may 06 update

Giant Industries Inc., Scottsdale, Ariz., has selected ConocoPhillips technology for a 30,000 b/d sulfur removal unit for its 58,900 b/cd Yorktown refinery in York County, Va.

The S Zorb SRT unit will desulfurize gasoline blendstocks. The unit's design will allow for a flexibility of feedstocks from a variety of refinery sources, including light coker naphtha.

The project, which will be managed by D-CôK LLC, a subsidiary of Triten Corp., Houston, is slated for start-up in 2007.

Connacher Closes Purchase of Montana Refinery for $55 million

Connacher Oil and Gas Ltd., a small Canadian petroleum-exploration firm, said on March 31 it has closed its $55 million acquisition of a Montana refinery from Holly Corp.

Connacher, based in Calgary, purchased the refinery in Great Falls, Montana, to handle its heavy oil production from its properties in Alberta and from its planned Great Divide oil sands project. The project is expected to start up later this year and could eventually produce up to 10,000 barrels a day. The company produced an average of 827 barrels of oil equivalent a day in 2005.

The 8,300 barrel a day refinery is one of the smallest in the United States. Connacher said all the refinery's employees have agreed to stay on. As well, it will shut the facility for an unspecified period beginning in April to install equipment to lower emissions.

The $55-million price for the refinery included a combination of cash and one million Connacher shares.

Connacher's stock, which has risen 453 percent over the past 12 months, fell 3 Canadian cents to C$4.95 on the Toronto Stock Exchange on Friday, March 31.

Oil Refinery Taps Graham Corp. for $1.8 Million Upgrade

Graham Corp. has received a $1.8 million order for an ejector system that will be installed in an oil refinery on the U.S. Gulf Coast.

The equipment will replace an ejector system originally installed by the Batavia firm in the early 1970s. It is scheduled to be shipped in the third fiscal quarter ending Dec. 31.

The equipment is part of a project to upgrade this oil refinery’s capabilities so that it can recover a greater amount of transportation fuel per barrel of crude oil processed.

“Graham’s original, quality engineered equipment installed in this facility provided more than 30 years of reliable service,” said William Johnson, Graham’s president and CEO, in a statement. “This history, combined with our engineering expertise and solid record for the design of large ejector vacuum systems for refineries, were key to our being awarded this project.”

This is one of three orders the company has received in less than a month for refinery upgrades or retrofits in the U.S. Gulf Coast region. In late March, Graham announced it had been awarded two contracts totaling $1.8 million for vacuum systems that will be installed in oil refineries in the same region.

Graham designs and builds vacuum and heat transfer equipment for process industries around the world. Its principal markets are the chemical, petrochemical, petroleum-refining and electrical power-generating industries.

BP Refinery at Texas City Restarting Production

The third largest U.S. refinery, BP's 460,000 barrel per day (bpd) Texas City, Texas plant, is restarting production this week, six and a half months after being completely shut by Hurricane Rita, sources said on April 10.

Barring no problems with the restart, the refinery should be producing gasoline by April 15, the sources told Reuters.

A BP spokesman declined to discuss operations at the refinery.

Base Price for Lyondell-Citgo Refinery set at US$4bn-4.5bn

The base price for the 268,000 barrel-a-day Houston refinery being sold by Venezuelan state oil firm PDVSA and US-based Lyondell Chemical Company is set at between US$4bn and US$4.5bn, a PDVSA official told BNamericas.

"It's a fairly new refinery, it was upgraded recently, that's a fair price," the official, who declined to be identified, said.

Investment bank Morgan Stanley has been retained to give financial advice during the sale, the official added. Officials at the New York headquarters of Morgan Stanley were not available for comment when contacted by BNamericas on April 10.

PDVSA's US refining and marketing arm Citgo and the Lyondell Chemical Company signed a letter of intent the first week of April to study the sale of their Lyondell-Citgo Refining (LCR) partnership.

LCR was established in 1993 and the Houston refinery is its main asset.

Neither Lyondell nor Citgo would retain a participation in the Houston refinery. "Both parties are seeking total divestment," the PDVSA official said.

Independent US refiner Valero Energy Corporation could be interested in buying the Lyondell-Citgo Refining (LCR) partnership in Houston, Texas, Caracas daily El Universal reported.

Valero is interested in the refinery even if it has to acquire the crude "from other sources," Valero VP Mary Brown was quoted as saying in the article.

The fact that Valero focuses on refining and does not compete with PDVSA in either marketing or E&P could be a plus, the PDVSA official said, without confirming Valero's interest in the refinery.

A Chinese company has also expressed interest in purchasing Lyondell-Citgo, the official said.

The Houston refinery receives crude from PDVSA at a discounted price and ending that practice is the main reason why Venezuela pushed to end the partnership with Lyondell and sell the venture's only asset.

PDVSA and Lyondell also announced they have settled for an unspecified amount a 2003 lawsuit filed by the latter concerning an interruption in the supply of crude to the refinery that PDVSA said was caused by a 63-day oil workers strike.

Lyondell holds a 58.75% interest in the partnership and Citgo the remaining 41.25%.

After a 1997 major upgrade, the Houston refinery has the ability to transform very heavy high-sulfur crude oil into clean fuels including reformulated gasoline and low-sulfur diesel as well as other high-value products such as jet fuel and aromatics.

The refinery is strategically located on the US Gulf Coast with access to interstate pipelines and Houston port.

Venezuela sends over 1 million barrels a day (Mb/d) of crude and liquid fuels to the US, about 1.04Mb/d of which end up being processed by Citgo's eight facilities or by some other PDVSA-affiliated refineries such as Chalmette, Sweeney or Hovensa. The resulting fuels are then marketed through the 14,000 gas stations Citgo banners in the US.

CPCL Refinery Pipeline Sinks

Over half a kilometer stretch of pipeline meant for carrying crude from the Bharati dock of Chennai Port to an oil refinery at suburban Manali, sank into the water April 11 as the support system gave in, a top official said.

However, production would not be disrupted in the refinery of the Chennai Petro Chemicals Limited (CPCL) as it had crude stocks for two weeks, A Kasuturirangan, Director, Operations, CPCL, said.

He said pipeline to a stretch of 580 meters sank into the water as the support system gave in.

The Port Trust, which owned and operated the pipeline, would repair the line and CPCL would not suffer any financial loss due to this. Restoration of the line would take about two weeks, he said.

Fortunately, no oil ship was berthed at the port for unloading and there was no cause for anxiety regarding oil seepage, port authorities said.

Reliance Petro to set up Greenfield Refinery and Export to Europe and North America

Reliance Petroleum Ltd, which would launch its public issue on April 13, will be focusing on exporting jet fuel, diesel, gasoline and alkylates to North America and Europe.

RPL, a 100 per cent subsidiary of Reliance Industries Ltd, is a start-up company, formed to set up a greenfield petroleum refinery and polypropylene plant in a special economic zone at Jamnagar, Gujarat. The company plans to enter the capital market to part-finance the Rs 27,000 crore (Rs 270 billion) export-oriented refinery project at Jamnagar. The issue opens on April 13 with a price band of Rs 57 to Rs 62 and closes on April 20.

Addressing a press conference in connection with RPL's forthcoming public issue, G V Jagannatha Kumar, chief financial officer, Reliance Petroleum Ltd, said RPL would be exporting its products to the most demanding and profitable markets like Europe and North America.

The proposed refinery, which will have a capacity to process 580,000 barrels per stream day, has been configured to refine a variety of feedstocks including heavier and more sour crude oils and to produce high quality transport fuels and other value added petroleum products for the markets like US and Europe.

The company was trying to tap the opportunities in the outsourcing of refinery business. The global refining system was expected to witness extended demand supply mismatch, he added.

The proposed refinery and the 900,000 tonne polypropylene plant will be located adjacent to the existing refinery and petrochemicals complex of Reliance Industries. Both the plants are expected to begin commercial operations by December 2008.

RPL proposes to fund the project through equity of Rs 11,250 crore (Rs 112.5 billion) and debt (that include syndicated loan, export credits and other long term debt) of Rs 15,700 crore (Rs 157 billion).

The IPO will offer 135 crore (1.35 billion) shares. However, RPL had placed 45 crore shares through a pre-IPO placement to a number of financial institutions. The price per share for this pre-IPO allotment was Rs 60. These equity shares will have a one year lock-in period.

Reliance Industries will again acquire 90 crore (900 million) shares through the IPO, exactly the same amount to be offered to the public. This will have a three-year lock-in period.

Thus the net size of the IPO available to the public is 45 crore (450 million) shares. Retail investors will have the option of paying only Rs 16 a share on application and can apply for a minimum of 100 shares and a maximum of 1600 shares.

ONGC, Cairn in Talks for Barmer Refinery

On April 9 state-owned Oil and Natural Gas Corporation (ONGC) is in advanced stage of discussions with UK-based Cairn Energy for equity participation in Indian oil exploration giant's proposed Rs 9,000 crore, 7.5 million metric tonne per annum (MMTPA) refinery in Rajasthan.

Confirming the development, ONGC chairman and managing director, Subir Raha said, "We are in talks with Cairn Energy for equity participation in Rajasthan refinery." He, however, did not divulge the details of the stake that Cairn Energy will be picking up in the proposed refinery.

Cairn Energy, which had earlier said it is intent on investing in the Indian refining sector and is studying various options, is also said to be in discussions with other domestic oil companies for possible tie-ups.

ONGC is likely to set up the refinery in Barmer district of Rajasthan through its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), in association with Cairn Energy. The country's biggest oil explorer is planning to incorporate a new company for this project. The project would be a public-private venture with the Central government with ONGC, MRPL and the Rajasthan government together holding 49%t, while the remaining to be held by Cairn Energy and financial institutions, amongst others.

However, it is not yet known as to what stake Cairn Energy will take in the refinery project.

Cairn Energy has discovered more than 500 million barrels of proven oil reserves in Barmer district of Rajasthan and hopes to begin production from mid-2006. ONGC has a 30% stake in Cairn Energy's Rajasthan oilfields.

The UK energy major is also weighing an option of setting up a crude distillation unit so that Rajasthan crude could be processed along with the imported crude. It may be recalled that when asked about Cairn's interest in ONGC's new refinery at Rajasthan, Mike Watts, Cairn Energy's director for exploration and new business, had told the media, "Our participation seems unlikely at the moment. However, we are keeping our options open."

Yuma Refinery Project still Seeking Investors

The developer of a proposed gasoline refinery in eastern Yuma County is continuing its push to build the first such project in the United States in about 30 years.

Arizona Clean Fuels Yuma has received cooperation from the Mexican secretary of energy to build a pipeline that would run through Baja California to the refinery. The company also received an Environmental Protection Agency permit to build a refinery.

But the company is still looking for investors. It also is seeking a long-term crude oil supplier after the Mexican state-run oil company said it would be unable to enter into a long-term supply deal because of its declining reserves, said Glenn McGinnis, chief executive of Arizona Clean Fuels Yuma.

The refinery would be Arizona's first. Most gasoline now used in Arizona is carried by pipelines from California and Texas.

Wisconsin’s Superior Refinery Considering Expansion

Wisconsin’s only oil refinery is considering a major expansion. Murphy Oil USA in Superior expects to make a decision in the next year.

Murphy Oil bought 66 acres of land adjacent to its Superior refinery last month, ostensibly to give it ample buffer from residential areas.

But refinery manager Dave Podratz says they are conducting a feasibility study on expanding. He says there’s a “pretty dramatic” shortage of refining capacity in this country and nearly every refinery is looking at opportunities to expand their capacity and take advantage of the tightness in the market. He says Murphy Oil is doing the same

Podratz says nothing is definite, being just a study, but after Hurricane Katrina devastated refineries along the Gulf Coast, state officials traveled to Superior inquiring about possibilities the Superior facility could grow.

Podratz says Murphy is uniquely positioned in that it has access to Canadian crude oil and not on the Gulf Coast or subject to hurricanes. He says in some ways that gives the firm a more secure area to build a refinery.

Also, Podatz says using oil from Canada, who he calls “good partners,” they wouldn’t be subject to disruptions in oil from the Middle East. Podratz says expansion would probably need a commitment from a Canadian company to partner in a larger facility.

Murphy Oil’s Superior refinery produces 35,000 barrels of gas and fuel a day and serves parts of Minnesota, Wisconsin, Iowa, the Dakotas and Michigan.

Audit Shows BP Ran Refinery in a Dangerous State

A safety audit of BP PLC's biggest refinery showed the British oil giant deferred maintenance and delayed repairs at its biggest refinery to the extent that staff at the Texas plant believed it was in a 'dangerous' state, according to the Financial Times.

Citing a 2005 audit conducted by an unnamed independent consultancy, the FT said the views of the employees echo those of staff in Alaska, who have warned for some time that both workers and the environment were at risk.

The paper said the audit was carried out just two months before a deadly explosion at the Texan refinery which killed 15 people and injured around 500 others.

Last month BP's Alaskan operations suffered a large spill at the Prudhoe Bay oilfield.

Nobody at the company was available for comment, though a spokesman told the paper all BP-operated refineries had been assessed and remedial initiatives effected.

BP Reports Second Pipe Break at Alaska Refinery

British oil giant BP PLC said April 17 that a second pipeline ruptured at its Alaskan refinery, a month after the company reported its largest-ever spill at an oilfield on Alaska's Northern Slope.

Company officials could not immediately provide details about the break, or its severity.

The rupture follows a massive spill at the facility last month in a pipeline between two gathering centers. As much as 270,000 gallons (1.02 million liters) of crude spilled into the oilfield over an estimated period of five days.

The U.S. Environmental Protection Agency is investigating last month's spill, The Wall Street Journal reported earlier this month. A Washington-based EPA spokesman Dale Kemery spokesman would not confirm whether either incident was being investigated on April 17, saying it was against agency policy to comment on such matters.

Navajo Refining to Utilize KBR’S Deasphalting Process

Navajo Refining Company, L.P., Inc., a Holly Corp. subsidiary, will utilize KBR’s ROSE Solvent deasphalting process at its 75,000-bpd refinery located in Artesia, New Mexico. The unit will deasphalt vacuum residue. The deasphalted oil (DAO) extracted by the process will be low in contaminants like sulfur, metals and Conradson carbon (CCR), and will be a premium feed for the refinery’s fluid catalytic cracking (FCC) unit. Navajo Refining relocated the unit from Kansas to New Mexico after refurbishing the major equipment, acquiring the Rose license and technology, and expanding the unit’s capacity.

Dynoil LLC Confirms it will Build a 100,000 Barrel per Day Bio-Diesel Refinery

A. Vernon Wright, Chief Executive Officer of Dynoil LLC, a Delaware Limited Liability Company, announced April 23 its intentions to build a 1,500,000,000 (1.5B) gallons-per-year refinery to process traditional vegetable oil feedstock into environmentally friendly bio-diesel.

Dynoil has selected for its refinery a site near the US traditional center of petroleum refining, Houston, Texas and the US Gulf Coast. The refinery will process conventional vegetable oil into bio-diesel fuel that will contain zero sulfur and nearly zero nitrogen oxide (NOx) emissions. Dynoil’s bio-diesel can be blended into various grades of diesel fuel that may contain from five percent (B5) to twenty percent (B20) bio-diesel to meet market demand requirements.

Dynoil’s refinery of alternative energy fuel, which is traditionally referred to as “green” or renewable energy, will process approximately 100,000 barrels per day of vegetable oil into fuel that can be utilized as a blending stock with petroleum diesel. Bio-diesel can also be used for home heating or electric power generation.

Dynoil is committed to the utilization of state-of-the-art technology to convert vegetable oil into consumable fuel oil. Dynoil believes that the construction of its 100,000 barrel per day bio-diesel refinery may have positive effects on the current high price of oil by reducing the amount of the traditional importation of crude oil and/or refined petroleum products. As a side effect, the refinery should have a positive, although small, influence on the nation’s balance of payments to OPEC or other oil exporting countries.

Dynoil has conducted market studies wherein it has concluded that the current market for bio-diesel in the US Gulf Coast is at least 100,000 barrels per day. Dynoil has also identified markets on the US East, West Coasts and on the Great Lakes where it intends to rapidly expand its production of bio-diesel. Dynoil intends to transform what is presently only a small theoretical market for alternative renewable and environmentally-friendly energy into a commercially available fuel for the US consumer. Dynoil hopes that the demand for various farm grown oils will invigorate the planting of oil producing crops by the American farmers.

Dynoil believes that it has created an opportunity to use the latest technology to convert farm grown renewable crops into an alternative energy which will directly impact the consumption of foreign oil.

BP Products North America Inc. Fined $2.4 Million for Unsafe Operations at its Oregon, Ohio, Refinery

The Occupational Safety and Health Administration compared violations at the plant with those at BP's Texas City, Tex., refinery, where 15 workers died and more than 170 were injured in a major explosion in the last year. The Texas refinery had been fined for safety violations twice the year before the explosion.

"It is extremely disappointing that BP Products failed to learn from the lessons of Texas City to assure their workers' safety and health," Edwin G. Foulke Jr., OSHA assistant secretary, said in a statement.

OSHA cited BP for violations that included housing people in vulnerable buildings, failure to correct problems with gas monitors and use of unapproved electrical equipment where flammable gases or vapors may exist.

"We addressed the issues raised in the aftermath of the inspection, which was conducted back in the fall. A significant number of changes were made as a result of the lessons learned in Texas City," said Ronnie Chappell, a BP spokesman. "We're disappointed by the action taken today. We disagree with the substance and characterization of the alleged violations."

BP removed 50 temporary trailer-like structures from the plant, which are similar to the structures in which most of the Texas fatalities occurred, he said. The company is seeking a conference with the agency to discuss the fine and allegations, he said. He would not comment as to whether BP would ask for the fine to be reduced.

The company received a $21 million fine, the largest ever imposed by OSHA, for its Texas refinery explosion. The previous two fines were related to another explosion in 2004 and another incident in which two employees were burned to death that same year.

BP did its own investigation of the explosion deaths and released the report in December. In it, the company said management took risks and did not stress safety.

Marathon Oil is Expanding its 245,000-bpd Garyville, LA Refinery

Marathon Oil Corp. is expanding its 245,000-bpd Garyville, LA refinery. Project cost is estimated at approximately $2.2 billion and is expected to increase the refinery’s crude throughput capacity by 180,000 bpd to 425,000 bpd. Completion is scheduled as early as fourth-quarter 2009. The initial expansion phase includes front-end engineering and design (FEED) work which could lead to construction in 2007. The final investment decision is subject to FEED completion and receiving applicable permits.

Anticipated project investments include installing a new crude distillation unit, hydrocracker, reformer, kerosene hydrotreater, delayed coker, additional sulfur recovery, capacity and other infrastructure investments. The new facilities will incorporate the latest safety and environmental control technologies. The proposed refinery configuration also will be designed to provide maximum feedstock flexibility, enabling Marathon to process more heavy sour crude oils.

Simultaneous with the FEED process, Marathon will begin acquiring permits and addressing other regulatory requirements which are required prior to construction. Once completed, this expansion will enable Marathon to supply the US market with nearly six million additional gpd of ultra-clean fuels, including gasoline and distillate.

ConocoPhilips Installing S Zorb Sulfur Removal Technology at Wood River

ConocoPhillips is installing its proprietary S Zorb sulfur removal technology (SRT) at its Wood River, Illinois, refinery, representingthe fourth company-owned site to utilize the gasoline desulfurization technology. The new 32,000-bpd unit which is being designed for a flexible feedstock slate, is targeted for completion in early 2007

This is claimed to be the largest refinery in the Conoco Phillips refining system with a crude processing capacity of 306,000 bpd. The Wood River facility will revamp its kerosine hydrotreater, reusing existing equipment to develop a low-capital cost SRT unit.

CUBA

Joint Venture to Reactivate Cuba’s Cienfuegos Refinery

With the signing on April 10 of an association agreement and the complementary documents, the PDV-CUPET Ltd joint venture to reactivate the oil refinery in Cuba’s province of Cienfuegos has been constituted.

The oil companies PDVSA of Venezuela and CUPET of Cuba authorized the formalization of the agreement to their respective subsidiaries PDVSA CUBA and Comercial CUPET, thus fulfilling the letter of intent signed on April 28, 2005 under the Bolivarian Alternative for the Americas, an initiative of Presidents Hugo Chávez of the Bolivarian Republic of Venezuela and Fidel Castro of Cuba.

The social objective of this enterprise is the refining of hydrocarbons and manufacture of products; the buying, storing, processing, distribution of hydrocarbons and their derivatives within Cuba and abroad; the transportation of oil and its derivatives by sea, river and land within and outside of Cuban territory via cargo boats under its ownership or chartered for the purpose.

The venture is based on the Cuban party owning 51% of the assets and the Venezuelan party 49%.

To guarantee the objectives of the PDV-CUPET Company an agreement is to be signed with PDVSA to supply crude and other products required for the optimum functioning of the Cienfuegos refinery, which is to immediately undergo a rehabilitation process.

The two sides have affirmed that this agreement is a demonstration of interest in extending and consolidating bilateral energy cooperation in the hydrocarbons sector, based on the principles of equality and reciprocal benefit.

The signing took place in the Palace of the Revolution in the presence of President Fidel Castro and Rafael Ramírez, minister of energy and oil of the Bolivarian Republic of Venezuela and president of PDVSA.

PANAMA

Occidental Hires Contractors for Panama Refinery Study

Eyeing a possible entry into the refining business, Occidental Petroleum Corp. has hired three engineering firms to assess the feasibility of a proposed grassroots refinery in Panama.

The contractors, Purvin and Gertz, Jacobs Engineering (JEC) and Fluor Corp. (FLR), are conducting a feasibility study of a refinery designed to process heavy South American crude, said Occidental spokeswoman Jan Sieving. Sieving didn't know the time-table for completing the study.

The study comes amid a South American ramp-up by Wall Street-darling Occidental. The company currently produces 78,000 barrels per day in Colombia and Ecuador, although Occidental has been in a recent contract dispute with the Ecuadorian government. Occidental also picked up acreage in Argentina with its 2005 acquisition of Vintage Petroleum Inc.

"They're just assessing supply, demand and what an appropriate capacity would be," Sieving said. "There are no plans in the works to go through with this."

If Occidental decides to build the refinery, it would largely be driven by the region's limited capacity for heavy oil refining, Sieving said.

"Panama is a strategic location, because it's right there with transportation, both going to the Pacific Coast, and potentially up through the Gulf Coast," Sieving said.

Occidental provided the government of Panama with potential details of the refinery early this week, according to news reports.

While Panama says it will welcome the plant, the government has refused to offer financial support for the project, which local news reports have said would cost $6 billion to build and process 400,000 barrels per day. Sieving declined to confirm the specifics for the plant.

Although Occidental's tight upstream focus has been popular with Wall Street, analysts said the Panama proposal could work because of the company growing profile in the region.

Occidental, in discussing the venture, has described it "not so much of being a downstream investment, as a way to enhance an upstream investment," said Jacques Rousseau, an analyst at Friedman Billings Ramsey.

Oil produced in the region currently trades at a great discount to benchmark West-Texas Intermediate. A refinery would allow Occidental to sell gasoline or diesel, rather than selling oil very cheaply, Rousseau said. If the company decides to go forward with the project, it would be as a minority partner, with perhaps 25 or 30%, he said.

Financing will be key to winning approval from Wall Street, said John Parry, a senior analyst with John S. Herold.

"Unless they get off-balance sheet financing, the market would cream them," said Parry, adding that the project could work with backing from a national oil company or outside investor.

VENEZUELA

Renewed Commissioning of Venezuela’s Cardón Refinery

Operations at Venezuelan Cardón refinery, with a capacity of 300,000 bdp, have been 90 percent restored following a recent breakdown, an official spokesman said.

According to Alejandro Granado, the Refining Vice-President of state oil holding Petróleos de Venezuela (Pdvsa), the occurrence could delay shipments of products for one or two days. However, he ensured that exports would not be adversely affected.

Cardón, along with Amuay Refinery, is part of Paraguaná Refining Complex, west Venezuela, Reuters reported.

The facilities located in western Falcón state reduced operations following a burst and an electrical fault earlier this month.

A number of explosions, fires and accidents have damaged recently the Complex, with a joint capacity of 940,000 bpd.

PDVSA to Build 800,000 bpd Oil Upgrading Refinery

State oil company Petroleos de Venezuela SA will build a heavy oil upgrading refinery in the country's oil-rich Orinoco River basin, the government news agency said.

PDVSA aims to upgrade 800,000 barrels a day of heavy crude into lighter, more marketable oils at the new plant, the Bolivarian News Agency quoted Alejandro Granado, the head of refining at PDVSA, as saying.

Canada's SNC-Lavalin Group Inc. will conduct conceptual studies for the proposed plant, Granado said.

SNC-Lavalin spokeswoman Gillian MacCormack said a contract had not yet been signed, but that the company has been discussing various projects with PDVSA.

The plan is part of a larger effort by Venezuela to boost refining operations to exploit the vast potential of its Orinoco tar belt.

The area holds enormous deposits of extra-heavy oil and tar-like bitumen, which were long considered commercially nonviable due to the costly, energy-intensive process of extracting and refining them.

But recent technological advances have changed that. At present, BP PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips, France's Total SA and Norway's Statoil ASA are operating four upgrading projects that jointly produce about 600,000 barrels a day of synthetic crude.

The Venezuelan government believes some 235 billion barrels of crude are recoverable from the Orinoco region and is working to quantify and certify the deposits.

If that claim is established, it would give Venezuela the world's largest crude oil reserves.

VIRGIN ISLANDS

Hovensa Oil Refinery Resumes Production

Production at the Western Hemisphere's second largest oil refinery has fully resumed after crews repaired a mechanical problem that slowed gasoline output for three weeks, a company official said April 3.

The mechanical failure occurred March 11 in the Hovensa oil complex's fluid catalytic cracking unit, which converts semi-refined crude into gasoline.

Alex Moorhead, executive vice president of Hovensa LLC, said the unit was repaired on April 1 and gasoline production resumed later that day.

The company had expected repairs to be completed by March 25.

The catalytic cracking unit, one of the largest in the world, is capable of producing 175,000 barrels of gasoline a day. Hovensa has not said how much production was affected by the damage to the unit.

Operators of the refinery on the island of St. Croix have declined to provide details about operations in the past to avoid fueling market speculation. Hovensa, a joint venture of New York-based Amerada Hess Corp. and Venezuela's state-oil company, processes about 500,000 barrels of crude oil per day.

2. ASIA

INDIA

Numaligarh Refinery to Set up Hydro-Cracker

Numaligarh Refinery Ltd, a BPCL subsidiary, is planning to set up a hydro-cracker and hydrogen unit to enhance production of Euro-III fuel and high-end distillates.

The over Rs 300-crore proposed project would also help the company to improve capacity utilization.

The pre-feasibility study is over and the detailed feasibility report (DFR) is expected next month.

The DFR on capacity augmentation from three to 4.5 mt is also expected next month.

NRL currently utilizes a little over 70 per cent of its rated capacity.

Apart from crude availability, low rate of crude cut resulting into production of a very high percentage of heavy end products restricts the company from improving capacity utilization.

According to company sources, the unit if implemented will help NRL extract a higher refining margin as well as enhance capacity utilization up to 110 per cent.

Meanwhile, the Rs 290-crore project for producing 167 thousand tonne Euro-III motor spirit (MS) is expected to commence commercial production next month. NRL previously had a negligible five thousand tonne MS production capacity. The project is expected to boost capacity utilization to over 80 per cent.

"The motor spirit production facility would impact the profit after tax by close to Rs 100 crore," a company official said. NRL posted a net profit of Rs 409 crore in 2004-05 and is expected to register a 10 per cent drop in 2005-06.

The refining margin will also fall short of $5.35 a barrel it recorded in 2004-05.

The high evacuation cost currently takes a toll on refining margin, sources said.

The margins would receive a major boost following commissioning of the 660-km

Global Oil Firm Eyeing Stake in Bina Refinery

A global oil major is interested in picking up stake in BPCL's Bina refinery in Madhya Pradesh, Petroleum Secretary M S Srinivasan said April 11.

"Everyone is taking a look at investments in the refining sector. One oil major company is interested in acquiring a stake in BPCL's Bina refinery," he told reporters when asked about any foreign investment to be made in downstream segment.

However, he declined to divulge the name of the company as well as the country to which it belonged.

The Bina refinery would have a capacity of 6 million tonnes per annum and is being built at an investment of Rs 9000 crore. The refinery is expected to go onstream in 2008-09.

Earlier, Oman oil company wanted to take a 26 per cent stake in the Bina refinery project but backed out due to glut in refining capacity of the country.

India's refining sector is booming with all major oil companies including Indian Oil Corp, BPCL, HPCL and Reliance Industries either expanding existing capacities or implementing greenfield projects. But, foreign participation in the sector has been virtually nil so far.

Srinivasan's comments came days after British oil giant BP pulled out from state-run Hindustan Petroleum Corporation Ltd's 9 million tonne refinery at Bhatinda in Punjab.

US oil giant Chevron is also believed to be in talks with Reliance Industries for its upcoming 27 million tonne refinery at Jamnagar in Gujarat being built at an investment of Rs 25,000 crore.

Mangalore Refinery to Award Contract for Expansion by Q3

Mangalore Refinery and Petrochemicals Ltd, a subsidiary of Oil and Natural Gas Corp, is planning to award contracts for expansion of the refinery capacity to 15 million tonnes by third quarter this year.

"We have to finalize Project Management Contract and Engineering Procurement Contract by Q3," company chairman Subir Raha said April 10.

The Board of ONGC had last month approved a capital expenditure of Rs 8,000 crore for expanding refinery capacity from 9.69 million tonnes to 15 million tonnes per annum.

Expected to be completed in three-and-a half years, the Integrated Refinery Upgrading project will make MRPL one of the largest PSU refinery investments at a single location in the country.

Raha said the Refinery Upgrading Project, on commissioning, will significantly enhance value addition in the refinery product slate.

The project envisages production of high value products like Propylene, Euro-III / Euro IV compliant petrol and diesel which are in good demand in international markets. The estimated production of Propylene from the upgraded refinery complex will be 300,000 tonnes per annum (tpa).

With the implementation of this upgrading project, the refinery would be able to process higher proportion of low cost sour and heavy crudes leading to better margin.

In order to enter the high-priced Lubes market, a 250,000 tpa of Lube Oil Base Stock (LOBS) production facility will be built as part of the upgrading project. This will produce high-end Group II (plus) and Group III LOBS.

NEW GUINEA

InterOil will Install New Generators to Boost Refinery Profitability

InterOil Corp of Papua, New Guinea plans to install new generators during the second and third quarter of this year under its refinery optimization program.

This process will require the company to shut down the refinery for approximately three weeks.

The program that began in the second quarter of last year involves the revamp of certain refinery components, which will result in a significant improvement in the refining margins and operating revenue.

During this year and next year, the company would focus on securing exports to the Pacific Island regional market.

InterOil hopes that completion of the optimization efforts should increase the refinery’s profitability by increasing the internal use of low sulfur waxy residue for power generation and increasing the amount of diesel that may be sold.

The company said in its financial report for last year that it had a number of projects relating to optimizing the refinery’s output.

Capital expenditure commitments of US$4.6 million (K15 million) have been made with respect to this program.

The refinery began operations in the first quarter of last year, during which

the company’s refining and marketing business segment posted a loss of US$31.5 million (K100.6 million) as against a loss of US$5.7 million (K18.21 million) for 2004.

“The optimization initiatives we believe will allow our refinery to meet its earnings targets in the future,” the company said April.

The initiatives include increasing the refinery gross margin by determining which crude feedstock will produce a lower percentage of naphtha and low sulfur waxy residue in relation to other more profitable products.

The company will also make changes in the refinery’s equipment to use these lower margin products for internal power generation needs in lieu of diesel.

The refinery is rated to process up to 32,500 barrels of oil per day using Kutubu crude as the feedstock and established a peak rate of 34,500 barrels of oil per day during testing using Kutubu crude.

Last year, InterOil processed a total of approximately 7.4 million barrels of crude feedstock.

Depending on the type of crude feedstock used and prevailing domestic product demand, InterOil is able to meet the domestic market by refining approximately 16,000 to 22,000 barrels of crude feedstock a day.

PAKISTAN

$2b Oil Refinery to be Launched in Pakistan

Pakistan's Economic Coordination Committee of the Cabinet (ECC) has allowed the setting up a $2 billion mega oil refinery at Khalifa Point in the district hub of Balochistan.

The ECC meeting, which was presided over by Prime Minister Shakuat Aziz, said that the refinery is to be commissioned by 2010, would have a maximum refining capacity of 13 million tonnes of petroleum products which would be higher than the country's total existing capacity of 12.8 million tonnes.

The ECC directed the ministry of petroleum and natural resources to award the project contract to pre-qualified, short listed companies through international competitive bidding on a build and operate (BOO) basis.

Pakistan currently consumes 16 million tonnes of petroleum products, of which, an 82 per cent requirement is met through imports. Total refining capacity in Pakistan currently stands at 12.8 million tonnes.

The committee led by the prime minister and comprising deputy chairman, The ECC allowed extension in the lease period of mining, production and development of three major fields of Pakistan Petroleum Limited for their full life to get a better price during the sale of 51 per cent of its shares.

The ECC rejected a proposal of the petroleum ministry for providing industry status to the CNG sector on the ground that petroleum sector was already under a deregulated regime.

The ECC, however, approved a policy for the import of LNG which would be announced separately. Interestingly, the government has already issued a no-objection certificate to Associated Group to start LNG imports.

Pakistan to Invite Bids for Oil Refinery after Iran Backs Out

Pakistan is inviting bids from international investors to build a $1.3 billion oil refinery in the restive province of Balochistan after Iran refused to carry out the project.

About 2,000 acres of land was acquired at Khalifa Point in Balochistan's coastal area of Hub for the Pakistan-Iran venture, but in 2002 Tehran refused to help in establishing the refinery, saying it would have no rate of return.

According to official sources, the petroleum ministry has now indicated that the land acquired by the Petroleum and Petrochemical Corporation (Perac) at Khalifa Point in Balochistan for the refinery is available.

The petroleum ministry plans to seek proposals from investors through international competitive bidding to set up a state-of-the-art deep-conversion refinery on a 'Build-Own-Operate' basis, the sources said.

On May 16, 1991, Pakistan and Iran had signed an agreement to initiate the project, with a capacity to refine 120,000 barrels crude oil per day, but later Tehran backtracked.

Pakistan's current demand of petroleum products is about 16 million tonnes per annum, 82 percent of which is met through imports (crude and finished products) and the rest through indigenous resources. The country's total refining capacity at present is about 12.8 million tonnes.

Energy demand and supply projections indicate that by 2012 the total deficit of petroleum products in the country would be 11 million tonnes.

PHILIPPINES

Shell will Keep and Expand Capacity of the Philippines RP Refinery

The Royal Dutch Shell Group will keep its refinery in the Philippines and even expand its capacity, scuttling an earlier plan to shut it down and transfer it elsewhere in Asia.

An industry source said officials of Pilipinas Shell Petroleum Corp. (Shell), which owns and operates a 130,000 barrel-per-day refinery in Tabangao, Batangas province, are now considering an expansion in the wake of better refining margins.

“Given that refineries all over the world have had greater margins in more than a year now, then that is an encouragement for those who existing refinery facilities to expand,” the source said.

“The environment has changed such that in the past, they were not in a position to even (convince) their headquarters to consider an expansion. They are now at the point where they are serious about considering expansion and therefore are making the appropriate studies. There’s a qualitative change,” the source added.

Shell reported higher refining margins in 2005, the second straight year it posted positive revenues. The margins of oil refineries, including Shell, have turned negative since the economic crisis of 1997.

The source attributed Shell’s positive margins in the past two years to the significant difference in the price of Dubai crude, the benchmark used by refiners, and imported finished products.

The price difference between crude and imported diesel is $20 per barrel at $57.69 per barrel (Dubai crude) versus $77 (diesel) for March.

In February, Dubai crude averaged $57.61 per barrel against imported diesel at $71.90 per barrel. Last year, Dubai crude averaged $50 per barrel against imported diesel at $67 per barrel and unleaded gasoline at $62.10 per barrel.

The source said the government was also keen in granting tariff differential to Shell.

“There is a need to balance, on one hand, the need for more refinery facilities, because we need to secure the energy needs of the country against a situation where (oil refineries) make very little profits and there is no incentive for them to expand,” the source said.

He said the government must ensure that profits that refineries get from the country are reinvested in terms of expansion.

He said Shell would make its decision to pursue an initial public offering once it has undertaken its expansion program.

Shell in the past two years has been weighing its refinery operations in the Philippines. It earlier said it was set to make a decision on whether to shut down its refinery by the end of the year.

VIETNAM

Construction Begins on Vietnam’s First Oil Refinery

The management of the central region economic zone in which Dung Quat refinery is situated said a Hanoi-based construction company had sunk the column to a depth of 12 meters.

The contractor, the international consortium Technip Group, said all piles would be in place by June, ensuring the refinery is completed in 2009 as per schedule.

The US$2.5 billion Quang Ngai province-based refinery is designed to process 6.5 million tons of crude oil per year.

Its saga, which began in 1995, was delayed by a decade due to funding and other difficulties.

The Vietnamese government finally decided to run the project alone in 2003 after several international partners pulled out because of doubts over its efficacy.

3. EUROPE / AFRICA / MIDDLE EAST

SERBIA

Hellenic Petroleum Interested in Serbian Oil Refinery

Hellenic Petroleum is in talks with the Hungarian MOL and the Austrian OMV for a joint-bid in the privatization of the Serbian NIS. The tender is expected to take place in September 2006 incorporating the full sale or part of the Serbian refinery.

The qualified minister for the sale of NIS, Mr. Predrak Bubalo, revealed that the Serbian government examines the full or partial sale of NIS depending on the consultant's proposal, Merrill Lynch.

Hellenic Petroleum already operates in the Serbian market with 15 fuel stations aiming to increase to 22 by the end of 2006.

Hellenic Petroleum is in preliminary talks with the other two European refineries.

NIS incorporates two geographical strategic refinery units, which after a substantial upgrade of capacity could cover the supply of half of the Balkan region.

NIS has ten subsidiaries and 500 fuel stations.

Roof Collapses on Serbia Oil Refinery Waste Reservoir

A roof on one of the waste reservoirs of Serbia's biggest refinery collapsed April 9 northeast of the capital, allowing gases to spread and prompting hundreds of complaints about a stench in the town.

Thousands of liters of refinery waste liquids were stored in the reservoir near the town of Pancevo in an industrial zone about 50 kilometers (30 miles) northeast of Belgrade.

The roof fell through because it was worn-out and was being prepared for reconstruction, said refinery director Mirodrag Bogojevic.

No one was injured in the incident, and workers have started transferring the waste into other reservoirs, Bogojevic said.

The local authorities in Pancevo said they had received about 250 calls from citizens complaining of strong smell spreading in the town. Local official Biljana Miladinovic said the wind has brought most of the pollution from the refinery to the eastern parts of the town.

The area is one of the main industrial zones in Serbia, with chemical factories and the refinery. It is also one of the most polluted regions. Almost none of Serbia's old factories have proper environmental protection equipment.

NIGERIA

Nigeria’s Orient Refinery Signs Construction Contract with Julius Berger Plc.

In a bid to meet its target to roll out its products by next year, one of the 18 companies given license by Nigeria’s Federal Government to establish private refineries in the country, Orient Refining and Petrochemicals Company Limited, has awarded a multi million-naira contract to construction giant, Julius Berger Plc.

The contract, which is valued at over N1 billion, is for the site preparation works of the refinery to be situated on the bank of Anambra River in Anambra East Local Government Area of Anambra State. The construction of the first phase of the Orient Refinery project would cost a total of N53 billion.

The Managing Director of Orient Refining and Petrochemicals Limited, Engr. Nnameka Nwakwa, disclosed this in a brief contract signing ceremony in Port Harcourt the Rivers State capital.

Speaking shortly after the ceremony, Nwakwa said: "the Board of Directors of Orient Petroleum Refinery is very pleased that the foundation for the establishment of the company's refinery has been consolidated with this contract signed today with Julius Berger Plc."

According to Nwakwa, Orient Refinery was the first company in Nigeria to achieve these milestones.

The refinery, he explained, had an approved capacity of 55,000 barrels per day, pointing out that the main source of feedstock supply to the refinery would be the oil and gas fields in Oil Prospecting License (OPL) blocks 915 and 916, parts of the Anambra River geological basin situated within refinery site.

"We plan to raise sufficient funds for both the construction of the refinery and its associated Exploration and Production (E&P) activities. The sale of shares of the OPR - Refining and Petrochemicals Company by private placement is currently in progress and detailed information of this offer is available in our website and the branches of the four receiving banks, Intercontinental Bank, Fidelity Bank, Oceanic Bank and Guaranty Trust Bank.

In his remarks at the occasion, the Industrial and Gas Sector Manager of Julius Berger Plc, Engr. Bello Mustapha said the construction giant would do everything possible to meet the specifications and schedule of the contract agreement.

He disclosed that the multinational construction company would mobilize to site in the "next few days", even as he solicited for support to ensure the smooth execution of the project.

Nigeria gives China Oil Rights for $4 billion in Investments

Nigeria will give China four oil drilling licenses in exchange for commitments to invest $4 billion in downstream oil and infrastructure projects, a top Nigerian oil adviser said on April 26.

The deal is expected to be signed by Nigerian President Olusegun Obasanjo and Chinese President Hu Jintao, who is due to arrive on a state visit to Africa's top oil producer, said Tony Chukwueke, adviser to Minister of State for Petroleum Edmund Daukoru.

The two nations have been in talks for several months about such an agreement, which involves China buying a controlling stake in Nigeria's 110,000 barrel-a-day Kaduna oil refinery and building a railroad system and power stations.

Nigeria will offer first right of refusal to China National Petroleum Corp. (CNPC) for four oil exploration blocks during a licensing round due to be held in Nigeria on May 19.

"We are doing a cooperation agreement upstream which integrates the Kaduna refinery. We may have to sign off on that during the visit," Chukwueke, who is head of the Department for Petroleum Resources, told Reuters.

"They will be part of the bidding round because of that agreement. They have first right of refusal on four blocks."

The blocks comprise two areas in the oil-producing Niger Delta, one onshore and one in shallow water, and two areas in the higher-risk inland Chad basin, where no oil is currently produced.

China will commit to investing $4 billion in the Kaduna refinery, a railroad and power stations, Chukwueke added.

CHINA

Petrochina and Kuwait to build refinery in Pearl River Delta

China’s Petrochina Co. and Kuwait may build an oil refinery in a joint venture in the Pearl River Delta region of China, the executive vice-governor of Guangdong province, Zhong Yangsheng said April 22 in Hainan.

The Guangdong government is due to announce the location of the refinery soon, Zhang told journalists during the Boao Forum for Asia held in Hainan.

Zhang declined to give any further details of the project, according to Chinese news agency Xinhua.

China, which is the world’s second-largest oil consumer after the United States, is encouraging oil companies to expand their refining capacities in order to meet the country’s increasing power requirements.

In December, Kuwait’s oil minister, sheik Ahmad Fahd al-Sabah, visited Guangdong to meet with Petrochina executives.

The refinery planned by Kuwait will have the capacity to process 400,000 barrels of oil pr day, the Kuwait News Agency reported in December, citing al-Sabah.

The news agency added that Kuwait would provide the oil for the Guangdong refinery.

RUSSIA

Struggling Yukos Ready to Sell Key Baltic Refinery

Yukos, the Russian oil company that is fighting bankruptcy proceedings in Moscow, is on the verge of selling its controlling interest in the billion dollar Mazeikiu Nafta refinery to the Lithuanian Government, but future control of the strategic oil asset remains in doubt.

After talks with Algirdas Brazauskas, the Lithuanian Prime Minister, Steven Theede, chief executive of Yukos, said he was making serious progress. If a deal is signed next week, the Lithuanian Government is likely to reopen negotiations to sell on the stake in the Baltic’s biggest fuel factory to a Russian oil producer. BP’s Russian affiliate, TNK-BP, is expected to be in a leading position to buy a piece of a vital export conduit for Russian oil. Lukoil is also a keen buyer, as is PKN Orlen, the Polish refiner, and Kazmunaigas, the Kazakh state energy company.

The nationalization of Mazeikiu Nafta is a last-ditch attempt to push through a sale of the Yukos stake and prevent control over the 160,000 barrel per day refinery from passing to Rosneft, the Russian state oil company.

Strapped for cash, Yukos first began attempting to sell its 47 per cent stake in Mazeikiu Nafta last year and fought off an attempt by Rosneft to block the sale in a Dutch court. Rosneft acquired Yuganskneftegaz, the main Yukos oil production subsidiary, when it was sold by Russia’s tax authorities in a controversial bailiff’s auction and the Kremlin-sponsored oil company is pursuing more Yukos assets. A Moscow court has banned Yukos from selling its non-Russian assets as part of bankruptcy proceedings against the company, which has been crippled by $28 billion (£16 billion) in punitive tax claims by the Russian authorities.

Last month, banking creditors of Yukos initiated the bankruptcy proceedings seeking repayment of a $482 million loan. Rosneft has since taken over the claim having repaid the banking syndicate.

The auction of the Mazeikiu Nafta stake has also been beset by political problems. The Lithuanian Government, which owns 40 per cent of the refinery, has a right of first refusal over the Yukos stake and the auction process has been befuddled by Lithuanian concern over the identity and interests of the ultimate purchaser.

The 25-year old former Soviet refinery was substantially refurbished by Yukos, becoming a highly profitable processor of crude supplied from Yuganskneftegaz. Anxious to secure a reliable supply of Urals crude for the plant, the Lithuanian Government is thought to be reluctant to allow its prize asset to be captured by a foreign government.

A bid from Kazmunaigaz, valued at $1.2 billion, was considered vulnerable to supply disruption because the Kazakh firm hoped to supply its own crude across Russia via pipelines. The Kremlin has a keen interest in maintaining Russian control over an asset that is a major gateway for Russian oil into Western markets.

Putin Calls for Oil Refinery on Border in Russia's Far East

President Vladimir Putin said April 26 that construction of an oil refinery on the border in Russia's Far East would help derive maximum profits from a proposed oil pipeline in the region.

Putin said the scale of the mooted $11.5 billion East Siberia-Pacific pipeline was unprecedented and would open up new markets, while an oil refinery would make sure the pipeline produced maximum possible benefits.

"We should consider in advance the construction of an oil refinery complex, plants and enterprises in Russia so that our economy will maximally benefit from the country's export capabilities," Putin said at a meeting with regional governors in the Western Siberian oil city of Tomsk ahead of a meeting with German Chancellor Angela Merkel.

Putin cited data from the Ministry of Economic Development and Trade that estimated the cost of the refinery at between $2.19 billion and $2.92 billion, and said state-owned oil company Rosneft could start construction next year.

Earlier this month, Rosneft Vice President Alexei Kuznetsov said the company had been considering constructing of an oil refinery on the pipeline, which will be operated by state-owned oil pipeline monopoly Transneft, and that it would have output capacity of 20 million tons per year.

The pipeline is slated to pump up to 80 million metric tons a year (1.6 mln of bbl/d) from Siberia to the Russian Far East before being sent on to the Asia-Pacific region, in particular to energy-hungry China.

The first stage of construction was initially expected to be completed by the end of 2008. Transneft boss Semyon Vainshtok said construction could start as soon as the end of April.

LUKoil President says LUKoil and ConocoPhillips in Refinery Talks

LUKoil, Russia's No. 1 independent crude oil producer, is in talks with U.S. energy giant ConocoPhillips to process its oil in the United States, the company's president said April 25.

"We are currently in talks regarding processing our oil at Conoco's refineries in the U.S.," Vagit Alekperov told a news conference in the Kazakh capital. "Unfortunately, the [global] economy is reluctant to accept Russia's oil supplies."

Alekperov said Conoco's proposals were not completely in line with LUKoil's strategy, but praised the U.S. company for strengthening LUKoil's position in the north-east of the U.S. by selling it the Mobil-brand retail network.

In late spring 2004, LUKoil bought Conoco's 779 Mobil stations in New Jersey and Pennsylvania through its 100%-owned subsidiary Getty Petroleum Marketing Inc.

LUKoil is a vertically integrated oil and gas company. Russia's ING Bank (Eurasia) is LUKoil's majority shareholder (63.3%), with ConocoPhillips holding a 16.8% stake.

DUBAI

Foster Wheeler Energy Ltd. gets EPC Contract for Major Upgrade to Gas Condensate Refinery in Dubai

Foster Wheeler Energy Ltd. (FWEL), a Foster Wheeler Ltd. subsidiary has an engineering, procurement and construction management (EPC) contract from ENOC Processing Co. LLC for a major upgrade of EPCL’s Jebel Ali gas condensate refinery in Dubai, United Arab Emirates. Terms were not disclosed.

FWEL will upgrade the existing 120,000 bpsd gas condensate refinery which includes a 70,000-bpsd liquified petroleum/gas naptha hydrotreater, a 36,000-bpsd crude catalytic reformer and ancillary processing units, plus associated new or revamped utilities and offsite facilities. The new facilities will allow EPCL to upgrade its existing naptha product to a low-sulfur petrochemical naptha product stream and operate the plant at full capacity using sour condensates. Other new products will include liquified petroleum gas, butane and sulfur.

IRAN

Iran’s Ilam Natural Gas Refinery is 80% Complete

The main gas sweetening tower of Ilam Natural Gas Refinery was installed in the refining plant on April 9. The equipment in the tower absorbs the incoming acidic gases and turns them into sweet gas outputs.

Managing director of the refinery, Manuchehr Taheri referred to the tower as the heart of the plant and said that the most important stages in the gas sweetening process took place at the tower.

The natural gas produced at Tang–e- Bijar and Kamankuh natural gas fields comprise the input for Ilam Natural Gas Refinery.

In its first development phase, the refinery is capable of refining seven million cubic meters of the natural gas, the official said, adding, however, the figure was expected to hit 10 million cubic meters in the second phase of development. It was reported on April 8, that being 80 percent complete, the basic construction work of the refinery started in 2000.

Private Sector to Build Gasoline Refinery in Iran’s Khuzestan Province

The Majlis (parliament) has agreed with the building of a gasoline refinery by the private sector in the oil rich southern Iranian province of Khuzestan.

Given vehicles high fuel consumption, existing gasoline refineries are not able to meet the nation’s fuel demands, noted a lawmaker representing the people from Ramhormuz, one of the cities in Khuzestan Province.

He also referred to the flight of billions of dollars from the country for gasoline purchase from abroad each year and explained that the government was determined to encourage the private sector to invest in the building of gasoline refineries across the nation, the Persian service of Iranian Students News Agency ISNA reported.

Commenting on the funds allocated to the gasoline purchases from abroad, the legislator said, if the world prices for the commodity remained at the current levels, the funds earmarked in the current year’s budget bill would suffice.

KUWAIT

Kuwait to Invite Bids for $6bn Oil Refinery

International companies including Washington Group International Inc, Stone & Webster and Technip will be invited this month to bid for four contracts worth as much as $6bn to build a new refinery in Kuwait.

Hyundai Heavy Industries, Foster Wheeler Ltd, and GS Engineering & Construction Corp are among the 12 companies that will be invited to bid for contracts to build the new 615,000-barrel-a-day refinery, Hatem al-Awadhi, Kuwait National Petroleum’s assistant managing director of projects, said April 8, in a telephone interview.

“We’ll give companies five months to submit their bids for the project,” al-Awadhi said from Kuwait City.

Gulf oil producers, including Saudi Arabia and Qatar, are planning to build new oil refineries because existing global capacity may fail to meet rising demand.

Oil prices reached a record $70.85 a barrel in August partly because of a shortage of refining capacity after Hurricane Katrina damaged refineries along the US Gulf of Mexico coast.

Kuwait currently operates three refineries with a combined capacity to handle 900,000 barrels a day of crude.

The new facility will be built at Azour, south of Kuwait City, and will replace the country’s oldest plant located at Shuaiba.

That one, which has a capacity of 200,000 barrels a day of oil, will be shut in March for three months for scheduled maintenance, KNPC said on February 7.

About 225,000 barrels a day of fuel products from the new plant will be sold into the domestic market, leaving the balance available for export, al-Awadhi said.

QATAR

Qatar Petroleum Studying 200,000 b/d Oil Refinery Feasibility

Qatar Petroleum (QP) is conducting a feasibility study to set up a new oil refinery with a capacity of 200,000 barrels per day (b/d), Second Deputy Premier and Minister of Energy and Industry H E Abdullah bin Hamad Al Attiyah told reporters on the sidelines of the Qatar Economic Forum here April17.

Qatar Petroleum, he said, was preparing to launch mega projects in the downstream sector such as petrochemicals, iron and steel, as part of am ambitious expansion plan. A plant to produce power was also under active study, the Minister said.

Talking of oil, Abdullah bin Hamad said that Qatar had come a long way over the past 10 years when oil production capacity was barely 350,000 b/d. The capacity has now soared to 850,000 b/d and plans were afoot to raise it to 1.1m b/d over the next three years.

He said the current production capacity of liquefied natural gas at 25 million tonnes per annum (mtpa) would be raised to 77 mtpa by the end of 2010. The production capacity of green fuels (gas-to-liquid or GTL) will be 34,000 b/d when the Oryx project comes on stream and over the next few years this capacity will be increased to 400,000 b/d when other GTL projects are commissioned, the Minister said.

SAUDI ARABIA

Saudi Arabia Poised for Refinery Boom

With tight supply lines and bottlenecks in refinery operations, state and private oil companies are pushing for change and expansion.

Saudi Arabian refining operations look set to be part of that change. Several factors are influencing the new moves in Saudi refining.

Demographically, Saudi Arabia may be looking to service the needs of a growing population. Of its 9.5 million barrels per day of oil, currently around 7.9 million barrels are exported. The major buyers of Saudi crudes are the United States (18%), Japan (15%) and, increasingly, China (6.0%).

Yet its population is young. Nearly 40% of the population are under the age of 14.

Only 2.5% are over 65. Like other Middle Eastern countries, Saudi Arabia looks set to experience a demand-led boom. Growing urbanization and a youthful population tend to mean dramatic increases in energy and hydrocarbon consumption.

As a result, the production of crude diminishes slightly in importance, whilst conversely, the production of finished fuels increases. This is set to put a greater strain on Saudi Arabian refining capacity.

Another factor pushing refining operations into Middle Eastern countries is the state of US and European new builds. Low profit margins combined with increased environmental legislation has meant new refining capacity is stymied in the industrialized world. Instead, the onus to produce refined products is being transferred to crude producing countries.

Saudi Arabia is thus faced with a double whammy, increased desire for refined products at home and abroad.

The controversy over refining bottlenecks has not been missed by the Saudi Arabian oil ministers or Opec. It is they who have been chiefly responsible for pushing the “bottleneck” concept and blaming high oil prices on refinery capacity instead of petroleum production levels.

Another factor in the need for new refineries is the desire of countries like Saudi Arabia to sell more heavy crudes onto the market place. With production of light sweet crudes maximized, at the moment, heavier brands are often left on the shelf. One can see from several examples, notably discounted supplies like the Saudi’s “Arabian Heavy,” which sells at around US $10 - 12 less than light sweet brands.

This has meant that new refineries, complex refineries to deal with all types of crude, are needed. “Complex refineries can make fantastic profits,” says Mike Wittner, global head of energy analysis with CalyonBank in London.

“They can use the medium heavy sour crudes that are not so expensive and make high quality light products and middle distillates, which is really what the world wants right now. Capacity is stretched. It has been for more than a year, probably two, and that is where the global refining constraint comes from.”

The final key has been the high price of unrefined and refined products in the last three years. This has put a huge wedge of cash into the hands of the Saudi authorities. With this extra cash, many Opec countries are looking to make new investments, and refining is top of the list.

Saudi Arabia is planning a huge $8 billion project at Yanbu on the Red Sea. The location of the refinery is important. Its sea access will mean the refinery will be able to cope with export demand. Yanbu is also set to take heavier crude and will supply gasoline, diesel and naphtha to local markets, as well as to the United States, Europe and Asia. When completed, it should be able to produce around 400,000 barrels per day of products.

Saudi Arabia’s Oil Minister Ali Al Naimi said at last month’s Opec meeting in Vienna that ConocoPhillips had submitted the best tender for the Yanbu refinery, and Total SA’s bid for Aramco’s 400,000 bpd refinery at Jubail was also the best tender. Bids are still being assessed and no decision on the awarding of contracts has been made.

Another new refinery that will produce product for the plastics and general petrochemical industry is at Rabigh. Also on the Red Sea, the initial level of funding required for the expansion is around $5.8 billion. This is one of the joint ventures the Saudi Arabian state-owned oil company Saudi Aramco is investing in. Its partner is Sumitomo Chemicals from Japan.

The joint venture, called Petrorabigh, means that Aramco will send 400,000 barrels of crude to the refinery each day. In addition, they will also deliver 95 million cubic feet (cf) of ethane and 15,000 barrels per day of butane.

This all adds up to production of a stated 18 million tonnes of oil products, 1.3 million tonnes of ethylene and 900,000 tonnes of propylene each year after full completion, scheduled for 2008.

JGC Corp, Japan’s leading energy contractor, said last month it had received an order reportedly worth more than $860 million to build the refinery and a petrochemical complex building a high olefin fluid catalytic cracker and an ethane cracker. JGC was awarded the front-end engineering and design services contracts for the facility in late 2004.

The two companies announced last month that they have awarded Mitsui Engineering & Shipbuilding Company an $851.5 million contract to build two plants for the joint venture

The project is also interesting as it hopes to kick start some kind of industrial diversification for Saudi Arabia by producing cheaper base chemicals and products for the plastics industry.

With these new products, it is hoped that Saudi Arabia will be able to move away from it’s over-reliance on oil. Ninety percent of Saudi Arabia’s export revenue is currently in oil. The Kingdom hopes new plastics production will stimulate other Saudi industries down the chain, such as fibreglass, insulation and general plastic consumer goods.

Rabigh may also see an Initial Public Offering on the Saudi stock market. The result is that many banks have queued up to be part of the first tranche of funding. They include the Bank of Tokyo-Mitsubishi, BNP Paribas, Calyon, Citibank, HSBC, The Saudi British Bank, the Islamic Development Bank and several others.

To add to this, Aramco is also expanding refineries, such as Ras Tanura, at a cost of $1.3 billion. Refineries near Riyadh and Jeddah are also being given additional capacity to cater to that increasing domestic need.

One area where Aramco has been active is in joint ventures. This is something surprising given the statements recently by the head of BP, John Browne. In a speech given privately to the Energy Institute in London, Browne made a veiled attack on Saudi Arabia and the major reserve holding countries.

“The reality is that we have a serious problem,” said Browne to the audience of invited energy experts.

“Unless…geologists succeed in finding new and so far unidentified provinces…we will all be dependent on supplies from just three areas – West Africa, Russia and, most important of all, the five states around the Persian Gulf, led by Iran, Iraq and Saudi Arabia.

The resources on which we are going to rely are closed to investment by any private company. The decisions on investment and production are controlled by governments, which may not always be aligned with the interests of international consumers.

I believe it is natural for individuals and [Western] governments to distrust such dependence, and in recent weeks we have seen that distrust expressed in many different ways…. I believe the response to that distrust is the next great challenge facing the industry,” he said.

Far from being the case in Saudi Arabia, Saudi Aramco already has joint ventures in place, though none with Lord Browne’s BP. The Sasref refinery near Yanbu is a joint venture with Royal Dutch Shell, whilst the outlet at Samref is a joint venture with the US company, ExxonMobil. Both these refineries are also in the early stages of expansion.

One additional factor is an increasing desire by Aramco to invest in ventures overseas.

“Saudi Aramco is like anyone else,” says Bruce Evers, senior oil analyst at Investec Bank in London.

“Of course, they are looking to the emerging oil markets, and they want to do business there. These are the markets that are set to grow in the future. That will mean the whole of Asia, but especially China.”

This has meant Saudi Aramco moving towards joint ventures. They already produce some 1.6 million barrels per day of refined product in the US, Philippines, Greece and Korea. But increasingly they are looking to work with the Chinese state oil companies, like Sinopec. Alongside them, Aramco are looking to work on a project in Qindao at a cost of some US $1.2 billion. Already in place is a three-way operation concluded between Aramco, Sinopec and ExxonMobil.

Exxon and Aramco are to hold a 25% stake in a new refinery upgrade in Fujian province. At a price of some $3.5 billion, this refinery could prove a key pointer to the future of the Kingdom’s refining operations abroad.

The newly added parts of the Fujian refinery will be especially adapted to take Saudi Arabian heavy crude. Saudi Arabia is already the largest foreign supplier of crude to China, and that business looks set to grow. Sinopec will be in charge of distribution of the products once refined. The synergy is there; all that is needed are the personnel and political will to fulfill the promises.

“[Saudi Aramco] has realized that there needs to be some slack in the [global refining] system,” says Evers.

“Whether they can deliver on all their plans and promises is another matter; only time will tell on that one. They are going to be hard-pressed to do everything they say on schedule. But yes, Saudi Arabia is the key to the world’s energy markets and could well become the key player in the world’s refinery business as well.”

As the Saudis strive to widen the global refinery bottleneck, they boost the shifting of global petrochemical production to Asia from the traditional refining strongholds of the United States and Europe.

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