aug 07 update

The refinery from which an estimated 42,000 gallons of crude oil spilled into a river flowing into Oklahoma has reached an agreement with a federal agency to clean the spill.

The oil spilled into the Virdigris River after floodwater inundated the Coffeyville Resources refinery on June 30, and left a coat of oil on buildings, vehicles and vegetation in the Coffeyville area after the waters receded by the second week of July.

The oil was carried by the river several miles into Oklahoma, but was believed to have mostly dissipated before reaching Lake Oolagah, one of two lakes that provide drinking water for Tulsa.

The company said it has voluntarily entered into an Environmental Protection Agency agreement in which it will "conduct a timely and thorough cleanup of oil-impacted areas."

"We appreciate the efforts of EPA in working with Coffeyville Resources to develop an effective strategy for responding to the release," Jack Lipinski, CEO of Coffeyville Resources, said in a news release.

"The agreement with EPA describes Coffeyville Resources' ongoing efforts to remove oil discharged from the refinery, to assess affected areas, and to continue to ensure that public water supplies are not impacted by the release."

The company also said it has established a toll-free number to help residents file claims related to the oil discharge.

ExxonMobil Restarts Hydrocracker at Baytown Refinery

ExxonMobil Corp.'s Baytown, Texas, refinery planned to restart a hydrocracker July 11 after about two weeks of maintenance, according to a report filed with the Texas Commission on Environmental Quality.

The unit, hydrocracker 1, which converts crude to more valuable light products, was shut on June 23 to repair a leak in equipment associated with the unit. The shutdown had "minimal impact" upon production, and customer needs continued to be met, said the report filed at the time.

The ramping-up restart process is seen taking about two days to complete.

The refinery is the largest in the U.S., with the ability to process 565,000 barrels of crude oil a day.

Graham Corp Wins $9.5 Million Vacuum System Order for U.S. Gulf Refinery Expansion Project

Graham Corporation announced July 9 that it has been awarded a $9.5 million purchase order for an ejector/liquid ring pump combination vacuum system for a major U.S. refinery expansion project located in the U.S. Gulf Coast region. Planned delivery is September 2008, and revenue will be recognized on percentage of completion basis. At this time, it is not anticipated that this order will contribute to current fiscal year 2008 sales.

The refinery, which produces gasoline, diesel and aviation fuel, will add over 300,000 barrels per day in additional capacity. This increase, which is equivalent to building a new refinery, will make this site the largest refinery in the U.S. and among the largest in the world. The refinery already had several pieces of Graham’s equipment in its existing operations.

James R. Lines, President of Graham Corporation, noted, “This expansion is representative of the significant investment being made by the oil industry in U.S. refinery operations. We believe that market fundamentals continue to support refinery expansion in the U.S. and around the world, and we intend to capitalize on this growth while focusing on the projects and customers that have the highest degree of likely success.”

Graham engineers have been working with the refiner and the engineering, procurement and construction contractor over the last 18 months to develop design options and solutions to best meet the operating objectives of the refinery. The refinery will include the latest in design and technology that will minimize emissions associated with the refining process and produce lower emission fuels.

BP Cherry Point Refinery Shelves Plan for $500 Million Power Plant

The BP refinery at Cherry Point has postponed plans to build a power plant.

BP's Bill Kidd says expanding the refinery is more important now, but it's possible the project could resume in the future.

BP had planned to spend $500 million on a co-generation plant that would have produced power for the refinery and enough electricity for 400,000 homes.

BP Refinery in Whiting Returns Unit to Production

The BP refinery in Whiting, Indiana, has returned a distillation unit to production that had been shut down since July 5.

The shut-down of the unit was one of the reasons oil industry analysts gave for recent higher gas prices.

The unit processes 250,000 barrels of oil a day, about 40 percent of the refinery's capacity. It was shut down after a leak was detected.

A refinery in Coffeyville, Kansas, remains closed after a flood, but a pipeline linking Illinois and Texas reopened after a leak forced its closure on July 15.

Permits Approved for BP Refinery $3.8 Billion Expansion to Allow more Toxins into Lake

BP’s Whiting IN Refinery has been granted state and federal permits that allow it to release more ammonia and sludge into Lake Michigan, action that comes to the chagrin of local environmentalists.

BP received permission from the Indiana Department of Environmental Management and the U.S. Environmental Protection Agency to be exempt from environmental laws that cap the amount of toxins discharged into the lake.

"We asked for and were granted a new permit that provides a broader window for us to operate," said BP spokesman Scott Dean.

The refinery needs the exemption to proceed with its $3.8 billion expansion that will allow it to process heavy crude oil from Canada. The refinery's discharges, which are expected to include 54 percent more ammonia and 35 percent more sludge daily, will remain within federal and state pollution water standards. The permit is effective for three years, once the expansion is operational.

"It's a massive upgrading project that ensures the economic future of the Whiting refinery," Dean said, adding not getting the permits would hinder the project's feasibility.

The expansion, which is expected to add 80 jobs at the refinery, is on track to be completed by 2011, he said. An air permit still is required before work can proceed.

The refinery will build a new diffuser apparatus that will reduce the concentration of pollutants in the water by mixing them with clean water 200 feet from the shore. However, the refinery doesn't have adequate real estate to build a larger waste water treatment plant, Dean said.

"The Whiting refinery has a state-of-the-art waste water treatment plant that's equipped with primary, secondary and tertiary treatment: multi-state waste treatment that's in full compliance," he said July 16. "We use the best waste water treatment technology. Both state and federal environmental bodies reviewed our data and didn't see any risk with us having the new permit."

But Lee Botts, a Gary environmentalist and founder of the Great Lakes Alliance, said she and others think BP should try harder to protect the environment.

"The wastewater treatment plant is built on lake fill," she said. "We find it hard to think they couldn't find more room, given the size of the facility."

She and Tom Anderson, executive director of Save the Dunes Council, spoke at an April public hearing in Whiting concerning the permit plan.

"We raised a lot of issues, and we've been in an extensive exchange of information on it," said Botts, who said she's not surprised the permits were granted. "From an economic and social perspective, it's an enormously important project for the area and for the country. We're not objecting to them being able to operate; we just think they should do the maximum possible to protect the environment."

Although remaining within pollution limits, environmentalists have said the permit violates meet Clean Water Act standards, which prohibit water quality from being adversely affected by the source of pollution, even if the pollution doesn't violate federal and state standards.

"We're disappointed by the decision," Botts said. "The aim of the Clean Water Act, which is impossible to meet perfectly, was to stop of discharge of pollution into waterways. That's very unrealistic, but we've been making progress."

Bakersfield Kern Refinery to Evaluate Sale

Kern Oil & Refining Co. has hired an investment firm to evaluate business opportunities, including selling the privately owned company, director and Chief Financial Officer Steve Christovich said July 16.

"It's still an exploratory process," Christovich said.

"Our operations are fine here," he said. "We're running business as usual."

The Bakersfield refinery is one of California’s smallest, with the capacity to process 25,000 barrels of crude oil per day. About half of that becomes gasoline, according to the California Energy Commission.

The largest refineries, BP West Coast Products LLC in Carson and Chevron U.S.A. Inc. in El Segundo, each process 260,000 barrels a day.

Kern Oil & Refining Co. has hired Houston-based investment bank, Simmons & Co., to represent the refinery in any possible sale.

"They've had a long survival over there as a very small refinery, which is to their credit," said Joe Sparano, president of the Western States Petroleum Association, a trade organization.

California regulations calling for cleaner-burning, MTBE-free gasoline have required refiners to invest heavily over the past two decades in technology and equipment upgrades, Sparano said. Much of the gasoline produced at the Kern Oil & Refining Co. likely stays in Kern County, said California Energy Commission spokeswoman Susanne Garfield.

Garfield could not comment on what impact a sale might have on consumers, but said that every barrel of gasoline that meets California's air quality standards is important to the state's supply.

Kern Oil & Refining Co. is one of 14 producers of gasoline and diesel that meet California Air Resources Board standards, according to the commission. In the early '80s there were 32, Sparano said.

The dwindling supply means refiners who have stayed in business "make a great deal of money," said Dallas-based energy consultant Malcolm Turner.

Turner, chairman of Turner, Mason and Co., helped Shell Oil sell its aged Bakersfield refinery to Utah-based Flying J in 2005.

Purchase offers might come from entrepreneurial individuals or small companies, he said.

"Yes, they will find a buyer and there will be some interest in it," Turner said.

It's unlikely that a refinery the size of Kern Oil & Refining Co. would attract a buyer as large as Flying J, he said.

The refinery has been operating since 1934.

BP’s Carson, CA Refinery Hydrocracker Restarts

The 50,000-barrel-per-day (bpd) hydrocracker at BP Plc.'s 265,000 bpd Los Angeles-area refinery in Carson, California, was up and running on July 23 after restarting over the weekend, said sources familiar with refinery operations.

The hydrocracker was shut on July 5 for unplanned repairs that were expected to last 10 days, but the work was extended until at least July 19, sources said.

Air Agency OKs Bay Area Refinery Flare Reduction

Regional air quality regulators have approved plans to reduce flaring at all five of the Bay Area's refineries, a major step toward implementation of the first flare rule in the nation.

The plans, written by the gasoline makers, require the refineries to implement all feasible methods to reduce flaring.

"We've obtained commitments from each of the refineries to make capital and operational improvements to ensure that they eliminate unnecessary flaring," said Jack Broadbent, executive officer of the Bay Area Air Quality Management District. "Over time, this regulation will continue to further improve air quality in the communities nearest the refineries and throughout our region."

But residents near Bay Area refineries complained for years that they were being used excessively because the gasoline companies were unwilling to invest in equipment that would reduce the frequency and amount of gas released through the flares.

Those concerns were borne out. As regulators began increasing scrutiny of the refineries in 2002, the companies began changing operations and investing in equipment, like compressors that could capture gases that would otherwise be flared.

Flaring has been reduced by more than half at Bay Area refineries.

On average, about 1 ton of volatile organic compounds and 0.65 tons of sulfur dioxide are released through flares each day at the region's refineries.

Coffeyville Refinery Operations to Resume By Mid September

Coffeyville Resources LLC said July 18 that operations are expected to resume by mid-September at its Kansas refinery, which was closed earlier this month by record flooding from a nearby river.

During the weekend of June 30-July 1, heavy rains caused the Verdigris River to overflow its banks, top protective levees and flood the town of Coffeyville, including Coffeyville Resources' 108,000-barrels-a-day refinery and nitrogen fertilizer operations.

"We are fortunate that our preliminary assessment indicates there was no major damage to our large, engineered equipment and processing units," said Keith Osborn, executive vice president and refinery general manager. "However, we had damage to a large number of pumps, motors and control equipment, which taken together require extensive repairs."

Coffeyville Resources employees, supplemented by nearly 1,000 contract workers, are on site repairing and replacing equipment damaged by the flood.

On July 20, the company began the process of resuming production of nitrogen fertilizer at its plant near its oil refinery.

While gasoline inventories in the Midwest region are still tight, many of the operational problems in regional refineries that have eaten into the region's usual cushion of stockpiles since April have been resolved. Wholesale prices, the market most responsive to changes in supply, began falling last week on news of coming refinery unit restarts.

The latest of those problems, the unexpected shutdown of the largest crude processing unit at BP PLC's (BP) 410,000 barrel-a-day Whiting refinery and two weeks of concurrent unanticipated repairs at Valero Energy Corp.'s (VLO) Ardmore, Okla., refinery, accelerated the gasoline price rise that began when the Coffeyville refinery was shut down.

The BP news was especially significant to oil markets because the unit that was shut was the third and largest of three crude units to have a problem at the refinery in the last three months.

However, BP's crude unit restarted over the July 14 weekend, and the Valero repairs were seen wrapping up the following week.

Moody's Investors Service downgraded Coffeyville Resources' corporate family rating and its senior first secured debt ratings. Coffeyville Resources is a joint venture between the private equity arm of Goldman Sachs ( GS) and New York-based Kelso & Co.

The refinery shutdown has again delayed Coffeyville's initial public offering, Moody's said.

While the refinery shutdown means the loss of a major source of cash flow, Moody's anticipates that the company will receive substantial financial support from its equity sponsors, as well as up to $150 million from its business interruption insurance coverage and modest cash flow from its adjacent fertilizer plant.

Coffeyville's insurance policy includes $1.25 billion overall coverage for natural disasters and insures the facility against flood-induced damage and business interruption for up to $300 million, with an initial 45-day deductible.

Murphy Oil Seeks to Expand Wisconsin Refinery to 235,000 bpd

Murphy Oil Corp. wants to significantly expand its Superior refinery. Manager Dave Podratz said expanding to 235,000 a day from 35,000 barrels a day would help the region, which he said doesn't have enough refining capacity and has some of the highest prices in the country as a result.

But, Murphy's plans are tentative, in part because of high steel prices and a lack of skilled laborers.

Any project would take years to complete. And, Podratz is still looking for a financial partner in the Murphy Oil expansion.

Superior planning director Jeff Vito said the investment could potentially reach more than $6 billion.

Another company, Hyperion Resources of Dallas, is considering an $8 billion refinery in South Dakota.

BP’s 405,000 bpd Whiting Refinery at Full Capacity Next Year

BP Plc, Europe's second-largest oil company, expects its 405,000-barrel-a-day refinery in Whiting, Indiana, to resume full production in the first half of 2008.

“Repairs are ongoing and we expect to resume sour crude processing in the fourth quarter of 2007 and to restore the refinery to its full flexibility and crude capacity in the first half of 2008,” BP said in a statement.

BP has lost output at the Whiting refinery, the largest in the Midwest, and at its plant in Texas City, Texas. At full strength, they can handle a combined 880,000 barrels of oil a day, more than the daily production of Qatar.

The “very cautious” outlook on the return to full capacity of the Whiting refinery is “disappointing,” Richard Griffith, an analyst at Evolution Securities, said July 24. “It does reflect BP's experience with the Texas City refinery,” Griffith said. He has an “add' rating on the stock.

The Texas refinery is expected to process about 400,000 barrels a day by the end of this year, BP said in a presentation following the release of second-quarter results.

Total refining throughput in the second quarter fell 7.6 percent to 2.128 million barrels a day, BP said in the statement. “The lower throughputs were mainly due to the outages in the Midwest U.S. refineries,” the company said.

House Urges Reconsideration of Whiting Permit

The House voted July 25 to urge Indiana to reconsider its approval of a permit allowing an expanded BP Amoco refinery to dump more pollutants into Lake Michigan.

The resolution passed 387-26 on a roll call vote.

"This Congress will not simply stand by while our Great Lakes are treated like a dumping zone," said Illinois Rep. Rahm Emanuel, chairman of the House Democratic Conference and the bill's chief sponsor.

All of Illinois' 19 House members voted in favor of the measure except Peoria Republican Ray Lahood, who was absent.

Indiana's nine-member delegation was divided along partisan lines on what was generally a bipartisan vote. Four Democrats backed the resolution--one, Julie Carson, who was a sponsor, did not vote. The four Republicans opposed it.

The Indiana Department of Environmental Management has issued a permit allowing BP to increase its daily dumping of ammonia and silt into Lake Michigan as part of the company's plan to expand its Whiting, Ind., refinery. Officials have said the amount still would fall within federal guidelines.

Indiana Gov. Mitch Daniels, a Republican and former Bush administration official, defended the permit, saying it was in compliance with state law.

"We've got thousands of jobs that would be at risk if it doesn't move forward," he said.

Daniels added that the plant's increased capacity, projected to be 15 percent more by 2011, could help lower gas prices and thus help drivers in both Indiana and Illinois.

"I don't think it should be held up without a good scientific reason--and none has been provided," he said.

Great Lakes-area lawmakers had voiced concerns July 25 about what more ammonia and silt would mean for a major source of drinking water.

Illinois Rep. Mark Kirk, from Chicago's affluent northwest suburbs, accused fellow Republican Daniels of having made a "big mistake" and said the Indiana Environmental Protection Agency failed in its duty.

Rep. John Peterson, R-Pa., argued in Indiana's defense, saying the state had coordinated with the U.S. EPA to ensure federal clean-water requirements were met.

"We must have clean water and clean air, but if we are going to have a political reaction without the hearings, without the information, we shouldn't make these kinds of decisions on the floor of the House," he said.

BP officials told Illinois lawmakers after a July 25 meeting at the Capitol that they would meet with them again in September after reviewing their expansion plan further for possible ways for dealing with environmental concerns.

Illinois Gov. Rod Blagojevich has said state officials would consider legal action if Indiana doesn't rescind the permit.

Husky Shuts down Its Lima, OH Refinery after Fire Damage

Production was halted at the Lima, OH Refinery, and it could be mid-August before it's running at full capacity.

The refinery was shut down while workers attempted to repair damage caused by a July 19 fire that destroyed a transformer in an electrical substation. Late in the previous week, the plant was operating at 25 percent of its 165,000-barrel-per-day capacity but shut down completely over that weekend, according to Husky Energy Inc. spokesman Graham White.

Workers have replaced the damaged transformer, but some wiring and ancillary equipment need to be ordered. Even if the parts come in by the company's target date, it will still take weeks to get the refinery up to full production.

According to White the repair work was going well. The destroyed transformer had been removed and the new one was on site and was ready to be installed. Getting the refinery up to full capacity could take two to three weeks or more, so the move to full production would be a gradual one.

"It will be a full startup. We won't be up to full capacity until the middle of August," White said.

"We're using the down time to perform critical maintenance that is usually done in shutdown, so from that perspective it turned out OK," White said.

White refused to comment on what the lost capacity would mean in lost profits for Husky or its possible affect on the national market.

Husky acquired the 120-year-old plant for $1.9 billion to add capacity to process oil from Alberta’s tar sands.

BP Whiting Refinery Permit to Trim Mercury Discharges

Environmental regulators say the new wastewater permit for BP's refinery will lead to less mercury being dumped in Lake Michigan.

U.S. Environmental Protection Agency representative Peter Swenson said BP will have to reduce its mercury discharges to just over one ounce by 2012 under the new permit. That would bring it into compliance with EPA standards.

The permit has been controversial because it allows the refinery to discharge 54 percent more ammonia and 35 percent more silt into the lake.

Illinois politicians have strongly criticized Indiana's decision to allow the discharge increases. The U.S. House of Representatives voted 387-26 to urge Indiana to reconsider the permit.

Husky Looks South for Refining Solutions and Assesses Impact of Fire on Lima, Ohio Refinery

Husky Energy Inc. will be looking south to add refining capacity as its heavy oil and bitumen operations in Western Canada ramp up, the integrated oil and gas company said July 19.

Nabbing refining capacity for an expected 500,000 barrels per day of bitumen over the next 40 years is critical for the evolving integration of Husky's heavy oil and oil sands operations, the company said.

Shares in the major oil and gas producer edged down in July 19 trading after the company reported a 24 per cent drop in second-quarter profit and said a minor electrical fire at its refinery in Lima, Ohio on the 19th cut production sharply.

The newly acquired refinery was forced to cut operations by 75 percent after an early-morning fire at an electrical substation shut off power to the facility.

No one was injured in the fire, which was contained immediately, Husky said. Insurance will cover any losses while the company determines the extent of the damage and when full production can resume, according to the company.

"Initial indications are that it's not too serious," chief operating officer Robert Peabody said during a conference call. "We're just looking at how quickly we can get that repaired."

Husky recently acquired the Lima refinery from Valero Energy Corp., the biggest U.S. refiner, for US$1.9 billion, plus net working capital.

The refinery has a 165,000-barrel per day capacity, with approximately 10,000 bpd capacity to process heavy oil, Husky's growth engine in Western Canada.

Husky's Tucker oilsands project, which is ramping production up to 10,000 barrels per day by year-end, is expected to triple output by the end of 2008.

Labor shortages have caused some delays on the ground at Tucker, President John Lau said.

"So far, because of the shortage of labor, we have a bit of challenge for the well head and casing, and it takes a bit more time to steam the project," he said.

Tucker utilizes steam assisted gravity drainage to produce the molasses-thick bitumen by thinning it out with heat.

"Up to today, the warm up steaming is completed. We expect the project will be back on schedule, and we have a production target of about 30,000 barrels per day by the end of 2008."

Problems with water disposal lines caused a halt in steaming, which required time to heat up once the issue was resolved. Production was impacted by around 3,000 barrels.

Design work on the 60,000 bpd Sunrise oil sands project will be completed by the end of the year, when a start up date could be forthcoming. Future expansions to Sunrise could jack up bitumen production to 200,000 bpd.

Husky is reviewing possibilities of integrating more of its heavy oil and bitumen production at the facility, Don Ingram, senior vice-president, midstream and refined products, said.

"We're going to be evaluating that over the next six months and will make announcements by year end on where we are going to go on the sizing of that refinery, and what kind of products we're going to put into it," Ingram said.

Husky reported late on July 18 its net income fell to $721 million, down from $978 million a year ago due to one-off tax gains in 2006.

The company, controlled by Hong Kong billionaire Li Ka-shing, reported a 10 per cent increase in production to 379,000 barrels of oil equivalent per day.

Husky said it will be seeking an internal candidate to replace chief financial officer Geoff Barlow, the second CFO to quit Husky in just over a year.

CANADA

Shell Applies to Build $25 Billion Edmonton Oil Sands Plant

Royal Dutch Shell Plc plans to build an oil sands upgrading complex at its Edmonton, Alberta, refinery that could cost as much as C$27 billion ($25 billion), putting it among Canada's costliest projects, it said on July 30.

Shell said its proposed Upgrader 2 would be built in four 100,000 barrel a day stages, processing tar-like bitumen from its Athabasca Oil Sands Project -- which is already undergoing a multibillion-dollar expansion -- as well as its steam-driven oil sands projects in the same region.

It is the first major project announcement for the Anglo-Dutch oil major since it bought out the minority shareholders of Shell Canada last spring and consolidated the Canadian company into its worldwide operations.

Overall costs are pegged at C$22 billion to C$27 billion, Shell said in a regulatory disclosure document.

"This is not a detailed cost estimate for a financial decision by Shell. It's an early assessment based on current industry trends," Shell spokeswoman Janet Annesley said.

"We don't have the detail behind it with regards to, say, engineering work, etc. We will continue to progress and refine the cost estimate."

Costs per barrel of production appear to be in line with other oil sands upgraders announced in recent months, including the one for the Fort Hills development, led by Petro-Canada, FirstEnergy Capital Corp. analyst Mark Friesen said.

Upgraders are tangles of pipes and vessels that turn the heavy crude wrung from Northern Alberta's oil sands into refinery-ready synthetic oil.

"It looks like this number includes a lot of infrastructure-type things. If you use Petro-Canada's number with infrastructure, then it's very comparable," Friesen said. "This one seems to have everything in it, like water handling, and sulfur and power generation."

Construction of the project, which would also include bitumen blending facilities, could start as early as 2009, assuming regulatory and corporate approval. The first phase may be operational by 2012, Shell said.

Future phases could be built over 15 to 20 years, requiring a construction work force of 3,000 to 4,000 during peak periods, Annesley said.

Shell and its Athabasca partners, Chevron Corp. and Western Oil Sands Inc., aim to boost output of the unconventional crude to 770,000 barrels a day over the next several years.

However, Upgrader 2 would be a 100-percent Shell undertaking, Annesley said.

The upgrader already in operation at Shell's Scotford refinery has a capacity of 155,000 barrels a day.

The expansion of the Athabasca project, including the mine located near Fort McMurray, Alberta, and the existing upgrader at Scotford, has a price tag of up to C$12.8 billion. It is designed to add 100,000 barrels a day of capacity.

Several other developers are building upgraders or are planning to construct them, stretching Alberta's labor supply thin, bidding up the price of materials and forcing cost overruns across the sector.

CANADA / US

Marathon Evaluating Refinery Projects To Run Canadian Crude

Marathon Oil Corp. (MRO) may shift upgrading plans for its Midwestern refining system to handle volumes from newly acquired production in Alberta, Canada, executives said July 31.

The company will favor refineries with easy access to pipelines carrying Canadian crude oil.

Marathon said it agreed to acquire Canada's Western Oil Sands Inc. (WTO.T) for $5.56 billion plus assumed debt of $650 million, gaining access to Western's 20% stake in the Athabasca Oil Sands Project, one of the world's largest crude-oil reservoirs.

Upon completion of the transaction, oil producer and refiner Marathon will gain access to more than 300,000 gross acres of oil sands, of which more than 200,000 acres are expected to be developed by mining.

"The value creation is around the much lower cost that we can commercialize this at," said Chief Executive Clarence Cazalot. The acquisition of Western Oil Sands will allow Marathon to refine heavy crude from the Athabasca region at its Midwestern refineries for less than half of the cost of upgrading them at the exploration site, he explained.

The company's refineries in Detroit, Mich., Robinson, Ill., and St. Paul, Minn., are the first candidates for expansion, said refining chief Gary Heminger, speaking during a conference call. A previously discussed potential expansion of the company's Catlettsburg, Kentucky, refinery has been put on the back-burner, Heminger said.

Marathon will come to a final decision on whether to expand its Detroit, Michigan, refinery by the end of the year.

"We've always had Detroit in the first position," said Heminger. "We believe that Detroit will have the appetite for crude expansions (at the Athabasca oil sands) through the middle of the decade," he said.

The Detroit refinery will be a cost-effective location for refining the heavy, gunky oil extracted from the former Western Oil assets in the Athabasca oil sands. If approved, the expansion will add a coking unit, which refines the heaviest grades of crude oil, and expand its crude-processing capacity.

In the first quarter of next year, the company will begin evaluating whether to expand its Robinson, Ill., refinery, Heminger said. Robinson would be a much more complex project than the Detroit expansion, and would come online between 2012 and 2014, Heminger said.

Robinson has a competitive advantage from a transportation standpoint, said Heminger, because the refinery is located just 80 miles from a transportation hub at Patoka, IL.

Proximity to the Patoka hub has also made the St. Paul refinery a particularly attractive candidate for expansion, he said. St. Paul has a "competitive advantage of transportation costs, even over the Chicago area," said Heminger.

Any expansion at the St. Paul refinery would be at a smaller scale, he said.

Work on evaluating an expansion at Catlettsburg has been stopped because of the substantial transportation cost to bring crude 400 miles to the Kentucky refinery from Patoka. "Transportation options might open up down the road," said Heminger.

The company will be able to consider new transportation options - especially a potential route from Canada to the Gulf Coast - if such pipelines are developed as more production comes online from the former Western assets, said CEO Cazalot.

CENTRAL AMERICA

Reliance Industries to Bid for $7 Billion Refinery in Central America

Reliance Industries Ltd., is preparing a bid to construct and operate a US$7 bln refinery in Central America, the Business Standard reported, citing a company spokesman.

Reliance is on the lookout for a refinery in the US or Central America as the region has a major market for petroleum products, although Central America is a better option as the environmental norms there are not as stringent as in the US, the spokesman added.

Besides Reliance, Colombia's Ecopetrol, Japan's Itochu Corp and the US-based Valero Energy Corp. are vying for the contract to build the refinery, for which Mexico has already promised crude oil supply of 80,000 barrels per day for eight years.

The final offers by the four companies are expected to be presented by June 16, 2008, the newspaper said.

The Indian daily also cited sources as saying that Reliance is planning to buy a petroleum marketing company in North America.

International Interest in a Central America Refinery Progresses

Mexico's Ministry of Energy said four international companies have expressed interest in constructing a refinery in Central America under terms of the Mezo-American Energy Integration Program (PIEM).

The ministry named the companies as Colombia's state-owned oil company Ecopetrol; Itochu Corp. of Japan, Reliance Industries Ltd. of India; and US company Valero Energy Corp. — all four of which have been pre-selected by PIEM.

Benefits offered by the bidding include an 8-year buy-sale contract of Mexican oil, plus bank credits from Inter-American Development Bank and Central American Economic Integration Bank.

Costa Rica, Guatemala, Honduras, and Panama have ratified the PIEM, which will allow the investor to build a refinery in their countries.

PIEM, which first met in December 2005, aims to complete four tasks: to build a refinery in a Central American nation, create a "spine" of electricity links among the PIEM nations, harmonize energy regulation across the region, and promote the use of sustainable and renewable energy.

PIEM nations include Belize, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, and the Dominican Republic.

DOMINICAN REPUBLIC

Shell to Reveal Buyers of its Stake in Dominican Refinery

Shell plans to reveal in July the buyer of its shares in the Dominican Petroleum Refinery (Refidomsa), after it notified its partner the Dominican State its intention to sell its stake 6 months ago, the newspaper Listin Diario reports, quoting a reliable source.

Shell has 50 percent of Refidomsa’s shares and the State the other 50 percent, though the private company manages its day-to-day operations.

So far the only thing which he has come to the public light on the sale were declarations the, at the end a meeting with the governmental commission presided over by the secretary Property, Vicente Bengoa, named by President Leonel Fernandez to give pursuit to the negotiation.

Shell’s general manager in the country, Rafael Maradiaga, said that after studying various proposals, it selected four groups of finalists and that in the coming days it would inform the Government commission which was the chosen group.

Refidomsa president Rubén Montás said on July 20 that Shell had yet to communicate on the winning group or the price of the negotiation, and said the State will have 60 days to decide if it buys Shell’s stake or if it would let the new partner have those shares, as stipulated in the agreement in effect.

At the end of last month, the Cabinet minister Angel Lockward said the final four groups were Sun Petroleum and the Vicini-Corripio group, Trafigura Beheer B.V. oil group based in Switzerland, with offices, terminals and refineries in 65 countries. It is represented in the country by the group Propagas.

Another group is from Santiago, comprised of industrialists from that province’s free zones sector, the Bermúdez family, and the group Isla, headed by the oil baron John Moller.

NICARAGUA

Chavez Inaugurates 150,000 bpd Refinery in Nicaragua

Venezuelan President Hugo Chavez on July 20 inaugurated a 150,000-barrel-a-day refinery the nation is building in Nicaragua as part of the leftist leader's oil-funded battle against U.S. influence in the region.

Chavez said the $2.5 billion refinery will allow Nicaragua - the second poorest nation in the Western Hemisphere - to earn $700 million annually.

``I have come to deepen ties with the Nicaraguan people through their government,'' said Chavez, who a day earlier celebrated the 28th anniversary of the Sandinista revolution with his ally, President Daniel Ortega.

Ortega vowed during his campaign to have changed from his revolutionary days and said he would work with the United States, once his arch enemy. But since taking office, he has increasingly attacked the U.S. and made more radical statements.

Venezuela is building new refineries in politically aligned countries such as Nicaragua, Cuba and Brazil to ease the country's reliance on the United States - its main market for oil.

An avowed socialist who has sought to counter U.S. influence around the world, Chavez promised Nicaragua millions of dollars in financial aid and investment after Ortega's inauguration in January.

He also has vowed to become the sole energy supplier to Nicaragua, Cuba, Bolivia, and Haiti in an attempt to strengthen his bloc, known as The Bolivarian Alternative for the Americas.

Formed in 2004 by Chavez and Castro to promote trade and cooperation along socialist lines and oppose a U.S.-backed free trade area, the alliance has evolved into a symbol of Chavez's petrodollar-based clout in the region.

Ortega said while Venezuela has sent generators to curb Nicaragua's rolling blackouts and offered the country $400 million in aid, ``I haven't seen the United States send one single energy plant during this emergency.''

Ortega, whose Sandinista government led a war against U.S.-backed Contra rebels in the 1980s, returned to the presidency in January and has cultivated a strong relationship with Chavez, the White House's No. 1 foe in the region.

U.S. ambassador Paul Triveli said Ortega's comments surprised him. He said the United States has launched a five-year aid program that has so far given Nicaragua $10 million and there are plans to give an additional $16 million.

VENEZUELA

Pdvsa Reopens Crude Oil Facilities in Amuay Refinery

A crude oil processor at Amuay refinery of 640,000 bpd, property of state-run oil holding Petróleos de Venezuela (Pdvsa), went into commission again after a stoppage.

Ending in March, Pdvsa reported on discontinuance of the unit, but it failed to provide any details on the recovery time.

"The plant has been commissioned already; it has been operating for a week," said the source.

Amuay and neighboring Cardón compose the Paraguaná Refining Complex of 940,000 bpd.

Venezuela, a key oil supplier to the United States, has undergone a number of operational setbacks in the refinery process over the past few months.

2. ASIA

AUSTRALIA

Australia’s Caltex in the Market for Rivals' Refineries

Australia's largest oil refiner, Caltex, is interested in buying refineries from some of its arch rivals, which are reluctant to invest in Australia because of competition from bigger Asian plants.

Royal Dutch Shell recently said its Australian business might decide against major investments at its Geelong plant in Victoria and Clyde refinery near Sydney because of competition from larger plants in Asia.

In 2003 Mobil mothballed its Port Stanvac oil refinery in South Australia, leaving the oil giant with only its Altona refinery in Melbourne, where it has already reduced capacity.

On July 23, Caltex's chief executive, Des King, said the company would be interested in acquiring other refinery assets in Australia, although it had yet to receive any approaches from rivals willing to sell. Caltex, which is half owned by the US's second-biggest oil company, Chevron, operates two refineries in Sydney and Brisbane, producing about a third of this country's fuel products.

"If something were to become available, we would be interested in knowing how that would fit into our portfolio. Certainly our expertise is running refineries," Mr King said at a briefing in Sydney. "That would help us in terms of economies of scale."

Unlike Caltex and BP, Mobil and Shell have refineries in the immediate region, which means they can rely more on importing fuel. About a quarter of fuel in Australia is imported, with the remainder refined at seven plants, mostly on the eastern seaboard.

"Most likely over the next decade to retain a viable refining industry in Australia some kind of restructuring might be required to compete against these large complexes offshore," Mr King said.

"And people will just make different decisions…Mobil has already decided that they will shut Adelaide and import."

ABN Amro's energy analyst, Aiden Bradley, said Caltex would have to pay a premium for assets from its rivals. "It would go completely against the grain of any oil major…to give one of their competitors a leg-up.” "It's not going to be the sale of the century." he said.

Mr Bradley said the four refining majors - BP, Caltex, Mobil and Shell - would not need to pour large amounts of money into their plants for several years, but after that period he expected a reduction in the number of refining companies in Australia to as few as two.

While a resurgent Australian dollar has given motorists what Mr King described as a "10 per cent holiday" on prices at the bowser, the stronger currency has eaten away at Caltex's US dollar-denominated refiner margins.

"Refined margins increased significantly in US dollar terms … but a big chunk of that was eroded because of the higher Aussie dollar - that is just the nature of our business," Mr King said.

INDIA

Indian Oil to Shut Two Refineries in Gujarat for Maintenance

Indian state-run refiner Indian Oil Corp Ltd is planning to shut down two of its refining units in the western state of Gujarat from Aug 10 to Sept 15 for maintenance, sources said.

The two units likely to be closed are the fluid catalytic cracking unit and atmospheric unit II, in addition to certain other minor shutdowns that will happen in a phased manner.

The company has also shut its refinery in Mathura in the northern state of Uttar Pradesh from June 22 to August 5, also for maintenance.

The Mathura refinery was operating at a capacity of 8 metric tons per annum (mtpa) prior to the shutdown while the Gujarat refinery is currently operating at 12.2 mtpa.

The sources said the company's production will not be affected by the maintenance shutdowns due to linkages with other refineries and there would be no shortage of petroleum as adequate stock has been ensured.

RPL may Complete Jamnagar Refinery next Year

Reliance Petroleum (RPL), which is setting up A Rs 27,000-crore refinery project at its Jamnagar SEZ, said it has completed 65% of the project in just 19 months of its commencement. The company said the work on the RPL refinery will be completed by 2008 and will be the sixth-largest in the world.

The board of directors in its meeting on July 16 disclosed as on June 30, that the company has utilized Rs 21,063 crore for the refinery against a projected utilization of Rs 13,812 crore, the company said in a communiqué to the BSE. The variation was mainly due to payments in advance under project contracts for continued, efficient and speedy implementation of the project, RPL said. The company, which had raised Rs 8,100 crore through an initial public offer last year, said it has achieved an overall project progress of 65% so far.

“During the quarter, the project implementation gained further momentum and led to the achievement of several significant milestones — engineering efforts peaked and cumulative engineering progress crossed the 90% mark and procurement & contracting activities nearly completed,” said a company release.

“I am pleased with the rapid progress achieved by RPL on all fronts of implementation. I would like to compliment the entire RPL team for a successful lift-off of the project,” a company statement quoted RPL chairman Mukesh Ambani as saying at the company’s AGM. “We are well on our way to recreate history of successfully completing the project in a record time frame. The team is fully equipped to sustain the rapid pace of construction in the coming quarters,” he added.

The quarter witnessed near completion of procurement activities for most equipment, tagged items and substantial part of bulk materials, the release stated. The construction activities gained further momentum with massive resource mobilization efforts and near-peak implementation force already at the site.

ONGC to Set up New 66,000 tpy Mini-refinery at Tatipaka

The Oil and Natural Gas Corporation (ONGC) is planning to set up a new mini-refinery unit with a 200-tonne capacity at Tatipaka in the Krishna-Godavari Basin. The project will involve Rs 45 crore.

The corporation is acquiring 23 acres of land for setting up the new unit, which is expected to be commissioned by the year 2009.

The new refinery would double the capacity of Tatipaka refinery, MV Subba Rao, deputy general manager of ONGC and in-charge of the refinery, said.

The Tatipaka complex consists of a mini-refinery, gas collection station (GCS) and an effluent treatment plant (ETP). The refinery has an installed capacity of 66,000 tonnes per year.

IOC Plans Maintenance Work at 2 units in Sept.

State-run Indian Oil Corp.'s Mathura refinery will resume operations from July 29 after maintenance, while its Haldia unit will be shut for up to a month from Sept. 20, a company source said on July 24.

The 160,000 barrels-per-day (bpd) unit at Mathura, located in Uttar Pradesh, was shut on June 21 for planned maintenance.

Once it is running again, IOC will shut some units at its 274,000 bpd Koyali refinery in Gujarat from Aug. 8.

"The shutdown of various units will be spread over 35 days" an official at the firm, who did not wish to be identified, told Reuters. He added that the overhaul would be complete by around Sept. 13.

Koyali's 30,000 bpd fluid catalytic cracker will shut from Aug. 8 for 35 days, while a 40,000 bpd crude distillation unit (CDU-I) will be down for 18 days from Aug. 12.

The refinery, which is IOC's largest, has five CDUs.

Its fifth CDU, with a 60,000 bpd capacity, will be shut for 21 days from Aug. 22, while its 28,800 bpd diesel hydro desulphurization unit will be out of action for 15 days beginning Aug. 22, he said.

IOC's attention will then turn to its 120,000 bpd Haldia refinery in eastern India, which is scheduled to be closed for 25-30 days from Sept. 20 to revamp the power plant and add a gas turbine, the official said.

Over the maintenance period, IOC will step up supplies from its other refineries to meet demand.

IOC has about 10 refineries spread across India with a total capacity of 1.2 million bpd.

INDONESIA

Iran, Indonesia to Build $5.6 Billion Refinery

The governments of Indonesia and Iran have agreed to build a US$5.6 billion oil refinery in Bojanegara, Banten, Indonesia.

"President Ahmadinejad, of Iran, met with the Indonesian president in Jakarta several months ago to sign various Indonesian-Iranian cooperation documents, including on the development of an oil refinery plant in Banten, Iranian Ambassador to Indonesia Behrooz Kamalvandi said.

In a press statement sent to the Human Relations office of the Banten regional government, the ambassador said the refinery plant would likely be built in Bojonegara subdistrict, because it was close to the coast that would make it easy for marketing the product.

In that location, the regional government of Banten is also planning to construct supporting international standard facilities.

"Refinery process needs a lot of water. Therefore, Bojonegara is selected to be the main site of the plant. We have carried out pre-feasibility studies on the possibilities of Bojonegara to be selected," the ambassador said.

He said that the feasibility studies were conducted very carefully and maturely because a site for such a plant needed extensive land.

The project will benefit Banten as it would absorb thousands of workers, he said.

Construction of the plant, which will have a processing capacity of 300,000 barrels of crude oil a day, will start next year and is to be completed in 2012.

Iran will supply 200,000 barrels of crude oil a day to the refinery and the remaining 100,000 barrels will come from Saudi Arabia or Oman, Rudy Radjab, former president of PT Elnusa, a subsidiary of Pertamina, said.

The governments of the two countries are scheduled to meet in Tehran in August to discuss the project.

Indonesia to Sign over $7 Billion Energy Deals with S. Korea

Indonesian companies will sign a string of energy deals worth over $7 billion with South Korean firms during President Susilo Bambang Yudhoyono's visit to Seoul, officials from the two countries said on July 24.

Yudhoyono was to witness the signings on July 25 as part of a three-day state visit to South Korea, where he will hold talks with President Roh Moo-hyun.

An official at state-run Pertamina said the refiner and South Korea's top oil firm SK Corp. will ink a preliminary deal to boost the capacity of the Dumai refinery in Sumatra's Riau province to 200,000 barrels per day (bpd) from 120,000 bpd, the official who declined to be identified, told Reuters.

"Pertamina expects to sign a letter of intent with SK Corp. to boost the Dumai refinery. But the project will take time to materialize," said the official, adding that the upgrade is estimated to cost $1 billion.

South Korea is anxious to gain access to global energy resources to drive its energy-hungry economy, while Indonesia needs investment and technology to open up new fields amid declining output and upgrade refineries to feed its rising fuel demand.

The largest deal will be between South Korea's Kenertec Co., POSCO Engineering and Construction, a unit of POSCO Co. Ltd. and PT Nuansa Cipta Coal Investment on signing a $5.5 billion direct coal liquefaction project in Indonesia.

Pertamina will also sign an agreement worth about $25 million to cooperate in the upstream sector with SK Corp. and state-run Korea National Oil Corp. (KNOC).

The Pertamina official said the state oil firm is currently building a lubricant base oil plant in Dumai refinery together with SK Corp.

The official said Pertamina is expected to sign a preliminary deal with Korea Gas Corp. to study the development of a liquefied natural gas terminal in Indonesia. He gave no details.

He said Pertamina and SK Corp. would seek to forge a $3 million deal to market lubricants under a common brand name.

Pertamina and South Korea's E1 Corp. will also sign a deal to develop a liquefied petroleum gas plant for about $154 million.

The plant, to start production from 2010 for 15 years, will give E1, Korea's top LPG importer and exporter, easier and cheaper access to LPG and gas condensates from gas fields in Palembang in South Sumatra.

The official said Indonesia's PT Petras will sign a deal for an unspecified energy project with a consortium of Korean firms led by Innet Co. worth about $600 million.

THAILAND

Thai Refinery Listings Expected in 2008

The stock market listings of the Thai unit of Exxon Mobil Corp and Star Petroleum Refining Co are expected next year, a senior Energy Ministry official said July 23.

"An appropriate time for the flotation of Esso refinery would be March 2008, while SPRC (Star Petroleum) should go public within one to two months of Esso's listing," Pornchai Rujiprapha, who heads a committee in charge of the listing plans, told reporters.

Esso (Thailand) had appointed Morgan Stanley and Phatra Securities as advisers, Pornchai said.

The listings are required under an agreement made more than 10 years ago, which allowed the oil companies to build refineries in Thailand.

Thailand has seven refineries, and Esso and Star Petroleum are the only two not to have listed.

The Esso unit, which is 12.5 per cent owned by the Finance Ministry, operates a complex refinery with a capacity of 170,000 barrels per day.

Before the listing, the company has to finish restucturing its debts, which surged after Asia's 1997/1998 financial crisis, Pornchai said. It has debts of around 10 billion-20 billion baht ($449.2 million-$896.9 million).

For the listing of the 150,000 barrels per day SPRC plant, state-run PTT PCL, which owns 36 per cent of the refinery, was negotiating with its other major shareholder, Chevron, he added.

The US oil firm owns 64 per cent of Star Petroleum.

PTT has said it wants to list Star in the fourth quarter of this year, but that the plan needed approval from Chevron.

VIETNAM

Vietnam to Adhere to Timetable in Construction of First Oil refinery

The government of Vietnam has repeated its instruction to state oil giant PetroVietnam to adhere strictly to the construction timetable for the country’s first oil refinery scheduled to be completed in 2009.

In a dispatch July 30 Prime Minister Nguyen Tan Dung told the firm to cooperate with France’s Technip Group, the head of an international consortium which won the bid for the Dung Quat refinery’s four major packages, to speed up work and open the refinery in the central Quang Ngai province on February 29.

Technip began work in late 2005.

But PetroVietnam admitted in a recent report to the government that work was proceeding at a “snail’s” pace.

Technip attributed the delay to an inadequate workforce and poor equipment.

Many firms refuse to supply equipment to the group, others had their products rejected for failing to meet technical standards.

Besides the four packages, PM reminded PetroVietnam to keep close eye on works – breakwater, oil exporting port, and administrative and service buildings – ensuring the deadlines of completion.

The Dung Quat saga initially began in 1995, with Vietnam locating the refinery in the Quang Ngai to boost development in the area.

But the project has seen international partner pull outs and repeated delays since that time.

Industry experts call the location of the refinery in central province ‘unfeasible’.

Under the new plan, difficulties again arose, with the government now looking to Technip and its consortium to complete the project.

The PM also reminded PetroVietnam to keep a close eye on the progress of the breakwater, oil export port, and administrative and service buildings to ensure the deadlines were met.

He urged the company to hasten work on other key projects and draft plans for building the country’s third oil refinery.

These include the Ca Mau gas-power-fertilizer complex in the southern province of the same name, Nhon Trach gas-power complex in the southern Dong Nai Province, and an oil refinery complex in Long Son commune in Ba Ria-Vung Tau province.

He instructed the oil firm to cooperate with the Ba Ria – Vung Tau authorities to assess the project and submit it to him for consideration in the third quarter.

The third oil refinery, set to go on stream before 2015, will have an annual capacity of seven million tons of crude oil.

PetroVietnam is asked to work out an estimated investment and measures to arrange financial sources for the project to ensure its feasibility.

Vietnam is Southeast Asia's third-largest crude oil producer with output averaging 350,000 barrels per day. But it still imports most of its oil products in the absence of major refineries.

3. EUROPE / AFRICA / MIDDLE EAST

LITHUANIA

Lithuania’s Mazeikiu Refinery Sale Plans Troubled

Lithuania's decision to sell the Mazeikiu-Nafta refinery (formerly owned by Yukos) to Polish PKN-Orlen was still tolling the refinery as the Russian side recently confirmed no immediate resolution was possible and the pipeline could be finally terminated, local media reported recently. The Lithuanian decision to back the Polish side resulted in retribution from Russia, including cutting off crude flows to the refinery.

The 300,000 barrel-per-day refinery was a prized asset, one that the Kremlin-controlled Rosneft dearly wanted to buy; and it almost succeeded. Last December, a fire at the refinery caused a months-long shut-down and millions of Euro in damage. That led PKN-Orlen to think twice about the purchase. But rather than yield to Rosneft, the Polish concern decided to go ahead with the deal.

However, in July 2006, oil exports through a Russian-Lithuanian pipeline, which provides crude to the refinery, were halted after a leak was found in the Bryansk region. The leak was stopped, but the resulting inspection by Russia's Environmental Supervision Authority resulted in an order demanding that Transneft, the Russian pipeline monopoly, lower the pressure in the line - a move that cut throughput from 31 million tonnes to 19 million tonnes.

Coincidentally, the difference of 12 million tonnes was exactly the volume designated for the Lithuanian refinery. Moreover, the environmental agency discovered over 8,000 defects in the pipeline, which Transneft promised to fix. But in early June, Russian officials announced that the Druzhba pipeline would not be repaired, meaning that all pipeline exports through Lithuania, which gets 90 percent of its oil from the Druzhba, would cease.

POLAND

Technip to Build Paraxylene Complex at Polish Refinery

Technip has been awarded a contract worth approximately €160 million by PKN Orlen S.A. for the construction of a new paraxylene complex in its refinery in Plock, central Poland.

Technip's operations and engineering center in Rome, Italy will execute the project, which includes engineering, procurement and supply of equipment and materials, and technical assistance for activities at site (construction, pre-commissioning and commissioning). Services, materials and equipment supply will be delivered on a lump sum basis; activities at site will be charged on a cost-plus-fee basis.

The complex's production units will be based on UOP technology and have a capacity of 400,000 tons/year. The auxiliary system will be developed by Technip.

Project completion is scheduled for December 2009.

This new contract marks a new step in the collaboration between Technip and PKN Orlen, which includes among others the diesel oil hydrodesulfurization unit and the hydrogen plant currently in progress at the Plock Refinery.

Technip Wins Gdansk Refinery Contract

Technip has been awarded by Grupa Lotos S.A. a lumpsum turnkey contract worth approximately 472 million euros for the Gdansk Refinery in Poland.

Technip's operations and engineering center in Rome, Italy will execute the contract. This is the third contract signed by Technip in Poland in the last few months, reinforcing the presence of the Group in this country.

The contract covers the engineering, procurement, and construction of a new 45,000 barrels per stream day mild hydrocracking unit, based on Shell Technology.

This project is part of Lotos' development strategy whose objective is to increase the throughput capacity of the Gdansk refinery by approximately 75%, bringing it to 10.5 million tonnes of crude oil a year.

The project is scheduled for completion in the fourth quarter of 2010.

SARDINIA

Saras Completes Mild Hydrocracking Catalyst Substitution

Saras S.p.A. has completed, as programmed, the catalyst substitution of one of its Mild Hydrocracking units.

As anticipated the substitution, originally scheduled for Q4, has been brought forward to Q3 in order to maximize production of ultra low sulfur diesel in Q4 when demand is traditionally strong. The unit is now fully operational.

The impact on Q3/07 EBITDA is at the lower end of the previously communicated range of US$7- 10 million.

Saras' operations are mainly centered at the Sarroch refinery near Cagliari on the southern coast of Sardinia. Sarroch is one of the largest refineries in the Mediterranean by production capacity and one the most complex in Europe. The refinery's actual capacity is 15 million tonnes per year (110 million barrels), representing about 15% of Italy's total capacity. Sarlux owns a combined cycle power plant with gross capacity of 575 megawatts and annual production exceeding 4 billion KWhours.

GHANA

Police Investigate Ghana’s Tema Oil Refinery Theft

Three people were expected to be arraigned before an Accra court, for their suspected roles in the robbery of ¢6billion (Gh¢600,000) from the Ghana Commercial Bank accounts of the Tema Oil Refinery (TOR).

The Director of Operations of the Criminal Investigations Department (CID), ACP Charles Tokor said the three people, whose names were being withheld by the police were being processed for court July 11.

He noted that the three were under high security surveillance and were being interrogated by the police.

When asked whether the suspects were responding to police interrogation, he responded that "they are not assisting us in the interrogations but we will take them to court."

He said information has revealed that the suspects included some officers from TOR.

He was emphatic that heads will roll after investigations had established culpability against anyone in the refinery.

The Public Relations Manager of GCB, Nana Duncan said the Bank currently preferred to keep silent on the issue pending its independent investigations.

KENYA

Kenya Refinery Seeks Partner in Upgrading Project

The Kenya Petroleum Refineries Limited (KPRL) has appointed Standard Chartered Bank to find strategic investors to help in its upgrading. The project is estimated to cost Sh22 billion and be complete by 2010.

The Government is to contribute Sh3.25 billion for the project while Royal Dutch Shell Plc Sh1.112 billion. Chevron Texaco Global Energy Inc will contribute Sh1.026 billion, BP Plc Sh1.112 billion and the balance of Sh15.5 billion is expected to be raised from other interested investors.

KPRL general manager, John Mruttu, said July 20 that the firm's board of directors had approved the appointment of SCB and an engagement agreement formalizing the new development was signed between the two parties on July 19.

"KPRL looks forward to working closely with SCB on this important assignment. The potential for increases in processed crude oil volumes resulting from the upgrading of the refinery will significantly enhance profitability of the company and reduce Kenya's dependence on imported refined petroleum products," Mr. Mruttu said.

He said the proposed upgrade had both socio-economic and environmental benefits.

"The project both safeguards the future of the refinery and increases its competitiveness as well as aligning it to the global drive to use un-leaded gasoline and low sulfur diesel," he said.

Mr. Mruttu said cost estimates for the upgrade project were currently being updated by Foster Wheeler Energy Ltd., which was awarded the contract to prepare the basic design for the upgrade.

"A review of the petroleum products market in East Africa is being undertaken by Purvin and Gertz and once the results of these studies have been analyzed the information memorandum package including this new information will be released to potential investors," he said.

SYRIA

China, Syria in Talks on Possible $1 Billion Refinery Project

Syria and China are discussing jointly building a US$1 billion (€730 million) oil refinery in eastern Syria, state media reported July 11.

Syria's deputy premier for economic affairs, Abdullah al-Dardari, discussed the proposed refinery with Premier Wen Jiabao during a visit to Beijing, the Xinhua News Agency and China Daily newspaper reported.

The China Daily quoted Syria's oil minister, Sufian Allawy, as saying a deal would be signed after a feasibility study is carried out.

China's state-owned oil industry has been investing heavily abroad in hopes of security energy supplies to fuel its booming economy.

The refinery would have a daily capacity of 70,000 barrels of crude, according to the China Daily.

The refinery would be financed by China's biggest state-owned oil company, the China National Petroleum Corp., and a Syrian petroleum company, Xinhua said, citing Dardari.

Syria also wants to import Chinese technology to increase production at Syrian oil fields, Dardari said.

"Oil field cooperation is a crucial component (of cooperation) between Syria and China," Xinhua quoted Dardari as saying.

The Damascus government will invite Chinese companies to explore for oil in offshore fields totaling 5,000 square kilometers (2,000 square miles), the China Daily said, citing Dardari.

CNPC and India's government-owned Oil and Natural Gas Corp. agreed in December 2005 to jointly pay US$580 million for a stake in a Syrian oil company.

RUSSIA

LukOil to Invest $3 Billion in Refinery in Russian Republic of Kalmykia

LUKoil’s CEO Vagit Alekperov has stated that the company plans to invest US$3 billion by 2012 in projects to build a gas refinery and filling stations in Kalmykia, a Russian republic on the Caspian Sea. The CEO said the new plant, which will produce industrial chemicals from natural gas, would depend on natural gas supplies from LUKoil-owned

Mr Alekperov said Kalmykia was chosen out of five potential regions because of its advantageous geographic position for gas supplies, and for shipment of refined products. The LUKoil CEO said his company would build 10 filling stations in Kalmykia as part of the cooperation deal.

Jacobs Consultancy Receives Contract for Refinery Upgrade Project in Russia

Jacobs Engineering Group Inc. announced in July that a subsidiary, Jacobs Consultancy UK Ltd., received a contract from Slavneft-Yanos to provide consulting support for a strategic development program at a 300,000 barrels per stream day refinery in Yaroslavl, Russia.

Officials did not disclose the contract value.

Slavneft-Yanos, co-owned by TNK-BP and "Gazpromneft," plans to upgrade this major refining facility by converting the residue into high-value products that meet European specifications.

TNK-BP, one of the leading privately owned oil companies in the world in terms of crude oil production, is a vertically-integrated oil company with a diversified upstream and downstream portfolio in Russia and the Ukraine. It was formed in 2003 by the historic merger of BP's Russian oil and gas assets and those of Alfa Access Renova group. TNK-BP owns 50 percent of Slavneft. The other 50 percent is owned by Gazpromneft, also a leading vertically-integrated Russian oil company which ranks among the largest companies in the world. The Company was established in 1992 as a joint stock company "Siberian Oil Company," and in 2006 it was renamed as Gazpromneft.

The consulting work will be executed by Jacobs Consultancy's office in Marble Arch, United Kingdom, supported by in house process experts from Houston, Texas.

In making the announcement, Jacobs Group Vice President Greg Landry said, "We are extremely pleased to help Slavneft-Yanos strategically evaluate the Yaroslavl refinery and establish the development program for this important asset. This is Jacobs' first contract for a downstream client in Russia. The project is in line with our strategy to continue expanding our Eastern Europe presence in the dynamic hydrocarbon sector."

AZERBAIJAN

Heydar Aliyev Refinery Resumes Liquefied Gas Production

The unscheduled repair of catalyst cracking facility has been completed in Baku Refinery named for Heydar Aliyev. The State Oil Company of Azerbaijan (SOCAR) told APA-Economics that the breakdown has been repaired and the facility is ready to produce liquefied gas.

The cracking facility was shut down for repair at the beginning of July and this failure pushed the price of liquefied gas up.

Azerbaijhan State Oil Company to Build Refineries Abroad

On July 13 the Turkish Energy Markets Regulatory Authority (EMRA) approved a joint proposal by the State Oil Company of Azerbaijan (SOCAR) and Turkey’s Turcas Petrol to build a refinery near the Turkish port of Ceyhan. This was the second large-scale, successful initiative by SOCAR this year -- the first was the acquisition of the Kulevi Oil Terminal in Georgia.

SOCAR formed a joint venture with Turcas Petrol -- SOCAR-Turcas Energy -- in December 2006 to construct a $4 billion oil refinery near in Ceyhan. SOCAR and Turcas applied to the Turkish Energy Markets Regulatory Authority for the approval of the project in April and have been anxiously waiting for the agency’s response.

Just before the application, the shareholders raised the joint venture’s initial capital from 50,000 YTL to 50 million YTL ($40 million). SOCAR owns the majority of shares in SOCAR-Turcas Energy (51%), followed by Turcas Petrol (25%), and Aksoy Holding (24%).

Most of Azerbaijan’s oil is transferred to western markets via the Baku-Tbilisi-Ceyhan (BTC) pipeline, which ends in the port of Ceyhan. So the selection for the new refinery site was not accidental.

In April SOCAR president Rovnag Abdullayev announced that by 2009 “Azerbaijan will own 80% of the oil production in the Azeri-Chirag-Guneshli field,” which holds an estimated 5-7 billion barrels of oil.

“The capacity of the BTC is 50 million tons, of which 40 million tons will belong to Azerbaijan. So, we plan to build an oil refinery in Ceyhan, the outfall of the pipeline, to refine Azeri oil there,” stated Abdullayev.

The proposed refinery will have an annual capacity of 10 million tons, and the necessary investments will be made gradually over the next six years (Turcas.gov.tr).

In addition, SOCAR unveiled its long-term plan to expand its activities in other former Soviet republics and European Union member states. The company already has offices in Georgia and Romania and by the end of this year plans to open new facilities in the United Kingdom and Greece. SOCAR is also considering whether to acquire stakes in major refineries in countries where it may be involved in future oil sales.

SOCAR made its first major purchase when it bought the Kulevi Terminal in Georgia, near the Black Sea port town of Poti. After the purchase, SOCAR’s president announced that the company would upgrade the terminal and build a new refinery with an annual capacity of 5-10 million tons. “We are very interested in Georgia’s market [and] Kulevi Terminal will open our way to the Black Sea,” said Abdullayev.

In March, speaking at the Sixth International Oil, Gas, Energy and Infrastructure Conference (GIOGIE-2007) in Tbilisi, another SOCAR official, Mahir Mamedov, noted that the company will invest $20 million over the next two years into the Georgian economy and will “build three petroleum storage depots and 25 modern filling stations in Georgia”. With the completion of a railway link near Kulevi, the terminal will be ready to receive oil shipments from Azerbaijan by rail starting this fall.

Initially, the Kulevi terminal will process 10 million tons of crude oil per year, gradually increasing this amount to 20 million tons. With SOCAR’s investment and oil deliveries, the Kulevi terminal may soon challenge the Batumi Oil Terminal, which has been the biggest oil terminal in Georgia.

The acquisition of a terminal in Georgia raised the significance of cooperation with Romania, another Black Sea region country and EU member state. In May the local press in Azerbaijan and Romania reported that SOCAR is interested in buying a 25% stake in Romania's second-largest oil company, Rompetrol. However, the parties have not yet signed any agreement.

On July 11-15, a high-level delegation led by Abdullayev visited Romania and met with Romanian President Traian Basescu and other government officials and industry representatives.

After meeting with SOCAR representatives, Romania’s minister for small and medium-sized enterprises, trade, tourism, and freelance professions, Ovidiu Silaghi, said, “SOCAR is [still] interested in processing oil in Romania [and plans] to bring the raw material from Azerbaijan”.

SOCAR has just begun to implement its new strategy, which so far seems to be working successfully. The company wants to secure long-term contracts with a potential buyer and then build its own refinery or partner with the major energy company in that state.

SOCAR has already signed long-term contracts with Thailand’s PTT Public Company Ltd. and Indian Company Reliance Petroleum for delivery of Azeri Light crude oil to these countries.

By 2010, Azerbaijan will be producing 65 million tons of crude oil and more than 10 billion cubic meters of natural gas per year. Natural gas production will reach 20 billion cubic meters by 2015. Hence, SOCAR is likely to continue its international expansion as the country gets involved in other regional projects such as Nabucco and a Turkey-Greece-Italy pipeline.

KUWAIT

Kuwait Increases Refinery Budget to $14 Billion

State refiner Kuwait National Petroleum Company (KNPC) has increased the budget for the Gulf state's planned 615,000 barrels per day refinery to about $14 billion, it said July 23.

The former oil minister, Shaikh Ali Al Jarrah Al Sabah, who resigned in June, had said in May the budget for the Al Zour scheme, the Middle East's biggest refinery project, would be $12 bln.

That was already double the original cost estimate. Rapidly rising costs in the energy industry have hit budgets and delayed refinery projects in the Middle East.

A spokesman for KNPC said the budget was now 4bn dinars ($13.94bn), up from the original estimate of 1.85bn dinars.

The Gulf state issued a new tender for the project last month. It cancelled the first tender in February after bids came in far above its initial budget. Bids reached as much as $15bn, according to local media reports.

KNPC said earlier this month around 30 companies have made preliminary bids for the refinery. The bidding deadline was July 3.

According to media reports, French firm Technip, US companies KBR, Bechtel and Foster Wheeler and Italy's Snamprogetti had submitted pre-qualification bids. KNPC plans to complete construction of the refinery by the end of 2011, a year later than the original schedule.

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