oct 06 update

Four months after getting socked with a $2.4 million fine for safety violations, the BP refinery in suburban Toledo is indirectly getting more heat from one of the oil industry's top regulators.

Carolyn Merritt, chairman of the U.S. Chemical Safety and Hazard Investigation Board, said that her concerns about BP's ability to self-diagnose problems were heightened by the company's apparent lack of maintenance with pipelines in Alaska.

"It's an indicator that [BP] executive management has been blind to the safety culture issue," Ms. Merritt said of 200,000 gallons of oil that leaked from a BP pipeline in March and 966 gallons that leaked in August. Both leaks, attributed to corroded pipes, were in Alaska's Prudhoe Bay.

While drawing no direct parallels to the operation of the company's local refinery in Oregon, Ms. Merritt said corroded pipelines in Alaska could be a symptom of a fundamental oversight breakdown within BP - especially in light of the March 23, 2005, explosion at BP's Texas City refinery in Texas, which killed 15 people and injured 170 others.

The latter, one of the nation's largest industrial accidents, prompted the government to form an independent panel charged with giving BP a corporate-wide safety culture checkup.

Safety culture is a term that grew out of assessments that arose after the world's worst nuclear accident, the 1986 Chernobyl power plant disaster in Ukraine. It is an uncommonly broad probe into a company's workplace atmosphere, usually reserved for sites that have experienced major accidents or close calls with disasters.

Such assessments were used to determine NASA's competence after the 1986 Challenger explosion and the 2003 Columbia shuttle disaster. Akron-based FirstEnergy Corp. was subjected to a safety culture investigation by the Nuclear Regulation Commission after the utility had allowed the old nuclear reactor head at its Davis-Besse plant in Oak Harbor to deteriorate so much by corrosion that the massive steel device nearly blew apart in 2002.

Chaired by former U.S. Secretary of State James A. Baker III, the BP oversight panel is focusing on BP's five North American refineries. Mr. Baker is a senior partner at Baker Botts LLP, a Texas-based law firm that has represented BP.

Besides the Toledo area and Texas City operations, his panel is looking at BP refineries in Carson Calif., Whiting, Ind., and Cherry Point, Wash. The panel is expected to issue its findings by early November.

Ms. Merritt said the corroded pipelines in Alaska are serious because they are a sign that BP has "pervasive complacency and denial of risk."

Devices known as "smart pigs" are supposed to be run through pipelines regularly to catch problems far in advance of what happened in Alaska, she said.

Ms. Merritt said catastrophes can arise when "layer and layer of management oversight and care" is missing.

"Then, you begin to worry about everything that's going on everywhere else," she said.

Those thoughts were echoed by U.S. Rep. Ed Markey (D., Mass.), a senior member of the House Energy and Commerce Committee, who said BP "maximized short-term profits at the expense of maintaining the integrity of these pipelines." He urged Congress to look closer into the matter.

Mary Caprella, spokesman for BP's local refinery, deferred questions about the panel's inquiry to Scott Dean, of Warrenville, Ill., who manages public relations for BP Products North America, Inc., the North American division of the London-based conglomerate.

Mr. Dean said the Alaska and Texas incidents are similar only in the sense that BP has accepted full responsibility for them and will "spare no expense" getting down to the root of each problem to see that they don't happen again.

He declined to comment on the ongoing investigation of BP's corporate culture. "We believe in our hearts that all of these incidents are unrelated," Mr. Dean said.

Ohio steel produced by U.S. Steel in Lorain will be used to replace 16 miles of pipeline in Alaska, he said.

The Oregon refinery was fined $2.4 million by the Toledo office of the U.S. Occupational Safety and Health Administration, which had cited the facility for 39 safety violations. Several of the violations had parallels to those issued to BP in the aftermath of the Texas City refinery explosion, officials have said.

All but seven of the Toledo-area violations against BP were described by OSHA as willful, that agency's most serious category.

BP was fined a record $21.4 million by OSHA for 303 willful violations related to the Texas City refinery explosion.

Louisiana Woos OPEC, Oil Suppliers with $5 - $10 Billion Refinery Bid

Louisiana, the second-largest oil refining state in the U.S., is proposing to crude-producing nations to turn farms into an oil refinery, said Dane Revette, the state's director of energy development.

The Gulf Coast state has two existing refineries whose stakeholders include foreign oil companies -- one from Venezuela and the other Saudi Arabia. Revette, who is attending today's Organization of Petroleum Exporting Countries meeting in Vienna, is conferring with officials from OPEC and non-OPEC countries while there in hopes of building a third, he said.

``What we're interested in doing is seeing a refinery built in the United States,'' Revette said in an interview. ``Of course if one is going to be built, we'd like to see it built in Louisiana. We think it's the best place, essentially the place that a refinery can be built the quickest.''

The last refinery built in the U.S. was Marathon Oil's Garyville, Louisiana, plant, which opened 30 years ago. The lack of refining capacity was exposed last year when Hurricanes Katrina and Rita struck the Gulf Coast, idling platforms and refineries and helping to send gasoline pump prices above $3 a gallon.

Kuwait, the fourth largest oil producer in the Middle East, has expressed interest in building a U.S. refinery and has held talks with Louisiana state officials, Kuwaiti officials have said.

A lack of construction in the U.S. and Europe during the last 30 years has left refineries with little margin for error and susceptible to breakdowns. Worldwide, refineries ran at 95 percent of capacity in 2004, up from 80 percent in 1984, according to the International Monetary Fund.

Strict environmental rules and the high cost of investment have kept oil companies based in the U.S. and Europe from building refineries near their biggest markets.

Revette said he's holding talks with producers ``trying to explain the attractiveness of Louisiana'' as a place to invest. There are half a dozen producers ``that could do this,'' he said. ``Those are OPEC and non-OPEC.'' He declined to identify any.

Kuwait emerged as a frontrunner in the bid to build a new U.S. refinery when the country's former oil minister, Sheikh Ahmad Fahd al-Sabah, said in December that his country was interested in building a plant with as much as 400,000 barrels a day of capacity. Talks continue, said Kuwait's OPEC governor, Seham Abdul Razak Razzouqi.

``I know that they visited Kuwait and our subsidiary, which is in charge of international investment,'' Razzouqi said today in Vienna. ``I've been talking to them, so as part of all our investments abroad, we're looking at these projects, evaluating them.''

Revette said a new refinery could cost between $5 and $10 billion.

Oil producer countries gain an advantage by having refineries sited near consumer markets, said Michael Rothman an analyst at International Strategy & Investment in New York, who is advising Revette. Motiva Enterprises LLC, a joint venture between Royal Dutch Shell Plc and Saudi Arabia, plans to double the capacity of a 285,000 barrel a day oil refinery in Texas, making it the largest in the U.S.

Motiva also operates a 235,000 barrel a day refinery in Convent, Louisiana, Revette said. Citgo Petroleum Corp., a unit of state-run Petroleos de Venezuela SA, operates the fourth-largest U.S. refinery, which can process 440,000 barrel a day, also in Louisiana.

``There is an attraction for an OPEC producer to have a guaranteed outlet, especially as you look forward,'' Rothman said.

At the start of this year Louisiana had 16 operating refineries with total capacity of 2.5 million barrels a day, according to the Department of Energy. Texas has 24 refineries.

Sugar cane farms could be used to site a refinery because they are situated near rivers, pipelines and rail lines, Revette said. Trade agreements with Central and South American nations have made U.S. farms less profitable, he said.

``Sugar cane growing in Louisiana is not thought of as the growth opportunity that it might otherwise be,'' Revette said. ``I've been contacted by some sugar cane farmers who have decided that maybe this is a good time to cash in.''

Foster Wheeler Awarded Contract by Sinclair Oil

Foster Wheeler Ltd. said September 11 that its subsidiary Foster Wheeler USA Corp. has been awarded a contract by Sinclair Oil Corp. for a 30,000 barrel per stream day delayed coker, gas plant and coke handling facilities at its refinery at Tulsa, Okla.

Financial terms were not disclosed.

The new coker will allow the refinery to process heavier crudes while maximizing the production of higher value products, Foster Wheeler said.

The reimbursable engineering, procurement and construction contract was included in the engineering and construction company's second-quarter 2006 bookings, Foster Wheeler said.

US EPA Proposes Easing Refinery Pollution Rules

The Bush administration proposed easing environmental rules September 8 to allow oil refineries and other industries to change how they calculate whether they need pollution control equipment.

The oil refinery industry says the eased regulation would open the way for production of more oil and other products. But environmental groups say the proposed rules are gimmicks and loopholes allowing industry to emit more pollution, evade pollution controls and save money.

"This is a big gift to the refinery industry," said Frank O'Donnell, president of Clean Air Watch, an environmental watchdog group. "They are saying let's close our eyes and pretend pollution is not happening."

In a news release, the Environmental Protection Agency said the proposed rules will make it easier for owners and operators to determine whether changes to a plant or facility require installing pollution control equipment. The rules largely affect oil refineries and pharmaceutical and chemical plants.

U.S. refineries are planning to increase oil refining capacity by 1.4 million barrels a day and will do so under strict environmental standards, said Bob Slaughter, president of the National Petrochemical & Refiners Association.

"The new EPA proposals will help the industry respond to these official calls for increased refining capacity," Slaughter said.

Federal law sets the pollution levels that have to be reached before pollution controls, such as scrubbers, must be used. When changes are planned for pollution producing plants or facilities, operators must determine whether the changes increase pollution over the federal levels and apply for permits to make the changes.

The proposed rules essentially change how industry adds up how much pollution is being produced.

For example, one proposed rule change would allow operators to consider pollution levels of equipment separately in determining whether its pollution level has gone up. Under current law, the total level produced by the affected equipment is considered.

The changes "will streamline the permitting process that manufacturers and energy or power producers have to undergo prior to upgrading a facility," said Bryan Brendle, a lobbyist for the National Manufacturers Association.

Valero Refinery to Clean up Air with New $400 million Scrubber System

A multi-million dollar system that will tame one of Delaware’s largest single air-pollution sources was expected to start up in the middle of September at the Valero refinery near Delaware City.

The new sulfur dioxide “scrubber” on Valero’s petroleum “coking” unit will demote its smokestack from one of the nation’s top refinery sources of acid rain, smog and dust-forming emissions to something more typical of other nearby crude oil processors.

Valero planned to notify by letter thousands of residents who live within 5 miles of the development.

“It’s going to take out 19,000 tons a year of sulfur dioxide -- it’s a huge amount, absolutely,” said Ravi Rangan, an environmental program manager for the Department of Natural Resources and Environmental Control.

Rangan was one of the DNREC officials who helped pursue the refinery’s various owners for years over uncontrolled sulfur dioxide emissions and other pollution offenses. The effort eventually wound up in federal and state courts, producing corporate agreements to install two sulfur scrubbers now slated to start up before the end of the year.

The Environmental Protection Agency, DNREC and state and federal justice departments collaborated on the settlements and related penalties -- approved in early 2001 and later amended. Recent estimates of the scrubber costs to the refinery have ranged as high as $400 million.

Deadlines for the original agreement were set back in part by public objections to the refinery’s first scrubber design. That system would have flushed more than 100,000 tons of sodium sulfate into the Delaware River annually, along with traces of mercury and other contaminants.

A substitute design developed for the refinery will convert sulfur dioxide gases into elemental sulfur that Valero can sell for other industrial uses.

Violations at Toledo Refinery Spurs $17,500 fine of BP by OSHA

BP Products North America Inc. has been fined $17,500 and cited for numerous safety violations after an April visit by federal inspectors to its suburban Toledo refinery.

At issue is the proper treatment and containment of propylene, a flammable gas, including missing or improperly working valves on drain pipes, which could cause the release of the gas that could result in unconsciousness or even death.

Dick Tracy, assistant area director for the U.S. Occupational Safety and Health Administration, said inspectors went to the company’s Oregon refinery after a referral from another government agency, which he declined to name.

OSHA representatives found employees had not been properly versed in what control measures should be taken if they were exposed to the gas.

The company has 15 days to contest the citations and proposed fines. A spokesman could not be reached for comment.

This is the second time in less than a month that activities at the BP plant resulted in regulatory action.

Veolia ES Industrial Services Inc., a contracting firm with an office at the refinery, was cited for 14 violations including monitoring equipment and was given fines of $35,000 after an accident in which a worker was burned severely.

Separately, OSHA recently cited a Port Clinton company and issued a $10,000 fine after an accident killed a worker.

Browning Ferris Industries of Ohio was cited for two serious violations in connection with a June 13 accident in which a 32-foot guardrail on an elevated platform failed and a worker plunged 22 feet to his death. The firm has 15 days to contest the findings.

Air Permit for $2 billion Yuma Refinery Renewed

The company planning to build a $2 billion oil refinery in eastern Yuma County has another 18 months to start construction on the facility now that state environmental regulators renewed a key air quality permit.

On September 18, Arizona Department of Environmental Quality Director Steve Owens announced that the department has issued a renewal of the air permit for the Arizona Clean Fuels (ACF) refinery to be built near Tacna.

"We are really just reissuing the same permit we issued last year," Owens wrote in a news release. "It's still the toughest air quality permit ever crafted for a refinery."

Ian Calkins, spokesman for ACF, the company that wants to build the refinery, said ADEQ's willingness to grant the renewal gives them another 18 months to start construction.

"It was great news on this end," Calkins said. "We appreciate ADEQ's willingness to work with us on reissuing the permit and believe it sends a positive message that this refinery does indeed comply with clean air regulations and laws."

ADEQ issued the original air permit last year. Under state law, ACF had 18 months — until November 2006 — to begin construction of the refinery or the permit would lapse.

Calkins said when it became apparent that ACF wasn't going to be able to begin construction by the deadline, the company applied with ADEQ to have the permit renewed.

"We recognized that with the deadline looming that we weren't going to be able to meet some of the timeline requirements of the permit due to some issues and challenges unrelated to the air permit," Calkins said.

Among those challenges, Calkins said, is that the company still needs to secure a financial partner for the project that can put up a significant amount of the capital to begin construction.

Another issue is ACF is still trying to secure a long-term crude oil supply contract. Calkins said both matters should be resolved well within the deadline of the renewed permit.

"The outlook is positive on both of those fronts," Calkins said. "We are close to finalizing a crude oil supply agreement and securing a financial partner."

Under the permit renewal, ACF is now required to begin construction on the refinery within the permit's effective date, which means that the new 18-month deadline ends during April 2008.

The permit renewal also puts the same strict limits on potential emissions from the refinery as the previous permit. Like the previous permit, the renewed permit is good for five years.

The refinery would be located on approximately 1,450 acres near Tacna and could produce approximately 150,000 barrels per day of motor fuels, including approximately 85,000 barrels per day of gasoline and 35,000 barrels per day of diesel fuel and 30,000 barrels per day of jet fuel.

ConocoPhillips Sweeny Hydrogen Unit to be Shut 7-10 Days

Crude runs have been cut at ConocoPhillips' Sweeny, Texas, refinery, following a mechanical failure in a hydrogen unit September 17, according to the company's report to a state environmental agency.

The hydrogen unit will be shut for seven to ten days for repairs, according to the report filed with the Texas Commission on Environmental Quality. Crude throughput and gasoline output at the refinery will be reduced, according to the report.

A fuse tripped on the hydrogen unit feed compressor, causing the hydrogen purification unit to shut at about 3:00 p.m. EDT September 17, according to the company's filing with the agency.

ConocoPhillips attempted to restart the unit five hours later, but it tripped again early on Sept 18.

"Preliminary investigations indicate damage to the turbine driver", according to the report.

Emissions associated with the event necessitated the report. To reduce emissions, the refinery will reduce crude throughput, reduce charge to a key gasoline-producing unit, known as a fluid catalytic cracker, and reduced throughput at other key units, including the delayed coker unit and distillate feed hydrotreater.

During the work, ConocoPhillips will replace hydrogen that would ordinarily come from the hydrogen purification unit with hydrogen from underground storage caverns and a third-party pipeline.

The report didn't say how sharply runs were cut. The refinery's normal crude throughput is 210,000 barrels a day.

BP to Review Its Global Business after Texas Refinery Blast

BP PLC is carrying out a review of its global business in an attempt to improve safety following last year's explosion at its Texas City oil refinery that left 15 people dead and 170 others injured.

John Mogford, the vice president for safety and operations, will lead the review. He also led the team that investigated the Texas refinery blast.

A BP spokesman said the review will take about five to 10 years to finish.

He described the move as a 'root and branch' assessment of all areas of safety and operational integrity.

'It's a fundamental review that will involve procedures, plant, equipment and culture,' he said.

The review hopes to help BP achieve a 'group-wide standard' on safety, the spokesman said.

BP claimed full responsibility to the incident in the 460,000-barrel per day Texas City refinery, the third largest in the US.

Citgo Shuts Down new Hydrotreater in Texas Refinery

Citgo Petroleum Corporation, the US refining branch of the Venezuelan state-run oil holding Pdvsa, has discontinued operations at a new gasoline hydrotreater in its 165,000 bpd refinery in Corpus Christi, Texas, because of high pressure in the reactor, the firm said in a communiqué forwarded to the Texas Environmental Protection Agency.

"The unit will be shut down to determine the causes and correct high pressure in the reactor," Citgo explained. "The new gasoline hydrotreater unit has not been fed."

BP To Upgrade Whiting IN, Refinery between $1 and $2 Billion to Take Canadian Oil

BP PLC appears to have chosen its Whiting, Ind., refinery for a massive upgrade that would allow the 410,000-barrel-a-day plant to process heavy Canadian, the Gary Post Tribune has reported.

Last October, company officials said they were considering upgrading either the Whiting or Texas City, Texas, refinery to turn high-sulfur crude from Canada's oil sands into gasoline. At the time, Charlie Vesolowski, craft foreman for the Local 150 Operating Engineers, said BP managers told him they could spend between $1 billion and $2 billion.

Petrobras Purchases Half of 100,000 bpd Pasadena Refinery, Plans to Double Capacity

The state-controlled oil company of Brazil has acquired a half interest in a Pasadena refinery and aims to double its capacity in five years as part of its push into the U.S. market.

Jose Sergio Gabrielli de Azevedo, president of Petrobras, said at a news conference September 19 that the $380 million purchase of a 50 percent interest in Pasadena Refinery System is part of his company's overall plan to invest $2.4 billion in the U.S. and to increase its production in the Gulf of Mexico.

"This is the largest new investment we have in the next five years outside of Brazil. We hope that we can not only have a good position in downstream in the United States, but also to improve and move Petrobras into a leading-edge position in deep-water exploration and production," Gabrielli said.

The refinery, now half-owned by Astra Oil Co., a U.S.-based refining and trading company owned by the Belgian group Compagnie Nationale a Portefueille, has a processing capacity of 100,000 barrels per day.

Gabrielli said Petrobras aims to double that capacity to 200,000 barrels per day and allow it to process heavier oil, such as Brazil's Marlim crude.

Heavier crude is harder to refine into fuels like gasoline than light crude and often has impurities, like sulfur, that must be removed during processing.

Amy Jaffe, an energy expert with Rice University's Baker Institute for Public Policy, said Petrobras still has roles to play as a national company, such as holding down fuel prices in Brazil, but the company is trying to run itself as close to a private firm as possible.

"One thing to get them prepared to be more profitable downstream is to go into an attractive downstream market somewhere other than Brazil," she said. "We're a premium market for selling gasoline. We all drive SUVs and can't kick the habit."

Petrobras has 16 refineries in South America with capacity of 1.8 million barrels a day. Gabrielli said the company wants to increase that capacity to 3.2 million barrels a day in five to seven years.

The half-interest in the Pasadena facility is its first refining investment in the U.S.

"The main goal is to add value to its oil," Luiz Caetano, an analyst with BANIF Investment Banking in Brazil who follows Petrobras, said in an e-mail.

"Petrobras will strongly increase oil production in the next years and will have 520,000 barrels available to export in 2010, mostly heavy oil. So, they intend to export heavy oil from Brazil and produce derivatives in the U.S., improving their margins."

Earlier this year, Gabrielli presented Petrobras' work force with a 2007-2011 strategic plan that anticipates the company will invest more than $87 billion in accelerated growth; 86 percent of that in Brazil. The remaining $12.1 billion is targeted for investments elsewhere.

Gabrielli said the company is analyzing several possibilities in Europe and Asia as well as in the United States.

BP Finds Leak at Texas City Refinery Cracker Tower

BP said in a filing with state environmental regulators on September 14 that it detected a leak in a gasoline-making catalytic cracking unit tower at its 460,000 barrel per day refinery in Texas City, Texas.

According to a filing with the Texas Commission for Environmental Quality, BP detected a leak at FCCU3 cooling tower and began testing to determine which cooling tower exchanger is leaking.

The filing said BP expected the testing to end on September 17.

A source familiar with refinery operations said the exchanger was one of many and the unit could run during repairs without a cut in rates.

The refinery, where 15 people died in a blast last year, is in the process of restarting following shutdown ahead of Hurricane Rita last September.

CENTRAL AMERICA

Mexico Opens $7 Billion Central American Refinery Tender

Mexico opened the bidding process to operate a new oil refinery in Central America on Sept. 12, Energy Minister Fernando Canales said.

Mexican state oil monopoly Pemex will oversee the tender, which will seek a bidder to buy 230,000 barrels per day of Mexican crude oil for the refinery. The tender will be for a 20-year supply contract.

A winner will not be announced until July 2007, Canales said, after meeting ministers from Central America, Colombia and the Dominican Republic to push forward a broad regional energy integration project.

Aside from the refinery, mostly likely to be built in Panama, Guatemala or Honduras, the energy plan includes linking up power grids and running a liquefied natural gas pipeline down the region's Pacific coastline.

The refinery, set to cost about $7 billion and open in 2011, will supply gasoline across Central America, providing a dependable source of fuel and lowering energy costs for the largely poor region.

With the capacity to handle up to 350,000 barrels a day of oil, the refinery would dwarf the region's smaller refineries that mainly process lighter South American oil.

Mexico will supply the bulk of the oil, with a much smaller amount coming from fledgling producers Guatemala and Belize, and the rest to be bought on the open market.

Canales said Mexico -- a major supplier to the United States whose oil output has stagnated in recent months amid declining yields at its aging Cantarell oil field -- was confident that by 2011 it would have enough new production to supply the refinery.

"For this date, assigning a quota of 230,000 barrels per day will not be a problem for Pemex," he told a news conference. "We have very ample reserves that we are exploring. The expectation is that production levels will not fall, but will recover and in the future will grow."

Companies that have shown interest in the refinery include Occidental Petroleum, Glencore, Itochu Corp., Mitsubishi, Marubeni, Royal Dutch Shell, BP Plc, Chevron, Valero Energy and Petrobras.

The Inter-American Development bank last month offered an initial $400 million credit line for the project, which will be mainly privately financed.

JAMAICA

$300 Million Jamaican Refinery Expansion to Start in 2007

A $300 million project to expand Jamaica's sole refinery with Venezuelan help will start at the end of next year, Jamaica's Trade, Science and Technology Minister Phillip Paulwell said.

The expansion will last two years and take the refinery's capacity to 50,000 barrels a day from its current 35,000 barrels a day, Paulwell said September 8 in an interview outside an energy conference in Mexico. A final agreement is expected to be reached with state oil company Petroleos de Venezuela SA by the end of next month.

As part of the accord, Petroleos de Venezuela will take a 49 percent shareholding in the Kingston refinery, paying $65 million, Paulwell said.

Petroleos de Venezuela said in August that it was creating a joint venture with Jamaica's Petroleum Corp. as part of Venezuela's PetroCaribe initiative. The PetroCaribe initiative offers the 13 members, including Jamaica, Venezuelan petroleum products on preferential terms that eliminate third parties.

Member countries may pay for oil in goods, and under subsidized financing.

2. ASIA

INDIA

India’s Congress Demands Action against Essar Refinery

Demanding action against Essar Oil Refinery for breaching the Company Act, the Congress in Jamnagar took out a rally on September 8 and submitted a memorandum to the district collector.

A delegation led by Jamnagar MP Vikram Madam submitted a memorandum which stated that stringent actions should be taken against the refinery located at Vadinar, as a breach in an undersea pipeline had led to flood-like situation in nearby villages destroying several farms.

The party said that the sea water entering ponds and farms had led to salinity ingress leaving the soil infertile for cultivation. They demanded compensation for farmers from the company. They also alleged that migrant laborers working at the refinery were creating a tense situation in some nearby villages.

Reliance to Complete New Refinery Ahead of Schedule

Reliance Industries Ltd will complete construction of its new oil refinery six months ahead of schedule, Atul Chandra, President of its international business, has been cited as saying.

Reliance, which plans to finish the construction of the refinery by June 2008, will export premium oil products to Europe and the U.S. from the plant, Chandra said.

Chandra has further said that the company plans to enter into the coal and nuclear power businesses.

ONGC says Rajasthan Refinery not Viable without Incentives

Admitting for the first time ever that the proposed Rs 8,000 crore Rajasthan refinery project was not economically viable, ONGC said September 19 the project would be shelved unless the state government extended large scale fiscal incentives.

"Unless the state government gives fiscal incentives, the refinery will not come," ONGC Chairman and Managing Director R S Sharma told reporters here.

ONGC has sought sales tax exemption for 15 years for making the 7.5 million tonnes refinery viable.

"We are told that it will not be possible for the state government to offer US the fiscal incentives," he said.

Sharma said an economic and financial viability study of a refinery at Barmer in Rajasthan to process crude oil discovered by Cairn Energy of UK in the state has found the project totally unviable.

Building a refinery in a landlocked state is uneconomical. With IOC's Mathura and the expanded Panipat refinery in the region and HPCL building a nine million tonne per annum refinery at Bhatinda by 2010, there will be no market for the planned refinery, he said.

ONGC plans to get its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) de-nominated as the official offtaker of crude oil found by Cairn Energy in Rajasthan and instead sell it to refiners like Reliance or Essar Oil.

Cairn Energy, the 70 per cent owner of the oilfields, had earlier this month said that it was looking at building a pipeline to evacuate the crude to a refinery.

IOC Plans 15 mn Tonne Refinery in Bengal

Indian Oil Corporation is planning to build a 15 million tonne refinery in Bengal. The company today signed an agreement with the Bengal government and committed to be the anchor investor in a petrochemical SEZ in the state.

Through this agreement with the Bengal government, Indian Oil Corporation has committed to be the anchor investor in the proposed 62,000-acre Special Economic Zone in Haldia.

It's going to be reserved for petroleum, chemical and petrochemical companies, and as the lead investor in the SEZ, Indian Oil would build a 15 million tonne refinery there in partnership with a foreign player. This is estimated to cost Rs 15,000 crore.

CMD, Indian Oil Corporation, Sarthak Behuria says, "There is the other major investment of a 15 million tonne refinery and we will immediately start a techno-economic survey. We are also looking for a multinational partner because India is now being developed as an export hub."

The proposed SEZ would be located in East Midnapore- the home of Haldia Petrochemicals and a five million tonne Indian Oil refinery. An Indonesian conglomerate called Salim would build the basic infrastructure.

The roadmap for development of the SEZ would be prepared jointly by Indian Oil and the Bengal government, within the next eight months.

Nagarjuna Refinery to Complete Financial Closure Soon

The six-million tonne refinery at Cuddalore in Tamil Nadu, promoted by the Nagarjuna group and the Tamil Nadu government is expected to complete financial closure by the end of the year.

Company sources said that most of the debt for the Rs 4,750-crore project was already tied up and that the group was in talks with several small foreign oil companies, including Russia’s Itera group, for equity placements.

“We are not sure if Itera will take up equity at this point, as we are still talking with them. We are also in talks with several other foreign companies for equity but cannot reveal any names,” said a source close to the development.

Tata Sons has already picked up a 26-per cent stake at Rs 400 crore in the project and is expected to hike it to 40 per cent at a later stage, sources said. This will be Tata group’s first foray into the down-stream refining sector.

Indian refining major, Indian Oil Corporation (IOC), has also picked up a 10-per cent stake in the project through its subsidiary, Indian Oil Corporation Tankers.

IOC has also signed a memorandum of understanding with Nagarjuna Oil Corporation for marketing its products such as LPG, Euro-IV motor spirit, high-speed diesel, fuel oil petrochemical, naphtha and sulphur.

The Nagarjuna group will have a 51-per cent equity stake in the project, while co-promoter Tamil Nadu Industrial Development Corporation holds 5 per cent. Krupp Uhde, the EPC contractor has a 7 per cent stake in the firm.

India Conglomerate Pins Hopes of Industrial Power on Arabian Sea Coast Refinery

India's largest conglomerate is pinning its hopes on an Arabian Sea coast oil refinery, poised to become the world's largest, to catapult it and the country to industrial giant status.

"It is not just a refinery. We believe the refinery challenges the paradigm that China is forging ahead of India with its industry," Reliance Industries Executive Director Hital Meswani told reporters on a tour of the Jamnagar complex.

The sprawling facility in Gujarat state, which opened in December 1999, occupies 30sqkm – one-third the size of Manhattan – and has helped move India from being a net importer of refined petroleum product to an exporter.

Reliance is set to invest a further $6bn in a bid to double output. Although Reliance gives few financial details for Jamnagar, analysts believe the facility will move into profit in 2009.

"It's a refinery for the world, based out of India," Meswani said of the complex, set for another expansion in 2008 – and a move to the world's top spot from its current third place behind Venezuela and South Korea.

"We want to take India to the world and to transform Jamnagar as the refining hub for the world," he said.

"India is often compared to China – India for its services sector and China for its industrial sector. (But) we want to show what India can do on the manufacturing and industry sides."

In China, the industrial sector accounts for 46 per cent of GDP, compared to 27 per cent in India.

Reliance is a corporate behemoth that has straddled India's economy for decades with activities in petrochemicals, oil and gas, refining, power, insurance and telecommunications.

Situated in the Gulf of Kutch on the Arabian Sea, the refinery took three years to build. The company says its 5,000km of pipes, 1.7 million tonnes of concrete, 14,000km of cable and equivalent in steel of 16 Eiffel towers represent a record.

Work is entirely automated and overseen by engineers working out of underground control rooms. None of the employees belong to a trade union.

It also has its own power station, a super tanker port, fire station, medical teams and security service, 170km of roads and a residential area of 2,500 homes – making it virtually a self-sufficient "state within a state".

"The volume, the energy consumption, the capital costs (and) the integration make the refinery unique in the world," said the facility's sector chief, D M Katre.

The facility is currently producing 33 million tonnes of refined products – petrol, diesel, kerosene and liquefied petroleum gas – plus petrochemicals each year.

Since opening, the complex has served 5,000 ships and "only Rotterdam is handling more refined products," said marine captain Sunil Pradham.

OKINAWA

Petrobras May Invest $1 Billion in Exxon's Okinawa Refinery

Petroleo Brasileiro SA, (Petrobras) may buy a stake in a refinery controlled by Exxon Mobil Corp.'s Japanese unit to boost sales in China, company officials said.

Petrobras is in talks with the plant's shareholders, Exxon's unit TonenGeneral Sekiyu K.K. and Sumitomo Corp., said the officials, asking not to be identified because an agreement hasn't been concluded. The cost of Petrobras's stake in the plant and spending by the investors to upgrade technology may total $1 billion, one official said.

Petrobras is targeting the refinery in Okinawa in southern Japan as a platform for sales to China, the world's fastest- growing market. Saudi Arabia last year raised its stake in Royal Dutch Shell Plc's Japanese unit to almost 15 percent. Refiners in Asia's biggest economy have closed or sold plants because of stagnant domestic demand.

``Industrywide restructuring plans may be in the pipeline in Japan given that refiners face severe competition in a shrinking oil market,'' Hidetoshi Shioda, senior energy analyst at Mizuho Securities Co. in Tokyo, said.

Atsuko Funo, a Tokyo-based spokeswoman for Exxon, declined to comment. TonenGeneral is 51 percent owned by Exxon, the world's largest publicly traded oil company. Nansei Sekiyu K.K., which operates the 100,000 barrel-a-day Okinawa refinery, is 87.5 owned by TonenGeneral and 12.5 percent by Sumitomo, Japan's third-largest trading company.

Petrobras may buy a refinery asset in Japan to tap Asian oil demand growth, Platts said, citing comments by Chief Executive Sergio Gabrielli.

The refinery will need upgrading to process Brazil's heavy crude oil, company officials said. They also said Petrobras wants an initial accord by the end of the year.

Officials at Rio de Janeiro-based Petrobras couldn't be reached for comment. Sumitomo spokesman Hideyuki Terajima said his company is studying future plans for Nansei Sekiyu.

Petrobras on Sept. 2 said it completed the $360 million purchase of a 50 percent stake in a 100,000 barrels-a-day refinery in Pasadena, Texas.

China wants to boost its oil processing capacity 25 percent by 2010 to meet an increasing need for motor fuels and chemicals as car-ownership and consumption of electronic goods rise, the government said in March. The economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade, boosting energy demand.

China's refined oil-product imports jumped 26 percent to 25.8 million tons in the first eight months of this year and stood at 3.8 million tons in August, the Beijing-based Customs General Administration of China said yesterday.

Nansei Sekiyu may have two options to strengthen its refining business -- upgrading the refinery to increase export capacity for petroleum products, or scrapping the plant and building a storage tank terminal at the site, said Hirofumi Kawachi, an energy analyst at Mizuho Investors Securities Co. in Tokyo.

In 2004, Idemitsu Kosan Co., Japan's second-biggest refiner, closed its 110,000 barrel-a-day refinery in Okinawa to eliminate redundant capacity and boost its competitiveness. Idemitsu uses the refinery site as one of its crude oil and petroleum tank terminals.

Okinawa and the surrounding islands consumed 2.3 million kiloliters (14.4 million barrels) of petroleum products, or 1 percent of Japan's overall demand, in the year ended March 31, according to trade ministry statistics.

The islands' fuel demand fell 2.3 percent from a year earlier, more than the 0.4 percent decrease in overall Japanese demand.

Venezuela to Build Refinery in Vietnam

Minister of Energy and Petroleum Rafael Ramírez has disclosed that a Venezuelan refinery will be built in Vietnam next year as part of the energy exchange expansion plan bolstered by state-run holding Petróleos de Venezuela (Pdvsa).

The minister told official TV channel Venezolana de Televisión that Vietnam is one of the countries showing the largest economic growth in the world, official news agency ABN reported.

He recalled also that during a visit paid recently to Malaysia, President Hugo Chávez executed a number of agreements for development of technologies aimed at manufacturing of biofuel.

3. EUROPE / AFRICA / MIDDLE EAST

UNITED KINGDOM

UK to Refurbish Stoke-on-Trent Oil Refinery to Re-refine Used Oils

UK based Whelan Oil Refining Ltd has confirmed that it will be starting work on site in September to refurbish a redundant oil refinery in Stoke-on-Trent to establish a Waste Oil Refinery to re-refine used oils.

The result is a high quality Base Oil for sale to the lubricant manufacturing industry, at a time when Base Oils supplies are in short supply and when the United Kingdom has become a net importer of Base Oils for the first time. Whelan Refining Limited will be unique in the UK in operating in strict compliance with the Waste Oil Directive.

The Company’s IPPC Application has been submitted and returned by the Environment Agency as being “Duly Made”. This new facility, which is due to be operational in January, 2007, is the first of its type in the UK and brings with it welcome re-refining capacity to the UK lubricants market.

Whelan Refining Ltd will be spending approximately £2,000,000 to modernize, re-engineer and establish the refinery business.

MD of Whelan Refining Ltd, John Whelan, says “Whelan Refining will provide an alternative and, importantly, secure outlet to the currently beleaguered waste oil collection industry - opening marketing opportunities to those collectors who wish to promote the notion of re-generation to their customers.”

There are over 300,000 tonnes of Waste Oil collected in the UK every year and the company will be re-refining 50,000 tonnes of it to produce Base Oil. Thus, they will be seeking to purchase primarily “crank-case oils” from collectors to satisfy their feedstock needs.

LITHUANIA

Poles give Lithuanians Assurances of Future Oil Deliveries to Refinery

Lithuanian Prime Minister Gediminas Kirkilas said September 28 a local oil refinery will receive reliable deliveries of crude despite being cut off from a pipeline since July.

Polish refiner PKN Orlen SA, which recently agreed to buy the Mazeikiu Nafta refinery for US$2.3 billion, has obtained solid guarantees of future crude supply, Kirkilas said after meeting with company executives.

"I was assured that the Polish company would not have problems with crude supplies," Kirkilas said.

The Mazeikiu Nafta oil refinery has not received crude via pipeline for more than two months after a rupture in Belerus in July. Russian oil officials said repairs could take years, sparking outrage in Vilnius.

Some Lithuanian politicians believe Russia is stalling repairs to put pressure on the Baltic state to reconsider its sale of the refinery to PKN Orlen in favor of a Russian oil producer.

In the meantime, the refinery is maintaining output by importing tanker-delivered crude via a terminal on the Baltic Sea.

Kirkilas also denied information that the Polish concern, worried by crude cutoff, is brokering a deal to resell Mazeikiu Nafta to Russian company Lukoil. PKN Orlen promised to develop and invest in the oil refinery, the only one in the Baltic region, he said.

PKN Orlen signed an agreement in May to buy a 53.7 percent stake in Mazeikiu Nafta from the embattled Russian oil giant Yukos for US$1.49 billion. It also agreed to buy an additional nearly 30.7 percent stake in Mazeikiu from the Lithuanian government for $852 million.

The European Commission has yet to approve the deal.

SOUTH AFRICA

Restart of South Africa Sapref Refinery Delayed

South African refiner Sapref has delayed the full start-up of its 180, 000 barrels per day plant in Durban until the beginning of October, extending its shutdown to more than three months, a company spokeswoman said on September 18.

Maintenance work began on June 26 and had originally been due to last for two months, but was extended into the beginning of September because of extended maintenance time on some units.

The plant, which was then expected to be fully operational in the second week of this month, will now not reach full capacity until the first week of October as the refiner prioritizes health and safety during the start-up process.

While the refinery is in the preliminary stages of switching on the units involved in the maintenance work, Sapref is continuing to import petroleum products to meet its supply obligations.

TATARSTAN

Contract awarded to Foster Wheeler for $3 Billion Tatarstan Refinery

CJSC Nizhnekamsk Refinery has let a contract to Foster Wheeler Ltd.'s Paris-based subsidiary Foster Wheeler France SA for front-end engineering and design (FEED) for a refining and petrochemical complex to be built in Nizhnekamsk in Tatarstan, Russia.

The contract, terms for which were not disclosed, is an addition to an existing project management consultancy contract awarded in 2005.

The planned complex, expected to cost more than $3 billion, will consist of a deep-conversion refinery with 140,000 b/d of distillation capacity and a petrochemical plant. Construction of the complex will occur in three separate phases during 2008-10.

The oil processing section of the complex will include aromatic units and a deep conversion section with a fluidized catalytic cracker, a distillate hydrocracker, a delayed coker, and a gasification plant. The petrochemical section of the complex will include purified terephthalic acid, polyethylene terephthalate, linear alkylbenzene and polypropylene units, plus the associated power generation facilities.

Foster Wheeler will develop a complete FEED package, including definition of scope and configuration for all the processing units. The company's Moscow office intends to supervise and coordinate the FEED activities, which will be carried out by the Russian Design Institute JSC VNIPIneft (Moscow), for the non-licensed refinery units, including the atmospheric crude distillation and the vacuum distillation units, as well as utilities and offsites.

The selection of licensors for the oil processing and petrochemical plants has been completed by CJSC, with the support of Foster Wheeler.

IRAN

$100 Million Tehran Refinery Project Improves Petrol Quality

The managing director of Tehran Refinery, Abbas Kazemi said that the quality of the gasoline produced in this refinery will be improved by boosting its octane degree to 90, MNA reported.

He said that when an eligible contractor is chosen to filter light naphtha, azote (Nitrogen) and isomerization, the optimizing operation of Tehran Refinery will be initiated by the end of the current month.

He added that the contractor of the project is an Iranian company which has attained relevant license from France.

Kazemi also said that by conduction of the project, the octane degree of the produced gasoline will increase from 82 to 90 degrees, adding that presently the octane of the gasoline produced in Tehran Refinery is 82 degrees which will reach 87 degrees by receiving octane from the Arak Refinery.

He also said that Tehran Refinery produces the gasoline in accordance with the standards of the world.

The project value is about $100 million, Kazemi said, adding that by conducting this project, some 500,000 liters will be added to the present gasoline production of Tehran refinery that is 8.2 liters per day.

In conclusion, the managing director of Tehran Refinery said that the production of super gasoline will be also increased in the refinery.

Sarkhun Gas Refinery’s Output Quality and Quantity to be Enhanced

Upon completion of three related major projects, the quality of the gas produced at Sarkhun and Qeshm natural gas refinery and the quantity of the byproducts of the plant will increase.

Daily output from Sarkhun and Qeshm refinery currently stands at around 15 million cubic meters but due to the gas production tank limits the plant’s outputs could not be expanded. Gas condensates and liquefied petroleum gas are among the major byproducts of the natural gas refinery.

Within the next three years, some Rls.60 billion will be allocated to the completion of the projects, Alireza Tajzadeh, the refinery director said adding that the project contractor would be hired by the end of the year (Iranian year ends March 20, 2006).

Daily production of the refinery byproducts currently stands at 11,000 barrels of gas condensates and 80 tons of LPG. About four million cubic meters of the gas produced at the refinery is delivered to Hormozgan Combined Cycle Power Plant, 3.5 million cubic meters to Bandar Abbas Power Plant, two million cubic meters to Bandar Abbas Refinery and the rest is used in other industrial sectors and for household uses.

IRAQ

Bomb Targets Oil Pipeline North of Baghdad

An explosive device planted under an oil pipeline was detonated near the village of Is'haqy north of Baghdad September 28, official sources said. The blast set fire to the pipeline linking the refinery in Beiji and the refinery in al-Doura. Firemen were on the scene to try to extinguish the flames, the sources said.

ISRAEL

Antitrust Authority Approves Ashdod Refinery Sale

On September 27 Antitrust Authority director general Ronit Kan approved the sale of Oil Refineries Ashdod to Paz Oil Company Ltd., subject to certain conditions. These conditions are intended to ensure that Oil Refineries Ashdod remains operational and competitive, while also enabling Kan to keep an eye on Paz’s actions.

Paz undertook to sell Haifa Basic Oils Ltd. and Pi Glilot Petroleum Terminals and Pipelines Ltd., which is due to be privatized in a few months.

The Antitrust Authority also imposed restrictions on Paz’s fuel stations business, to ensure that it will not acquire stations or assets from other fuel companies. The Antitrust Authority created a supervisory mechanism for the number and location of fuel stations. The Antitrust Authority stipulated that Paz will have to obtain its permission to open new fuel stations in two especially sensitive areas - Tel Aviv and Jerusalem.

Paz plans to present its financing for the deal and send it to government representatives for review. A banking syndicate led by Bank Hapoalim, and including Israel Discount Bank and institutions will provide the financing.

Paz and the state will also settle the interest payment the company has to pay. This is the accountant general interest rate, excluding inventory, of 7% on the financial offer of $500 million. The refinery’s inventory is estimated at $300 million.

The parties will also have to settle interim accounts on inventory, projects under construction, and the repayment of loans. The final accounting will be made after the deal is closed, and will mainly focus on the final value of inventory.

Paz, controlled by Zadik Bino, has been waiting for weeks for approval of the deal by Kan and the ministers of finance and national infrastructures in order to close the deal. Paz won the government tender for Oil Refineries Ashdod on July 31 with a bid of NIS 3.51 billion.

KUWAIT

Kuwait Extends Deadline for $6 Billion Refinery Bidding

The Kuwait National Petroleum Company (KNPC) has extended the deadline for bidding on a 6-billion-U. S. dollar refinery in southern Kuwait, the Arab Times reported September 18.

International firms are permitted to submit offers until the end of next month, the report said.

"It has been extended because the companies that are making the offers have asked for some extension," Hani Hussein, CEO of KNPC's parent Kuwait Petroleum Corp, was quoted as saying.

He said that 12 international contractors have pre-qualified for the 615,000-barrel-per day refinery to be built in the country.

The refinery is set to be completed by 2010 and will replace the aging Shuaiba refinery.

With all three of the oil refineries the country's affiliated to it, the state-controlled KNPC totaled its profits at 450 million dollars from April to June, 2006.

Kuwait, a member of the Organization of Petroleum Exporting Countries (OPEC), boasted an overall refining capacity of more than 930,000 barrels per day.

QATAR

Invensys Awarded Multimillion Dollar Automation Contract for Grassroots Laffan Refinery Project

Engineering Procurement Contractor, GSEC of Seoul, Korea, has awarded Invensys Process Systems a multimillion dollar automation contract to provide an integrated process control, safety, asset management, and plant information system solution for the grassroots Laffan Refinery under construction at the Ras Laffan City in Qatar. Once operational in 2008, the refinery will process approximately 146,000 barrels per day of gas condensates from the adjacent QatarGas and RasGas LNG liquefaction facilities, making it one of the world's largest condensate refineries.

"Important grassroots refinery projects such as the Laffan Refinery don't come along very often and Invensys is honored to have been selected as automation supplier," commented Ken Brown, president of Invensys Process Systems. "Once again, Invensys' proven track record in successfully implementing projects of this scale anywhere in the world, combined with our ability to deliver a well-integrated process control, safety, asset management, and plant information solution, were key factors."

Invensys' broad scope of supply for the project will include:

Foxboro’sboro's latest Mesh Control Network-based I/A Series process control system technology (encompassing approximately 5,000 intelligent I/O points plus approximately 2,000 serial points integrated largely via OPC
Triconex triple-modular-redundant (TMR) technology for both the safety instrumented system (SIS) and the fire and gas (F&G) protection systems • Avantis.PRO maintenance management software integrated with the automation systems to help balance asset availability and utilization
Invensys' award-winning real-time equipment Condition Monitoring (CM) solution to facilitate highly effective predictive maintenance techniques
Invensys' advanced refinery and offsites applications for refinery order management and product movement monitoring, tank farm information, and movement line-up and execution
Third-party real-time plant database and production scheduling applications
Associated engineering, integration, training, and site services.

The Invensys automation systems at the new Laffan Refinery will be interfaced to existing Invensys systems at both the RasGas and QatarGas sites to help maximize the synergies between these plants.

SYRIA

Iran, Venezuela plan 150,000 bpd Syrian Refinery

Venezuela and Iran are planning to construct a petroleum refinery in Syria capable of processing 150,000 barrels a day, Venezuela's oil minister has said.

'We're studying [planning] an oil refinery in Syria,"said Rafael Ramirez, during an official visit to Venezuela by Mahmoud Ahmadinejad, the Iranian president, on September 18

Venezuela's relations with Iran and Syria have strengthened under Hugo Chavez, its president, who views the Middle Eastern nations as important allies in his efforts to build what he calls "multi-polar world" no longer dominated by the United States.

Ahmadinejad's first trip to Venezuela also highlighted Iran's backing for the fellow OPEC country's bid for a UN security council seat that Chavez would use to challenge Washington's campaign for international sanctions against Tehran.

Chavez said Ahmadinejad's visit showed that the two countries were jointly defying what he says is the imperialist aggression of the world's only superpower.

"It is a union that seeks a balance in the world and to save the future of your children, my children and our grandchildren," Chavez told a state-owned TV network.

Buoyed by high oil prices that underpin their popularity at home and tapping into anti-American sentiment around the world, both presidents are awkward foes for the United States.

Iranian-Venezuelan ties have previously focused cooperation as major oil exporters, but the leaders emphasized their new bond in standing up to America.

Under Chavez, Venezuela - the world's fifth largest oil exporter - has reduced its refining assets in the United States while expanding operations throughout Latin America and the Caribbean.

Petroleos de Venezuela SA, Venezuela's state-run oil company, has recently bought a stake in a small Argentine refinery, signed a deal to double capacity at a Uruguayan refinery, revamped a Cuban refinery and laid the cornerstone for a $2.5 billion refinery in Brazil last December.