march 06 update

Fluor Corporation announced recently that it had been selected by Marathon Petroleum Co. LLC, a wholly-owned subsidiary of Marathon Oil Corp., to provide front-end engineering design (FEED) services for a proposed $2.2 billion expansion at the company's Garyville, La., refinery.

Marathon's final investment decision for this expansion is subject to completion of the FEED and receipt of applicable permits. The FEED contract value was not disclosed and will be booked in the fourth quarter.

"Fluor is pleased to continue its long-standing relationship with Marathon by being part of an important project that would provide much-needed refining capacity to the U.S. We are dedicated to supporting Marathon's success on this project," said Jeff Faulk, Fluor's group president of Energy & Chemicals.

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.

"Marathon looks forward to working with Fluor through the design phase of this important project, which would increase the capacity at our Garyville refinery from 245,000 barrels per day (bpd) to 425,000 bpd, enabling us to better meet the fuel supply needs of our customers," said Gary R. Heminger, Marathon executive vice president and president of MPC.

Petrobras to Buy $370 Million Stake in Texas Refinery

Brazil's state-owned oil company announced it will pay $370 million for a 50 percent stake in a Texas refinery as part of its plan to expand into the United States.

Petroleo Brasileiro SA, or Petrobras, will buy the stake from Astra Oil Trading NV, a division of Belgium's Transcor International NV.

The refinery in Pasadena, Texas, can process 100,000 barrels of petroleum products daily and is being upgraded to handle more, Petrobras said in a statement.

The Latin American energy titan, will operate the refinery with Astra, and is seeking direct access to the huge North American market.

Martinez Refinery Gets Hefty $1.1 Million Pollution Fine

A Martinez-area refinery was hit with one of the largest fines ever for air pollution in the Bay Area.

Tesoro Refining & Marketing Co. agreed to pay $1.1 million for pollution that occurred at its Golden Eagle Refinery in January 2005. The money is to be split between the Bay Area Air Quality Management District and Contra Costa County to enforce clean air laws.

Parties to the settlement included the refining company, the air district and the county District Attorney's Office.

Last year, a boiler failed at the refinery allowing a dark plume of smoke containing harmful particulates to rise over the refinery, and soot eventually settled on residential areas. The refinery was unable to promptly control the pollution.

Tesoro has also been ordered to upgrade some of its equipment to prevent a repeat of the problem at an estimated cost of $275 million.

In a company statement, Tesoro said it was disappointed with the penalty but added, "We are committed to doing the right thing, and we believe investing $275 million to modify the coker is the right thing for our community, our environment, our employees and our business.

Alaska’s Largest Oil Refinery Threatens to Shut Down

The owner of the state's largest crude oil refinery has threatened to shut down its plant unless it gets a major financial concession from the state. State officials say Flint Hills Resources, which operates a refinery at North Pole, is asking for a break that could cost the state up to 100 million dollars. Flint Hills buys oil from the state to run its refinery.

The company could have to pay more to the state if federal regulators adjust rates for transporting oil through the trans-Alaska pipeline. Refinery executives worry their company would have to make that additional payment to the state next year.

Flint Hills chief financial officer, Anthony Sementelli, asked the state this month to change its supply contract so that the retroactive payment wouldn't be required. State oil and gas director, Bill Van Dyke, declined the request. He says Flint Hills knew when the oil supply contract was negotiated that disputes over pipeline tariffs were likely and could affect the oil price retroactively.

BRAZIL

$1 Billion Expansion of Brazilian Refinery due by June

Refap SA and Petroleo Brasileiro SA (Petrobras) will complete the expansion of the 120,000 b/d Alberto Pasqualini refinery in Rio Grande do Sul to 180,000 b/d by June.

The $1 billion project includes the installation of catalytic cracking, coking, and diesel hydrotreating units. It will increase the refinery's ability to process heavy crude and its output of diesel.

Petrobras imports large quantities of light oil to mix with heavy domestic crudes.

Brazil's Petrobras Gaining 50 Percent Stake in Texas Refinery

Petrobras, Brazil's state-owned oil company, will pay $370 million to buy a 50 percent stake in a Texas refinery, as part of the Latin American energy titan's plan to expand into the United States.

Petrobras, whose full name is Petroleo Brasileiro SA, will buy the stake from Astra Oil Trading NV, a division of Belgium's Transcor International NV.

The refinery, in Pasadena, Texas, can process 100,000 barrels of petroleum products daily and is being upgraded to handle additional capacity, Petrobras said in a statement. Petrobras will operate the refinery with Astra.

Petrobras wants to expand into the United States to get direct access to the huge North American market.

Tesoro Refinery Hit with Large $1.1 Million Fine, Must Modify Coker

A Martinez area refinery was hit with one of the largest fines ever for air pollution in the Bay Area.

Parties to the settlement included the refining company, the air district and the county district attorney's office.

Last year, a boiler failed at the refinery allowing a dark plume of smoke containing harmful particulates to rise over the refinery and soot eventually settled on residential areas. The refinery was unable to promptly control the pollution.

Tesoro has also been ordered to upgrade some of its equipment to prevent a repeat of the problem at an estimated cost of $275 million.

CANADA

Suncor Boosts Colorado Refinery for Oil Sands by $390 million

Suncor Energy Inc. has placed a $390 million bet that doughy Canadian oil sands will play a key role in Colorado gasoline supplies.

That's the amount Suncor is spending at its Commerce City oil refinery to meet new environmental regulations and to increase its capacity to process oil sands from Alberta.

Suncor is Canada's second- largest producer of petroleum from oil sands.

Improvements at the Commerce City refinery will enable Suncor to increase oil-sands refining from the current 8,000 to 9,000 barrels per day to 15,000 barrels per day, and also process oil sands with higher sulfur content than the refinery can handle.

Upon completion of the project, up to 17 percent of the refinery's 90,000-barrel-a-day capacity will come from oil sands. The remainder comes from Colorado oil fields and conventional crude oil in Canada.

Suncor last year purchased the Valero Energy refinery, also in Commerce City. The combined facility, the only refinery in Colorado, supplies about 35 percent to 40 percent of the state's gasoline and diesel fuels.

Alberta Plans $7 to $8.5-billion Refinery

Plans for Canada's largest refinery and petrochemical complex - a $7-billion to $8.5-billion proposal being guided by Alberta's energy ministry and a group of the oilpatch's largest firms - will take a major step forward within days.

The government and 19 firms underwriting the proposal are set to receive a glowing final report on the economics of such a complex, a project that would eventually pump out up to 450,000 barrels of gasoline, kerosene and diesel a day.

It would also produce petrochemical feedstocks, hydrogen, ammonia and 500 megawatts of coal-fired electricity - along with higher financial returns than previously believed - according to Houston petrochemical consultant David Netzer, who has just completed the study.

"Building a refinery in Alberta is by far - and I repeat the phrase 'by far' - more economical than building a refinery in the U.S.," Netzer said.

Government sources say Alberta is already trying to sell the project, as it quietly assembles the proper research and analysis to prove to investors that the project is both viable and attractive.

"Investors would be able to look at it and say, 'it makes sense to build this in Alberta,' " one source said.

"With the information that we have now, our people in Economic Development are out talking to potential investors. I would guess that people are crunching numbers today."

Netzer was putting the finishing touches on a report that says returns could reach as high as 30 per cent, instead of the 11 per cent earlier studies have suggested. A draft version of the report was circulated for discussion two weeks ago.

"It's an analysis of what could be and how we could get there," said Alberta Energy spokeswoman Donna McColl, "to demonstrate to prospective investors the business case of upgrading bitumen so you can produce a finished product and petrochemicals."

Netzer said the higher returns are due in large part to the sharply lower cost of bitumen compared with light sweet crude, substantial high-grade diesel output from the proposed refinery, conversion of byproducts to petrochemical feedstocks and integrated, coal-fired power generation at the complex, which would be located near Edmonton.

"Combining all of those things, you reach very, very strong synergies," Netzer said. "Every element of this has been used somewhere, so the hurdles are not technical, the hurdles are political."

Nova Chemicals Corp. vice-president of Western feedstocks and business development Graeme Flint said the project would also mark the next stage in the development of Alberta's petrochemical industry, a sector that has billions of dollars at stake and is worried about a shortage of feedstock, particularly ethane.

"We've spent billions of dollars investing in petrochemical facilities - as has Dow (Chemical) in Fort Saskatchewan (Alta.)," said Flint, whose firm is among the companies funding Netzer's report.

"This complex anticipates the next phase of that petrochemical development, hence the billions of dollars of investment, which includes the assumption that somebody's got to be prepared to step forward and say, 'yeah, I'm going to build an ethylene plant to use some of the materials of low value out of this refinery and upgrade them to petrochemicals.'"

Netzer's study is the third and most detailed overview of the concept, a key step in Alberta Energy Minister Greg Melchin's plans to implement an integrated energy strategy for the province.

The strategy is aimed at ensuring Alberta captures as much value as possible from its hydrocarbons - such as oil and gas, but also coal and coalbed methane - by performing upgrades and conversions to petrochemical feedstocks in the province.

The goal is to ensure Alberta receives the greatest value for the province's massive hydrocarbon resources, rather than exporting them to be upgraded elsewhere.

Upgrader/refinery would account for about 50 per cent of the cost. It would start at 300,000 barrels a day and be expandable to 450,000 barrels a day.

Hydrogen generation plant using gasified petroleum coke would account for about 25 per cent of the cost. This facet could be two discrete components: An air separation/oxygen production plant and a hydrogen production plant. Along with the upgrader, hydrogen would be used for ammonia production, fertilizer and use in the power plant. It could also be exported.

Petrochemicals facility would account for 15 per cent of the project, using by-products from the upgrader/refinery.

Five-hundred megawatt, coal-fired boiler power generation plant would make up 10 per cent of the complex. Ammonia would be used to remove sulfur from the plant's stack gases, producing ammonium sulfate, a valuable fertilizer.

MEXICO

Pemex Contemplates Building $4 Billion Mexico Refinery

The head of Mexican state oil monopoly Petroleos Mexicanos, or Pemex, said the company is contemplating building a seventh refinery in Mexico.

The refinery would either be built in the Gulf coast state of Veracruz or on the Pacific coast, and get Pemex closer to meeting domestic demand for gasoline, chief executive Luis Ramirez said.

If the government approves expenditures for the $4 billion refinery, it could be operating by 2010, he said.

Despite being the world's third biggest crude company with average daily output of 3.33 million barrels this year, Pemex lacks the refining capacity to meet growing domestic demand for gasoline.

Pemex is a major supplier of crude to the U.S. market, and most of the 1.8 million barrels a day it exports heads to refineries along the U.S. Gulf Coast that specialize in processing heavy crude.

The need to diversify its customer base, or build more plants in Mexico, became clear for Pemex after hurricanes Katrina and Rita this year, which knocked almost all of the state company's overseas clients off-line for several weeks. The company also missed an opportunity to supply higher priced gasoline to consumers in the U.S.

Meanwhile, demand in Mexico for gasoline has increased by 25 percent since 2000, to 664,000 daily barrels. During the first 11 months of this year, Pemex satisfied a quarter of that demand with imports.

Thanks to record high crude prices, the company expects to report revenues of $70 billion for 2005 and $80 billion for 2006. Pemex hands over about 60 percent of its sales to the Mexican government, which in turn uses the cash to fund a third of the annual federal budget. Major capital expenditures -- such as a refinery -- would require congressional approval.

Under Mexico's Constitution, private investment in the energy sector is severely restricted.

The Mexican government is also considering building a refinery in Central America as part of a plan for greater regional cooperation.

Starting in 2006, Pemex also plans to start generating electricity to sell to the state power utility. The company already generates some power for proprietary use at its gas processing facilities and refineries.

Pemex hopes to seek tenders next year to install 300 megawatts of electricity, which will require investment of about $350 million, Ramirez said. Systemwide, Pemex has the ability to generate 4,000 MW of electricity with cogeneration techniques, which uses heat produced at industrial plants to generate power.

NEW FOUNDLAND

Investor Group Studying $2 Billion Newfoundland Refinery

A newly formed private company has launched a study into building a massive oil refinery on Newfoundland's coast to serve tight gasoline markets, especially in the U.S. Northeast, one of the executives behind the plan said on February 10.

Newfoundland and Labrador Refining Corp. will spend the next 42 weeks determining if markets are ready for a 300,000 barrel a day plant on Placentia Bay in the province's southeast, said Brian Dalton, chief executive of Newfoundland-based Altius Minerals Corp.

It would cost at least $2 billion, he said.

Such a plant would be among the largest in North America and the first built in the continent in more than two decades. Analysts have said tight refining capacity has been a big factor behind surging oil and fuel prices.

"When you look at refined products, the market is pretty integrated North America-wide, but from a proximity-to-markets perspective, the U.S. Northeast is a huge component and we're specifically modeling where the best openings are there right now," Dalton said.

The feasibility study is expected to cost $7 million.

Besides Altius, which is a mining firm, Newfoundland and Labrador Refining's investors are Dermot Desmond, founder of Dublin-based International Investment and Underwriting; Scottish financier Harry Dobson; and Stephen Posford, former head of European operations for investment bank Salomon Brothers.

The Placentia Bay region is also site of the 105,000 barrel a day Come-By-Chance refinery, run by North Atlantic Refining Ltd., a unit of Swiss energy trader Vitol SA.

Vitol said in December it is seeking a buyer for the plant, which is more than 30 years old and which requires hefty investment to bring it up to modern standards.

Dalton said its decision to sell is not related to a lack of market opportunities for petroleum products.

"I think you've got to look at Vitol and some of the things they've said. They're primarily and marketing and trading firm. This hasn't been their normal business to be in," he said.

"Overall we do know that certainly globally there's an opening right now in terms of refining capacity."

The last refinery built in North America was Shell Canada Ltd.'s 98,000 barrel a day Scotford plant near Edmonton, Alberta, which started operations in 1984.

Newfoundland and Labrador Refining is not looking to any one region for crude supply for the proposed plant. Oil could come from the North Sea, Middle East or the growing offshore Newfoundland region, Dalton said.

NOVA SCOTIA

Nova Scotia Talking to Firms about Setting up Oil Refinery to Serve North American Market

Nova Scotia is seeking companies interested in developing a large-scale oil refinery to serve the North American market, and has held talks with several firms, officials said.

"It boils down to our province and a whole lot of other jurisdictions (making the pitch to companies) recognizing there is a worldwide shortage of refinery capacity particularly for the international trade," said John Perkins, a spokesman for the Department of Energy, on February 17.

"It's an opportunity, a market niche we figure Nova Scotia has the right tools to fill."

Port Hawkesbury Mayor Billy Joe MacLean confirmed there have been discussions related to an oil refinery.

He says his community on the Canso Strait, where Cape Breton meets the Nova Scotia mainland, has a deepwater port and is accessible to large tankers.

"Negotiations as I understand it, are ongoing ... there are very, very serious discussions going on regarding a very large type of refinery."

He said he has been in Calgary twice in recent months meeting with unnamed petroleum companies related to a refinery project.

Energy Minister Cecil Clarke, who is now on a leave of absence from cabinet duties and other officials in government, promoted the idea at recent petroleum industry conference in Houston, Tex., and with various companies.

Mr. Perkins said while there may be need for only one refinery in Nova Scotia - Imperial Oil has a refinery in Dartmouth, N.S. - to meet domestic demand, "the niche we are looking for is the global market and the concept we have in mind is basically built on a trans-shipment model to serve markets elsewhere."

Nova Scotia has the land that is suitable for industrial development and reasonablely accessible to ice-free, deep water ports, and a well-educated workforce familiar with this type of business.

Mr. MacLean said negotiations are ongoing and he is making a pitch for the Strait of Canso.

The area is also the site of Canada's first LNG terminal at Bear Head, Richmond County.

Anadarko Petroleum Corp. is building a LNG terminal to import liquefied natural gas which it will deliver into the expanded Maritimes and Northeast Pipeline late in 2008 for delivery to the northeastern North America markets.

Gulf Oil opened a 60,000 barrel-a-day refinery in Point Tupper in 1971, processing imported oil from the Middle East, Angola and the Persian Gulf.

It operated for almost a decade before outside economic forces and an oil embargo forced its closure.

2. ASIA

AUSTRALIA

Alaska’s Largest Oil Refinery Threatens to Shut Down

CHINA

China’s Top Planner Says Oil Refinery Capacity 'must rise'

China’s top economic planner has warned that oil-refining facilities are stretched to the limit and urged that capacity be increased.

The National Development and Reform Commission (NDRC) also suggested that prices of refined-oil products, which are regulated by the government, be raised.

"Low refined-oil prices and a fragile supply system are major problems facing China's refining industry," the commission's Industry Department said in a report.

It said the refineries of Sinopec and China National Petroleum Corp (CNPC) the two major oil producers have pulled out all stops but the country still needs an additional refining capacity of 17 million tons to meet demand.

Construction of refinery projects should he speeded up to satisfy oil demand, which is expected to grow by about 6 per cent this year, the commission said.

"With more refineries, we can avoid an excessive load on existing equipment and curb industrial accidents," it said.

The work safety situation in the oil industry is grave, with two major accidents reported within a month in companies under the umbrella of CNPC, the country's largest oil group.

Ten people were killed and nearly 40 injured in a gas pipeline explosion on January 20 in Renshou County, Southwest China's Sichuan Province. More than 1,800 residents were evacuated.

No casualties were reported at an oilfield explosion in the Xinjiang Uygur Autonomous Region on December 26.

Li Yizhong, minister of the State Administration of Work Safety, said many companies in China have been neglecting work safety while concentrating on production.

"The trend is evident not only in the coal mining sector but also in the oil refining industry," said Li at a recent national work safety meeting.

In a separate work safety report on the oil industry, the commission said the losses caused by accidents last year at CNPC rose 36 times over 2004.

The increase was mainly because of the November blast at a chemical plant of CNPC's Jilin Petrochemical Corp, which spilled 100 tons of benzene pollutants into the Songhua River.

On oil prices, the commission said there is room for them to go up.

It said China's oil refineries suffered a loss of 30 billion yuan (US$3.75 billion) in 2005, and they need price hikes to cut losses.

The government sets the prices of refined-oil products but the authorities are considering a gradual reform so that they are subject to market forces and in line with the global market.

The commission pointed out, that China's refined oil prices are lower than the world market levels.

"The economic performance of refineries this year depends on a policy adjustment on refined-oil prices," it said.

Sinopec Refinery Awards $25 Million Contract for Two Steam Generators

China Petroleum & Chemical Corp. (Sinopec) subsidiary Guangzhou Petroleum Co. has awarded a $25 million contract to subsidiaries of Foster Wheeler Ltd.'s Global Power Group for the engineering and supply of two 120 Mw circulating fluidized-bed (CFB) steam generators to its 154,000 b/d Guangzhou City refinery in Guangdong Province, China.

The project is part a Sinopec refinery expansion program.

Foster Wheeler International Engineering & Consulting (Shanghai) Co. Ltd. will design the coal and coke-fired CFBs that will be manufactured by Foster Wheeler Power Machinery Co. Ltd. at Xinhui, China.

The boilers are expected to be operational in 2007.

INDIA

India’s MRPL to Invest Rs 12,800 Cr in Refinery Project

Mangalore Refinery & Petrochemicals Ltd (MRPL) has decided to invest Rs 12,800 crore in its integrated refinery upgradation project and is seeking its parent company, ONGC's approval for the same.

With the implementation of this project, the new refinery configuration will allow processing of higher proportion of low cost sour and heavy crudes leading to better margin.

The refinery project, on commissioning, will significantly enhance value addition in the refinery product slate. The yield would improve by about 11 per cent, to 83 per cent on crude.

The company's chairman Subir Raha said this was the first of a series of major projects planned at Mangalore, and the integrated upgradation project would further improve cost-efficiency in the company.

Production of new high value products like propylene, paraxylene and Euro-III / Euro IV compliant gasoline and diesel is envisaged through this project.

Estimated production of propylene and paraxylene from the upgraded refinery complex will be 300,000 tpa and 900,000 tpa respectively.

Reliance Petroleum Borrows $1.5 Bln for New Refinery

Reliance Petroleum Ltd., a unit of India's biggest non-state company, said it borrowed $1.5 billion to pay for its new refinery in the western Gujarat state.

Reliance plans to spend $6 billion on a 580,000 barrels-a- day refinery at Jamnagar, where it operates a 660,000 barrels-a- day refinery, the third-biggest in the world. Reliance also plans a 1 million tons a year polypropylene plant at the same site.

Reliance is almost doubling refining capacity as economic growth in Asia's fourth-largest economy stokes demand for fuel and chemicals. India's economy grew 8 percent in the six months ended September, the second-fastest growing of the world's 20 largest economies.

The 7-to-10 year loan was arranged by 14 banks including ABN Amro Holding NV, Bank of America Corp., Bank of Tokyo- Mitsubishi UFJ Ltd., BNP Paribas SA, Calyon and Citigroup Inc., the company said in an emailed statement.

Reliance Petroleum said last month it plans to sell shares to raise as much as $1.3 billion to fund the refinery.

India’s Numaligarh Refinery to Enhance Market Reach

Numaligarh Refinery Ltd (NRL) is taking measures to enhance its profitability and market reach at the latest by March 2007, despite facing a shortage in crude supply.

The company expects to post a rise in its gross refining margin (GRM), following the completion of Rs 290-crore project for producing 1.67-lakh-tonne Euro-III motor spirit production facility in 2006, replacing naphtha as feedstock in the hydrogen plant with natural gas in March 2007, and commissioning of the 660-km Numaligarh-Siliguri product pipeline in 2007.

While banking heavily on Oil India Ltd , which is set to be a 26 per cent stakeholder soon for providing backward integration, NRL is working out a product sharing arrangement with Hindustan Petroleum Corporation Ltd to expand its retail network across the country.

Currently, the company's sole customer is its parent - Bharat Petroleum Corporation Ltd.

The latter sources most of its Euro-III diesel requirement in Kolkata from Numaligarh.

The arrangement, however, is proving costly because of dependence on time-consuming rail and road transport facilities in the Northeast.

"We currently face problem in evacuation, impacting the production schedule of the refinery.

"Once the product pipeline is in place, we will not only make savings on transportation, but also improve production," a company official said.

The pipeline is being commissioned by OIL with a guaranteed supply of 1.7 million tonnes by NRL.

To hike motor spirit production: Numaligarh Refinery is set to enhance its Euro-III motor spirit production from 5,000 tonnes to 1,67,000 tonnes by next year following the commissioning of the Rs 290-crore naphtha-motor spirit conversion plant.

"This facility will help us produce more of value-added products and enhance out GRM," he said.

The GRM will receive a further boost once the Dhuliajan-Numaligarh two million standard cubic meter natural gas pipeline is in place in March 2007.

NRL will use one mscmd of natural gas to replace naphtha as feedstock in its hydrogen plant and 37 MW captive power unit.

The remaining one-mscmd gas will be supplied to the proposed joint venture, which will supply compressed natural gas in Guwahati and other cities in Assam.

BPCL Looking for Partners for Bina Refinery

Bharat Petroleum Corporation Limited (BPCL) on February 15 said it is looking for partners for its upcoming Bina Refinery in Madhya Pradesh.

"The groundwork for Bina refinery is going on. We are talking to different parties for partnering the program," BPCL Chairman and Managing Director, Mr Ashok Sinha said here. BPCL took up Bina Refinery in Madhya Pradesh through its subsidiary Bharat Om an Refineries Ltd.

The six-million-tonne refinery is estimated to cost around Rs 9,100 crore. Meanwhile, the company is also looking for on-shore blocks in the Middle East. Different consortium, where BPCL is a party, would bid for the blocks, he said.

Mr Sinha said BPCL has already borrowed Rs 5,500 crore till December this year vis-a-vis Rs 3,500 crore in 2004-05.

IOL Planning to Shut Barauni Refinery for Maintenance

Indian Oil Corporation Limited may shut its refinery in Barauni in eastern India for maintenance in April, a company official said.

The complete shutdown, slated to begin in the third week of April, will last for about three weeks, said the official.

The Barauni unit in Bihar has capacity to process 6 million metric tons of crude oil annually, or 120,000 barrels a day. IOL's seven refineries can process 41.35 million tonnes of crude oil a year and Barauni is one of seven refineries owned by the company.

Indian State Governor says 750 mn tonne Refinery in Barmer Soon

Around Rs 60 to 80 million would be spent on a 750 million tonne refinery to be set up in Barmer district Rajasthan.

This was noted by state Governor Pratibha Patil at the Budget session of the Rajasthan Assembly which began February 28.

She also informed that Cairns Energy had discovered oil worth 350 million tonne in Barmer region and added the Oil and Natural Gas Commission (ONGC) will set up a 750 million tonne refinery to refine oil.

She said several allied industries would also be set up along with the refinery, which are expected to provide employment to thousands of people, leading to overall development of the region.

She also said that it is necessary to increase the present 5380 megawatt capacity to 10,000 MW to fulfill the state's power requirement.

Keeping this in view, the government has decided to generate extra 4500 MW of power to ease the situation. It has started work on six power units with a capacity of 1775 MW.

This year the 125 MW second unit of Rs 618 crore Giral Lignite project has been cleared. And work on delayed Dholpur gas project is progressing rapidly.

INDONESIA

Iran to Build Oil Refinery in Indonesia Investing $1.5-$2 Billion

Indonesian President Susilo Bambang Yudhoyono asked his minister of energy to follow up Iran's commitment to jointly build an oil refinery in Indonesia, Foreign Minister Hassan Wirajuda said February 23.

Wirajuda made the statement after accompanying President Susilo to meet with visiting Iranian Foreign Minister Manouchehr Mottaki at the State Palace here.

"The discussion was about Iranian intentions to invest in building an oil refinery in Indonesia. The president has instructed the minister of energy to follow up the plan," Wirajuda told a joint press conference here.

Indonesian Minister for Mines and Energy Purnomo Yusgiantoro is encouraged to visit Iran.

According to the Iranian foreign minister, Iran would invest 1.5 to 2 billion US dollars in the field of energy in Indonesia.

The refinery was first initiated by Iranian President Mahmoud Ahmadinejad when he met President Susilo in the United Nations' summit in New York.

JAVA

Java’s Pertamina Refinery Closes Production for Repairs

The Indonesian government-run firm Pertamina oil refinery on the island of Java will suspend fuel production for 18 days for repairs, an official said.

"Production will be halted starting February 15th and production will only resume March 5 because of repairs," Pertamina spokesman M. Harun told AFP in regards to the Balongan refinery on the north coast of West Java.

The Balongan refinery, which processes crude oil into fuel products, has a production of 125,000 barrels per day. It has closed for repairs several times in the past two years, causing shortages in fuel supplies.

Pertamina's Processing director Suroso Atmomartoyo was quoted by the Detikcom online news service as saying the closure would not cause shortages as it had been long anticipated.

"This (repair) has been long planned so there will be no problem with fuel supplies," Suroso said.

He said Pertamina will import fuel to help meet domestic demand.

Pertamina's marketing director Ari Soemarmo in December said because of problems in Balongan, Pertamina planned to import an additional 500,000 barrels of gasoline and diesel oil in January.

Delays Cloud Plans for 150,000-200,000 b/d Indonesian Refinery

Indonesia's state-owned PT Pertamina has announced a delay of as long as 2-3 years in construction of a 150,000-200,000 b/d refinery in Tuban, East Java.

Pertamina Director Suroso Atmomartoyo said the firm has found no partner for the project, on which construction was to have begun this year with completion expected in 2008.

President Susilo Bambang Yudhoyono disclosed plans for the refinery last July.

Indonesia imports almost a third of the oil products it uses because its 1.06 million b/d of refining capacity isn't enough to meet demand.

Last August, China's Sinopec and Pertamina announced plans to study feasibility of the Tuban refinery.

At the time, Pertamina Pres. Widya Purnama said the study was expected to be completed by the end of 2005, enabling construction of the refinery to begin in 2006.

But Atmomartoyo said Pertamina may have to cancel plans to cooperate with Sinopec due to prolonged and complicated negotiations over costs, which have risen because of brisk worldwide refinery construction.

Indonesia's Koran Tempo newspaper quoted Atmomartoyo as saying that the cost of the project is now estimated to reach $3 billion from an initial projection of $1.6 billion.

Factors other than rising construction costs may be at play in Sinopec's uncertainty over the refinery project.

Much of the feedstock for Tuban is to come from the Cepu Block, where the start of production is expected to be delayed by a dispute over operatorship between ExxonMobil Corp. and Pertamina.

SRI LANKA

Thai Firms Sought for Investment in 200,000 bpd Sri Lanka Refinery

Saha Regal Best Co (SRB), a Thai construction investment firm, is looking to select medium-sized Thai construction firms to carry out civil construction for the development of a 200,000 barrel per day (bpd) oil refinery in Sri Lanka. The company has signed an agreement with a Chinese state-owned enterprise, China National Machinery and Equipment Import and Export Corporation (CMEC), and PL Global of South Korea for engineering, procurement and construction for the refinery in Sri Lanka.

SRB last year formed a joint venture with Hong Kong-based Assurgress International Investment Ltd and proposed to the Thai Energy Ministry to undertake the country's ambitious energy landbridge project in southern Thailand.

The project, talked about on and off for the past 15 years, involving the construction of oil refineries and 250-km pipeline stretching from Phang-nga, on the Andaman Sea coastline to Nakhon Si Thammarat, on the Gulf of Thailand.

The project has been put on hold again by the government after a feasibility study found it would not create the needed returns on investment.

The refinery project in Sri Lanka belongs to Regional Co-operative Petroleum Refinery Inc (RCPRI) and the total investment is worth approximately US.5 billion, including 0 million for a 350-megawatt cogeneration power plant.

The refinery would process imported crude, transferred initially from the Middle East via a single-point mooring and undersea pipelines, according to Mr Chan.

He said RCPRI granted the contracting agreement of the project to SRB and its consortium.

''I could not see any risk from the project because it is supported by the Sri Lankan government in line with certain markets, and free from [the risk of] tsunami,'' said Mr. Chan.

The plant would be located on 100-acre site on which the developers have a 99-year leasehold, he added.

The Board of Investment of Sri Lanka has granted incentives to the project, for example, a 20-year tax holiday and 20-year duty waiver on all imports of materials and equipment. In addition, expatriates working for the project would pay income tax at 15% of their revenue.

Mr. Chan said SRB would invite medium-sized construction companies in Thailand to subcontract the projects for civil construction due to the fact that strong construction companies are scarce in Sri Lanka. He also noted that the capability of medium-sized Thai construction firms had been shown to be reliable.

''We have twenty-two months to go for selecting and screening potential subcontractors because the project would begin construction by the end of 2007,'' said Mr. Chan.

He estimated the construction would be completed within three years after work formally begins.

Castlepines Corporation, an investment company based in Sydney, Australia, has agreed to provide project finance to the project subject to its normal terms and conditions being adhered to for an investment in such an operation, said Mr. Chan. Castlepines has a project funding arrangement with Deutsche Bank and Lehman Brothers Inc.

The consortium is also undertaking construction of a 300,000 bpd oil refinery worth .8 billion in Banten on West Java Island in Indonesia.

The three companies also won a deal for construction of two coal-fired power plants with a capacity of 55 MW each and transmission lines, plus a 2.3-million tonnes per year high-grade Portland cement plant, all owned by Aurora Energy Tech. The total investment for the power plants and the cement plant would be 0 million, according to Mr. Chan.

3. EUROPE / AFRICA / MIDDLE EAST

ROMANIA

Petrom Invests $50M in Romanian Refinery

Austrian-owned OMV-Petrom, the country's largest oil company, said February 28 it was investing euro42 million (US$49.8 million) million (US$49.8 million) in one of its refineries to allow the facility to produce greater quantities of low-sulfur fuels.

The investment in the Arpechim plant in the southern city of Pitesti will produce 1.2 million tons of low-sulfur fuel a year. South Korean company SK&EC-LG International will build the new installation at the refinery according to an OMV-Petrom statement.

The company plans to invest some euro1 billion (US$1.19 billion) to modernize its two refineries of Petrobrazi and Arpechim by 2010.

OMV-Petrom, which is the largest refining operator in Romania, with a refining capacity of 8 million tons per year, the release said.

In 2004, then state-owned oil company Petrom was sold to Austrian group OMV AG for euro1.5 billion (US$1.8 billion).

NIGERIA

Nigerian Militants Announce New Attacks on Oil Installations and a Military Vessel

Militants holding nine foreign hostages in southern Nigeria said they attacked an oil pipeline February 20.,and blew up a military vessel in violence that has cut about 20 percent of crude production in Africa's oil giant.

The Movement for the Emancipation of the Niger Delta said they attacked a Shell-operated oil-pipeline switching station known as a "manifold" and a navy vessel. "Both were destroyed with explosives," the group said in an e-mail.

Shell said it had no information on any violence against the company's facilities and had no announcement of further production cuts. Government officials weren't immediately available for comment.

The West African nation is reeling from weekend attacks in which militants blasted oil and gas pipelines and sabotaged a key oil loading terminal belonging to Royal Dutch Shell PLC, forcing the company to halt the flow of about 455,000 barrels a day about one-fifth of daily output in Africa's top crude producer.

Nigeria is Africa's leading oil exporter and the United States' fifth-largest supplier, usually exporting 2.5 million barrels daily.

The militants claiming responsibility for the attacks say they have kidnapped nine foreign oil workers and threatened to spread the violence further across the south, and said they would kill President Olusegun Obasanjo if he entered the region.

"We are going to continue with the destruction of oil facilities in Delta State while concluding arrangements for our wider attacks on the entire region," the group said. "We are declaring a war on Obasanjo. We will attack and kill him should he venture into the Niger Delta for any reason."

Shell spokeswoman Caroline Wittgen said February 20 she had no information on any attacks but the company was working to ensure workers' security and the hostages' liberation.

"We're offering every assistance we can to secure the safe release of the hostages and necessary measures to ensure the safety of staff," she said. She didn't elaborate.

Efie Alari, a self-declared commander of the Movement for the Emancipation of the Niger Delta, told The Associated Press by telephone February19 that his group was poised to attack foreign crude oil tankers offshore.

"We'll use our rockets on the ships to stop them from taking our oil," Alari said. His identity could not be independently verified, but the call came from a number the group has used before.

The military said it would do whatever was necessary to ensure tankers remain safe in Nigerian waters.

"I don't know their capabilities, but we're not leaving anything to chance," Maj. Said Hammed, spokesman for the military task force in the Niger Delta, said of militant forces. "The assurance has been given at the highest level of government that oil tankers are safe in Nigerian waters. That assurance remains."

Violence and sabotage of oil operations have been common in the Niger Delta for the past 15 years amid demands by the region's impoverished communities for a greater share of the oil revenue flowing from their land.

In the Forcados estuary, dozens of armed militants seized nine foreigners after storming a barge belonging to the Houston-based oil services company Willbros, which was laying pipeline for Shell. The hostages include three Americans, two Egyptians, two Thais, one Briton and one Filipino, militants and Willbros officials said.

Militants said in an e-mail to AP they had not decided what to do with the hostages.

Hostage takings are a common occurrence in the delta, but most are released unharmed. Last month, militants held four foreigners for 19 days before releasing them unscathed.

TUNISIA

Tunisia Opens Tender for Construction of 120,000 Bpd Refinery

The Tunisian government has opened an international tender for the building, administration and operation of an oil refinery 340 kilometers away from Tunis, the country capital. The production capacity will be 120,000 barrels of oil a day. The deadline for bid submission is the end of March and they may be by foreign companies.

São Paulo - The government of Tunisia has opened an international build, own and operate (BOO) tender for an oil refinery close to the La Skhira oil terminal, around 340 kilometers away from Tunis, the Tunisian capital. The information was disclosed by the Tunisian embassy in the Brazilian capital Brasília.

The Ministry of Industry, Energy and Small and Medium Enterprises of the Arab country is inviting foreign companies interested in participating in the tender for pre-qualification for the bid. The minimum refining capacity will be 120,000 barrels a day. The company chosen will have the right to exploration of the plant for a period of at least 30 years.

The project, called La Skhira Refinery, is the first turned to the private sector in Tunisia and should be designed and realized in conformity with international petroleum standards (US and European). The site disposes of infrastructure for refined product storage and has a crude oil pipeline. The plot of land, which will have an area of approximately 100 hectares, is located close to the European continent, which is one of the largest importers in the world and has a deficit in oil products.

La Skhira port terminal may receive tankers with a capacity of up to 120,000 tons and may store 350,000 tons of crude oil. The terminal mostly receives vessels that transport oil between Tunisia and In Amenas, in Algeria. The daily capacity of the pipeline that connects In Amenas to La Skhira is 38,000 tonnes a day. In 2004, Tunisia produced 3.4 million tonnes of crude oil.

The government of Tunisia estimates that pre-selection of potential investors should take place up to June and the final choice should be announced in June 2007. The start of construction of the refinery is scheduled for December 2007, and operation should only begin in June 2010.

The Tunisian consumption of oil products in 2004 totalled 79,000 barrels of oil a day. This figure is growing on average 4% a year. Most of the oil products consumed in the country are imported. In 2004, imports totalled 61,000 barrels a day.

Companies interested in participating in the tender should send their offers up to March 31, at 01:00 pm, local time. The offers should be sent in an anonymous sealed envelope bearing the words "Raffinerie do Skhira - offre de préqualification - Ne pás ouvrir" to the following address: Ministère de l'Industrie, de l'Energie, des Petites et Moyennes Enterprises. Groupe IPP - 86 avenue Mohamed V Tunis 1002, Belvédère - Tunisie.

BAHRAIN

Japan may build Export Refinery in Bahrain

Japan may build a major oil refinery in Bahrain with full Japanese capital, ambassador Takao Natsume was quoted as saying.

The local Al Mithaq newspaper, quoting the envoy, said proposed refinery aims at Persian Gulf crude oil meant for export to the Japanese market in particular and the project would cost billions of dollars.

The plant will employ hundreds of locals and there are also indirect benefits for a lot of institutions and small investors and merchants in the area, said the report.

The paper said Bahrain was being preferred because of its central geographical location in the Persian Gulf which means smooth transport and access for crude oil from all regional countries.

IRAN

170,000 bpy Crude Refinery to be set up in Iran’s Bushehr Province

Shokrollah Attarzadeh, the chairman of the Majlis Energy Committee announced on February 12 that the first crude oil refinery of Bushehr Province will be set up in Bahregan.

“The construction of this refinery will be launched in the next Iranian year (to be started March 21, 2006). The crude oil refinery will have a capacity of 170,000 barrels per year,” he added.

The MP explained that in Bahregan region, northern Bushehr Province, 250 barrels crude oil is produced per day in Sorush and Noruz wells, most of which face problem with regard to marketing and purchasing.

“Construction of the aforesaid crude oil refinery in this region will somehow resolve this problem. Moreover, it will turn the produced heavy crude oil into the oil products such as gasoline, which is considered as a step to reduce import of this product,” Attarzadeh further explained.

The lawmaker also noted that the Energy Committee made the decision to build the crude oil refinery in Bahregan as a result of a reform made on the national budget’s bill of the upcoming Iranian year.

Fire Rages at Refinery in Iran Capital

Tehran’s oil refinery caught fire in the early hours of February 18, state radio reported.

The cause of the fire has been identified as a leak in one of the fractionation columns of the refinery, the report said.

An ad hoc committee, whose members include Deputy Oil Minister Mohammad-Reza Ne’matzadeh, has been created to investigate the cause of the sudden blaze.

No causalities have been reported, but there are believed to be extensive damages to the installation.

Iran's Refining Capacity to Increase to 900,000 bpd

Deputy Oil Minister said the country's refining capacity is slated to increase to 900,000 barrels daily within the next five years, IRNA reported.

Touring the Arak Oil Refinery Complex Mohammad Reza Nematzadeh also the head of Iran Refining and Oil Derivative Distribution Company said that the refineries like other industrial units have a useful life.

"Modernization and renovation of some of the older refineries is on the oil ministry's agenda," he added.

Abadan with 90 years of age is the oldest refinery in the country.

The complex is undergoing some modernization and repair, the deputy oil minister said.

He added that Arak refinery complex will be reconfigured to refine heavy fuel to light and airplane fuel.

Nematzadeh said the cost of production, up-keep of transmission and distribution of oil derivatives is approximately rls 16 billion annually.

Responding to the question on oil policies in case of possible sanctions, he added "we went through difficult times during the imposed war and are able to operate refineries, and oil facilities and meet the needs of the country in any situation."

"Although sanctions dictate hard times, but we are not concerned and there will be no problems, Nematzadeh underlined.

Nematzadeh said the plan is to build these new refineries with gas condensate or heavy crude as feedstock.

He said that the exact location of refiners are not definite yet, but will be announced in the near future.

A major problem facing the company is the rising energy use especially gasoline consumption in the country, he said.

He also expressed approval of the proposed plan for dual-rate system for gasoline starting next year (March 21).

He said the plan should be effective in preventing further rise in the rate of gasoline consumption in future years.

Gasoline imports, if the current consumption trends continue, will range dlrs 4-4.5 bln by the end of this year.

Gasoline budget shortfall for the first half of the current year stood around dlrs 900 mln.

The total refining capacity is 40 mln liters daily where as the gasoline consumption is estimated to exceed 64.5 mln liters daily this year. "Hence, we have to import 24.5 mln liters daily," he added.

He said that optimizing gasoline consumption is the most effective solution to rein in the unfettered consumption.

Iran’s New 360,000 bpd Refinery Design Ready in 6 Months

Iran expects to finalize within six months the design of a proposed 360,000 barrels per day (bpd) condensates refinery, part of a $12 billion plan to expand the stretched sector, a state official said on February 27.

The refinery, to have three trains with a capacity of 120,000 bpd each, is expected to produce 36 million liters per day of gasoline and other light products, said Ahmad Zeraatkar, director of refining at the state Management and Planning Organization.

“We are at the basic design stage and that takes about six months. After that we will evaluate the economics of the project and announce the financing,” he said on the sidelines of a refining conference in the United Arab Emirates.

The new refinery, which would process condensates from the giant South Pars gas field in the Gulf, is part of Iran’s plan to upgrade its existing nine refineries and build two new ones.

Iran is also studying plans for a heavy oil refinery with an initial 160,000 bpd capacity to handle crude from Azadegan field, Zeraatkar said.

Iran plans to invest over $12 billion in its refining sector over the next 10 years to lift capacity to 2.5 million bpd from some 1.5 million bpd now, he said. The new capacity will be linked with oilfield expansions and will not affect Iran’s crude exports. Despite being the world’s fourth biggest oil exporter, Iran is heavily dependent on gasoline imports because of its lack of refining capacity.

ISRAEL

Six Contenders Declare Bids on Israel’s Ashdod Bazan

Six contenders declared their intention to bid on the Ashdod facility of Oil Refineries Ltd. (Bazan) to the Government Companies Authority before the deadline February 16, the Finance Ministry said.

Paz Oil Company Ltd., Delek Petroleum Ltd., Dor-Alon Energy Israel Ltd., Sonol Israel Ltd., Ampal Fuels Ltd., and Bianca Oil Refining Ltd. (an organ of Russian oil company Rosneft) all submitted an initial bank collateral deposit with the GCA in the amount of NIS 10 million, each alongside a detailed questionnaire on their financial condition, ownership structure and holdings. The bid declaration process had begun on February 12.

"The Government Companies Authority is pleased by the interest shown in the [privatization] procedure by the central actors in the fuel market," said GCA Director Eyal Gabbai. "The privatization of the Ashdod refinery is a significant milestone, and is reaching advanced stages of execution following years of trying to do so," he said.

The GCA is currently handling the contenders' requests in order to begin the sale procedure "efficiently and quickly," Gabbai said. Following initial handling, the companies will receive information about the Ashdod refinery so they can complete the due diligence process.

The date for submitting price offers is expected to be set in the first half of the year, the ministry said.

The sale of the Ashdod refinery is taking place in accordance with a December 2004 decision by an inter-ministerial committee on privatization and a December 28, 2005 decision by the High Court of Justice to strike down an appeal by the Movement for Quality Government. The MQG had accused the government of illegally paying the Israel Corporation for the refineries, state property which the company had been operating at a profit as a concessionaire. Following the court's clearance, the state paid NIS 677.5m. for the 26% stake held by Israel Corp., paving way for the sale.

The privatization scheme chosen by the state seeks to divide Oil Refineries Ltd. into its two composite facilities - Ashdod and Haifa - then sell the Ashdod refinery in a tender and, finally, offer the stock of the Haifa refinery for public trading on the Tel Aviv Stock Exchange. The state could also sell the Haifa facility in a tender, barring the winner bidder in the Ashdod sale.

KUWAIT

Kuwait Petroleum International Reviews Future Functions of Refinery in Europe

Kuwait Petroleum International (KPI) said February 13 it is currently reviewing the future role and functions of its Kuwait Petroleum Europoort (KPE) refinery in the Great Rotterdam area.

In a press release, KPI said the review aims at evaluating Kuwait's oil business in north-west Europe in terms of future needs, noting that the "review includes the possibility" of selling the "profitable" refinery to a third party.

The refinery not only produces fuel products, but also a number of specialty products, such as lube base oil, bitumen and waxes.

KPI is a subsidiary of state-owned Kuwait Petroleum Corporation (KPC).

MIDDLE EAST

Middle East to Increase Oil refinery Capacity by 60%

Middle East countries are predicted to increase their oil refinery capacity by 60% and make the capacity over Russia and the former Soviet republics' total. The lack of investment has hindered the energy sector in Russia and other countries, according to data release of OPEC and world oil and gas expertise Wood Mackenzie.

The Middle East has invested hugely in expanding and building oil refineries, making the region especially the Persian Gulf major exporter of petrol, diesel, heating oil and aviation oil.

SAUDI ARABIA

Oil Jumps Topping $62 a Barrel after Saudi Refinery Attack

Oil prices soared Friday February 24, topping $62 a barrel, after attackers tried to blow up a Saudi oil refinery.

U.S. light crude for April delivery jumped $1.91, or roughly 3 percent, to trade at $62.45 a barrel on the New York Mercantile Exchange.

Saudi security forces thwarted the attempted suicide car bombing at an oil processing facility in eastern Saudi Arabia, Saudi security sources told CNN.

Three Saudi security forces were killed and 10 were injured after they opened fire on three cars believed to have been carrying suicide bombers, Saudi security official Nawaf Obaid told CNN.

The cars had forced their way through an initial entrance to the Abqaiq plant and were met with gunfire between the first and second security perimeters, Obaid said.

The gunfire is believed to have caused two of the vehicles to detonate before they could enter the facility, he said.

It was not clear what happened to the third car, although Saudi officials said none of the cars entered the facility.

All of the would-be attackers were killed, although it was not clear how many people were inside the two vehicles when they detonated.

Obaid said the incident occurred more than a half-mile from the facility's inner core of security.

Al Qaeda leaders have previously called for attacks on oil fields in Saudi Arabia, a key U.S. ally.

Most Saudi oil is exported from the Gulf via the huge Abqaiq producing, pumping and processing facility, Reuters reported. The world's biggest processing plant, it handles about two-thirds of the country's output.

Former Middle East CIA field officer Robert Baer has described Abqaiq as "the most vulnerable point and most spectacular target in the Saudi oil system."

"It's not clear what damage there is, but Abqaiq is the world's most important oil facility," Gary Ross, CEO at PIRA Energy consultancy in New York, told Reuters.

"This just emphasizes fears over global oil supply security when we're already facing major ongoing risks in Nigeria, Iran and Iraq."

Attacks on Nigeria's oil network have already forced Shell to cut output by 455,000 barrels per day (bpd), shutting in a fifth of the country's exports. Militants holding foreign oil workers hostage say they will continue attacks in the next few days.

But oil's upside may be limited by brimming U.S. fuel tanks. Gasoline stocks increased to 225.6 million barrels, the highest level in seven years, according to weekly data released Thursday. Crude stocks increased 1.1 million barrels to 326.7 million barrels, also the high end of the average range for this time of year.

"The market is being tugged by two forces -- data are pulling it down and political forces are pulling it up," independent oil consultant Geoff Pyne told Reuters.

Outages in Nigeria, the world's eighth-largest crude exporter, have helped push London Brent crude close to parity versus U.S. West Texas Intermediate (WTI) futures.

U.S. crude usually trades at a premium to Brent, but the London benchmark better reflects the Nigerian risk premium as it is used to price West African oil sales.

Aside from tension in Nigeria and Saudi Arabia, traders said Iran's nuclear ambitions and the possible ramifications for the nation's oil production also remain a worry.

The board of the International Atomic Energy Agency (IAEA) meets March 6 to discuss the next step in resolving Iran's nuclear row with the West.

And Iraq, which has been struggling to get oil output back to pre-war levels, is suffering the worst sectarian violence since the fall of Saddam Hussein, compounding the geopolitical risks in the Middle East.

UNITED ARAB EMIRATES

Public Shareholding Company, Takreer plans $4bn Refinery

The Abu Dhabi Oil Refining Company is investing $4bn in building an oil refinery with a capacity of 300,000 bpd in Fujairah, one of four new projects under review, reported Gulf News. It will turn out naptha, high-grade petrol and diesel. The firm plans to increase overall refining capacity to 800,000 bpd within five years.

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