jan 06 update

Coffeyville Resources LLC is planning a $92 million expansion of its refinery and nitrogen fertilizer plant in Coffeyville, Kan., the company said January 3.

The Kansas City, Kan., company's board approved the expansion last month, company spokeswoman Angie Dasbach said.

The company said it expects the expansion at its Coffeyville refinery to increase crude oil production by 15 percent, to more than 115,000 barrels a day.

The refinery expansion is expected to be completed late this year, the company said in a written release. The fertilizer facility upgrades will be completed by the fall of 2007.

Coffeyville Resources CEO Jack Lipinski said in the release that the moves will allow the company to meet growing demand in Midwestern markets. Board approval of the latest expansion increases Coffeyville Resources' capital program to more than $350 million through 2007.

A refinery company that Farmland Industries Inc. auctioned off for $281 million in 2004, Coffeyville Resources was bought again in June for more than $700 million by Goldman Sach's private equity arm and leveraged buyout firm Kelso & Co. The new owners named Lipinski as Coffeyville Resources' new CEO.

Motiva gets Tax Abatement for $3.5 Billion Port Arthur Refinery

A tax incentive agreement designed to help coax Motiva Enterprises to build a new $3.5 billion refinery in Port Arthur won unanimous approval from Jefferson County Commissioners Court on January 2.

Tom Purves, manager of Motiva's existing Port Arthur refinery, said the 20-year tax break was critical as Motiva leadership weighs the advantages of Port Arthur versus Convent, La., for the project.

"It is the cornerstone of making sure our company understands that Texas is behind this project, more specifically Jefferson County," Purves said.

The project would mean an estimated 3,000 to 4,000 jobs during construction and add 300 new permanent jobs.

Motiva's refining capacity would more than double from 275,000 barrels a day to 600,000 barrels a day.

"We think it would be the biggest refinery in the country," Danny Harris, tax representative for Motiva, told the court.

Purves said that if Motiva decides to build in Port Arthur, the project should provide work for everyone in the area who wants to work and has the needed skills.

Under the agreement, the county would keep just a portion of Motiva's tax payment on the new refinery each year for 20 years. The remainder would be refunded to the company.

The county would net no new tax money from Motiva during three years of construction. In years four and five, the county would see an extra $555,000 a year. Payments would rise to $3.13 million in 2011 and to $4.16 million a year for 2012 to 2026, according to the agreement.

Motiva will attempt to use local and historically underutilized vendors, suppliers and subcontractors under the agreement.

In Louisiana, a 100 percent tax abatement for 10 years would be almost automatic, Harris told the court.

Harris and Purves said they now will approach other taxing entities in the county about tax breaks with hopes they follow the county's lead. Those include the Port of Port Arthur, Drainage District 7 and the Jefferson County Navigation District. An agreement with the city of Port Arthur is in place and talks have begun with the Port Arthur school district, Harris said.

Purves said he expects Motiva leaders to make a decision by the end of January about a location for the new refinery.

Commissioner Waymon Hallmark thanked Purves for "working so hard to get this project to come here and not just sitting back and letting it go to Louisiana." Other court members echoed the sentiment.

Less than two weeks after the storm, the court approved hiring Daniels to make emergency repairs. However, Assistant District Attorney Tom Rugg said the work Daniels performed at the request of the county engineer went beyond the scope of an emergency as envisioned under exceptions to state purchasing requirements.

An emergency repair would cover a temporary roof, Rugg said. Instead, the airport roof was replaced with one designed to withstand higher wind speeds.

County Engineer Jose Pastrana said he tried to contact several area contractors in the days after the storm, but Daniels was the only one to submit a proposal. He said he believes the charges are reasonable, especially considering the scarcity of labor and supplies at the time.

Several county officials will meet to try to determine how the county can legally pay the Daniels bills since a contract was never signed.

The court also approved a $1.19 million payment to DRC Emergency Services for debris removal. FEMA grants will be used to pay the bill.

Valero Names New CEO

Valero Energy Corp. named Executive Vice President and Chief Operating Officer Bill Klesse chief executive in a series of executive changes. Klesse, 59, replaces Bill Greehey, 69, who will remain chairman.

San Antonio-based Valero, which owns and operates 18 refineries in the United States, Canada and the Caribbean, said Tuesday that Rich Marcogliese, 53, was named executive vice president of operations. He was senior vice president of refinery operations.

Joe Gorder, 48, senior vice president of corporate development, was named executive vice president of marketing and supply.

Gene Edwards, 49, senior vice president of product supply and trading and wholesale marketing, was named executive vice president of corporate development and strategic planning.

Godrej Ships Three $15 Million Reactors for St Charles Refinery Upgrade

On January 15 the process equipment division of Godrej and Boyce Manufacturing Co Ltd shipped out three thick walled reactors and two separators for the St Charles Refinery of the Valero Refining Company, the largest in North America.

These reactors, valued at USD 15 million, are bound on a specially chartered big lift shipping vessel, and will form the cornerstone of the ultra low sulfur diesel upgrade being implemented at the refinery located in Norco, Louisiana.

On installation they will enable the refinery to meet the mid-2006 deadline set by the Environment Protection Agency for the production of diesel with 15 ppm sulfur content, a press release said.

Godrej has recently bagged a USD 40 million order for the supply of equipment for two projects of GASCO in Abu Dhabi. The order is to be executed by late 2007, the release added.

Sinclair Refinery Prepares to Produce Low-Sulfur Diesel

Managers of the Sinclair Oil refineries in Casper and Sinclair expect them to begin producing cleaner-burning diesel fuel in May.

The low-sulfur fuel is mandated by the U.S. Environmental Protection Agency. Starting June 1, allowable sulfur levels in highway diesel fuel must be reduced by 97 percent.

The EPA said that in terms of a benefit to the environment, the new rule stands to have the same effect as removing 13 million trucks from roads.

Kevin Brown, executive vice president of Sinclair, said he expects volatility in diesel prices as refineries shut down to make changes so they can produce the new diesel.

Brown said EPA has estimated the new diesel will increase production costs by 3 to 5 cents a gallon.

BP Texas City 460,000 Bpd Refinery to Restart in March

BP's giant oil refinery in Texas City, Texas, will resume fuel production in March, six months after it was completely shut by Hurricane Rita, sources familiar with the plant's operations said on January 10.

A company spokesman declined to comment on plans for resuming operations at the refinery, which has a capacity to produce 3 percent of the nation's gasoline, but BP executives are scheduled to update investors on the plant's operations.

The 460,000 barrel per day refinery was completely shut down on September 21 in preparation for Hurricane Rita, which made landfall along the Texas coast after thrashing through the oil-rich Gulf of Mexico.

Hurricanes this year briefly cut a quarter of U.S. energy output, sending crude prices to a record over $70 a barrel and retail gasoline over $3 (1.7 pounds) a gallon.

At the time of the shutdown in September, BP announced it would undertake a safety inspection of the all of the refinery's processing units including the miles of pipe linking machinery at the 1,200 acre site.

Flaws in the piping led the company to roll back its restart date to late in the first quarter of this year, from the initial target of late 2005, the sources said.

Sources said the plant's restart would not include the octane-enhancing unit where last year's fatal explosion occurred, adding that unit may be shuttered for good.

"It won't restart any time soon," one of the sources said. Investigators continue to sift through the wreckage of the isomerization unit, where a volatile vapour and liquid overflowed and ignited in the March 23 blast.

One source said it was possible BP might resume production earlier, but that late in the first quarter was most likely.

Steam needed in the refining process was restored throughout the refinery in December, leading to speculation the plant would resume gasoline production as soon as January.

Last August, only months after the fatal March explosion, a ruptured pipe caused a separate blast in a residual hydrotreater at the refinery and a fire started when a leak developed on a gasoil hydrotreater.

Those incidents, along with a fire at a BP chemical plant in Alvin, Texas, led the U.S. Chemical Safety and Hazard Investigation Board to ask BP to undertake a review of safety at its five U.S. refineries.

The CSB continues its investigation of the explosions. BP issued its final report on the March blast in December, saying failures by workers to follow correct procedures were critical factors in causing the explosion.

Marathon Selects Fluor for Proposed $2.2 Billion Expansion at its Garyville, LA Refinery

Fluor Corp. has announced that it has been selected by Marathon Petroleum Co. LLC, a wholly-owned subsidiary of Marathon Oil Corp., to provide FEED services for a proposed USD 2.2 billion expansion at the company's Garyville, Louisiana, refinery. Fluor's services will include front-end engineering for new processing units, as well as utilities and off sites. The contract will be performed over a 12-month period and executed in Fluor's office in Houston, with support from the company's global engineering centers.

Shipping Accident Hinders Refinery Output in Port Arthur

The Total Petrochemicals terminal was relatively idle on the Neches River in Port Arthur and had to slow production because a ship channel accident has cut off crude oil shipments.

At least one Southeast Texas refinery has slowed production and another faces the possibility because of an accident keeping crude tankers out of the Sabine-Neches Ship Channel.

Total Petrochemicals USA started reducing its output within the last day, said spokeswoman Pat Avery on January 19.

In the worst-case scenario, production could be completely halted as early as this weekend, she said.

Ship traffic has been stalled since January 17 when a barge rented by the Dunham Price Group of Westlake, La., lost 94 concrete pilings

The accident, which happened two miles south of the Rainbow and Veteran's bridges, was still under investigation.

Salvage work can't be done fast enough for refineries waiting on crude shipments.

Motiva Enterprises representatives planned to discuss whether reducing output is necessary, said Gerald Hill, a Motiva community environmental coordinator.

The plant is already running at a reduced level because of upcoming turn-around projects, he said.

ExxonMobil is "implementing contingency plans to minimize or avoid supply impact," said spokeswoman Kathleen Jackson.

Valero is the only refinery not cut off from crude shipments.

The concrete pilings fell far enough away from its terminals that ships are allowed in.

Accidents often snag ship traffic, keeping the waterway closed for days.

But if the ship channel was widened, a zone could have been established allowing vessel to pass the latest debris site, said Clayton Henderson, assistant general manager of the Jefferson County Waterway and Navigation District.

The U.S. Army Corps of Engineers is looking into deepening and widening the waterway to 500 feet from its current 400 feet.

The study is scheduled to be complete by 2007.

With the Corps of Engineers' approval and funding, construction will start the following year, he said.

Giant Industries Plans Restoration and Recovery from Its 62,000bpd Yorktown Refinery Fire

Giant Industries Inc. experienced a fire at its 62,000-barrel-per-day Yorktown, VA, refinery in late November 2005, with most damage impacting the gas plant supporting the fluid catalytic cracker, and also affecting other units’ piping and instrumentation cables. Property insurance, with a $1 million deductible, together with business interruption insurance was expected to cover much of the repair cost and commercial impacts

The company plans a two-phase restoration to be completed by the end of first-quarter 2006, operating about 40,000 barrels daily until then. A 30-day turnaround for the fluid catalytic cracker had been planned for April 2006; it will now be accomplished in tandem with a $7-million high-return project aimed at boosting the yield of higher value product.

Agencies Investigate Baytown Refinery Spill

Baytown, Texas State and Harris County environmental officials are calling for faster reporting of pollution accidents.

The call comes as they investigate a Baytown refinery spill that showered oil onto a neighborhood.

Authorities say they'll be looking into whether Irving-based Exxon Mobil violated any reporting, emissions or nuisance laws in its handling of the spill at its vast Baytown refinery.

A storage tank at the refinery failed January 23, spilling 14-hundred barrels of heated process gas oil and releasing steam containing the oily material. That steam showered a public-housing complex across the street.

Exxon Mobil first reported the spill to the Texas Commission on Environmental Quality about 12 hours after the spill.

That met the state requirement for reporting spills within 24 hours, but environmental officials say they should have been alerted sooner that the spill entered a community.

CANADA

Ultramar Investing $150 Million to Expand its Quebec Refinery

Irving Oil will still hold bragging rights when the dust settles in Levis, Quebec.

Its position as owner-operator of Canada's largest oil refinery lay in question after an announcement by Ultramar Canada that the company will invest $150 million into an expansion at its Levis facility in the early weeks of 2008.

The upgrades, which have passed the pre-engineering stage, will reduce a "bottleneck" at the refinery and increase its barrel-per-day production by 23 per cent to 265,000 from 215,000.

Ultramar's communications vice-president Louis Forget boasted the refurbishment would make the Quebec's biggest refinery Canada's biggest refinery.

But according to Irving Oil officials, Saint John's East Side refinery already produces 280,000 barrels per day - leaving its bragging rights as Canada's largest oil refinery intact.

Still, the changes to Ultramar's refinery - namely a new furnace, bigger pipes, new heat-exchangers, and self-generating hydrogen capacity - will no doubt rev up the race to higher production levels between the two companies, and right across the industry.

Thomas Wise, an energy consultant with Purvin & Gertz, called the expansion significant.

"I think companies do compete for market share and if they can produce more to get there they're probably happy with that," he said,from his Calgary office.

Michel Martin, a spokesman for Ultramar, said the increase would help the company meet demand.

"The economic cycle we're in right now is tremendous. For the last, I would say, 10 or 12 years at least demand for products like gasoline and diesel has been steadily increasing at a pace of two to three per cent a year.

"You end up in a situation where either you have to import finished products or you have to and want to produce them locally," he said.

Irving Oil has itself done several upgrades in the past few years, intent also on increasing production to meet demand. In the last five years, it has invested in ultra-low sulphur diesel at is co-generation power project, as well as several projects similar to the one being implemented in Quebec. Irving Oil declined comment on Ultramar's news. However, a spokeswoman said past upgrades at the Irving refinery are springboards to additional investments.

"Every time we do a project, we ensure it provides an opportunity for future projects," said Jennifer Parker.

2. ASIA

AUSTRALIA

South Australia Gives Mobil July Deadline for Decision on Stanvac Refinery

The South Australian government has given oil company Mobil until July to decide on the future of a mothballed South Australian refinery.

Rejecting reports Mobil has until 2009 to decide whether to reopen the Port Stanvac site, SA Treasurer Kevin Foley said the government hoped a decision would be made within weeks.

"I am confident that in the next few weeks the government will reach a position with Mobil that will see the clean up of the site commence," he said on January 29.

Mobil closed the southern Adelaide refinery in mid-2003 and federal Industry Minister Ian Macfarlane said the company had until 2009 to decide whether to permanently shut it down.

Mr Macfarlane said the SA government had also agreed to give Mobil another decade to clean the site after 2009.

Mr Foley said there was a three-year extension open to Mobil to make a decision, but the state government would not support further time.

"It will be impossible, in my view, for Mobil to convince the government that they need three more years to make a decision about the Port Stanvac site," he said.

"We will stick to our agreement and allow them to orderly exit the site but we are not going to allow them to take another three-year extension and bluff South Australians."

If no decision was forthcoming by July, Mr Foley said the government would make good on previous threats to force Mobil to leave and clean the site.

"We are prepared as a government to take to parliament a law to kick Mobil off the site and charge it the full cost of cleaning up the site," he said.

"Mobil can either do it the easy way and negotiate with (the) government a clean up, or they can take the hard option.

"It's not in Mobil's interests to fight a state government and I think that they will agree and negotiate an orderly clean up of the site.

"But again, I point out, that if Mobil does not conclude negotiations shortly with (the) government to clean up that site, we will go to the (March 18) election proposing to pass a law to kick Mobil off the site and hit them up with the bill."

BANGLADESH

Japan to Explore for Offshore Gas, Install Oil Refinery in Bangladesh

Japanese investors expressed their keen interest to invest in the energy sector including installation of an oil refinery in Bangladesh.

“We are willing to explore gas in the offshore region.”

The President of Japan Energy Development Company Ltd (JEDCL) Masahiro Nakamura commented on these issues at a meeting with Energy and Mineral Resources Advisor Mahmudur Rahman on January 21.

A geologist from JEDCL, Masahiro Ohsawa said Bangladesh has the largest bay because it was created by the many rivers originating from the Himalaya and flowing into the Bay of Bengal.

Ohsawa said there was a huge potential for hydrocarbon deposits in Bangladesh.

Appreciating the seismic policy adopted by the Energy Ministry of Bangladesh, JEDCL President Nakamura said they would feel comfortable working under the existing policy.

Japanese Ambassador to Dhaka, Matsushiro Horiguchi was also present during the meeting.

Energy Advisor Mahmudur said JEDCL has a turnover of US$20 billion.

Welcoming the officials of JEDCL, the Advisor suggested to them that the matter be discussed with Petrobangla.

The visiting JEDCL officials were impressed with the investment environment in Bangladesh and expressed willingness to explore for gas offshore and install an oil refinery, Mahmudur Rahman said.

Terming JEDCL’s trip as a fact-finding tour in Bangladesh, he said a meeting regarding this would be held January 22 between Petrobangla and JEDCL.

JEDCL is now working in the EU countries in the oil and gas exploration sectors.

INDIA

Mangalore Refinery to be Expanded and Become ONGC’s Downstream Vehicle

The Mangalore special economic zone (SEZ) will soon be a reality despite attempts by the petroleum ministry to stall the Oil & Natural Gas Corporation’s foray into this business. The board of ONGC’s subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), is likely to clear the expansion of its refinery, which will be a part of the SEZ.

The petroleum ministry under Mani Shankar Aiyar would like ONGC to be a pure oil exploration and production (E&P) company, but ONGC chairman Subir Raha’s vision for the company is to make it more vertically integrated, spanning activities from E&P to refining to petrochemicals and petroleum retailing.

Sources said MRPL is planning to invest Rs 11,000 crore in expanding its refinery to 15 million tonnes. This would include a petrochemicals plant and a lube oil base stock refinery of 2.5 million tones. The planned petrochemicals complex will be the first of its kind in south India.

MRPL, with an installed capacity of 9.7 million tones, is currently investing in debottlenecking to enhance its capacity to 12 million tonnes. Another 2.5 million tones will be added through the setting up of a lube oil base stock refinery.

ONGC, which took management control of MRPL by buying out the holdings of the AV Birla group, has since increased its holdings in the refinery to 71.6% through a fresh equity infusion.

It is now making MRPL the vehicle for expansion into businesses unrelated to exploration and production.

A special purpose vehicle (SPV) will be formed for setting up the SEZ. The Karnataka Industrial Areas Development Board (KIADB) is likely to hold 49 % in the SPV while MRPL will be the major stakeholder. ONGC will, through MRPL, invest around Rs 21,000 crore in the proposed SEZ’s petrochemicals projects.

According to the original understanding reached with the Karnataka government, ONGC was to be the co-promoter of the SEZ, but company sources said that the investment was likely to come through MRPL. A decision to this effect is yet to be taken.

The Mangalore SEZ, to be notified by the Karnataka government, will comprise a liquefied natural gas (LNG) import and regassification terminal, an ethane/propane and LPG recovery plant, a petrochemicals complex and a power plant.

Of the 10 million tones of LNG that ONGC plans to import from Qatar every year, 1.8 million tonnes will be used to extract ethane/propane and another 0.5 million tones may be used in MRPL. Regassified LNG will also be supplied to Mangalore Fertilizers and Chemicals Ltd and other privately-owned power projects in Karnataka.

RIL to Complete $5.7 Billion Jamnagar Refinery Project Expansion in 2008

Reliance Industries plans to complete its ambitious $5.7 bn expansion of Jamnagar Refinery Project under Special Economic Zone by March 2008 to emerge as the world's largest single-location refinery.

The company has already started implementing the massive 30 mn tonne per annum refinery without waiting for the Petroleum Ministry to formulate and notify the policy for export-oriented refineries.

According to RIL sources, 50 per cent of the front-end engineering design of the Jamnagar expansion is complete and the company has started procurement of major equipment. The construction is expected to start soon to meet the March 2008 deadline.

American major Bechtel is serving as engineering, procurement, construction and management contractor for the project while the technology is sourced from global majors such as Exxon Mobil and Foster Wheeler, the source said.

The expansion project would catapult Jamnagar refinery to number one position in the international rankings for single-location refineries with the total refining capacity touching 1.2 mn barrels per day (BPD).

RIL is currenly placed at number three with 6,60,000 BPD behind Venezuela Paraguana refining of 9,40,000 BPD and South Korea's SK Corp with 8,17,000 BPD.

RIL, which has already emerged as a major exporter of the refinery products, is expected to reap great benefits from Jamnagar expansion on account of cost competitiveness and lucrative benefits. RIL, which was the first to set up export-focused Jamnagar under the export promotion capital goods (EPCG) scheme ahead of PSUs and private players, has recorded a 35 per cent hike in export to Rs 21,814 crore in the first nine months of the current fiscal and 80 per cent of these exports were refinery products, the RIL source said.

Incidentally, RIL has now timed the switchover of Jamnagar expansion from domestic tariff area project to SEZ facility to capture the business opportunity emerging in the international market, once again marching ahead of the public sector oil refineries.

The company estimates that the global refining industry is likely to witness a demand-supply mismatch on lack of capacity addition since the companies in US and Europe are unlikely to set up greenfield projects due to stringent laws.

The sources said that the Jamnagar expansion, when completed in 2008, is expected to give a big push to RIL's bottomline in 2009-10 fiscal, which would be the first full year of its operation.

Since being implemented under SEZ, the project would enjoy customs and excise duty exemption on purchase of all capital goods, raw materials and spares and 100 per cent income tax exemption for a block of five years, 50 per cent tax exemption for two years and upto 50 per cent of the profits ploughed back for the next three years.

Jamnagar expansion project would also be able to set its products in the domestic market once it achieve positive net foreign exchange earnings as per the formula laid down under foreign trade procedure.

IOC to Fit Proposed HCU within Haldia Refinery Site to Meet 2010 Deadline

The Indian Oil Corp has decided to go ahead with its proposed hydro-cracker unit (HCU) at its Haldia refinery without waiting for the Kolkata Port Trust (KoPT) to allot the extra land required.

Facing a 2010 deadline for ensuring Euro-4 standards of cleaner fuels, IOC is trying to squeeze the extra facilities into the existing plant, located in a 500-acre plot.

So far there has been no word from the KoPT about giving IOC an adjacent 82-acre plot which is part of the land occupied by a unit of Hindustan Fertilizer Corp. The KoPT’s parent ministry of shipping and HFC’s ministry of fertilizers are locked in a dispute over the land.

The hydro-cracker unit at the 6-million-tonne Haldia refinery would be IOC’s fifth after the Gujarat, Panipat (two) and Mathura units.

IOC officials said that by 2010 all motor spirits (MS) to be used in the metro cities have to comply with Euro-4 standard and the MS used elsewhere of Euro-3 standard or Bharat stage-3.

So, the Haldia refinery has to graduate from producing stage-1 and stage-2 fuels to stage -3 and stage-4 fuels or distillates. The HCU is indispensable in this respect, officials said.

In 2000, when the project was conceived, the HCU project cost was estimated at Rs 1,506 crore. This has gone up to Rs 2,000 crore.

The HCU will have eight plants — two sulfur recovery plants, one hydrogen plant, one 25mw gas turbine unit, one cooling tower, one nitrogen plant, one effluent treatment plant, one amino re-generation plant and one sour water stripper plant.

According to officials, it would be difficult to lay out the eight new plants within the existing area. All the same, German engineering and contracting group Lurgi AG has been appointed consultant to work out a plan.

An HCU extracts higher volumes of light distillates like LPG, petrol, naphtha, aviation turbine fuel (ATF), Russian turbine fuel (RTF) and kerosene compared with the current refinery set up.

IOC’s Haldia unit had been running at a loss till 2002 but it broke even following the installation of a Rs 506-crore fluid catalytic cracking unit (FCCU).

The FCCU installation improved the distillate yield from 50-53% to 62%. The HCU would increase this further to 70% and above.

Saudi Investment Sought by India in Hindustan Petroleum’s Refinery at Visakhapatanam

India will again seek Saudi Aramco's participation in state-owned Hindustan Petroleum Corporation's refinery at Visakhapatanam during Saudi Arabian Oil Minister Ali Al Nuaimi's visit.

Al Nuaimi will be part of the high-level delegation accompanying Saudi Arabian King Abdullah Bin Abdul Aziz Al-Saud on his first visit to India beginning Jan 24. King Abdullah will be the chief guest at the Republic Day celebrations.

"The issue of hydrocarbon cooperation is also a component of bilateral talks to be held between the prime minister and the Saudi king," Petroleum Minster Mani Shankar Aiyar said January 19.

Without elaborating on the issues to be discussed, Aiyar said India was still seeking Aramco's participation in the Visakhapatnam refinery though Hindustan Petroleum has not been shortlisted for possible participation in Aramco's Yanbu refinery.

"We were hoping that by offering Saudi Aramco an opportunity to invest in the Visakhapatnam refinery, we would get an opportunity to invest in Yanbu but we have not been shortlisted. Nonetheless our offer of collaboration in Visakhapatnam is open," said Aiyar.

Expressing disappointment about the missed opportunity in Yanbu, the minister admitted that Nuaimi had said that his country's decision would be purely on commercial considerations.

"So far as the oil component of our energy security is concerned, we have a strong assurance from Saudi Arabia that any incremental requirement will be met," he said.

"The 26 percent dependence (on Saudi Arabia) is the optimal level. We must also seek to diversify our oil sources."

India currently depends on imports for over 76 per cent of its requirement of 112 million tonnes of crude and petroleum products.

Aiyar said subjects relating to regional cooperation were the "same as those discussed during the Asian roundtable in January 2005 and my subsequent visit to Riyadh in March".

During those meetings, Nuaimi had emphasized "the need for interdependence based on mutual investments".

India’s Ogun State and Britain’s QED Energy Seal Pact on $695 Bln Refinery Project

The Ogun State Government has signed a Memorandum of Understanding (MOU) with a British oil company, QED Energy, for the construction of an US$ 695,085,403 oil refinery, to be sited at the waterside area of the state. The refinery, according to the Chief Executive Officer (CEO) of the company, Mr. Alfred Gordon, when completed, would produce 750,000 barrels of oil per day.

Gordon, who spoke to reporters after the signing ceremony in Abeokuta, the state capital, revealed that construction of the first phase of the project would begin in second week of February, with a capacity to produce 250,000 barrels per day.

"Our decision to site the project here (Ogun State) is a product of three years intensive research," Gordon stated. He added: "We have looked at other parts of West Africa and concluded that this is the best place to site the project."

The attraction to the site, Gordon said, included its proximity to Lagos and also the availability of good deep water for vessels, which would make the project viable. According to him, as a company policy, out of the 6,000 people to be employed when the refinery is in full operation, 80 per cent of them would be indigenes of the state.

The completion of the entire project, he said, would span between three and four years. As part of its social responsibilities to the people, Gordon said qualified Nigerians would be trained in the United Kingdom to work for the company after their return.

"We will also establish a training center in the country to train Nigerians in various skills to enable them work in and outside of Nigeria," the energy firm's boss added. He also said: "Again, we are looking at cross-posting Nigerians to work in QED projects in the North Sea in the middle East."

Asked on measures taken to check environmental pollution when the refinery takes off, he said: "We have already carried out an environmental impact assessment. We will concentrate on wind back energy. "His words: "It is going to be a modular type of refinery, which will be built in stages up to a maximum capacity of cubic 750,000 barrels per day."

Gordon and Mr. Emmanuel Omuku signed the memorandum on behalf of the company.

NEW ZEALAND

New Zealand Refinery to Pause Production in May for Maintenance to Hydrocracker Catalyst

The New Zealand Refining Company, operator of the country's sole oil refinery, is planning a maintenance shut-down starting on May 1, but says it is stockpiling reserves to lessen the impact.

The company says the seven-day shut-down is necessary to replace part of the hydrocracker catalyst - a process which is required every three years.

Refinery economist Peter van Cingel says there should be no real disruption to fuel supplies as it has been planned and budgeted for.

The North Island refinery, which supplies about 80 percent of New Zealand's refined fuels, is stockpiling the 31,850 tonnes needed to cover the closure.

NZ Refining processed 19.1 million barrels of crude oil in the six months ended June 2005, close to capacity, at a margin of $US7.76 per barrel.

New Zealand Refinery $25 Million FEED Study Under Way for $500 Million Expansion

Royal Dutch Shell PLC, refining specialist UOP LLC of Des Plains, Ill., and construction-design contractor WorleyParsons Services Pty. Ltd. have begun the $25 million (NZ) front-end engineering and design (FEED) study for the expansion of New Zealand's sole refinery—Marsden Point at Northland on the North Island's east coast.

New Zealand Refining Co., which owns and operates the refinery, is embarking on a 3-year, $500 million expansion of the facility. If the FEED proves the project feasible, the Marsden Point facility could increase its intake by 20% from its current 100,000 b/d of crude oil.

Key aspects of the program include modification of an existing distillation unit to increase crude distillation capacity and the construction of new process units to increase total refinery output, particularly gasoline production.

Marsden Point currently produces 35 million tonnes/year of petroleum products. It supplies 90% of New Zealand's diesel demand and 60% of the country's gasoline. The balance of demand is imported from Australia and Singapore.

PAKISTAN

Pakistan’s Prime Minister Invites Investment for New Coastline Oil Refinery

Prime Minister Shaukat Aziz has invited local and foreign investors to set up a modern oil refinery along Pakistan’s southern coast.

He chaired a meeting on January 9 to review the basic criteria for setting up new refineries.

He said that Pakistan’s geo-strategic location makes it ideal for an oil refinery, which would cater to domestic requirements and tap the world market for refined oil products. “Pakistan, with its human capital and ideal location, has the potential to be the regional hub for oil refining facilities. The government is determined to market this potential,” the prime minister said.

He directed the Ministry of Petroleum and Natural Resources and the prime minister’s advisor on energy to submit detailed guidelines for setting up the coastline refinery. He also ordered the ministry to submit within two months a policy for new refineries with a view to encourage local and foreign investors.

He said that the government recognizes the critical role of energy security in sustaining growth and increasing competitiveness in the globalized world, and is focusing on enhancing the country’s capacity in the energy sector.

The government’s plan for the development of the energy sector includes enhancing Pakistan’s oil refining facilities and adopting a new policy to set up oil refineries, he said.

Aziz said that the refinery will be set up by private companies, and would use crude oil from the Gulf to export to the rest of the world.

The meeting was also attended by the Planning Commission deputy chairman, the prime minister’s principal secretary, the petroleum and national resources secretary and the prime minister’s advisor on energy.

Pakistan Seeks Cooperation from Iran for Setup of Oil Refinery in Gawadar

The government of Pakistan will welcome Iranian cooperation in setting up an oil refinery in Gawadar for the mutual advantage of both countries, said the Minister of State for Petroleum and Natural Resources, Naseer Mengal during a visit by Iranian Deputy Petroleum Minister Nejad Hosseinian on January 24.

Mr Mengal said that a lot of potential and scope existed for expanding the existing Pakistan-Iran relations and that the proposed Iran-Pakistan-India gas pipeline project would be a milestone in the history of both countries.

He said the leaderships of both countries were unanimous on implementing the project as quickly as possible for the benefit of the region.

He expressed satisfaction over the pace of progress on the project negotiations and hoped that the fifth joint working group meeting would provide a fruitful outcome for gearing up the project.

Mr Hosseinian briefed the minister on the progress on the IPI gas pipeline project, saying that it would go a long way to explore new vistas of cooperation between the three states.

SINGAPORE

Major Singapore Refinery Expansions Awarded to Foster Wheeler

Shell Eastern Petroleum Ltd. (SEP) has awarded contracts to U.K.-based Foster Wheeler Energy Ltd. (FW) for two design engineering projects in Singapore for its new ethylene-oxide/mono-ethylene-glycol plant (EO/MEG) on Jurong Island together with significant modifications for its Pulau Bukom refinery on a nearby island.

SEP said that, after completion of the design phase, FW is expected to be named as the manager of engineering, procurement, and construction for the implementation stage in late-2006, when SEP makes its investment decisions. FW’s experience with a SEP joint venture in China was said to underlie the selection.

Feedstock for the EO/MEG plant—to be finished by 2009—will come from SEP’s planned ethylene cracker on adjacent Bukom Island. Bukom refinery modifications will modernize existing units, add new ones, and add storage, tie-ins and interconnections. The foregoing are also expected to be complete by 2009.

SEP’s plans for its Bukom refinery are aimed at oil-chemicals integration that will yield improved results.

Terms of the awarded contracts were not released.

SOUTH KOREA

Graham Corp. Awarded $3.6 million Order for 150,000 bpd South Korea Refinery Project

Graham Corporation (AMEX: GHM) announced January 10 that it received a purchase order for a large ejector system that will be installed in the fourth largest oil refinery in the world located in South Korea. The $3.6 million order was received in the third quarter of fiscal 2006, which ended December 31, 2005. Revenue for this project will be recognized on a percentage-of-completion basis, and shipment is presently scheduled for the third quarter of fiscal year 2007, which ends December 31, 2006.

The Graham ejector system will be included in the facility upgrade to process lower quality sour crude oil feedstock, which is a low cost and more plentiful alternative to sweet crude oil. The vacuum distillation process increases the amount of crude oil that can be converted to gasoline and other transportation fuels. Graham's ejector system will be installed in what is expected to be one of the largest vacuum distillation units in the world with processing capacity of 150,000 barrels of oil per day.

William C. Johnson, President and CEO, commented, "We faced stiff international competition to win this project. Our customer required a specialized ejector system in order to maximize the output from the vacuum distillation process. Graham had previously designed and manufactured a similar system for an Asian facility, and the customer was able to use it as a blueprint for this project. Our proven technology at the existing facility demonstrated the reliability and robust capabilities of our engineering solutions giving the client confidence in our products and engineering know how."

Total bookings for the third quarter of fiscal 2006, which ended December 31, 2005, were $14.3 million. Due to the timing of the release of orders by customers, the trend of bookings from quarter-to-quarter is not reflective of the future sales potential for Graham. Rather, Graham believes that a six to 12-month perspective of orders received provides a better indication of demand trends.

TAIWAN

Kuokuang Petrochemical Plans $12.46 Billion Refinery, Chemical Complex in Taiwan

Kuokuang Petrochemical Technology Corp. (KPTC) plans to spend as much as $12.46 billion to build a refinery and petrochemical complex in Taiwan's Yunlin County.

Facilities will include: a 300,000 b/d refinery, a naphtha cracker, capable of producing 1.2 million tonnes/year of ethylene, an aromatics complex with output of 800,000 tonnes/year of paraxylene, 23 plants for middle and downstream operations, 14 cogeneration plants, and 13 docks.

Construction is expected to begin later this year, with completion scheduled for 2014.

KPTC is a joint venture of several leading Taiwan petrochemical companies. Major stockholders are Chinese Petroleum Corp. 43%, Oriental Union Chemical Corp. and the Chang Chun Group 20% each, and China Man-Made Fiber Corp. 10%. Minority stockholders include Fubon Financial Holding Venture Capital, Ho Tung Holding Corp., and Pan Asia Chemical Corp.

VIETNAM

Vietnam Province to Discuss Construction of $1.5 Bln Oil Refinery with Hong Kong Investors

The central Vietnam province of Binh Dinh will discuss with the Hong Kong Association of International Investors construction of a US$1.5 billion oil refinery in Nhon Hoi economic zone.

Vu Hoang Ha, chairman of the province’s People’s Committee, said negotiations would be held in Hong Kong Jan. 10, initially for a feasibility study.

Construction of the refinery would then begin early June on a 500 ha site in the economic zone. The refinery is expected to have a capacity of five million tons a year.

Binh Dinh is the second province after Phu Yen to discuss an oil refinery project with foreign investors.

If the projects are approved Vietnam will have four oil refineries in all. State oil giant PetroVietnam plans to build the other two in Dung Quat and Nghi Son also in the central region.

Work began on the Dung Quat plant last November.

Vietnam, Southeast Asia's third-largest oil producer, this year earned $7.38 billion from exporting its crude oil, up by 30.3 percent.

But its lack of oil refineries meant it had to continue importing all refined products, losing hundreds of millions of dollars in precious foreign exchange.

Hong Kong to Invest in $450 Million Central Vietnam Refinery

The Hong Kong General Chamber of Commerce has signed an agreement with Vietnam's central province of Binh Dinh for the construction of a $450 million refinery, it was reported January 17.

The project is expected to be completed in 2010 in the province’s Nhon Hoi economic zone, with an annual refining capacity of 2 million tons of oil, increasing to 8-10 million tons from 2016-20.

Vietnam, Southeast Asia's third-largest oil producer, earned $7.38 billion from exporting its crude in 2005, up by 30.3 percent over 2004.

But a lack of refineries means the country has to continue importing all refined products.

To increase its refining capacity, state oil firm PetroVietnam plans to build two new refineries in Dung Quat and Nghi Son.

Construction was restarted on the 140,000 barrel-per-day Dung Quat refinery – the country's first – in the central province of Quang Ngai last November.

Japan’s Idemitsu Considers Joining Second Vietnam Oil Refinery Project to be Completed by 2015

Idemitsu Kosan Co, Japan’s second-largest refiner, may join Vietnam’s second oil refinery project which is expected to be completed by 2015, it was reported January 20.

Idemitsu would sign this month an initial agreement to study participation in the Nghi Son refinery, the report quoted Tran Thi Binh, deputy general manager of the petroleum processing division at Vietnam Oil & Gas Corp, or PetroVietnam, as saying.

Idemitsu’s study of the venture to build a plant in the northern province of Thanh Hoa to process about 140,000 barrels a day and produce petrochemicals will take several months.

The plan to build the Nghi Son plant was approved in 2005, Minister of Planning and Investment Vo Hong Phuc said in December.

Earlier, in November, PetroVietnam began construction of Vietnam’s first ever refinery in Dung Quat at a cost of US$2.5 billion and capacity to process 145,000 barrels per day.

On January 18, the Hong Kong General Chamber of Commerce signed an agreement to build a $450 million refinery in Vietnam's central province of Binh Dinh.

The project is expected to be completed in 2010 in the province’s Nhon Hoi economic zone and have an annual refining capacity of 2 million tons of oil, increasing to 8-10 million tons from 2016-20.

Vietnam, Southeast Asia's third-largest oil producer, earned $7.38 billion from crude exports in 2005, up 30.3 percent from 2004.

But a lack of refineries means the country has to continue importing all its refined product needs.

3. EUROPE / AFRICA / MIDDLE EAST

LITHUANIA

Kazakhstan OKs $1.2 Billion Lithuania Refinery Deal

Kazakhstan`s central government January 12 publicly endorsed a state-owned company`s $1.2 billion offer for majority interest in a Lithuanian refinery.

The Baltic Republic`s Mazeikiu Nafta is 53.7-percent controlled by a defunct Russian oil company, OAO Yukos, recently liquidated by the Kremlin, Novosti reported.

The offer by Kazakhstan`s KazMunaiGaz would give it control of the 240,000-barrel-per-day refinery, a big adjacent terminal and various pipeline assets.

'Taking into account the geopolitical position of Lithuania, its economic potential and its membership of the European Union, the government of Kazakhstan fully supports KazMunaiGaz`s intention to buy a stake in the Lithuanian oil refining company Mazeikiu Nafta,' said Danial Akhmetov, the Kazakh prime minister.

He said Kazakhstan is pursuing the acquisition to boost trade with Lithuania. Akhmetov also said KazMunaiGaz would upgrade the facility.

NORWAY

Statoil Selects Aker Kvaerner for Norway’s Mongstad Refinery Upgrade

Aker Kvaerner has signed a letter of intent with Statoil to provide the engineering, and assistance to Statoil on the procurement and construction management for the upgrade of the group's Mongstad refinery, north of Bergen, Norway. The value of the engineering contract to Aker Kvaerner is approximately EUR 8.7 million initially. In addition, will come the value of the procurement and construction supervision as requested by Statoil during the construction phase.

Aker Kvaerner's scope includes the basic and detailed engineering, together with procurement and construction supervision assistance - executed from its offices in the Netherlands. The Energy Integration project (EVM-RO) is strategically important for the refinery because of the substantial improvements to the energy efficiency of the Mongstad complex.

"Statoil is implementing the upgrade to strengthen the refinery's position as an energy- and environmentally-efficient supplier of refined petroleum products, and to further develop a robust and long-term competitive position for Mongstad as an industrial area," says Egil Sael, vice president for business development in Statoil's manufacturing business cluster.

"This is the fifth project across Statoil's refineries and chemical plants to be awarded to Aker Kvaerner in the last five years," says Wim van der Zande, president of Aker Kvaerner's European Process business. "We are very pleased to be involved in this project. Our selection reflects the good working relationship we have established with Statoil and the strong track record we have accumulated in this market."

Aker Kvaerner's order for the engineering contract was booked in December 2005. The contract will be finalized during January 2006 and the project will commence 1st February 2006. An application to the Norwegian authorities for the project was filed by Statoil in 2005. Depending on the final permission and related conditions from the Norwegian authorities, Statoil will make the final decision whether to execute the full project in 2006. In such case the engineering scope is expected to be completed by April 2007 and the completion of the refinery upgrade is scheduled for late 2008.

The energy project also includes a new Combined Heat and Power plant and a new gas pipeline from the Kollsnes to Mongstad - both projects are being executed by third parties.

PORTUGAL

Portugal and London-based Argus Resources to Build $4.7 Bln Refinery

The Portuguese government has signed an agreement with London-based Argus Resources to build an oil refinery that will be the largest in the Iberian Peninsula when completed. The project will be built at the Sines oil terminal, located on the Atlantic coast 90km south of Lisbon, according to a MoU signed between the Economy Ministry and Argus Resources. The refinery, to be completed by 2010, is expected to cost USD 4.7 billion and will have a production capacity of 250,000bpd. More than half of the output will be exported, mainly to the USA.

THE NETHERLANDS

Shell’s 412,000 bpd Dutch Pernis Refinery Steam Leak Affects Production

A steam leakage at Shell's Pernis refinery in Rotterdam later fixed, caused a loud hissing noise, prompting concerns among people living close to Europe's biggest refinery, a Shell spokesman in the Hague said.

He declined to say whether the incident, which was also accompanied by a small fire, had affected any production units at Shell's 412,000-barrel-per-day refinery.

"There was a leakage in a steam line, which allowed a lot of steam and pressure to escape, creating a strong noise. It occurred at around 1.30 a.m. (local time), and we managed to block the line at 4.30," the spokesman said.

"The steam supply is still sufficient to supply all installations at Shell Pernis," he said. "There was also a small fire after the leakage occurred, but it was quickly extinguished."

Production at the Anglo-Dutch oil giant's refinery was hit by a utility failure on January 5. Shell said it had restored the supply of utilities like steam and air and was bringing operations back towards normal levels.

Shell did not say which refinery units were still affected by the utility failure, or how long it would take for the refinery to return to full production.

Oil traders said after last week's incident that production at Pernis had been scaled back, with some referring to a halt in distillation after a failure in the supply of air and steam at the plant.

Shell said January 12 that its chemicals units at Pernis were in the process of being started up after being shut for precautionary safety reasons after the utility failure at the adjacent refinery.

KENYA

Kenya Ready to Switch to Unleaded Fuel

After phasing out leaded petrol from its refineries and pumps by the end of last year, sub-Saharan Africa will now have to contend with the high sulfur content in diesel fuel, says the Nairobi-based UN Environment Programme (Unep).

"In Europe, sulfur levels in diesel vehicle fuel are typically 10 to 50 parts per million. In most African countries, these are currently at 5,000 parts per million with some countries having even higher sulfur content," said Klaus Toepfer, the executive director of Unep.

"This is a real environmental and health achievement," Mr Toepfer said, when he announced that all the 49 sub-Saharan countries' vehicle fuels would be lead-free as of January 1, 2006.

Up to 2002, only Sudan, out of the 49 sub-Saharan Africa countries, was using unleaded fuel. Leaded fuel has been phased out in many parts of the world including North America and Europe.

Following a meeting of stakeholders in 2001 in Dakar, which came up with the Dakar Declaration, African countries agreed to phase out leaded fuel and in 2002, the Partnership for Clean Fuels and Vehicles was formed .

The Partnership has been focusing attention on the high levels of sulfur found in fuels in developing countries and economies in transition.

Paying tribute to all governments, companies and others players such as the World Bank, who kept the promise made at the summit, Mr Toepfer called for further measures to tackle other pollutants, promotion of bio-fuels and hydrogen, alongside more efficient vehicles, and "not just in developed countries but for everyone across the globe."

A spot check by The EastAfrican, as the deadline approached, showed that most filling stations in Nairobi and its environs were still selling leaded fuel.

Most motorists do not know what effect unleaded fuel will have on their cars or why they should switch to unleaded fuel.

However, some vehicles are fully compatible with unleaded petrol, while others will be compatible after minor changes. A BMW E30-3 Series of 1986 to 1992 and an Audi model 500 of 1984 to 1987, and Ford Cortina 1600 L of 1980 to 1984 are not compatible.

According to Chris House, the managing director of the Kenya Petroleum Refineries Ltd, whose his tenure in office was meant to end last December, the refinery, which handles the bulk of the region's crude oil, is already producing unleaded fuel.

"We have been preparing tanks for unleaded fuel production over the past couple of years; the changeover now makes the refinery's future operations in Kenya secure," he said. However, the refinery will only satisfy 65 per cent of the demand for unleaded fuel and low-sulfur diesel.

Production of unleaded fuel is made possible by a thermal gasoil unit or simply a Thermal Cracker, which enables the refinery to produce several products, including liquefied petroleum gas, cheaply.

With the unit, the refinery is able to produce unleaded gasoline and low- sulfur diesel on a large scale and satisfy local demand. "We will be able to generate profits and we will no longer require any protection from the government to stay afloat. In the long term, we will start buying the crude oil and sell its products to the marketers at a competitive price," said Mr House.

The refinery produces 1.6 million tonnes of fuel annually and processes crude oil for more than 20 marketers in the country, mainly oil companies. In addition, it produces about 28,000 tonnes of cooking gas annually, which is quite low compared with the rising demand.

In early 2006, the Partnership will launch a global leaded gasoline phase-out for the rest of the developing world and economies in transition with the goal of eliminating leaded petrol worldwide by 2008, according to the agency.

Currently, says Unep, over 30 countries globally are still using leaded petrol, and among those presenting the greatest challenges are Micronesia, Afghanistan, Algeria, Bhutan, Cambodia, Cuba, Iraq, Laos, Mongolia, Myanmar, the Democratic People’s Republic of Korea, Tajikistan, Turkmenistan and Uzbekistan.

BELARUS

Siemens to Equip Mozyr Oil Refinery in Belarus

The Siemens Industrial Solutions and Services Group (I&S) has received orders from the JSC "Mozyr Oil Refinery" in Belarus to equip the alkylation plant and the extractive distillation plant with new power supply systems.

The projects also include uninterruptible power supply (UPS) systems, basic automation and HMI systems. The total value of the orders is around 3.5 million euros.

The JSC "Mozyr Oil Refinery" in the Gomel region of the southeast of Belarus is one of the largest refineries in the country. In 2004, around six million tonnes of crude oil were refined. This corresponds to 45 per cent of total production of Belarus. A large proportion of the products are exported to European countries. In the framework of a comprehensive modernization program, the company is currently renovating the alkylation plant and the extractive distillation plant.

The main reason why Siemens was awarded the contract was the good level of cooperation between the JSC "Moyzr Oil Refinery" and Siemens in past projects. In 2002, for example, Siemens had equipped the catalytic cracker of the refinery with a new power supply system.

GEORGIA

Kazakh Bank to Invest in Georgia's New $350 Mln Oil Refinery

A Kazakh BankTuranAlem (BTA) top executive said on January 11 that the Bank is considering investing in the construction of a new oil refinery plant in Georgia.

“A business-plan will be prepared within a month… This will be an international consortium with the participation of Georgia and Kazakhstan. Now participation of other investors is also being discussed,” RIA Novosti news agency quoted Mukhtar Ablyazov, the BTA Chairman of the Board of Directors, as saying after talks with Georgian President Saakashvili in Astana.

He said that the cost of the project is estimated at USD $350 million and construction of the refinery will take three years. “We are ready to start construction this year,” the BTA executive said.

RUSSIA

LUKoil Scraps Plans for Kaliningrad Oil Refinery

Russia's largest crude producer LUKoil has abandoned long-standing plans to construct an oil refinery in the Kaliningrad region, the company's senior official said.

"In order to maintain the refinery, we need [tax] benefits that are generally applied in Kaliningrad," LUKoil Vice President Leonid Fedun said. "It is unlikely that we will get these benefits, so there will be no refinery, at least with our participation."

At the same time, the company is considering alternative sites for a plant, following acquisitions made by the firm's strategic partner, US oil major ConocoPhillips, Fedun said.

LUKoil initially announced its plans to build a refinery in the Russian Baltic exclave of Kaliningrad as far back as in 2000. The development of the plans were regarded mostly as a strategic move to put pressure on Lithuania's Mazeikiu Nafta refinery, in which LUKoil has long been interested as a gateway to European market, than a concrete and economically viable project.

In a December 13, 2005 article, Lithuania's Litovskaya Narodnaya Gazeta newspaper quoted Kaliningrad Governor Georgy Boos as saying: "LUKoil Baltija head Ivan Paleichik has not ruled out the possibility that LUKoil may decide to build a refinery if it fails to get the shares of the Lithuanian oil complex. 'If the refinery is built, Mazeikiu Nafta will be of no interest."

A 53.7% stake in Mazheikiu Nafta, currently owned by Russian oil firm Yukos, is up for sale as Yukos attempts to pay off its multi-billion dollar back tax bills.

TURKMENISTAN

Japan Seeks Joint Hydrocarbon Projects in Turkmenistan Including Modernization of Seyidi Refinery

A visiting Japanese delegation has expressed serious interest in joint hydrocarbon projects and modernization of Seyidi refinery, the second largest refining facility in Turkmenistan.

The delegation, led by Norioshi Yabe (phonetically spelled) of Itochu, visited oil and gas installations in Turkmenistan and expressed firm desire to participate in a number of hydrocarbon projects including modernization and upgrading of Seyidi refinery near the border of Uzbekistan.

The Itochu rep said that his company would soon present concrete proposals for mutually beneficial cooperation.

In a parallel development, Minoru Sakai, director of information centre for exploration of hydrocarbon resources, visited Ashgabat and held meetings with a number of top officials.

He said that in February 2006 an international seminar would be held in Japan where major Japanese companies, organizations and industry leaders would get together to discuss deep, long-term hydrocarbon cooperation with Turkmenistan.

Sakai extended formal invitation to the Turkmen government to attend the seminar.

IRAQ

Bomb near Baghdad Refinery Sets Pipeline on Fire

A bomb exploded near one of Iraq's largest oil refineries on January 1 and set fire to an oil pipeline, police said, in an attack that threatened to exacerbate the country's fuel crisis.

It was the second sabotage attack in just a few days on a pipeline feeding the Doura refinery in Baghdad, one of the three largest in the country.

It comes as Iraq grapples with a fuel crisis stemming from the closure of a major refinery in the north that has prompted panic buying of fuel and long queues at petrol stations.

The previous attack on the pipeline feeding the Doura refinery cut capacity at the plant down to 30 percent, while the Baiji refinery in the north was shut on Dec. 21 after insurgents threatened truck drivers transporting petrol along Iraq's perilous roads.

ISRAEL

Israeli Gov't to put Bazan Refinery up for Sale

The Government Companies Authority will place advertisements in the domestic and international press January 12 inviting interested parties to post their candidacy to purchase Oil Refineries Ltd. (Bazan)'s Ashdod facility, the Finance Ministry said.

The announcement comes following a High Court of Justice decision from December 28 to reject an appeal by the Movement for Quality Government against payments made to the Ofer brothers' Israel Corp., at the expiry of their concession to operate the Ashdod and Haifa oil refineries.

The Histadrut Labor Union protested the announcement and said that it would "not hesitate to take all legal steps at our disposal to stop the process," claiming that GCA Director Eyal Gabbai had just promised January 9 not to pursue the sale until the workers' rights were settled and a collective agreement signed.

The government and Bazan intend to sell all state-held stock in the Ashdod oil refinery to a party that will operate it as an independent company from the day of its sale, the ministry said. Once the sale of the Ashdod facility is completed, the government intends to issue the stock of the Haifa refinery on the Tel Aviv Stock Exchange, or sell it to a private group.

The large fuel companies would be allowed to bid for the Ashdod plant, but not for the Haifa refinery. Israel Corp. has said in the past it would be interested in taking part in the privatization, as has Alon Oil Group.

Parties may express their interest in the Ashdod facility by February 16, after which a date will be set for submitting formal bids, most likely in mid-May. The government intends to close a deal soon after.

London-based investment bank HSBC and Jacobs Consultancy - a firm specializing in refineries, energy, government agencies and other areas, with offices in Houston, London and Leiden - will follow the privatization process, the ministry noted.

Oil Refineries Ltd. to Invest in New Sulfur Scrubbers and Other Upgrades for Israel’s Ashdod Refinery

The Oil Refineries Ltd. board of directors has approved NIS 220 million in investments. NIS 145 million will be channeled to the Ashdod refinery for installing new sulfur scrubbers, to meet new emission standards.

Oil Refineries will also replace burners with innovative technologies, install double roofs on some storage tanks to prevent emissions and odors, and reinforce and upgrade monitoring, control and cut-off systems, in order to improve operational safety.

Oil Refineries chairman Ohad Marani said the company would continue to invest in safety and the environment. He said the company was committed to improving the quality of life of residents residing close to its refineries.

Meanwhile, Oil Refineries employees announced that they would not hesitate to strike again unless there is a settlement by February 16, the date for the sale of the Ashdod refinery. Ashdod oil refinery workers committee chairman Yaakov Davra said that he would shut down the company if he saw no progress in the negotiations. On January 24 the workers committee set a deadline of February 16 for completing negotiations. This is the date when bidders for the Ashdod refinery are due to submit requests and deposit bank guarantees. Immediately afterwards, information rooms for the sale of the refinery will be opened.

LEBANON

Qatar Petroleum Finances Project to Examine Viability of Tripoli Refinery as Lebanon's Refining Potential becomes Source of Regional Interest

Lebanon was among the first in the Middle East to build oil refineries in the 1950's, but now its facilities in Zahrani and Tripoli are inoperative making it one of the only countries in the region with no refining capacity, and consequently entirely dependent on imported fuel sources. With prices of oil soaring, the cost of meeting annual energy consumption requirements is not sustainable in the long-term.

This month Sarkis Helaiss, the director general of oil facilities in Lebanon, and Hussein Ishaq, the director of refining affairs at Qatar Petroleum signed a letter of intent for a Memorandum of Understanding about developing Lebanon's refining potential.

The macro-economic consequences of the global energy market - where an unstable oil supply is coupled with rising demand - has been a double edged sword for Lebanon.

At $68 per barrel the cost of crude oil is crippling the government, which must spend over $1 billion a year to meet its fuel consumption requirements, but paradoxically has been the necessary catalyst for the private sector to invest in Lebanon's refining facilities.

Zakaria Rammal, an advisor to Lebanese Energy Minister Mohammad Fneish, said this is the first feasibility study dealing directly with Lebanon's oil refining potential.

Qatar is financing the project - which will start in 15 days and take six months to complete - and has appointed an international consulting firm to conduct it. The goal is to determine whether the dormant and out-of-date Tripoli refinery should be revamped or destroyed all together, where supplies of crude oil will come from, and the type of fuel that Lebanon should refine.

If the study yields positive results, Qatar will consider investing in a large refining facility that will aim to process 150,000-200,000 barrels of petrol derivatives per day.

The Qatari Energy Minister, Sheikh Abdullah bin Hamad al-Attiyah said that construction of a refinery could cost up to $2 billion, but would potentially reduce Lebanon's energy spending by 30 to 40 percent by reducing dependence on imported fuel.

The Qatari backed project is not the first feasibility study into Lebanon's energy sector. The EU, the European Investment Bank, and the World Bank have all commissioned studies on Lebanon's energy efficiency.

According to the 2004 World Bank hydrocarbon strategy study, the lack of any viable energy sources and a reliance on fuel imports, coupled with the rising demand for energy is a significant cause of the country's fiscal crisis.

The World Bank estimated the Lebanese market currently consumes 98,000-99,000 barrels of oil per day, meaning it imports 5,000,000 tons of petroleum products annually.

The report projected future consumption rates reaching 128,000 barrels per day (bpd) by 2010-2015, meaning petroleum imports to Lebanon are estimated to grow by 5.2 million tons within the decade.

The government cannot sustain its current expenditure on energy. The allocations included in Lebanon's 2004-2005 fiscal budget were based on a stable oil market - where the price of crude was $24-25 per barrel.

The government covers the losses of Electricite du Liban - the national power company which takes the lion's share of the energy imports - with an $800 million subsidy.

"All Lebanon needed to develop its oil refineries, was private sector investment, but the government did not prove that Lebanon was a stable investment environment. The new legislation passed by Parliament in 2004 introduced the right reforms, and all that was needed was a comprehensive feasibility study. Now we have that, thanks to Qatar," independent energy expert Rudi Baroudi said.

The 2003 Refinery and Natural Gas Law 549 set the parameters for energy sector reform, and according to Baroudi will lead to increased efficiency and transparency in oil market. The law establishes a framework for refurbishing and expanding the Tripoli refinery and a new structure in its pricing regime. It also outlines a plan to decrease the state's role in the energy sector, by changing the government's focus from economic regulation, to enforcing environmental and safety standards and protecting people from market fluctuations in oil prices.

Though the country lacks natural oil and gas resources, with its central location, relatively transparent economy, and two non-operational refining facilities, Lebanon has always been well positioned to increase its energy efficiency.

Only now that the security of the global energy supply is in doubt - due to political tensions in oil-rich regions and a shortage of refining capacity world-wide - has the development of Lebanon's refining potential been recognized as a strategy at the regional level.

World-wide existing refineries process enough crude oil to meet present levels of global consumption, but world-wide demand will soon outpace refining capacity, due to the rapid industrialization occurring in China and India and the lack of refining facilities in America - none have been built in 28 years.

"The choke point on refineries, especially in the U.S., is threatening the security of global supply so the petrol dollars streaming into Gulf States are being reinvested in refining facilities. America doesn't want to build new refineries because it takes so long and they don't make very much money, so producers are building in places where you won't get protests and infrastructure won't be damaged," Soloman Smith Barney oil consultant Peter Gignoux said.

Though re-launching the Tripoli refinery (there are no plans to rebuild Zahrani) is immediately geared toward filling local energy consumption needs, the remaining capacity will be marketed to meet regional requirements.

In 2004 total regional refining capacity stood at 3.8 million bpd. Currently there are seven refineries in Egypt, five in both Libya and Turkey, two in Syria and eight in Saudi Arabia. In financing the deal Qatar gets a new customer to process its crude oil.

Regarding the proposed refinery, Al Attiyah said that the designed capacity will be 150,000 to 200,000 b/d. He sais that once the feasability study is over in six months, the report will be analyzed by two technical teams from both Qatar and Lebanon and a bidding with all required specifications will be announced.

SAUDI ARABIA

Saudi Aramco’s Riyadh Refinery Gets Innovative Upgrades Including Diesel Hydrotreater Complex

Riyadh Refinery is using a combination of new technologies, smart thinking and cohesive teamwork to achieve both environmental and economic gains through a series of modernization efforts, which include the commissioning of a sulfur plant, the construction of a new Diesel Hydrotreater (DHT) Complex, increased gasoline production and the commissioning of a co-generation plant.

The new Sulfur Recovery Unit (SRU) Trains 1 and 2 were commissioned in May, with each train designed to produce 70 metric tons per day (mtd) of molten sulfur, much of which goes to local customers.

The sulfur recovery unit has eliminated the incineration of acid gas, or H2S, resulting in a cleaner environment for the Riyadh area. The sulfur plant will bring extra benefits of $3 million per year to the refinery.

The combination of new technologies, innovation and teamwork is having an impact on Riyadh Refinery's operations and profitability, and the DHT project is a good example.

The DHT construction is continuing as planned, with completion set for May 2006. The project will provide a 45,000 barrel-per-day (bpd) DHT unit to supply low sulfur diesel to the city of Riyadh. To support the DHT, the project provides a new hydrogen plant, a third SRU train, a 4,500 gallon per minute cooling tower, and a 400 gallon per minute amine regenerator.

Supplying low-sulfur diesel to Riyadh will help meet the ambient air quality standards of the Presidency of Meteorology and Environment.

The blending of high-octane gasoline imported from the Eastern Province with the local surplus of light naphtha is another production innovation that has allowed the refinery to increase its profitability.

During 2005, the high octane gasoline blending component, platformate, continued to be imported from the east to absorb part of the surplus of light naphtha production. That has resulted in increased gasoline production by 4,500 bpd and has reduced the amount of gasoline imported to the Central Region.

A major achievement for energy conservation was the commissioning of the cogeneration plant in May 2005. Riyadh Refinery commissioned three combustion turbine generators and three heat recovery steam generators (HRSG).

Each generator is designed to produce 22 megawatts per hour and is synchronized with Saudi Electricity Co. Each HRSG is designed to generate 50 metric tons per hour of steam, which can be increased to meet the refinery's high-pressure steam header requirements.

YEMEN

Work to Start on $450 Million, 60,000 bpd Yemen Refinery in May

A private Yemeni firm will start work on a new 60,000 barrel-per-day (bpd) refinery in Yemen in May, the Saba state news agency said.

It quoted company officials as saying the economic, environmental and technical studies had been completed for the $450 million project, and with the help of International Finance Corp (IFC), the World Bank's private sector lending arm.

The Ras Issa Refinery is a new venture 50 per cent owned by HoodOil, a subsidiary of the Haseel Saeed Anam group, a prominent private firm in Yemen.

The company source was quoted as saying that India's Reliance Industries would have a 25 per cent stake. The IFC earlier had said Reliance was expected to pick up a 25 per cent stake in the refinery.

'HoodOil will offer part of its stake to local investors,' Saba quoted the source as saying.

The IFC has said it will extend a $45 million loan to the project and invest another $5 million by buying 3.7 per cent of Ras Issa. It said the refinery would start operations by the third quarter of 2007 and process Yemen's Marib light crude.

The refinery would produce petroleum products such as diesel, gasoline, jet fuel and liquid petroleum gas.

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