010, Petroperu needs to reduce sulfur in diesel fuel to 50 parts per million from 1500 parts per million now.

``The law has established that we need to produce cleaner fuels,'' he said. ``This requires us to resize the whole feasibility study.''

Arevalo said foreign companies already are seeking to form partnerships with Petroperu to explore oil fields and reduce dependency on foreign oil. The country produces around 80,000 barrels per day of mostly heavy crude oil and imports about 70,000 barrels a day of light crude. Peru posted a $1 billion hydrocarbon deficit last year.

The goal is to eventually become self-sufficient in oil production and then seek to expand internationally, he said.

The company could eventually sell shares on the market while still maintaining government ownership, following the example of Petroleo Brasileiro SA, he said. Selling shares to investors would boost its transparency and efficiency, he said.

``The best formula now in the world is the public-private alliance.''

TRINIDAD & TOBAGO

Petrotrin Refinery Equipment Faces Fire Risk

Equipment at Petrotrin refinery at Pointe-a-Pierre runs the risk of being damaged by fire because of frequent industrial disruptions of its plants, Wayne Bertrand, the company's President of Operations, has warned.

In an interview with the Daily Express concerning the industrial impasse between the company and the Oilfields Workers Trade Union, Bertrand said: "Over the last two weeks there were several short industrial disruptions at Pointe-a-Pierre and the withdrawal of services by plant personnel, (these place) the entire refinery and its environs in an extremely unsafe condition."

He said: "When plant personnel do not report for work it becomes necessary to shut down the units in a controlled and safe manner to reduce the possibility of further risks,"

Bertrand said "on each occasion that the units are shut down, and then restarted at short intervals, there is the possibility of long term damage to equipment."

Recently six plants were shut down for two days. They were restarted when the workers returned to their jobs July 26.

The State-owned oil company and the OWTU are locked in negotiations for a new wage agreement for 2005-2008. They have been negotiating for the past eight months.

OWTU president general Errol McLeod said at a press conference the workers deserved "a 67 per cent increase, not 35."

He said government has already intervened in the negotiation and given instruction as to the increase workers should receive.

Speaking about losses to the company when plants were not operating, Bertrand said it also affected the profits that would acrue to workers under the existing industrial agreement.

He said production of crude was down and if the company was to increase its crude production it must discover new fields, or stimulate the old ones.

2. ASIA

AUSTRALIA

South Australian Opposition Calls for Detail on Port Stanvac Refinery Plans

The South Australian Opposition wants the Government to explain what is being done with the Exxon Mobil refinery at Port Stanvac.

It says a deal signed with Treasurer Kevin Foley required Mobil to detail its plans by the start of this month.

Opposition infrastructure spokesman Martin Hamilton-Smith says no announcement has been made.

"What we'd like to see is the Government come out and tell us what's been done, if anything," he said.

"Have they missed their 30th June commitment to sign an agreement with Exxon as they told Parliament, or has the deadline been missed again, and are the people going to have to wait even longer for this site to be cleaned up?"

A government spokesman says an agreement has been reached and will be announced when the Treasurer gets back from overseas.

South Australia’s Port Stanvac Deal still Years Away

The Port Stanvac refinery site will sit unused for at least another three years, while the southern suburbs battle to deal with a major shortage of industrial land.

Deputy Premier Kevin Foley announced July 17 that remediation of the site - some of which is already under way - will continue, focusing on the foreshore and wharf areas.

But a decision on whether to permanently close the refinery and unlock the land for industrial use, or to reopen the refinery, is still three years away.

The new agreement, which came more than two weeks after the deadline of July 1, has been labeled "a disgrace" by the Opposition.

Mr Foley conceded the deal was "not perfect, but reasonable".

"I have also told ExxonMobil that while we are prepared to grant them an extension for a further three years at Port Stanvac, we will not contemplate any further extension beyond 2009," Mr Foley said.

Opposition Leader Iain Evans said Mr Foley had "rolled over because his agreement says he has to roll over".

The original agreement, signed in 2003 when Mobil mothballed the site at a cost of $30 million, did allow for the mothballed status to continue until 2009.

The company then has another 10 years, until 2019, to demolish the plant and clean up.

"They've signed this agreement of their own making and people of the southern suburbs are going to miss out on jobs for the next 13 years," Mr Evans said.

"That piece of land is a prime piece of real estate and it should be producing jobs for South Australians."

Onkaparinga Council chief Jeff Tate said, before the new deal was signed, that continuing with the mothballed status would be the "worst possible outcome".

A council spokeswoman said the council would comment on the new deal once it had a chance to properly assess the detail.

Mobil spokesman Alan Bailey said volatility in the petroleum business environment meant it was "just too soon" to decide now whether to close or re-open the refinery.

"This decision is in the best interests of the state and South Australians," Mr Bailey said.

Under the new agreement, Mobil will provide a progress report every six months to an independent environmental auditor.

CHINA

PetroChina to More Than Double NW Refinery Capacity By 2008

PetroChina Co. (PTR) plans to more than double the capacity of its refinery in northwestern Gansu province by 2008 to meet increasing demand in that area for oil products, a source with the refinery said July 10.

The total investment for the expansion is expected to be CNY4.25 billion ($531.25 million), according to a report by China Oil News.

The capacity of the refinery in Qingyang city, eastern Gansu, will be expanded to 3 million metric tons of crude a year or 60,247 barrels a day, from the current 1.2 million tons or 24,099 b/d, he said.

The expansion work will start later this year and may be completed by 2008, he said, without elaborating further.

The refinery may also process imported crude oil following the expansion, although it currently only processes domestically produced crude, he said.

INDIA

Saudi Aramco Backs Out of Paradip Refinery

The world’s largest oil producing company Saudi Aramco has decided to back out of the 15 million tonnes a year grassroots refinery and petrochemical complex being set up at Paradip, Orissa by India’s largest oil refiner Indian Oil Corporation (IOC).

This would mean that IOC would now go solo in building the Rs 25,000 crore refinery which would include facilities for production of front-end petrochemicals, like paraxylene, polypropylene and styrene. Confirming the development, IOC’s chairman, Sarthak Behuria told FE, “We will build the Paradip refinery on our own. No decision has been taken on inducting a foreign partner.”

IOC has now offered Kuwait Petroleum Corporation (KPC) a stake in the Paradip refinery. IOC had signed an MoU with KPC to jointly consider setting up exploration and refining ventures in India, Kuwait, and other countries in March this year. IOC, however, is yet to hear from KPC, said Behuria.

Earlier, Behuria had said that IOC would take up a detailed project report (DPR) of the Paradip refinery to its board of directors where the company would discuss the quantum of investments and the sources to fund it. Saudi Arabia’s King Abdullah Bin Abdul Aziz-Al-Saud had expressed his country’s interest in investing in the Indian refining sector.

GE to Supply Compressors for New Reliance India Refinery

General Electric's oil and gas business unit will supply compressors for a new refinery being built by Reliance Petroleum Ltd, the company said on July 6, reports Reuters.

The new plant is being constructed near to an existing 660,000-barrels-per-day refinery owned by parent Reliance Industries at Jamnagar in Gujarat. The Reliance group has said that taken together, the two would form the world's largest refining complex.

"GE's Oil and Gas business will supply compression technology to Reliance Petroleum Ltd for a greenfield project in Jamnagar that will result in the world's largest refinery complex at a single location," GE said in a statement.

GE will supply three reciprocating compressors, two screw compressors and spare parts for the project.

Reliance Petroleum, in which oil major Chevron Corp. has a 5% stake, is yet to start operations. It plans to spend USD 6 billion on the new 580,000-bpd oil refinery by the end of 2008.

PAKISTAN

Bosicor Plans $312 million Refinery in Pakistan's Southwest

Bosicor Oil Pakistan, a private local firm, plans to build a $312 million refinery in the country's southwest with a daily capacity of 180,000 barrels, the company said.

Located about 45 kilometers (28 miles) west of Karachi on the coast of Balochistan province, the refinery would initially have a capacity of 120,000 barrels per day (bpd), Bosicor said in a statement.

The project would be completed in two stages, with the first phase expected to be completed by 2009.

"The first stage taking capacity to 145,000 bpd and the second stage taking the capacity to 180,000 bpd," it said.

Bosicor already has a 30,000-bpd refinery in Balochistan. The company estimated the cost of the project at Rs18.8 billion, which includes 7.2 billion of equity, Rs3.5 billion of suppliers' credits and Rs2.7 billion of working capital.

The country's oil import bill for the 2005/06 fiscal year (July-June) exceeded $6.5 billion, compared with $4.4 billion in the previous fiscal year.

Another oil plant, Indus Refinery, is being built in Karachi. It will have the capacity to process 4.2 million tonnes of crude oil a year (around 84,000 bpd), and will be completed by December 2007 at a cost of around $250 million.

SOUTH KOREA

Hyundai Plans New Gasoline Unit by 2010

South Korea's fourth-biggest refiner Hyundai Oilbank Corp. received local government approval for a $2 billion expansion of its Sosan plant that includes a gasoline-making unit, government and industry sources said on July 11.

The company is planning to build the 85,000 barrel-per-day (bpd) residual fluid catalytic cracking (RFCC) unit by 2010, industry sources said, confirming for the first time the type, cost and size of the secondary unit it will build.

The project will include a desulfurisation unit, called atmospheric residue hydro-desulfurisation unit (ARHDS), one source said.

Industry sources estimated the investment required at $2 billion, but did not say how or where Hyundai would raise the funds.

A Sosan city official told Reuters that the local government had granted Hyundai Oilbank a land permit for the expansion of its 390,000-bpd refinery in the area.

"The request was approved on June 30," the official said.

Hyundai Oilbank -- 70 percent-owned by Abu Dhabi oil investment fund IPIC, with the rest held by Korean conglomerate Hyundai Group -- said last year it was planning to add one or more secondary units at the plant, but did not give details.

The plan comes as refiners worldwide, particularly in the Middle East, India and China, are racing to build new capacity to capitalize on robust refining margins and satisfy future fuel demand growth.

Analysts said refining margins could weaken after 2009, when massive new capacity would hit the highly cyclical industry. Only a handful of new refineries have been built over the past decade amid strict Western environmental standards and a dramatic five-year profit slump after the 1997 Asian financial crisis.

Hyundai Oilbank's new unit will allow the refiner, which runs one of the country's least-sophisticated plants, to convert more of its surplus fuel oil supply into higher-value gasoline, improving its profits at a time of record-low margins for residual fuel.

"The company's profitability will be dramatically improved, given simple refining margin has been around zero due to relative underperformance of regional fuel oil price while crude oil, diesel and gasoline prices surged," said Kim Jae-joong, senior analyst at Korea Investment & Securities Co. Ltd.

Kim said the completion of the project would result in a fuel oil upgrading ratio of 74.5 percent from the current 19 percent.

S. Korea's Incheon Refinery to Revive Mothballed CDU

South Korea's smallest refinery SK Incheon Oil Ltd. will next year repair and restart a crude unit that has been idle since 2001, reviving one of several mothballed plants around the world to cash in on booming margins.

SK Incheon Oil, taken over by industry leader SK Corp. early this year after a drawn-out bankruptcy process, will resume running the 75,000 barrel per day (bpd) No.1 crude unit at some point next year, a company source said.

The unit, shuttered five years ago due to financial troubles and a slump in profit margins, will serve booming demand in the world's number-two consumer China and contribute to South Korea's role as one of the top swing fuel supplies in Asia.

"We will repair the No.1 crude unit and it will restart next year, although we have not yet specified the date," the source told Reuters. He added that the refinery's total capacity of 275,000 bpd, including the larger No. 2 CDU, would not change.

Refinery profit margins have surged over the past four years as robust demand growth in China and the United States strained the industry's ability to provide enough fuel, but few of the world's mothballed plants -- many too old to be competitive or lacking sophisticated upgrading capacity -- have been restored.

Australia's government last year asked Exxon Mobil Corp. to consider reopening its 53,000 bpd refinery in South Australia, idle since April 2003. Dutch oil refiner Petroplus's 115,000-bpd plant in Milford Haven, UK, has been shut since 1997.

But state oil companies in China, India and Middle East producers are rushing to build new refineries in a flurry of investment that analysts say may bring down the curtain on the fattened margin cycle at the end of this decade.

The former Inchon Oil Refinery Co. Ltd., which holds a 3.6 percent domestic market share, will maintain its crude processing rate for August at 180,000 bpd, or near its full capacity, after returning this month from maintenance in June, the source said.

Although the No. 1 CDU is relatively old and small, it may help the whole refinery improve profits.

"My guess is that by restoring CDU-1 to service and using it to segregate the heavier asphaltic crudes for bitumen production, the larger CDU No. 2 could run flat out on lighter and cleaner crudes, thereby getting more and better yield overall," said Enrico Sismondo, an industry consultant in Singapore.

"CDU-2 running lighter crudes would also make incremental naphtha, thereby saving some outside purchasing cost of incremental feedstocks for the BTX aromatic plant."

Inchon Oil Refinery filed for court receivership in 2001 after it suffered huge debts prior to a government-led rescue plan in 1999 when Hyundai took over the refiner from the Hanwha Group. The refiner also had to shut down the crude unit to help ease the domestic oil product supply glut at that time.

SK Corp., South Korea's largest oil company, agreed to buy its smaller rival for $3 billion late last year, part of an expansion drive targeting export markets such as energy-hungry China. The deal was completed early this year.

SK Corp., which operates a 840,000-bpd refinery in Ulsan, had said it would export the bulk of petroleum products from Inchon to the world's second-largest oil consumer.

3. EUROPE / AFRICA / MIDDLE EAST

AUSTRIA

OMV Oil Refinery Closed after Fire

There was a report on a fire at OMV AG, central Europe's biggest energy company, at a crude-oil distillery at its Schwechat refinery and now, Bloomberg cites, it will remain closed. This was the second blaze in four months to halt production. July 17 OMV spokesman, Thomas Huemer said in Vienna that it was a question of a short period of time. The last time OMV had a fire, the refinery was re-opened in about a week.

The company has enough oil in storage to fill all contracts. The July 13 fire shut down distillery No. 4, which refines about 9 million tons of oil a year. A fire at the same location on March 28 caused as much as € 30 million ($38 million) of damage and lost production, the Vienna-based company said in its first-quarter report. A leak at the distillery was responsible for the first blaze. OMV's Schwechat refinery is about 5 kilometers (3 miles) east of Vienna and has a capacity of 200,000 barrels a day.

BULGARIA

Bankrupt Nova Plama Refinery Headed for Int'l Auction

The core production assets of Bulgarian refinery Nova Plama will be sold in bulk at an international auction after the creditors of the bankrupt company took a decision to this end.

The non-production assets will be sold separately.

The proceeds from the disposal of the non-production assets will be used to settle outstanding payments to national power grid operator NEK.

One of the first tasks of the appraiser appointed by the creditors will be to take stock of the warehoused finished products. The creditors estimate that the Pleven-based company has stockpiled at least 39 tons of store-ready motor oils.

Nova Plama was adjudicated bankrupt on May 19 on a motion from its main creditors, Yorset Holding and DZI Bank.

The bankruptcy ruling is under appeal before the Supreme Cassation Court.

ENGLAND

Petrobras CEO Declines Comment on BP Essex Refinery

The chief executive of Brazil's state-run oil firm Petroleo Brasileiro SA, or Petrobras, July 4 neither confirmed nor denied whether the company is in talks to buy a refinery in southeast England put up for sale by BP PLC.

Asked whether Petrobras was interested in buying BP's 172,000 barrel-a-day Coryton refinery in Essex, CEO Sergio Gabrielli declined any specific comment on the issue.

"Our investments abroad will be concentrated in America, Africa and Asia. That's all I can say," Gabrielli said at a press conference in Rio de Janeiro on the company's 2007 to 2011 business plan. "We're always open for new opportunities."

Petrobras had said that it plans to invest $87.1 billion in the five-year period, $12.1 billion of which would be outside Brazil.

Gabrielli added that Petrobras' overseas investments will be concentrated in production projects in the U.S. Gulf of Mexico and Nigeria, as well as in the Pasadena, Texas, refinery, in which the company recently acquired a 50% stake.

Commenting on the $23.1 billion Petrobras has earmarked for its Brazilian downstream area in the 2007 to 2011 period, Gabrielli said that most of the investment will go into refining, mostly into upgrading the quality and output capacity of existing refineries.

GERMANY

Petroplus to buy Exxon's German Refinery

Dutch oil refiner Petroplus International B.V. on July 6 said it would buy Exxon Mobil Corp.'s Ingolstadt refinery in Germany and related businesses in the region, boosting its refining capacity by almost a third.

Terms of the deal, which include the purchase of Exxon's Bavarian industrial and wholesale marketing business and Esso Bayern, which runs a home-heating oil business, were not disclosed.

The large oil majors are taking different approaches to their European refining operations. British oil major BP, like Exxon, is seeking to shrink its refining business in Europe and has said it plans to sell its Coryton refinery in England.

Exxon's smaller U.S. rival ConocoPhillips, on the other hand, bought the Wilhelmshaven refinery in Germany in November, spending $1.4 billion to acquire and improve it.

The Petroplus deal is expected to close early next year, subject to review and approval from antitrust authorities.

The deal allows Petroplus to enter a high-demand market in southern Germany and surrounding regions, the company said. The Ingolstadt refinery, which processes 110,000 barrels per day, will push up its refining capacity by 30 percent, it said.

It will also immediately add to earnings and cash flow, Petroplus said.

Exxon will operate the Ingolstadt refinery and the related marketing businesses until the deal is completed. Under the terms of the deal, Petroplus will enter into a supply agreement with Exxon to supply the Esso retail chain in Bavaria.

NETHERLANDS

Shell Confirms Pernis Refinery fully Operational

A spokesman for Anglo-Dutch oil giant Royal Dutch Shell Plc. said on July 12 its massive Pernis refinery in Rotterdam was now fully operational after months of maintenance work.

The spokesman added that after several incidents in the past year Shell would invest tens of millions of euros into the plant's utilities systems, such as electricity supply and cooling, to prevent maintenance problems.

The 412,000 barrels per day (bpd) Pernis refinery has a crude distillation unit and a gasoline-making catalytic cracker, which was badly damaged by a utility failure in January.

The 50,000 bpd catalytic cracker, a major source of gasoline for Europe and the United States, had been closed for almost three months of maintenance work to resolve the glitches.

Italian Eni Bids for Chevron Refinery, Stations

Italian oil company Eni is bidding for a Chevron refinery in Rotterdam and 150 petrol stations outside Italy, a source close to Eni said on July 31.

The source confirmed the bid which was first reported in newspaper Il Messaggero The paper said the bid could be worth 1.15 billion euros ($1.46 billion).

Eni is taking part in the bidding for the service stations and the Chevron refinery," said the source, who asked not to be identified.

An Eni spokesman was not immediately available to comment.

The bid would represent an expansion in downstream output by Eni, Europe's fourth-biggest oil company by market capitalization.

Il Messaggero said Eni was among a dozen bidders for the Chevron assets. The service stations are in Portugal, Luxembourg and the Netherlands.

TURKEY

Russia’s Lukoil to Build $2.5 billion Refinery in Turkey

Russian firm Lukoil, one of the world's largest energy companies, is planning to build an oil refinery in northern Turkey, the Turkish media reported July 9.

Lukoil applied to the Turkish Energy Market Regulation Board for permission to construct a $2.5 billion oil refinery, and the Russian company's vice chairman, Nicolae Ciornii, had previously met with Energy Market Regulation Board Chairman Yusuf Gunay to discuss the issue, Turkey's Zaman Daily Newspaper reported.

The refinery will have a processing capacity of 8 million to 10 million tons of crude oil every year, the report said. The oil will be transported from Russia and Kazakhstan.

The announcement comes during the same week that another boon to Turkey's energy economy, the Baku-Tbilisi-Ceyhan oil pipeline, is scheduled to be officially dedicated. The pipeline brings Caspian Sea oil to the Mediterranean port of Ceyhan, making Turkey an important energy corridor for Europe and the United States.

These Western countries supported the construction of the pipeline, a project of BP and the second-longest oil pipeline in the world, in the name of energy security.

KENYA

Kenya Refinery Announces Plans to Build Gas Storage Facility

The Kenya Petroleum Refineries Limited (KPRL) will construct a multi-million shilling liquefied petroleum gas (LPG) reception, storage and distribution plant in Mombasa.

KPRL development manager, David Bombo, said the facility would have storage capacity of 4,700 tonnes.

The refinery has engaged Nutek Solutions to conduct an environmental impact assessment before the project is implemented.

On July 18, Sanjay Ghandhi, an environmental expert with Nutek Solutions, conducted a consultation meeting with various stakeholders who included Changamwe residents.

Other participants included representatives from oil companies, civil society, Oil Spill Aid Mutual Group and the Kenya Ports Authority.

NIGERIA

Nigeria Govt Drops Plan to Privatize Port Harcourt Refinery

Citing operational efficiency and the need to make Nigeria the hub of petroleum products supply in the West African sub-region, the Federal Government has dropped the Port Harcourt Refinery Company (PHRC) Limited from its privatization program.

The company, under the new initiative, will now be managed by the Nigerian National Petroleum Corporation (NNPC), which has described the plant as the "jewel of the downstream sector." But before handing over the PHRC to the NNPC, the government has asked the corporation to develop and present to it a business plan on how to achieve optimum-refining capacity from the current 80 per cent to 100 per cent.

Minister of State for Petroleum Resources, Dr. Edmund Daukoru, who unfolded the new scheme for the PHRC, pledged that the government would be neutral in the management of the refinery to meet the set agenda. Daukoru, who spoke on the development at the NNPC Management Downstream Retreat in Abuja, stressed that the immediate task before the NNPC is to raise the refinery's output to 100 per cent.

Government is satisfied with the progress made in plants' rehabilitation and their performance. It is a result of the improvement in operations of the refineries that President Olusegun Obasanjo granted the request to exempt Port Harcourt Refinery from the ongoing privatization. "Government expects the Port Harcourt Refinery, which has export capability, to position Nigeria as the hub of petroleum products supply and distribution in the West African sub-region," he said. Daukoru recalled that "prior to the February 2006 vandalizing of the Escravos crude oil supply line to Warri and Kaduna, the two refineries were operating at 75 per cent and 70 per cent in that order."

The minister noted that "the improved performance drastically reduced the level of petroleum products imports from 70 cargoes per quarter to 44 cargoes in the first quarter of 2006." He, however, lamented that "with the recent spate of vandalization, the Port Harcourt Refinery is now the only local source of products supply in the country, while the balance has to be imported." On the purpose of the retreat, the minister said it was "in response to Mr. President's directive to NNPC to map out ways for a fool-proof, efficient and continuous performance of the PHRC at almost 100 per cent capacity utilization as well as plan for prompt evacuation of petroleum products at that rate of performance."

He said the retreat was also aimed at intimating the government on the scope of the NNPC downstream expansion. Daukoru stressed the need to improve the nation's involvement in the downstream sector, which, he observed, had been the major driver of the global oil industry in the last three years. The minister told the participants that the workshop was also designed to fashion out a blueprint that would guide the corporation in the management of the plant. "He said: You know it has been a long road to get to the level where we are now-about 80 per cent efficiency. Just as we are making progress to make onerous commitments for the future, we have to consolidate this level of performance before we contemplate government adding further capacity, the thinking would be to encourage this existing one to operate at the most optimum capacity and then encourage the private sector to do the rest."

Daukoru said that from experience, the government would need to have hands off completely and allow the management of the refinery to take its decision, adding that without such free hands, appointing those who do not have any pedigree to the board of the refineries would only bring the nation back to the sorry phase it had passed through. "It is not government strangulating or suffocating progress at the refineries. You have a blank check. The government is more or less saying go and bring a business plan that will ensure that the refineries remain at the current level of operations and also improve on that, we are talking about 100 per cent. Even to move from 80 per cent to 85 per cent is a major improvement. "Daukoru stated. In his remark, the NNPC Group Managing Director, Mr. Funsho Kupolokun, stated that the workshop was in response to the government is move to reposition the refineries. Kupolokun said: "It is something we have taken seriously. You can imagine we had to pull out what we can call our reserves-all the previous top management who have retired, they are all here. "Talking about the decision not to sell the Port Harcourt Refinery, the truth is that it is an important asset to us, it is the jewel of the downstream. Among other things that is the only supply location strategically placed, it is the only refinery that is very modern. It is also the only refinery operating in West Africa that has export capacities. And this export capabilities imply that we can meet the shortfall in West Africa which is somewhere in the neighborhood of 200,000 to 300.000 barrels per day".

The refinery, which has 210,000 barrels per day capacity, was initially slated to be privatized along with Kaduna Refinery, which has 110,000 barrels installed capacity per day. The Warri Refinery, which has 125,000 barrels installed capacity is however retained under the arrangement. At present, both Warri and Kaduna refineries have been out of operations for more than six months due to the vandalizing of the crude oil pipeline at Chanomic creeks in the Niger Delta.

SUDAN

Sudan’s Khartoum Refinery Expanded

Sudan’s sole major refinery, in Khartoum, has completed its planned expansion to 100,000 barrels per day (bpd), boosting the country’s gasoline exports and domestic fuel supply, Chinese part-owner CNPC said.

Khartoum Refinery has completed its planned expansion to 100,000 barrels.

China National Petroleum Corp. (CNPC), a leading energy investor in Sudan and parent of Asia’s top oil and gas firm PetroChina , owns 50 percent of the refinery, which it built and operates. The Sudan government holds the rest.

A 400,000 tonne-per-year (tpy) reforming unit, which yields mainly gasoline, produced its first quality product on June 30, marking the successful completion of the $341 million expansion project, according to a notice on CNPC’s web site.

The upgrading, which doubled the plant’s capacity, also included a 1 million-tpy delayed coking facility, a unit that processes heavy residue oil into light transportation fuels. That unit had a smooth start-up in May, the report said.

The expanded plant will boost Sudan’s diesel supply significantly and allows for half of the gasoline output to be exported, it said.

The upgrade allows the plant to process more heavy crude oil, such as Fula from Block 6, 95 percent-owned by CNPC, now pumping at 30,000 bpdCNPC gets its investment returns from the revenue but is not involved in marketing the refined fuels, which is handled by state-run Sudanese oil firm, Sudapet, said Beijing based trading officials.

Malaysian state oil firm Petronas last year signed a $1 billion deal to build a second 100,000-bpd refinery in Port Sudan to process the new Dar Blend crude, which had been scheduled to begin production a year ago but had yet to be exported.

APS Engineering gets Contract for $2 Billion Grass Roots Refinery in Port of Sudan

APS Engineering Co. has a contract to execute basic engineering design and project management consultancy in implementing a grass roots refinery. The design capacity is 175,000 bpsd to be built at the Port of Sudan, The Republic of Sudan. The overall value is estimated at $2 billion. APS’s work scope includes selecting licenses relevant to some process units: basic engineering design execution for process units, utility units and offsite units and project management consultancy.

RUSSIA

Rosneft to Invite Tenders for $2 Billion Reconstruction of Tuapse Oil Refinery

In August 2006, Rosneft Oil Company will invite tenders for the reconstruction of the Tuapse Oil Refinery from the world's largest companies, as Alexander Sapronov, Rosneft Vice-President, informed newsmen in Tuapse. According to him, the Company plans to invest $2 billion in this project.

He added that the winning tender is to be determined in early 2007. Rosneft Vice-President named Tekhnik and Foster Wheeler among main pre-tenders.

According to Mr. Sapronov, the program provides for the construction of a practically new oil processing enterprise, and its implementation will up the power of primary oil distillation from 4.5 million tons to 12 million tons by 2010. Above that, the introduction of new facilities will make it possible to increase the conversion rate from 56% to 95.6%.

IRAN

Iran Gains Technology for Refining Heavy Crude

Iran managed to gain the technology after India in the region for refining ultra heavy crude, obtained from southern Soroush and Norouz oilfields.

The Public Relations Department at National Iranian Oil Products Refining and Distribution Company (NIOPRDC) said on July 18 that the crude is regarded ultra heavy as it contains extreme amounts of sulfur and metal compounds and no refinery in the region other than India has the facilities for refining it.

Ultra heavy crude is traded at cheapest prices compared to other brands of crude but the landmark refining achievement would enable Iran to boost its oil exports.

Two mln barrels of such crudes, obtained from Soroush and Norouz fields, have been successfully refined in Bandar Abbas refinery and marketed since the project came on stream early this year.

Iran Signs $2.7 Billion Refinery Deal with China

OPEC member Iran has signed a 2.7 billion-dollar oil refinery upgrade deal with China which will help feed the Islamic republic's hunger for fuel, Iranian state television reported.

Under the accord, a consortium led by Chinese firm Sinopec will upgrade capacity at a refinery in the central Iranian city of Arak from the current 150,000 barrels of crude oil per day to 250,000 barrels.

"Currently, Arak refinery produces about six million liters (1.6 million gallons) of petrol a day and when the upgrade operation is done the figure will reach about 16 million liters (four million gallons)," said deputy oil minister in charge of refining affairs, Mohammad-Reza Nematzadeh.

The project will take less than four years to complete, he added.

Iran is OPEC's second biggest oil producer after Saudi Arabia, AFP noted.

Most of its refineries, however, were built by American companies before the 1979 Islamic revolution and refurbishment has been hampered by trade sanctions imposed since then.

The contract with the Sinopec consortium marks an effort by the Islamic republic to increase its petrol production.

Its refineries have a capacity of 40 million liters (10 million gallons) of petrol a day, but demand is over 70 million liters (18 million gallons) a day, AFP stated.

Iran pays several billion dollars per year to import petrol to meet growing domestic consumption by its 68-million-strong population

IRAQ

250,000 bpd Lebanese Refinery for Iraq

Iraqi Kurdistan will soon have its own oil refinery with a capacity of 250,000 barrels per day from newly discovered oil fields, the Lebanese company chosen to implement the project said July 9.

A memorandum of understanding was signed between the Kurdish Minister of Natural Resources, Ashti Horami, and Lebanon's Make Oil AG to build the refinery over the next two years.

"There is an agreement with the Kurdish Regional Government, and we will announce the full details in a week," company director Ahmed Khair Al Din said by phone from the company offices in Beirut.

According to the rudimentary website of the company, registered in Lebanon in 1995, it specializes in the trade of crude oil and construction of refineries.

The accord follows the April announcement of the discovery of an oil field in Zakho region of Kurdistan - the first in the Kurdish Autonomous Region.

KUWAIT

Kuwait Seeks Foreign Partner for $6 Billion Refinery

Kuwait plans to offer a stake of up to 40 per cent in a planned $6 billion refinery project to a foreign partner, state-run Kuwait National Petroleum Company (KNPC) said.

'We have contacts with international companies about this,' KNPC Chairman Sami Al Rushaid told the state news agency Kuna, adding that the state would also offer a 20 per cent stake in the 615,000 barrel-per-day refinery to private Kuwaiti investors.

'We want to ensure that the stake of the foreign investor does not exceed that of KNPC and therefore it will be a maximum of 40 per cent,' Rushaid said, adding that Kuwait would carry out the project even if it did not find a foreign partner.

Twelve international contractors have pre-qualified for the refinery, which will be built in the south by 2010 and which will replace the ageing 200,000-bpd Shuaiba refinery.

KNPC is in charge of the downstream sector in Organization of the Petroleum Exporting Countries (OPEC) producer Kuwait, which has a crude oil output capacity of 2.7 million barrels per day (bpd).

The country has a refining capacity of 930,000 bpd from three refineries and the new refinery, as well as upgrades to existing plants, will boost the total refining capacity to about 1.5 million bpd, oil officials have said.

Kuwait is also expanding its refining capacity abroad. China gave preliminary approval to a $5 billion refinery joint venture between Sinopec and Kuwait Petroleum Corporation, industry sources say. Kuwait has also agreed to build a refinery in Pakistan.

Other Gulf producers are also boosting refining capacity to help tackle a global refining crunch that has helped to push oil prices to record highs, and to capitalize on robust refining margins.

OMAN

$120 Million Loan for Oman Refinery Company

Oman Refinery Company LLC (ORC), the pioneer of oil refining in Oman, has arranged a syndicated working capital facility loan of US$120 million. This was done through a consortium of local banks led by the National Bank of Oman (NBO) as agent and including Bank Dhofar, Oman International Bank and Oman Arab Bank.

According to ONA, the loan agreement signing ceremony took place July 10 at Muscat Grand Hyatt Hotel. Signing on behalf of ORC was Dr. Adil bin Abdul Aziz Al-Kindi, CEO while CEOs and MDs of the consortium signed for their respective banks.

Speaking on the occasion, Dr. Adil A. Al-Kindi, ORC’s CEO said, “ORC will employ the loan amount mainly for its working capital requirements related to Sohar Refinery under a toll processing agreement entered between them. According to him, the refinery produces 116,000 barrels-per-day (bpd).

SAUDI ARABIA

Shell Confirms Pernis Refinery fully Operational

A spokesman for Anglo-Dutch oil giant Royal Dutch Shell Plc. said on July 12 its massive Pernis refinery in Rotterdam was now fully operational after months of maintenance work.

The 412,000 barrels per day (bpd) Pernis refinery has a crude distillation unit and a gasoline-making catalytic cracker, which was badly damaged by a utility failure in January.

The 50,000 bpd catalytic cracker, a major source of gasoline for Europe and the United States, had been closed for almost three months of maintenance work to resolve the glitches.

YEMEN

Yemeni Government Cancels Hadramout Refinery Project

The Yemeni government has decided to terminate the agreement signed 5 years ago between Saudi and Emirate investors regarding the Hadramout Refinery project.

According to Al-Shoura.Net who published the news on July 29, the Ministry of Oil (MO) according to sources there intends to terminate all its obligations regarding Hadramout Refinery Company (HRC), as the company violated the agreements and contracts.

The same sources affirmed that this project was cancelled as the company, belonging to Saudi and Emirate businessmen of Hadrami origins, refused the partnerships imposed by the authority.

Two years ago, a delegation including a number of founding members of HRC visited the site at which the project was to be set up. Official media coverage was obviously attendant at the time, but it soon started to fade. Local sources mentioned that the company earlier accepted a bid submitted by a specialized American-Korean company to launch the construction phase.

According to a website, belonging to Ministry of Defense, the Ministry of Oil is now studying a number of new international bids to construct the refinery in Hadramout.