dec 07 update

A diesel hydrotreater at Valero Energy Corp's 325,000-barrel-per-day (bpd) refinery in Port Arthur, Texas, was likely to remain shut for two to four weeks for repairs after a fire November 8, said sources familiar with refinery operations.

A Valero spokesman said the company was still attempting to determine the extent of damage to the hydrotreater after a fire broke out in a heater on the unit.

"We're still evaluating the damage and the impact on production at the refinery, and there are no firm estimates yet," said Valero spokesman Bill Day.

A large number of contractors were in the north area of the refinery preparing for upcoming unit overhauls, the sources said.

A power failure on the north side of the refinery caused heated feedstocks to stop moving through tubes in the heater. One of the tubes ruptured due to the heat build-up, the sources said.

The fire was extinguished in about an hour.

Most of the damage was thought confined to the heater, the sources said, and did not extend to the entire hydrotreater. If the damage was contained primarily to the heater, repairs would probably take between two and four weeks.

Also affected by the power outage; were a platformer and alkylation unit.

"Power was out in some areas of the plant, but most process units are in operation," Day said.

The refinery has diesel hydrotreater processing capacity of 50,000 barrels per day.

Valero to Spend $1.4 Billion Expanding Its Louisiana Refinery

Valero Energy Corp. says it will spend $1.4 billion on a major expansion of its refinery outside of New Orleans that will increase both gasoline and diesel production.

Approval of the plan by Valero's board was announced November 6 by Rich Marcogliese, San Antonio-based Valero's chief operations officer.

The expansion at the company's refinery in Norco, La., will increase diesel production by 49,000 barrels a day and gasoline production by 11,000 barrels a day. The additional production is expected to start in 2010, Marcogliese said.

Marcogliese said the plan, one of the largest capital projects in Valero's history, was designed to increase the production of ultra low sulfur diesel fuel to meet new federal environmental standards in the United States.

About 1,500 people will be employed for about two years during the construction and the additional production will add at least 30 permanent jobs to the refinery's current payroll of 600, Valero spokesman Bill Day said.

Day would not disclose the refinery's output but said the increase would be significant.

Valero owns and operates 17 refineries in the United States, Canada and the Caribbean that have a total output of 3.1 million barrels a day. The company also has 5,800 retail and wholesale fuel outlets.

The planned expansion comes as oil prices flirt with the $100 mark and gas prices are rising. At the pump, the national average price of a gallon of gas rose 1.9 cents from one day to the next, according to AAA and the Oil Price Information Service.

Gasoline prices are up nearly 29 cents since mid-October and are 85 cents higher than a year ago.

The last all-new refinery was built in the United States in 1976. Since then, the gap between refining capacity and demand for motor fuel has narrowed, making any refinery shutdown result in upward pressure on gasoline prices along with difficult prospects of making up lost production.

Valero's plan is the second major refinery expansion recently announced in southeastern Louisiana.

Houston-based Marathon Oil Corp. is planning a $3.2 billion expansion of its refinery in Garyville that will increase crude oil refining capacity by 180,000 barrels a day. Marathon says the refinery will produce 7.5 million additional gallons of fuel daily starting in late 2009 after the expansion is completed.

Marathon believes its project will employ up to 4,000 construction workers, 200 new employees and 75 to 80 new contract employees.

Tesoro Uncertain when Hawaii Refinery Unit will again Produce after Storm Damage

Tesoro Corp., the larger of Hawaii's two refineries, said it is unable to determine when it will be able to start producing gasoline again after a November 4 storm and subsequent power failure damaged the facility's lone gasoline-producing unit.

Nathan Hokama, a Tesoro spokesman, said the company is doing whatever it can to meet its contractual obligations to supply gasoline, and that the Kapolei refinery has an average of about two weeks' supply at any given time.

"But that shouldn't be interpreted that we'll run out in two weeks, because that's not the case," he said.

"Tesoro is using its global presence in the product markets to assess the supply situation to try to meet our contractual commitments, which could include imports. In addition, existing suppliers (including Chevron) have extended their hand to help us during this period."

Chevron's plant is operating normally, according to spokesman Albert Chee.

Hokama said Tesoro expects prices it pays for products to increase because of tight supplies and the price level required to attract supplies from alternative markets outside Hawaii.

"It really just shows how vulnerable Hawaii would be to product supply and price fluctuations without its own refining capacity right here in the state," he said.

But Hokama said "We can't speculate what that will mean to consumers, because it really depends on what's happening in the marketplace," he said.

Hokama said the other major units shut down due to the power failure are expected to be brought back into operation by November. Those units make such commodities as jet fuel, fuel oil and ship fuel. But the catalytic reformer unit, which produces gasoline, sustained damage and is shut down while it undergoes repairs.

"We're working as quickly and safely as possible to bring it back into service," Hokama said.

Tesoro, which has a throughput capacity of 95,000 barrels a day, said the rest of the Kapolei refinery's units will operate at reduced production rates during the repair period. The company said it now expects its Kapolei refinery throughput to be in the range of 70,000 to 80,000 barrels per day during the current quarter, instead of 80,000 to 85,000.

Exxon Reports Los Angeles Refinery Flaring, Upset

Exxon Mobil Corp reported flaring on November 7 at its 150,000 barrel per day Los Angeles-area refinery in Torrance, California, due to an equipment breakdown, according to a notice filed with Los Angeles area air pollution regulators.

A spokeswoman for the South Coast Air Quality Management District said Exxon reported a "unit tripped" at the refinery.

An Exxon representative wasn't immediately available to discuss refinery operations.

Analysts Say Sunoco to Sell Tulsa Refinery

Sunoco Inc is said to be looking for buyers for its 85,000 barrel per day refinery in Tulsa, Oklahoma, analysts said November 7.

"It is better to sell. A lot of financial players are interested in physical assets," said Fadel Gheit, an oil analyst with Oppenheimer.

Gheit said the Tulsa refinery is a stand-alone refinery for Sunoco, which also has refineries in Pennsylvania, New Jersey and Ohio.

"It's not really a sophisticated refinery," Gheit added.

A spokesman for Sunoco said the company does not comment on rumors.

"We continue to operate the Tulsa refinery to the highest standards," said the spokesman, Gerry Davis.

During an earnings conference call on November 6, a spokesman for another independent refiner said the refinery would be on the block, in response to a question during the conference call about whether they would be seeking acquisitions.

"I think we recently heard that Sun would be marketing their Tulsa plant," said Matthew Clifton, chairman of the board and chief executive of Holly Corp.

BP Texas Refinery Ramp-Up May Stretch Into Late November

BP PLC's restart of major processing units at its Texas City, Texas, refinery could take a few weeks longer than expected, stretching further into November, according to a person familiar with the plant.

The ramp-up of a crude processing unit, coker, fluid catalytic cracker, or FCC, and cat feed hydrotreater is "going well but they're taking it real slow," the person said.

The 463,000-barrels-a-day refinery is nearing the end of a slow recommissioning following a serious accident in March 2005 and total pre-hurricane shutdown six months later. BP has said the refinery is on course to reach nearly full output by the end of 2007 and full-capacity production in the first quarter of 2008.

Work on the crude unit, coker and hydrotreater is ongoing, the person said. The maintenance and repairs were originally seen concluding in the second week of November. As of November 16, it wasn't clear when the unit restarts would commence.

On November 15, the refinery filed notices with Texas environmental officials that it planned to restart the FCC and an alkylation unit, both used to produce gasoline, on November 16.

However, the FCC restart may be delayed until Nov. 30, said the report to the Texas Commission on Environmental Quality.

BP and its safety culture have been under heavy regulatory scrutiny following a deadly explosion at the Texas City plant in March 2005, resulting in protracted periods of repair, maintenance and restart at all of BP's U.S. refineries.

NTR Retains Foster Wheeler for Engineering Work at Bakersfield CA Refinery

Foster Wheeler Ltd. said that its subsidiary Foster Wheeler USA Corp., part of its Global Engineering and Construction Group, has signed an agreement with NTR Acquisition Co. (NTR) to perform initial engineering work on planned projects at Kern Oil & Refining Co., pending the closing of NTR's acquisition of Kern. Kern's refinery is located in Bakersfield, Calif.

The terms of the agreement were not disclosed and bookings will be made as work packages are released by NTR. Foster Wheeler expects that the first work will not be released by NTR until after the acquisition closes. NTR anticipates the acquisition of Kern closing in the first quarter of 2008.

"Our agreement with Foster Wheeler is a significant first initiative in the future transformation of Kern's facility into a world-class heavy crude oil refinery," said Mario E. Rodriguez, chief executive officer of NTR. "Our acquisition of Kern effectively launches the platform for NTR's growth strategy and we are prepared to quickly implement our plans for additional investment in Kern's operations."

NTR Acquisition Co. is a special purpose acquisition company focused on the petroleum refining and marketing industry.

NTR announced on November 5, 2007 that it had signed agreements to acquire Kern, a privately held independent petroleum refining and marketing company, from Casey Co., Kern's sole shareholder. As part of the acquisition, NTR expects to make strategic capital investments in Kern's refinery operations to expand its conversion capacity and to improve its product yield.

Foster Wheeler's work will initially concentrate on engineering assessments in advance of specific projects, which are expected to include the addition of a transmix splitter, isomerization unit, hydrocracker and delayed coker to the refinery. The acquisition, which was unanimously approved by NTR's board of directors, is subject to NTR shareholder approval, applicable regulatory approvals and other customary closing conditions.

UOP’s New Slurry Hydrocracking Tech for Heavy Crude, Bitumen

UOP LLC, a Honeywell company, has expanded its portfolio of technologies to help refiners produce clean gasoline from heavier crude oil.

UOP's new slurry hydrocracking process, based on a technology licensed from Natural Resources Canada (NRCan), is designed to upgrade bitumen, a heavy, tar-like, highly contaminated oil derived from oil sands commonly found in Canada, Venezuela and the United States, as well as other heavy, highly contaminated feeds found in other parts of South America and the Middle East.

"As demand for oil continues to grow and light conventional crudes become less available there are more opportunities to tap a vast supply of heavy crudes," said Ashis Banerji, director of refining technology for UOP's Process, Technology and Equipment business unit. "Our new technology allows refiners greater ability to process more difficult crudes and completes UOP's residue upgrading portfolio. Combined with our hydroprocessing technology solutions, it enables us to offer our customers a complete range of solutions not previously available to help them optimize production while meeting growing demand for ultra-clean gasoline and ultra-low sulfur diesel."

"The Government of Canada has decades of science and technology experience in developing oil sands technologies to meet the special challenges of upgrading bitumen," said Gary Lunn, Canada's Minister of Natural Resources. "Through groundbreaking partnerships, such as this one with UOP, we are taking full advantage of the immense energy resources that lie buried on our own doorstep."

The bitumen extracted from oil sands is nearly in solid form, making it difficult and expensive to process into gasoline, diesel fuel and other products, and many of these heavy crude oils contain high concentrations of metals such as nickel and vanadium as well as complex hydrocarbons that make conventional processing methods uneconomic. UOP's slurry hydrocracking process utilizes a slurry catalyst to upgrade bitumen and heavy crudes to lighter distillates that can then be used to produce clean gasoline and ultra-low sulfur diesel.

UOP's slurry hydrocracking technology is based on a technology originally developed by NRCan that develops innovation and expertise in earth sciences, forestry, energy and minerals and metals to ensure the responsible and sustainable development of natural resources. It was further developed and proven commercially viable at the Petro-Canada facility in Montreal over a 15-year period starting in 1985. High availability of cost-effective lighter crudes at that time left little demand for the technology, but feedstock availability is now shifting. The volume of non-OPEC heavy crude supplied to the market increased 23 percent between 2000 and 2004 while the volume of light crude oil dropped 10 percent over that same period.

According to the U.S. Energy Information Association, roughly 80 percent of the world's bitumen is located in Canada. Independent energy industry consultant Purvin & Gertz predicts that bitumen-derived synthetic crude oil production will increase from the approximately one million barrels per day produced today to four million bpd by 2015.

UOP's residue upgrading portfolio currently includes a wide range of solutions to convert petroleum residues to ultra-clean gasoline, jet fuel and diesel. UOP has licensed more than 200 hydrocracking units and residue hydrotreaters worldwide, with more than 120 in production today.

Refinery Gets Nod from North Sioux Development Group

The North Sioux City Economic Development Corp. has approved a resolution in support of a proposed oil refinery in rural Union County.

A site just north of Elk Point is a finalist for the Hyperion Energy Center, which would use cutting-edge technology to refine 400,000 barrels of Canadian oil per day into ultra low-sulfur gasoline and diesel fuel.

The controversial refinery, which would be the first built in the United States since 1976, would create an average of 4,500 construction jobs over four years, with as many as 10,000 workers on site at its peak. When up and running, the energy center would employ 1,800 workers at wages averaging $20 to $30 per hour.

In its resolution, North Sioux Economic Development says the project complements its ongoing efforts to diversify the local economy.

The resolution also declares that Hyperion has "demonstrated a strong commitment to corporate citizenship and community involvement,'' and the proposed energy center would be "constructed and operated in a manner that exceeds all applicable regulatory and environmental rules.''

Delaware Refinery's Former Owner, Motiva Hit with $650,000 Penalty

A past owner of the refinery near Delaware City faces $850,000 in fines and related costs for a series of pollution offenses and permit violations dating to 2001, state regulators reported November 7.

Motiva Enterprises, which sold the local operation to another company, Premcor, in 2004, was cited by the Department of Natural Resources and Environmental Control for more than a dozen offenses over a four-year period. Some of the violations increased emissions of dust and smog-forming compounds by hundreds of tons annually.

DNREC's ruling calls for a $650,000 payment to the state's environmental penalty fund and $200,000 in spending on installation of pollution-control "retrofit" systems that curb emissions from diesel trucks.

Among other violations, DNREC reported, Motiva failed to complete follow-up tests in 2004 after one of its large waste gas treating systems was found to be releasing too much fine dust during tests in 2003. DNREC engineer Ravi Rangan said the company cut off the 2003 testing prematurely after detecting a violation but took no steps to correct the problem.

The company also made unapproved changes to a major refining system in 2001 that increased emissions of smog-forming nitrogen oxides by about 600 tons a year -- about 1.5 times the amount released by Conectiv's Hay Road power plant in 1999.

In addition, Motiva violated dust-release limits 15 times at a storage area for a sand-like refining byproduct called petroleum coke, and the company made unapproved changes that increased pollution from other parts of the operation.

"This issue has been resolved appropriately with a substantial penalty and sends a clear message that the department standards for refineries here in Delaware have been, and will continue to be, extremely high," DNREC Secretary John A. Hughes said in a statement. "We will not tolerate noncompliance."

Valero Energy bought the refinery from Premcor in 2005. DNREC currently is considering a Valero request to install a new scrubber that would eliminate the largest nitrogen oxide pollution problem cited in the action against Motiva, a joint venture of Royal Dutch Shell and the national oil company of Saudi Arabia.

One environmental group objected to the plan recently on the basis that it would convert the air pollution into millions of pounds of nitrates, potentially making the refinery the largest industrial source of nitrate releases to the Delaware River in any state.

DNREC officials have acknowledged they also are investigating other environmental violations by Valero.

Quebec, Texas Refinery Expansions Pushed To 2011 by Valero

Projects at Valero Energy Corp.'s (VLO) refineries in Quebec, Canada and Port Arthur, Texas have been pushed back to 2011, the company said.

"We are still very active in those," Chief Operating Officer Rich Marcogliese told analysts during a conference call November 6.

A project to install a new hydrocracker and expand the asphalting unit at the Quebec refinery is seen as making the refinery more efficient, but will not come online until 2011, after several other projects at the plant have been completed.

A plan to expand coking capacity - the processing of the heaviest part of crude oil - at the Port Arthur refinery - has also been delayed. A plant-wide turnaround has been scheduled for the refinery in 2009, and will include replacement of six drums on the existing coker.

The delay at Port Arthur is partially due to the large amount of work already under way at the refinery. The project will come online approximately one year after the coking project at the company's St. Charles refinery in Norco, La.

BP Texas Refinery Ramp-Up May Stretch Into Late November

The ramp-up of a crude processing unit, coker, fluid catalytic cracker, or FCC, and cat feed hydrotreater is "going well but they're taking it real slow," the person said.

On November 15, the refinery filed notices with Texas environmental officials that it planned to restart the FCC and an alkylation unit, both used to produce gasoline, on November 16.

However, the FCC restart may be delayed until Nov. 30, said the report to the Texas Commission on Environmental Quality.

NTR Retains Foster Wheeler for Engineering Work at Bakersfield CA Refinery

NTR Acquisition Co. is a special purpose acquisition company focused on the petroleum refining and marketing industry.

Marathon Forging Ahead on $1.9 Billion Refinery Expansion

Following a quarter in which Big Oil's profits were dogged by weaker refinery margins, Marathon Oil Corp. (MRO) announced final approval of a $1.9 billion expansion to its Detroit plant.

The move typifies the bullish approach of Marathon, which continues to view refinery investment as a good long-term bet, even in the face of short-term weakness. For investors who believe in the long-term energy story - including the prospects for long-term growth in U.S. gasoline demand - Houston-based Marathon is among the most heavily weighted toward the downstream, or refining and marketing, a business it plans to expand further.

In 2005, Marathon spent $3 billion to buy out its refining joint venture partner, giving the Houston company sole ownership of seven U.S. plants, concentrated primarily in the Midwest. In addition to Detroit, the company is spending some $3.2 billion to expand its Garyville, La., refinery. Some other oil majors have suspended or delayed comparable expansions during this period, due to the outlook on refining margins and expansion costs. In contrast, Marathon sees value in investing in downstream, long-term.

"We find ourselves with a belief in the downstream business," said Chief Executive Clarence Cazalot. Unlike oil reserves, which decline and need to be replaced, Cazalot sees refineries as legacy investments with the potential to provide the company with ongoing returns.

Additionally, Cazalot expects refining margins to hold up, although analysts say a steep drop in margins could make Marathon's projects less of a draw for investors.

Marathon's system excels at making money at the margin, owing to its ability to direct crude and products to the ideal market. "We have tremendous flexibility," Cazalot said.

Marathon's exposure to U.S. refining margins can hinder its share price, as in the most recent quarter when earnings per share fell 31% from a year ago, due largely to the exposure to refining, said analyst Fadel Gheit of New York-based Oppenheimer & Co. Still, when margins are strong, Gheit said Marathon will benefit more than its peers. Marathon has the ability to refine three times the amount of oil it produces, compared with peers whose assets are more evenly distributed between exploration and production and refining.

Despite the dip after third-quarter results were reported, Marathon's shares have nearly doubled over the past two years.

Marathon's faith in refining has led the $40 billion oil company to rank as the sixth largest U.S. refiner, with more capacity than giants like Royal Dutch Shell PLC (RDSB.LN). While Marathon is only a quarter the size of Chevron, the companies have nearly identical U.S. refining capacity.

A spate of new oil and gas production prospects from Canada to Libya to Equatorial Guinea may also help Marathon broaden its portfolio. The third-quarter acquisition of Western Oil Sands territory in Alberta, Canada, has given Marathon a source of inexpensive feedstock that may enable it to run its refineries more efficiently in the future.

As Marathon builds an asset profile that is more balanced between various sectors of the oil and gas industry, it could become a more secure investment, according to Gheit of Oppenheimer & Co.

Marathon's refining joint venture with Ashland Inc. (ASH), lasted from 1998 until Marathon bought out its partner in 2005 to embark on a more integrated strategy, in which it is able to expand its best assets, and invest in crude production and a transportation network to serve them, Cazalot said.

Historically, the Midwest and West Coast have had the nation's strongest refining margins, so the company's concentration of five of its refineries in the Midwest may benefit the company, long-term, according to analysts.

And Marathon is rapidly building its base there: It is upgrading its Detroit refinery, to enable the plant to run crude from its Canadian Oil Sands operation. Possible expansion of its plants in Robinson, Ill., and St. Paul, Minn., are also under consideration for the future.

Unlike other oil majors, who increase their refining capacity by just a few percent each year, Marathon is aggressively expanding its refineries, said John Parry, an analyst with Greenwich, Conn.-based John S. Herold.

But its concentration in the Midwest could be a liability if the region's historically strong margins begin to correct, as happened with West Coast margins during the past quarter.

Cazalot declined to disclose Marathon's pricing estimates but said the company also tests projects "under more conservative" scenarios when conducting project analysis. Even if margins dropped to $4.70 a barrel on the Gulf Coast, the Garyville project would still add an average $350 million a year in net cash flow, after taxes.

Parry and other analysts agree that Marathon's move will be most successful if higher margins of at least the level seen in 2004 to 2006 are sustained. But analysts say that if refining margins tank in a move that brings them closer to the amount seen in the 1990s, the projects will no longer be a draw for investors.

"I think Marathon is making a calculated bet that these mid-cycle margins are probably sustainable for an extended period of time, and that the likelihood of falling, other than very-short-term seasonally back to the morass that existed throughout the decade of the 90s is not going to occur," Parry said.

"What I've seen in the Midwest is that basically demand growth for both gasoline and diesel fuel is stronger there, and is forecast to be stronger there than in other parts of the country," she said.

Historically high West Coast margins - considered to be one of Tesoro Corp.'s (TSO) strengths - fell sharply in the recent period as refiners began to liquidate their inventories under market pressure.

"I think that was a unique California situation," said industry analyst Ann Kohler, with New York-based Caris & Co. Kohler characterized the West Coast situation as a temporary one.

Marathon has billed the placement of its refining network - with the bulk of the plants in the Midwest, and two on the Gulf Coast - as a strength, because it allows them to easily move crude and products to markets where they are highly valued. As crude production from Canada increases, Cazalot said the layout of Marathon's refineries gives the company many choices for where it may process the new supply.

The company says that its approach to developing its downstream assets will be sustainable, even if margins fall.

Marathon was the first company to plan and begin a major expansion of its refining assets. It will nearly double the size of its Garyville, La., plant. While Motiva Enterprises LLC, a joint venture between Royal Dutch Shell PLC (RDSB.LN) and Saudi Aramco has since announced a major plant expansion for the Gulf Coast, other majors have delayed expansion plans or scaled back on previously announced projects.

Marathon maintains that this aggressive strategy is not merely a bet on high long-term prices.

"It's not that we're leaning forward because we have a more robust price deck," Marathon's Cazalot told Dow Jones. "Our price assumptions, we think, are realistic and reflective of market conditions," he said.

BP L.A. Refinery Reports Mechanical Problem Triggers Sulfur Dioxide Release

BP Plc told California pollution regulators in November a mechanical problem at its 265,000 barrel per day (bpd) Los Angeles-area refinery in Carson, California, triggered a sulfur dioxide release in excess of permitted levels.

The release began at 8:20 a.m. PST, November 23, according to the notice filed with the California Office of Emergency Services.

A BP representative was not immediately available to discuss refinery operations.

ARUBA

Valero Net Falls and Puts Aruba Refinery on Block

Independent refiner Valero Energy Corp said November 6 its quarterly earnings fell 20 percent, but its shares rose on news it was considering selling its Aruba refinery.

That refinery, with processing capacity of 285,000 barrels per day, does not produce gasoline, the company said, and has suffered power outages that would require Valero to spend heavily to upgrade the plant.

"A large capital investment is required to make this competitive in the long run, thus we have decided to look at our strategic alternatives," Chairman and Chief Executive Bill Klesse said.

A sale of the Aruba plant could bring $2.5 billion to $3.0 billion, according to a Bank of America note to investors.

Valero sold its Lima, Ohio refinery to Canada's Husky Energy for $1.9 billion earlier this year as part of a review of its assets.

The sale dropped the company's total refinery capacity to slightly below 2.2 million barrels per day, behind the No. 1 refiner ConocoPhillips.

The company also announced it would proceed with the expansion of its St. Charles refinery that would increase its capacity to produce ultra low sulfur diesel.

Valero had warned investors in October that its third quarter earnings would fall short of expectations as the run in crude oil prices to record levels squashed its refining margins, and it said on November 6 the current quarter remained tough.

The sharp contraction in refining margins from the record levels reached in the second quarter have eroded earnings at all the major U.S. refiners as crude oil prices rallied versus the prices in gasoline and other products.

"So far in the fourth quarter, the margin environment has been difficult as prices for refined products have failed to keep pace with the increase in feedstock costs," Valero's Klesse said.

CANADA

KBR Wins Contract for Canadian Gasifer Unit

KBR said November 26 that it has been awarded a $225 million (CAD) dollar contract for construction and fabrication of a gasification unit by Lurgi AG. An Air Liquide subsidiary, Lurgi is a leading international company operating in the field of process engineering and plant contracting.

Lurgi is the engineering, procurement and construction contractor to North West Upgrading. KBR's scope of work will include the fabrication of nearly 100 modules and will peak at approximately 400 personnel performing field construction and module service work on this 30-month project.

The project, located near Edmonton, Alberta, is slated to begin in 2008, with field construction services for the Gasifer unit planned to start in summer 2008, and module fabrication expected to start in mid 2009. Mechanical completion of the Gasifer unit is planned for the first half of 2011.

The North West Upgrading project will have an initial design capacity to process 77,000 barrels of oil sand's SYNBIT/DILBIT mix bitumen feed per day. Two subsequent phases, each of identical capacity, are planned for implementation in the future.

Repairs Underway at Canada’s Scotford Upgrader after Gas Leak

Shell has advised that a gas leak November 19 at the Scotford Upgrader near Fort Saskatchewan, Alberta, was fully under control and all affected units had been safely shut down.

"We regret any concern this incident caused our employees and neighbors," said Upgrader General Manager, Peter St. George. "We appreciated the quick and professional response by our employees and the Strathcona County fire department."

The Shell Scotford Chemical Plant and the Upgrader expansion construction site resumed normal operations by November 20. The Scotford Refinery was in operation at reduced rates and affected customers were notified. Assessment and repair planning at the upgrader was underway.

The November 19 incident began at about 4 pm when a leak occurred in one of two residue hydroconversion units at the upgrader. Vapor ignited and the fire was later extinguished by emergency responders. There were no injuries. Odors were reported, however no offsite emissions above ambient air quality guidelines were measured. Regulatory authorities monitored Shell's response throughout the incident.

An incident investigation was begun as Shell continues to work with the Alberta Energy and Utilities Board and other regulatory agencies.

The Scotford Upgrader is part of the Athabasca Oil Sands Project, a joint venture among Shell Canada Energy (60%), Marathon Oil Sands L.P. (20%) and Chevron Canada Limited (20%).

Irving Submits Environmental Plan for New Refinery

Irving Oil Ltdhas moved on to the next step in its C$7 billion ($7.1 billion) New Brunswick refinery proposal by telling the province how it plans to conduct an environmental impact assessment.

Privately held Irving said it submitted draft terms of reference, giving details of its approach and methods for completing the assessment for the 300,000 barrel a day plant in Saint John, New Brunswick.

The refinery would be its second in the city and would double its refining capacity there. It would start up around 2012.

The company cautioned that taking this step in the planning process does not mean the refinery is a certainty.

"A lot still needs to happen before we can make a final decision to go ahead," Kevin Scott, Irving's director of refining growth, said in a statement.

The refinery is seen as the centerpiece of Irving's New Brunswick energy hub, which also includes a liquefied natural gas plant.

Recent reports said the Irving family, which controls a host of businesses in the Eastern Canadian province, may consider breaking up its empire as it prepares for the next generation to take over.

But Irving Oil said the energy hub plans are proceeding regardless of what happens with family succession.

The refinery would supply fuel to the U.S. Northeast and Atlantic Canada.

$2 Billion Refinery Upgrade Key to PetroCan's Oilsands Strategy

Petro-Canada's Edmonton refinery is undergoing a $2-billion conversion that's now more than halfway finished at the 135,000-barrel-a-day refinery.

The complex is integral to Petro-Canada's ambitious growth plans. It also symbolizes the energy sector's inexorable shift away from conventional activity and its migration toward the oilsands.

Even as natural gas drilling slows, it's still non-stop for most oilsands-related projects – not withstanding the fact that some players, such as Canadian Natural Resources, are stretching out their construction schedules to reduce inflationary pressures.

By the time Petro-Canada's current army of 4,000 on-site contractors have finished their work and the refinery reaches full production in late 2008, it will have weaned itself completely off conventional crude.

Instead, the 56-year-old plant will depend strictly on feedstock from the oilsands -- including a mix of sweet and sour synthetic crude as well as bitumen -- to produce such refined end products as gasoline and diesel fuel.

The result is a big drop in feedstock costs and a big jump in the refinery's projected annual cash flow, to between $300 million and $350 million annually.

"We're anticipating a handover to our operations staff in the third quarter of 2008 and commissioning throughout the fourth quarter," explains Boris Jackman, exec VP of Petro-Canada's downstream operations.

By breaking the refinery conversion project down into "bite size" chunks over the past few years, Jackman says Petro-Canada has sidestepped many of the problems that led to huge cost overruns on other major refinery projects.

"Every investment we've made in that refinery since 2001 has been focused on converting it to run on 100-per-cent oilsands-based feedstock," says Andrew Stephens, the company's senior VP, corporate relations.

"So when we did the ultra-low sulfur gasoline project (in 2004), that was one bite-sized chunk. The next one was the ultra-low sulfur diesel project (in 2006). And again, it came in on time and under budget. Both gave us a lot of confidence that we know this Alberta labor market and we can manage the challenges."

The refinery project is part of Petro-Canada's plan to boost its downstream return on capital employed -- a key measure of profitability -- to 12 per cent by 2010 from 10 per cent last year and just eight per cent in 2000.

More broadly, it's also part of the company's scheme to position itself as one of the top players in the oilsands. When the refinery conversion is done, much of the construction workforce is expected to migrate over to Petro-Canada's equally massive upgrader project in Sturgeon County.

That project, in turn, is but one piece of Petro-Canada's $26.2-billion, 280,000-barrel-per-day Fort Hills oilsands project, which will be built in two phases, with final completion set for 2015.

Phase one -- at a cost of $14.1 billion -- entails construction of a 160,000-barrel-per-day oilsands mine north of Fort McMurray, as well as the aforementioned 140,000-barrel-a-day upgrader in Sturgeon County. Initial mine output is expected in late 2011, with initial upgrader output six months later.

DOMINICAN REPUBLIC

Dominican Government to Buy Shell’s 50 Percent Stake in Refinery

President Leonel Fernandez instructed the Hacienda Ministry to buy Shell’s shares in the Dominican Petroleum Refinery and said as part of the government plan to save fuel, synchronized traffic lights would be installed in this capital and Santiago.

He also announced the conversion of 80 buses, 2,000 public transport, and 400 Police and Army vehicles, to use natural gas.

The chief executive pledged free advice, technical assistance and tax exemptions to the companies and homes to buy and install equipment which use electricity efficiently.

Others saving measures include the financing of the private sector to install natural gas distributors, a special subsidy to the students the Santo Domingo State University UASD and ban the use of government vehicles on weekends.

ASIA

CHINA

China and Russia Agree to Build Oil Refinery in Tianjin

The Russian oil company Rosneft and the Chinese National Oil and Gas Corporation have agreed to jointly build in Tianjin an oil refinery with a capacity of 10 million tonnes a year, the news agency Xinhua reported.

According to the news agency, the companies have already registered a joint venture that will be engaged in implementing the project.

During a recent meeting with a delegation of Rosneft, vice-mayor of Tianjin Yang Lungliang promised to solve the issue connected with the provision of a land plot for the construction of the oil refinery before June 2008.

Tianjin is one of the biggest ports of mainland China.

Shell Loses to BP on Chinese Refinery

BP is continuing its aggressive expansion in China, and its latest comes at Shell’s expense. Shell had been in negotiations with Sinopec and Kuwait Petroleum Corp. to build a 300,000-barrel-per-day refinery in Guangzhou, the capital of Guangdong, but China has selected BP. The refinery is slated for operation in 2010.

Both BP and Shell are active in China’s downstream. BP holds a 9.4 percent stake in Sinopec Zhenhai Refining and Chemical Co., China’s largest. Shell holds a 50 percent stake in an ethylene cracker in Guangdong Province that produces 800,000 tons per year. CNOOC holds the remaining 50 percent.

Shell has been trying to gain a foothold in China's refining sector after its hopes for a share in a new CNOOC refinery were dashed. The two ended talks late last year over a $2.5 billion, 240,000 bpd refinery CNOOC is building at the site of the Guangdong ethylene cracker.

INDIA

Essar to Invest $6 Billion to Expand Refinery

Mumbai (PTI): Ruias-led Essar Oil Ltd on November 16 said it will invest about six billion dollars to more than treble the capacity of its Vadinar refinery in Gujarat to 34 million tons by 2010 and has dropped plans to delist from stock exchanges.

The company would also raise up to two billion dollars through an issue of global depository shares to promoters on a preferential basis at an effective price of Rs 200 apiece, it informed the Bombay Stock Exchange.

"The promoters have informed the company that they no longer intend to proceed with the delisting of the equity shares of the company from stock exchanges," Essar Oil said.

Essar's plans to expand Vadinar refinery comes at a time when rival Reliance Industries Ltd is also increasing the capacity of its Jamnagar refinery in Gujarat. The Mukesh Ambani-led firm is setting up a 33 million tons refinery through a subsidiary Reliance Petroleum Ltd adjacent to RIL's existing 27 million tons refinery in Jamnagar.

India, which imports nearly three-fourth of its crude oil, is surplus in refining with a total capacity of close to 150 million tons a year. State and private refiners would be adding more than 90 million tons in the next four-five years.

Essar Oil is a part of Essar Energy Holdings Ltd, which in turn is a subsidiary of the Ruias-led diversified conglomerate Essar Global Ltd.

INDONESIA

Pertamina, Wahana to Build $20 Million Refinery in East Java

State oil and gas firm PT Pertamina will team up with a local company, Wahana Universal, to build an oil refinery in East Java at a cost of US$20 million.

Pertamina exploration and production director Hestu Bagyo said that the two companies had signed an agreement to build the refinery, which will have a total capacity of 6,000 barrels per day.

"The construction of the project will start in October 2008 and it is scheduled for completion in December 2008, when the Cepu block oil and gas well starts producing," he said on November 24.

Cepu, located along the border between East Java and Central Java, contains an estimated 600 million barrels of oil and 1.7 trillion cubic feet of gas.

The block is expected to produce 25,000 barrels of oil a day when it starts production, targeted for early 2009. This figure could rise to some 165,000 barrels a day in two or three years time.

However, the government wants the block to start producing earlier than the target date to help the government meet its target of a 30 percent increase in oil production by 2009. Under a fast-track program, the block is expected to produce some 10,000 barrels of oil per day by the end of 2008.

The block is operated by ExxonMobil and Pertamina.

MALAYSIA

China's CNPC to Acquire Stake in Malaysian Oil Refinery

Asia's top oil producer, China National Petroleum Corp, will acquire a stake in a new Malaysian oil refinery in the northern state of Kedah it was reported November 8.

The purchase should boost the viability of the project taken by a little-known company, Merapoh Resources Sdn Bhd, a daily said, citing unnamed sources.

There were no details given on the size of the stake CNPC will buy and for how much.

Merapoh, which is building the 200,000-barrels-per-day refinery, provisionally agreed last month to sell its entire production to CNPC under a 20-year agreement from 2013.

'Merapoh will sign an agreement on November 22 with CNPC in Beijing to form a joint venture and secure the supply deal,'' a source was quoted as saying.

CNPC is Asia's top oil and gas producer and most of its current refining businesses are run by its listed unit PetroChina.

China has been snapping up oil and gas assets around the world to boost its petroleum reserves to meet rising industrial and consumer demand.

VIETNAM

Foreign Firms to Build $1.7 Billion Oil Refinery in Central Vietnam

Vietnam's central Phu Yen has licensed UK's Techno Star Management and Russia's Telloil to build an oil refinery with annual capacity of 4 million tons of petroleum products, a Hanoi newspaper reported in November.

Capitalized at more than 27,480 billion Vietnamese dong (US$1.7 billion) the turn out is a total of 4 million tons of petroleum, jet fuel, diesel, benzene, liquefied petroleum gas, and sulfur.

Phu Yen licensed the Vung Ro project on Nov. 18 after receiving a recent in-principle prime ministerial approval. An official from the provincial Planning and Investment Department said if construction proceeds on schedule, the Vung Ro oil refinery should become operational in 2012 when Vietnam's annual demand for petroleum products is estimated to surge to 20 million tons from 12.5 million tons in 2006.

To meet rising domestic demand, the state-run Vietnam National Oil and Gas Group (PetroVietnam) is working on three oil refineries - two in central Thanh Hoa and Quang Ngai provinces, and one in southern Ba Ria Vung Tau province with a combined production output of some 20 million tons per annum.

Vietnam imported nearly 10.4 million tons of petroleum products worth over US$5.8 billion in the first 10 months of this year, posting year-on-year rises of 12.1 percent and 16 percent, respectively, according to the General Statistics Office.

Meanwhile, it exported over 12.4 million tons of crude oil totaling nearly US$6.6 billion, down 9.9 percent and 7.5 percent, respectively.

EUROPE / AFRICA / MIDDLE EAST

FRANCE

Total Says No Leaks in Gonfreville's Cracking Unit

France's Total said on November 9 there were no leaks affecting its 328,000 barrels per day Gonfreville refinery cracking unit, which is still being restarted.

This was in response to a report in which the company union said that leaks in the refinery's cracking unit were behind the delays in a return to full production at the plant, which closed mid-August for planned maintenance.

The full restart of the refinery, France's largest, has been delayed by about a month.

"There are no leaks," a company spokeswoman told Reuters. "The cracking unit is in the process of restarting," she said.

She added restarting such a unit took around four days but declined to put a date on the restart.

Gonfreville started a major turnaround on Aug. 20, and was initially expected to restart on Oct. 15.

The extended turnaround at Gonfreville and unusually heavy maintenance at other refineries in northwest Europe have led to a tight diesel market, sending premiums for the fuel to all-time highs.

At the start of the month France released 285,000 tonnes of heating oil stocks following the production delay at Gonfreville and amid forecasts of cold weather, which increased demand for the fuel.

IRELAND

ConocoPhillips says Irish Whitegate Refinery no longer for Sale

ConocoPhillips has decided not to sell its 71,000 barrel a day Whitegate refinery in Cork, Ireland, the company said November 24.

"The company saw more value in continuing to operate the refinery than selling it," Houston-based ConocoPhillips spokesman Bill Graham said in a statement.

After confirming plans to sell the refinery in January, ConocoPhillips had been in talks with potential buyers, Graham said, without specifying which companies were bidders. Investment bank Goldman Sachs was thought to be interested in purchasing a stake in the facility, according to market participants.

The refinery processes light, sweet crude, sourced primarily from the North Sea. The refinery has the ability to produce 18,000 barrels a day of gasoline, and 30,000 barrels a day of diesel and jet fuel, according to ConocoPhillips reports.

Only 65% of the refinery's throughput yields clean product, according to ConocoPhillips. It is the sole refinery in Ireland, and distributes its refined products inland and by sea to international markets.

The company acquired the refinery when Phillips Petroleum Corp. purchased Tosco Corp. in 2001.

ConocoPhillips' announcement to sell the refinery emerged in January, soon after Royal Dutch Shell PLC announced plans to consider the sale of three French refineries.

LITHUANIA

Lithuania's Mazeikiu Refinery Online after Two-month $80 Million Upgrade

Lithuania's Mazeikiu Nafta oil complex, the only refinery in the Baltic States, resumed operations November 16 after being closed for almost two months for an upgrade, operating company Mazeikiu Nafta said.

The refinery, which belongs to the Polish group PKN Orlen, went offline on Sept 22.

The shutdown, which was one of the longest in Mazeikiu's history, enabled the company to install new furnaces and carry out repairs to other facilities in order to save energy costs and improve efficiency.

The upgrade, which cost an estimated $80 mln, is part of a major five-year modernization plan valued at some $1.5 bln.

A fierce fire almost halved Mazeikiu output last October, which was partly restored by installing a smaller mothballed VDU unit.

The number of outsourced personnel from 15 countries involved in the turnaround exceeded 4000. The company placed contracts with more than 80 contracting organizations, the majority of which were Lithuanian and Polish companies. The work scope of this turnaround was almost three times larger than one performed during the previous turnaround in 2003.

The work carried out during the most extensive turnaround in Mazeikiu Nafta history consisted of numerous projects. In addition to the maintenance of the units and replacement of the part of the installations, significant activities on capital investment projects were performed. The company carried out the replacement of two heaters, installation of new internals in the crude distillation unit tower, revamping of the fluid catalytic cracking reactor block as well as other modernization works.

The plant is not expected to return to its full rate immediately as repairs of its fire-damaged vacuum distillation unit (VDU) are to last into the fourth quarter.

Polish oil group PKN Orlen, which bought Mazeikiu despite the damages at the end of 2006, said it expected the refiner to return to its full rates in the fourth-quarter of this year.

Mazeikiu has been running at about 140,000 bpd before the maintenance started.

The refinery was opened in 1980, when Lithuania was still part of the Soviet Union, to boost Russian oil exports to the West. It remains reliant on Russian supplies.

ROMANIA

Lukoil Awards Foster Wheeler CFB Contract for Romania Refinery

Foster Wheeler Ltd. announced that a subsidiary of its Global Power Group has been awarded a contract for a 70 MWe (gross megawatt electric) circulating fluidized-bed (CFB) steam generator by Lukoil Energy & Gas Romania s.r.l., a subsidiary of Lukoil OAO. The new combined heat and power plant will be located in Lukoil's oil refinery in Ploiesti, Romania.

Foster Wheeler has received a full notice to proceed on this contract. The terms of the contract, which were not disclosed, will be included in the company's fourth-quarter 2007 bookings.

Foster Wheeler will design and supply the CFB steam generator and auxiliary equipment for the boiler island. The plant will be designed to burn petcoke and up to 20% heavy fuel oil. Commercial operation is scheduled for early in 2010.

Foster Wheeler to Supply Steam Generator to Lukoil Romania

Foster Wheeler has announced that a subsidiary of its Global Power Group has been awarded a contract for a 70MWe circulating fluidized-bed steam generator by Lukoil Energy and Gas Romania.

The new combined heat and power plant will be located in Lukoil's oil refinery in Ploiesti, Romania.

Foster Wheeler will design and supply the circulating fluidized-bed (CFB) steam generator and auxiliary equipment for the boiler island. The plant will be designed to burn petcoke and up to 20% heavy fuel oil. Commercial operation is scheduled for early 2010.

SARDINIA

Saras Considers Investment Ideas for Several Sarroch Refinery Upgrade Projects

Saras SpA has several ideas about investments to upgrade its Sarroch refinery in Sardinia but it is not looking at a capacity expansion, said managing director Dario Scaffardi, adding he does not expect any major cost overrun.

'We are not looking at capacity expansion; it's unlikely at the moment. What we are looking at is having further conversion,' Scaffardi said in a conference call after the release of its third-quarter results this morning.

'Other possible options include a new power plant and co-generation unit. There are a variety of ideas at the moment,' he said, adding that no definitive decision has yet been taken.

Scaffardi said the 'very good returns' from brownfield investment has made Saras more careful to possible upgrade projects at the refinery and that its location in Sardinia makes investments there safe from major cost overruns.

'We don't see any major cost overruns. We're largely shielded due to the fact we operate in Sardinia, and local engineering firms haven't really changed in a significant way their pricing policy towards us,' he said.

Scaffardi said Saras is still looking to acquisition opportunities in the refining, marketing, and oil logistics sectors and confirmed the company will adopt a disciplined approach to any operation.

On its gas exploration activities, he said offshore tests will start in the coming months.

UNITED KINGDOM

WoodMac to Consult for UK Upgrader Project

Sonhoe Development Co. has appointed Wood Mackenzie as independent consultants to investors and lenders for its Heavy Oil Upgrading Project on Teesside.

In this role, Wood Mackenzie will provide an independent opinion of the technical and commercial aspects of the project, together with an assessment of its competitive position within the peer group of European refineries and the refining super-sites currently under development in the Middle East.

Sonhoe recently announced plans to build a GBP2 billion specialist oil refinery, an upgrader, in the Tees Valley in the North East of England. The new facility has been designed to process 200,000 barrels a day of heavy crude oil into high quality, low-sulfur diesel, petrochemical feedstock naphtha and kerosene for use in the UK or for export. The plant will also produce large quantities of hydrogen for its own use, plus a surplus for other purposes, and synthesis gas that it will use to generate its own power and steam via a high-efficiency combined cycle heat and power plant.

KENYA

BPCL Joins Race for Kenya Petroleum Refinery

State-owned refiner and marketer Bharat Petroleum Corporation (BPCL) is believed to have joined the race to acquire a majority stake in Kenya Petroleum Refinery (KPRL), Kenya’s oldest refinery complexes with an annual capacity of 4 million metric tonnes per annum (mmtpa).

Reliance Industries (RIL) has already shown interest in acquiring a 50% stake in the refinery, in which the Kenyan government holds 50%, with Chevron and Royal Dutch Petroleum Company holding the remaining.

BPCL has conducted the due diligence, say sources. The acquisition makes sense for the company, as it is in the process of setting up an LPG distribution system in Kenya. BPCL plans to upgrade this refinery to 6 mmtpa and attach a hydro cracker unit, said a senior official. While he refused to divulge the acquisition cost, it may go up, with BPCL joining the race.

After making huge losses in retailing petroleum products in India, BPCL wants to enter international markets — especially East Africa — to at least partially cover them. Buying a refinery in Kenya will help the company grow in east African countries like Tanzania, Kenya, Uganda and Sudan. The company also plans to set up an LPG import terminal in Kenya.

“Unlike India, Kenya is a net importer of refined petroleum products and LPG prices here are four times higher than in India. We will make a difference with our low operating cost,” said the official.

Henry M Bwisa, chairman, board of directors, Kenya Investment Authority, said “Reliance and BPCL have shown interest in investing in Kenya. After acquiring Gulf Africa Petroleum Corporation (GAPCO), RIL is doing the groundwork for a refinery in Kenya. BPCL has expressed interest in LPG distribution in Kenya.” An e-mail sent to RIL remained unanswered.

RIL is aggressively pursuing this refinery to fuel the retail outlets of GAPCO, in which it recently acquired a majority stake for an undisclosed sum. Besides, this move will allow RIL to source petroleum products to supply to the European and American markets where no new refineries were coming up. RIL is likely to make this acquisition through its wholly-owned subsidiary, Reliance Industries Middle East, a company registered in UAE.

An analyst with an international firm said, “It makes sense for Indian firms to move to African markets. Both RIL and BPCL are making losses in the retail petroleum business here because of the cap on sale prices by the government. The Kenyan market is unregulated. Besides, our operational costs are far lower compared to Chevron and Shell, who are operating there.”

SOUTH AFRICA

South Africa’s Coega Industrial Zone in Line for 200,000 bpd Oil Refinery and LNG Terminal

Coega, the special industrial zone and harbor on the Indian Ocean coast of South Africa and just north of Port Elizabeth, appears to be the first choice for a new 200,000bpd oil refinery that could be in operation by 2014-15. State-owned PetroSA (Parow, South Africa) is looking into a major liquefied natural gas receiving and regasification terminal at Coega, the site of the new Rio Tinto/Alcan 880,000tpa aluminum smelter, which is in the first phase of construction.

The USD 5.5 billion Mthombo refinery project is part of the USD 8.5 billion investment PetroSA will make in the refining and LNG projects aimed at securing the country's oil supplies and making a positive contribution to the balance of payments.

PetroSA CEO Sipho Mkhize told Parliament's Minerals and Energy Committee that the company would look for partners in the refinery project, which would only receive approval after the completion of the feasibility study in 2009. The final investment decision will be made in 2010-11.

RUSSIA

Tatneft Eyes Courts over Ukraine Oil Losses

Russian oil firm Tatneft is ready to launch international law suits to defend ownership and management rights at a Ukrainian refinery and recover money for lost oil supplies, a company executive said November 8.

First Deputy Director Nail Maganov said management in charge of the Kremenchug refinery, which last month ousted the previous Tatneft-friendly management team, had yet to pay for around 600,000 tonnes of crude that Tatneft delivered to the plant.

"We had oil stocks there as well as money, which was used as working capital," Maganov told Reuters in an interview.

He added that the refinery had a 45-day grace period to pay for oil deliveries and used about 2.1 billion hryvnia ($420 million) as working capital. The market value of 600,000 tonnes of crude is around $420 million.

"Our lawyers are studying the situation," Maganov said, adding that a preliminary analysis by the firm's lawyers had found Tatneft could not be sure of a fair hearing in Ukraine.

"So, we are studying international arbitration options and we think we have good prospects," the Tatneft executive said.

Kremenchug was taken over last month by Pavel Ovcharenko, a former manager of the Ukrtatnafta company. He arrived at the refinery with armed police after being reinstated by a court.

The plant has cut runs after Tatneft, controlled by the government of the Russian republic of Tatarstan, reduced supplies.

Tatneft owns 8.6 percent of Ukrtatnafta, the owner of Kremenchug, while the Tatarstan government itself owns 28.8 percent. Ukrainian state energy firm Naftogaz owns another 43.1 percent, while two Western firms own the rest.

A number of senior Ukrainian officials have criticized the takeover and removal of refinery chief Sergei Glushko, but no further action has been taken. Ovcharenko has accused the previous management of illegal business activities and questioned the way the plant had been privatized in the 1990s.

Kremenchug normally processes 180,000 barrels of Russian crude per day, or around 730,000 tonnes per month, which come mainly from Tatneft.

Maganov said Tatneft had not supplied oil to Kremenchug since Oct. 19. "We are also grateful to other Russian oil firms, which showed solidarity and are not supplying either."

The refinery bought 170,000 tonnes of oil for November delivery in Ukraine, a net crude importer.

Maganov said that, according to his information, about 93,000 tonnes were also bought for November delivery from Ukrgasenergo, a unit of RosUkrEnergo, a gas trader partly belonging to Russian gas export monopoly Gazprom.

Maganov also said Tatneft had no problems re-routing crude to other destinations, including to Russian plants and to exports, but declined to specify destinations.

IRAN

Iran’s Ilam Refinery Phase 1 to come on Stream December 6

The first phase of Ilam Refinery would become operational on December 6, said the Ilam Gas Refining Company managing director.

Manuchehr Taheri told reporters the first phase would start work with a daily 3.4 million cubic meter capacity.

He added all staff of the refinery were doing their best to run the first phase at due time.

“The second phase of refinery will be put into operation in February 2008,” the managing director said, adding its gas refining capacity would soar to 6.8 million cubic meters per day.

According to the plan, the refinery is constructed in two phases.

In the first phase, it receives 6.8 million cubic meters of sour gas, out of which 5.8 million cubic meters will be injected into gas transmission line after undergoing sweetening process.

In the second phase, the refinery is to be fed with 10 million cubic meters of sour gas.

The construction operations of the refinery started in 2004.

The flare of Ilam Gas Refinery was lit last September.

According to the National Iranian Gas Company (NIGC), the executive operations of the second phase of the Kermanshah-Ilam 30-inch gas transmission line and injection of gas into the line have been carried out.

Ilam, Chevar, and Ivan will be supplied with clean fuel, natural gas, when the refinery becomes operational.

The refinery produces 370 thousand cubic meters of ethane, over 1,300 cubic meters of propane, 1,200 cubic meters of gasoline, and 340 tons of sulfur in the first phase per day while its output in the second phase will be half of the first phase’s production.

Ilam Gas Refinery is situated 25 km northwest of Ilam, 12 km off Chevar region.

Iran’s Petroleum Ministry has allocated 20 trillion rials ($2.1 billion) for boosting the refining capacity, the National Iranian Oil Refining and Distribution Company (NIORDC) reported.

The huge sum will be paid for 12 refineries’ repair projects and 11 optimization projects of oil installations.

The refineries of Abadan, Tehran, Lavan, Tabriz, Bandar Abbas, Arak, Kermanshah, Shiraz, and Isfahan are among the 12 refinery projects.

The projects included oil infrastructures of the areas of Abadan-Mahshahr, Tehran-Tabriz, Isfahan-Marun, Eslamabad-Isfahan, and Kermanshah, Bandar Abbas Refinery, and other regions.

Deputy oil minister said that an estimated $12 billion should be invested in the gas sector by the end of the Fourth Five-Year Economic Development Plan (2005-2010).

Reza Kassaeizadeh, also the NIGC managing director, added some $22 billion are needed for gas development projects, of which $10 billion have so far been absorbed.

He recalled that close to two billion dollars were invested in the sector in the year to March 2005, $3.3 billion in the year to March 2006, and $4.8 billion until March 2007.

The official said official figures on investments in the sector in the first half of the year to March 2008 were not available.

“As per Vision Plan, the NIGC has to invest an annual six billion to seven billion dollars in downstream industries.”

SAUDI ARABIA

Worley Parsons Close to $8 Billion Contract with Saudi Arabian Oil

Worley Parsons is close to signing a contract with Saudi Arabian Oil, the world's largest oil company by production, to help it build an $US8 billion ($A9 billion) refinery in eastern Saudi Arabia, according to people familiar with the plans.

Under the contract, WorleyParsons will carry out project management and early engineering on the planned 400,000-barrel-a-day refinery, which will process Saudi heavy crude oil and supply the local market.

"The contract will be awarded soon. It still has to be signed, which is expected in two-three weeks," a senior Aramco official said.

Two other international engineering firms - Foster Wheeler and SNC-Lavalin Group - submitted bids on September 29 for the contract.

The contract to build the so-called East Coast refinery is expected to be tendered in 2009.

The East Coast refinery is the fourth new such facility to be built in the country, which will see total refining capacity increase to above 3.5 million barrels a day by 2012.

The refinery will be located at Ras Tanura, where Aramco is already operating a 550,000-barrel-a-day facility, the kingdom's largest, and supply a fast growing local market. Completion of the plant is due by the end of 2011.

Refinery technology is being tendered separately from the project management and front-end engineering design contract that will be signed with WorleyParsons.

Persian Gulf governments, flush with cash from four years of high oil prices, are investing in new crude oil refineries to meet rising demand and tighter specifications for products such as gasoline and diesel.

Some Organisation of Petroleum Exporting Countries members have partly blamed a lack of global refining capacity for ongoing high oil prices.

Aramco last year signed joint venture agreements with Total and ConocoPhillips to build two 400,000-barrel-a-day export refineries on the country's east and west coasts.

The Saudi oil ministry has separately invited local and international companies to bid for a private sector-run refinery with capacity of up to 400,000 barrels a day to be built in Jizan, on the Red Sea coast, although interest in the plant has been limited.

Aramco in October said it would invest as much as US$90 billion between 2007 and 2012 on boosting crude oil production capacity by almost a third and domestic refining capacity by about 86 per cent.

McIlvaine Company,

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