june 07 update

NATO is talking to oil and gas producing companies and countries about providing sea-borne rapid reaction forces to combat attacks on facilities, hostage taking and piracy, a senior NATO official said May 14.

Jamie Shea, director of policy planning in the office of the NATO secretary-general, said the likely measures would involve operations in Africa, Asia and the Middle East.

"In NATO, we are looking very actively at using our maritime resources ... to see how we can link up with oil companies," Shea said at the conference in London.

Shea said he had discussed the issue with Royal Dutch Shell Plc and London-based BP Plc, the world's second and third largest Western oil companies by market value, respectively.

While the companies were beefing up their own security measures, they were also keen to receive help with intelligence, Shea said.

NATO is also in talks with Qatar about how it could help secure the Gulf state's large LNG facilities.

NATO is not yet in talks with Saudi Arabia but may be prepared to help there as well, Shea said.

Other areas in which NATO could help; included fighting hostage-taking in Nigeria where workers are being seized from oil facilities on an almost daily basis and piracy in Asia.

Refining Industry Facing Complex Changes as well as Improved Profitability

Improved profitability in the refining Industry has brought a wave of investment aimed at raising capacity, boosting product quality and operating flexibility, and increasing refiner’s ability to deal with difficult feedstocks. Greater integration with petrochemical complexes and, in the future, biofuels, also characterize the modern refining industry, experts say.

However, refining like the petrochemicals industry to which it is so closely linked, is a historically cyclical business.

Energy analyst, Wood Mackenzie now believes that demand will continue to outstrip supply until 2010. The drivers, according to the company are demand, growth, historic under-investment, higher margins, and widening differentials between light, low-sulfur, crude oils on one hand and heavy, sour crudes on the other.

Wood Mackenzie has identified more than 600 refinery projects worldwide, of which about 100 are in the U.S. Despite sharp rises in construction costs, 70% of the U.S. projects are reckoned to have a strong probability of going ahead, compared to around 25% of the projects in the rest of the world with the Middle East, China and India attracting foreign investment in new capacity to meet population growth, while refiners in the U.S. and other developed countries revamp to meet new environmental standards, increase margins by taking more difficult feedstocks, and, in the case of the U.S. raise gasoline production to cover the current deficit.

The price of crude has increased since 2003 largely because worldwide demand has risen in response to economic growth. Important too, have been energy security concerns related to the war in Iraq, uncertainty about Iran, and civil unrest in Nigeria and Venezuela.

Higher demand has meant that the world’s spare production and refining capacity fell from around 5.6-million bbl/d in 2002 to less than 2 million bbl/d in 2003 and the years following. A spokesperson for BP says although there is no actual shortage but with spare production at worst, 1-million bbl/d, the market is tight. And since average U.S. refinery utilization rates are currently above 90% there is little spare capacity after adding downtime for maintenance.

Corresponding hikes in the prices of refined products have increased refining margins.

Also, since light, low-sulfur (sweet) crudes are easier to refine, shortage of supply has widened the price gap between these and heavy high-sulfur (sour) crudes.

As a result, this means very good margins for refineries that can handle the heavy crudes. So, for example, BP is spending money to increase its complexity and upgrading ability but not to raise its refining capacity. BP’s Whiting, IN refinery for example, will be upgraded in a $3 billion project by 2011 with a new coker and hydrogen plant and new revamped hydrotreaters. This will allow them to take most of ther feedstock as heavy Canadian crude, while adding 40,000 bbl/d of gasoline and diesel capacity.

Valero Energy Corp of San Antonio, TX, which is the largest North American refiner, is a leader in upgrading with over1.6 million bbl/d of capacity in catalytic cracking, hydrotreating and coking with sour crude and residual feedstocks making up about 60% of Valero’s feedstocks. Bill Klesse, Valero’s CEO and Chairman says that every $1 difference between sweet and sour crudes adds $500 million per year to their operating income.

Valero is one of the independent refiners that has risen in importance as the U.S oil majors sold off their refineries from 1970-2000 in the face of low margins. In the 1990’s companies like Valero, Sunoco, Holly Corp and Frontier Oil nearly tripled their refining capacity from 8% to 23% of the U.S. total.

By the beginning of 2005, U.S. refining capacity accounted for about 17 million bbl/d of the worldwide demand of 85 million bbl/d for petroleum products. This was divided between 55 U.S. refining companies operating 144 refineries and14.7 million bbl/d of refining capacity in 106 refineries for the European Union. This is according to the European Petroleum Industry Association.

Refining capacity in the EU exceeds demand, and in 2004 the EU exported 19 million m.t. of gasoline to the U.S. and Canada compared to total North American gasoline imports of 31million m.t. On the other hand, in the same year the EU imported from the former Soviet Union countries 25-million m.t. of middle distillates for diesel fuel and heating.

These imbalances reflect the fact that diesel is the preferred road transport fuel in Europe, whereas the U.S. has stayed with gasoline. Diesel consumption in the EU overtook gasoline in 1999. By 2003, diesel was the 160-millionm.t./y and strongly rising, compared to gasoline at 120-million m.t./y and falling.

The upgrading technology for a typical “hydroskimming” refinery has, in addition to atmospheric and vacuum distillation towers, a reformer to raise gasoline octane, and a desulfurizer for kerosene, diesel and heating oil.

The next step would be to add a fluidized-bed catalytic cracking (FCC) unit, a hydrocracker or both. The FCC Unit typically increases gasoline production, while a hydrocracker is often the technology of choice if diesel is required. With an FCC the product split depends on the operating conditions: mild cracking produces mainly diesel, while more severe conditions yield gasoline and light olefins. In the Middle East, where the use of natural gas instead of naptha to feed steam crackers means that propylene is in short supply, FCCs can be tuned to produce as much as 15% of propylene.

Such a medium-conversion refinery still produces around 24% of heavy fuel oil and other low-value products, depending on the feedstock. Adding a cocker creates a high-conversion refinery. This cuts the proportion of heavy products to around 15% and boosts gasoline from 45% to 58%.

Sulfur is a contaminant that refiners must generally remove. Whether desulfurization is done on FCC products ― gasoline or light cycle oil (LCO), destined for distillate fuels―or on the FCC feed, the objective is to add hydrogen to convert sulfur to hydrogen sulfide, which can then be removed.

Refineries that create propylene: import liquid fuels synthesized from natural gas, or import hydrogen to upgrade heavy feedstocks. The ultimate refinery would be one that gasifies all its feedstock, synthesizes fuels that are of better quality than their natural equivalents, and trades in energy carriers such as syngas, electricity and steam. Such a refinery could handle the heaviest feedstocks including tar sands.

The phase-out of MTBE as a low-pressure high-octane gasoline component has caused refiners to invest in alkylation and other octane-boosting technologies. Partial substitution of Ethanol for MTBE has also opened the door to large–scale use of bio-fuels in the U.S. Europe, meanwhile is backing biodiesel.

1. AMERICAS

U.S.

BP Appoints Watchdog at it’s U.S. Refineries in Wake of March 2005 Explosion

Oil giant BP has appointed a watchdog to monitor safety improvements at its five US refineries. It follows the recommendation of an independent panel headed by former US secretary of state James Baker after an explosion at BP's Texas City refinery in March 2005, which killed 15 people.

The move comes just a week after BP's chief executive of 12 years, Lord Browne, resigned after details of his private life were revealed.

The watchdog will be headed by Duane Wilson who sat on the 11-man Baker Panel and will monitor the company's progress towards improving safety in its US refining operations.

In January the Baker Panel said in its report that there were "material process safety deficiencies" at all five of BPs US refineries. Its recommendations included the appointment of an independent safety expert to track the company's safety performance and report annually to the BP board for at least five years.

Mr Wilson is a retired vice-president of Texas-based ConocoPhillips, the world's fifth largest oil refiner. His appointment also follows another critical report into the Texas City explosion in March by the US Chemical Safety Board, which said that cost-cutting at the refinery in the 1990s and after BP's merger with oil company Amoco in 1999 "left the refinery vulnerable to a catastrophe".

Frontier Oil’s Cheyenne Refinery Shutdown, Coker will be Replaced for $80 Million

The Frontier Oil Corp. refinery has been shut down while workers perform $105 million worth of maintenance and improvements to the facility.

Manager Lloyd Nordhausen said the refinery began shutting down May 13 and that it would remain dark for two weeks. The refinery will come back online in phases stretching until the end of June.

Nordhausen estimated that about 800 contract workers, in addition to the refinery's permanent work force of about 260, will be working on the facility.

Replacing the refinery's coker equipment will be the most extensive part of the improvements. The coker work will cost about $80 million.

Chevron’s El Segundo Refinery Sends up Flares

Workers at the Chevron Refinery in El Segundo, CA are working to correct a problem that resulted in flares May 16, a refinery spokesman said.

“We had a little process upset this morning in one of our process units,” said spokesman Rod Spackman. “It lasted a very short period of time and we’ve been working to correct the problem since this morning.”

Spackman said the problem had no impact on the refinery operations or the community.

He said several more flares could be expected as they work on the affected unit.

Gas Prices Affected by Refinery Technical Difficulties

No matter what the reason might be for higher prices at the pump, some motorists believe it doesn’t have to be that way.

There are 149 refineries across the country and already this year, a fifth of them have suffered serious breakdowns, bad enough to have an impact on production.

Giant's Yorktown Refinery is among them. Normally the refinery produces 2.5 million gallons of gasoline, but when things are off, it has an impact on the supply.

John Stokes, Senior Vice-President of Giant’s Yorktown Refinery said they had a compressor that failed and as a result they had to reduce production until they could get it fixed.

That equipment problem in February slowed down production for about 3 weeks.

Last fall, a fire at the refinery didn't affect the supply of gasoline but, for a month the plant had to stop producing street diesel.

"Refineries have millions of moving pieces of equipment and things that have to all work together, and when one fails it slows the production down throughout the system,” said Stokes.

According to the U.S. Government's Energy Information Administration, fires and equipment failures experienced by refineries is just part of the reason for the recent hike in gas prices.

The other is the switch over from government mandated winter to summer fuel.

The Yorktown refinery started making the switch last month.

"That has to work its way down through the whole supply train until its gets to the retail stations and that has to be all timed out that,” said Stokes.

The Yorktown refinery has a lot of room to expand. A company official says there are dreams, but no plans of doing that.

Tesoro Corporation Completes Shell Los Angeles Refinery Acquisition for $1.76 Billion

Tesoro Corporation has announced that it has completed the purchase of Shell’s 100,000 barrel per day Los Angeles refinery and 278 operating stations. All 278 retail sites will remain Shell branded and will be supplied by Tesoro.

Tesoro assumes operational control of the refinery and began to take over responsibility for the operations of the retail locations on May 11th. The total purchase price is $1.76 billion which includes $213 million for estimated inventories. The company financed the purchase, along with fees approximating $33 million with $589 million in cash, $500 million on the upsized $1.75 billion revolver and the remainder on an interim loan facility.

Motiva Norco Refinery Joins EPA Pollution Reduction Partnership

On May 15 the Environmental Protection Agency marked the entry of the Motiva Norco Refinery of Norco, Louisiana, into its national partnership for pollution reduction. The petroleum refiner pledges to recycle more than 3 million pounds of hazardous chemicals as part of the National Partnership for Environmental Priorities program.

“Motiva joins a growing list of EPA partners who exemplify the best in voluntary efforts to recycle, reduce and eliminate pollution,” said EPA Regional Administrator Richard E. Greene. “They are making significant contributions to sustain our environment and setting an example that inspires others.”

The National Partnership for Environmental Priorities consists of both public and private organizations that work with EPA to reduce usage or release of 31 priority chemicals beyond what is legally required. Reduction of these chemicals is important because of their ability to build up in the environment, causing harm to humans and the ecosystem.

Motiva pledges to recover and recycle these priority chemicals within their refining process. Specifically, the company has agreed to recycle 3 million pounds of spent aluminum oxide catalyst, 6,000 pounds of naphthalene, and 6,000 pounds of polycyclic aromatic compounds.

More than 100 partners across the nation have joined the National Partnership for Environmental Priorities program, which has set a goal to work with industry and the public to reduce the use or release of four million pounds of priority chemicals by 2011. There are currently four other Louisiana partners in the program.

Valero Halts Texas Refinery Output

Valero Energy Corp., the largest U.S. refiner, halted fuel production at its Houston refinery due to steam system and boiler problems.

Output was expected to resume early the week of May 20, said Bill Day, a spokesman for the San Antonio-based company said. The estimated loss of daily fuel production is 64,000 barrels of gasoline and 44,000 barrels of distillate. Distillate is diesel fuel, heating oil, kerosene and related products. The Houston complex is capable of processing 130,000 barrels of oil a day.

"Because most of the Houston Refinery's products go into the overall market, we do not anticipate that consumers in specific locations will be affected," Day said. "Valero is bringing in product from elsewhere to cover our contracts."

Several boilers were taken offline at the refinery, leaving the catalytic cracker and other conversion units in standby mode, Energy News Today reported earlier. Crackers use catalyst to make gasoline components by cracking heavy molecules into gasoline and distillate. Energy News said the refinery's steam supply would be restored by May 19 and normal operations would resume by May 26.

Outside Firm to Review California’s Big West Refinery Expansion

California’s Kern County has hired an outside consultant to review the impacts of a proposed expansion of the Big West Refinery.

An environmental document on the expansion was made public in February, but county planners decided to revise it following controversy over the refinery's planned use of a dangerous chemical called hydrofluoric acid, or HF. The refinery is owned by Big West of California.

Since then, refinery officials said they will use a modified form of the chemical, which makes it easier to contain in the event of a spill. But county officials want to be sure they have a full understanding of all other alternatives to HF.

"We thought it would be appropriate to have an independent, third-party evaluation ... to give assurance that a reasonable range of alternatives have been considered," said Ted James, Kern County Planning Director.

HF is one of two liquid acids used as a catalyst in a refining process known as alkylation. The product; alkylate, boosts octane in fuel and is a premium blending stock for cleaner burning gasoline and diesel required under California law.

HF is viewed by many to be more dangerous than sulfuric acid because it vaporizes when released into the air, forming a cloud that hangs low to the ground and can travel to surrounding areas. Exposure can range from skin and tissue burns to death.

A cloud containing lethal concentrations of HF drifted up to five miles from its release point during an industry-sponsored test in the Nevada desert in 1986.

Modified HF, which the refinery now plans to use, contains an additive that suppresses the acid's ability to vaporize and form a cloud.

Sulfuric acid remains a liquid when exposed to air, making a spill easier to contain.

Big West Vice President and Manager Gene Cotten said the company rejected sulfuric acid as an option because it produces a lower-quality product, requires more volume of acid and requires refrigeration, using more energy. In addition, spent HF acid can be regenerated on-site but sulfuric acid must be trucked to a regeneration plant in Los Angeles or San Francisco. Big West estimated using sulfuric acid would create about 14,600 truck trips a year compared with about 100 with HF.

Big West's sister refinery in Utah, the only other refinery owned by parent company Flying J, uses unmodified HF. Cotten said familiarity with using HF there was another reason why the company selected it for use it at the Bakersfield plant.

Pam Pryor, a manager for DuPont Stratco, a company that licenses alkylation processes, said the use of HF gained awareness in the late 1980s, following an HF release at a Texas City, TX, refinery that created a traveling cloud. More than 1,000 people were treated for injuries and 4,000 had to be evacuated.

The same year, an HF release at the Exxon Mobil refinery in Torrance resulted in an attempt by the local air district to ban the substance. Instead, it convinced local refineries to switch to modified HF.

But, Pryor said, it's common for companies to stick with what they know.

"We've seen that influence on projects," she said. "The thinking is 'We've done this before, we're comfortable with it.'"

Cal Hodge, who has decades of experience in the refining industry and is now president of A 2nd Opinion, a fuels consulting firm in Texas, said when you compare today's modified HF with sulfuric acid, modified is as safe as sulfuric acid.

To reach this conclusion, he considered the risk involved with the frequent transport of sulfuric acid to and from a regenerating plant.

"If I had to choose, I would lean toward modified HF," he said, because modified HF costs less than sulfuric acid and produces alkylate with slightly higher octane.

Other options for refineries exist, Hodge said, including the use of solid acid catalysts, which further decrease dangers associated with spills.

In the environmental review document, Big West said it explored this option but dismissed it because the company did not view it as viable because it's not used commercially.

Another process on the horizon is an enhanced sulfuric acid method that uses significantly less acid and produces a higher-quality alkylate.

But these methods aren't commercially proven, Hodge said, meaning a process has worked in a pilot plant and could work on a commercial scale, but no company has bought it yet.

"If you really want to push technology and look at new things, I think we can. You don't always have to do what you did last year," Hodge said. "The only problem is that it will delay (Big West's) facility one to two years and California is short on gas and you already have the highest gas prices in the country."

Several alternatives to traditional alkylation technologies have been developed but not yet adapted in a commercial setting. They include:

Several companies have developed solid acid catalysts, which reduce the risks and problems with containing liquid acids in the event of a spill.

At least one company has developed an enhanced sulfuric acid process that uses significantly less acid than traditional methods and produces a higher quality product.

Transformer Failure Caused Outage at CHS Refinery

A power outage that prompted the evacuation May 16 of 1,550 people from the CHS Refinery in Laurel, MT came from within the refinery, plant officials said.

An investigation found that an internal failure of a transformer resulted in low voltage in the plant power grid, said Pat Kimmet, refinery manager. This caused electrical equipment throughout the refinery to shut down. There also was a small fire in the crude unit.

Refinery officials evacuated about 225 CHS employees and 1,325 contractors working on routine plant maintenance and on the construction of a coker unit. After the evacuation, operations workers found a small fire in the crude unit and extinguished it. No one was injured.

The crude unit, which is the first unit that begins processing crude oil, was shut down, but it resumed operations at slightly reduced rates on May 17. The unit was expected to return to full production within a week. The refinery started a partial maintenance "turnaround," in which some units were taken off line for servicing. Construction on a new coker is continuing.

Motiva's Port Arthur Expansion may be in Doubt

Royal Dutch Shell, the biggest European oil company, may shelve a joint venture plan to create the largest U.S. refinery because of President George W. Bush's efforts to reduce gasoline use, a Shell executive said May 21.

"If you're an investor getting ready to put several billion dollars into expanded capacity, would you do that when the president himself says we want less gasoline?" John Hofmeister, Shell's top U.S. executive, said at a conference in Santa Clara, Calif.

At stake is a $3 billion plan by Shell and Saudi Arabia's state oil company, partners in the Motiva Enterprises venture, to more than double the processing capacity of a refinery in Port Arthur, Texas, to 600,000 barrels of crude a day. Bush called in January for the country to increase use of renewable and alternative fuels to curb reliance on imported oil, seeking a 20-percent reduction in gasoline use by 2017.

Motiva in April 2006 said it planned to begin expansion in 2007 and complete it in 2010. The expansion would vault the Port Arthur refinery past ExxonMobil's plant in Baytown, Texas.

U.S. Refinery Expansion has Limits

The oil industry has dropped some hints recently that its view of an optimal supply-and-demand situation in the U.S. gasoline market isn`t about to change as the Bush administration and Congress push ahead with their strategy to curb oil consumption.

With the summer driving season and the presidential campaign getting under way, the industry is delivering a reminder that while it will increase its refinery capacity to meet demand, it won`t overbuild to the point it creates a glut of gasoline on the market and collapses the supply fundamentals that have produced some glowing annual reports.

The highlight came in the form of a bombshell dropped by a top Shell executive. Shell Oil Company President John Hofmeister said at an energy conference in Northern California in May that the industry could consider passing on various refinery expansion projects due to the possibility that a sizable increase in the use of biofuels would actually cut into the amount of gasoline used by Americans in future decades.

'If you are an investor who is getting ready to put several billion dollars into expanded refinery capacity, would you do that when the president says we want less gasoline?' Hofmeister asked at the Cleantech 2007 conference in Santa Clara, Calif.

Cleantech had billed Hofmeister as a 'conservation and alternative fuels advocate,' but his remark caught on in the media as a warning that the need for more refining capacity in the United States might not be a crisis after all. It implied instead that the oil industry is willing to produce more gasoline only if it doesn`t upset the tight supply balance that has generated record corporate profits for themselves and record pump prices for the consumer.

Hofmeister had been speaking about the plans for a $3 billion expansion of Shell`s joint-venture Motiva refinery in Port Arthur, Texas, into a behemoth capable of processing 600,000 barrels of crude daily. It would be the largest refinery in the United States when the project is completed in 2011. Shell moved quickly to ensure the Port Arthur project was still alive; however, Hofmeister`s premise was disconcerting in that it implied that the increased use of ethanol to extend gasoline supplies would not necessarily bring about the dramatic increase in the nation`s overall fuel supply that is considered critical to a meaningful decrease in the price at the pump.

Hofmeister is not alone in his warning. Other industry officials have taken to grumbling in public that increased use of ethanol could complicate the expansion of U.S. refining capacity.

'It is part of our economics,' Rob Routes, head of Royal Dutch Shell`s global refining operations, said recently. 'So we basically look at the biofuels that are coming on that we know of, and we build that into the total supply-demand equation for the next five years. And we make our decisions on that basis.'

Charles T. Drevna, executive vice president of the National Petrochemical and Refining Association, was even blunter in a statement issued by the Washington industry group hailing legislation aimed at increasing U.S. refining capacity.

'The difficulty lately has been the conflicting signals policymakers have been sending refiners,' Drevna said. ' While (the) legislation identifies the need and offers a solution for expanding domestic capacity, others, including the administration, are seeking a significant reduction in the use of gasoline over the next 10 years. Any manufacturer in any industry would pause to reconsider investments in new factories or plants to continue making a product that policymakers are seeking to limit in distribution.'

Refinery economics look decades down the line, at which time increased use of ethanol, an aging and less-mobile baby boom generation and anticipated development of cars run by hydrogen may indeed flatten out demand.

The refrain that U.S. refining capacity is strained to the limit has become a virtual boilerplate when it comes to explaining why gasoline has plowed past the $3 per gallon mark. So the idea that ethanol is a reason to cancel expansion plans once considered vital takes on the air of Big Oil being more concerned with preserving those record prices rather than increasing gasoline supplies.

There are a sizable number of refinery expansions either under way or on the drawing board. According to the American Petroleum Institute, there are announced plans for new capacity equal to eight new refineries by 2011. These projects will require a return on investment sufficient to make them economically plausible.

At the same time, the new Democratic-controlled Congress made revocation of oil exploration tax breaks one of its first orders of business in January. And with a presidential election season getting under way, the idea that the oil industry needs further help from Washington in expanding its refining capacity could become a much harder sell.

Valero wants to Increase Capacity at Delaware City Refinery

Delaware's only oil refinery is asking to increase its capacity by more than 20,000 barrels per day.

A spokesman for Valero, which operates the Delaware City Refinery, says the extra output will add "much needed production to the markets." Valero could see tens of millions of dollars in extra revenues from the increase. But it would likely have little impact on fuel prices in areas near the Delaware River.

The proposal by Valero also raises environmental concerns. The company wants to use credits earned during an earlier pollution control project to "offset" a jump in air emissions that's estimated at 209 tons per year.

The Department of Natural Resources and Environmental Control has to approve the expansion. Valero wants a quick approval.

Toledo BP Refinery Output to be Cut for Extra Week during Repairs

Petroleum industry experts say a catalytic cracking unit that produces gasoline at BP PLC's suburban Toledo, OH refinery - shut down since April 21 because of a steam problem - failed to restart recently and will be down an additional week.

It is unclear how much of the 160,000-barrel-a-day capacity is shut down, just as prices at gas stations in the Midwest are near record levels.

Valerie Corr, a spokesman at BP's Chicago regional headquarters, would not elaborate on the report other than to say, "It's just one unit of the refinery."

Mary Caprella, a spokesman at the local refinery, said, "We still are working on maintenance at the facility and are operating safely."

Officers of Local 1-346 of the United Steelworkers of America union that represents refinery workers also declined to comment, but one, who asked not to be identified, said he didn't know when the unit would reopen.

BP has not disclosed how much production has been cut.

However, the Oregon refinery outage was named in news reports as one of the main reasons for a spike in crude-oil futures prices on the New York Mercantile Exchange two weeks ago and more recently as one of the factors contributing to continued high gasoline prices in the Detroit area.

Ms. Caprella said the refinery has about 525 full-time employees and an additional 350 contract workers are doing maintenance and construction projects there.

CANADA

$7 Billion Canadian Refinery Exempted from Environmental Impact Assessment

Following closely on the heels of Environment Minister John Baird's decision to exempt industry from hard caps on greenhouse gas emissions, the Minister has on May 24 exempted from assessment under the Canadian Environmental Assessment Act the first Canadian oil refinery to be built since global warming became a concern.

Irving Oil plans to build a colossal $7 billion dollar, 300,000 barrel/day refinery adjacent to its existing refinery in Saint John. Irving's existing refinery is the largest in Canada and therefore among the top 25 greenhouse gas emitters in the country at 3.3 million tonnes of CO2 per year. The gasoline is to be marketed in the northeastern United States. Six out of 10 cars on the road in Boston are already fueled by gasoline refined in Saint John, New Brunswick.

"We are appalled that Minister Baird does not plan to have Environment Canada assess the impacts of the new Irving refinery's emissions on global warming and smog," said David Coon, Policy Director of the Conservation Council of New Brunswick. "The carbon dioxide and nitrogen oxides will cross provincial and international boundaries, one of the triggers for a federal environmental assessment," said Coon. "Clearly, the federal government has legal obligations for the impacts of increased greenhouse gas emissions on global warming."

"This decision is the first dirty deal to surface since the Harper Government delivered its Regulatory Framework for Air Emissions," says Beatrice Olivastri, CEO, Friends of the Earth Canada. "We are shocked and appalled that this government is dodging the responsibility to rigorously review the GHG and air pollution of the proposed new refinery."

The Canadian Environmental Assessment Agency announced that the proposed scope of the environmental assessment would be restricted to the potential impacts of the construction of a pier and breakwater to load gasoline and petroleum coke onto ships for export and the unloading of crude oil from supertankers. The public has until June 30th to comment on the proposed scope of the federal environmental assessment.

CUBA

Overhauled Cienfuegos Refinery to Turn Cuba into Oil Exporter

A modernized oil refinery is set to go on line in December 2007, official media reported, in a shift due to turn import-dependent Cuba into an oil exporter.

Overhauled with capital from a joint Venezuelan-Cuban company, the Cienfuegos refinery in south-central Cuba will meet the Caribbean country’s own demands, and earmark 9,000 barrels of gasoline a day for export, Venezuela’s communications and information ministry said in a press release.

Vice President Carlos Lage confirmed the facility was set to start operations in December, the Juventud Rebelde newspaper reported.

Vice President Lage said the refinery would process 65,000 barrels per day of petroleum by late this year or early 2008, the paper said.

Cuban authorities in late March said Havana was optimistic and it could soon see a breakthrough in exploiting major oil reserves.

That could mark a sea of change that would see the cash-strapped regime become a flush energy exporter, with ample funding to perpetuate itself.

At the moment, Cuba gets cut-rate oil from Venezuela, its closest international ally and most important economic partner.

The Spanish multinational is just one of the firms elbowing in, along with Norsk Hydro, Canada’s Sherrit, Malaysia’s Petronas and India’s Videsh.

Cuba has divided its exclusive zone into 59 blocs for exploration and production, 16 of which are contracted out. Repsol has six, Sherrit and Petronas have four each, while Videsh has two.

Repsol in 2005 was the first to break ground in the area, but the company determined the crude it discovered was not commercially exploitable at that time.

In 2006, Cuba produced about 3.9 million tonnes of oil, seven times more than 1990 when the former East bloc collapsed, depriving Cuba of its long-accustomed supply of cut-rate Soviet crude.

ECUADOR

Petroecuador Expects Shell Offer to Revamp Refinery

Petroecuador is expecting to receive an offer by Royal Dutch Shell to improve the country's largest refinery, currently working below 50 percent of it normal levels, the company president said May 15.

The Esmeraldas refinery has the capacity to refine up to 95,000 barrels of oil per day, but a series of scheduled repairs and brief fires has it refining around 34,000 bpd.

"The refinery is our priority now," Petroecuador President Carlos Pareja said. He also said they also were expecting an imminent offer from Shell to improve it.

Ecuador, South America's fifth largest oil producer, has repeatedly delayed the bidding for the project in the country's largest refinery.

Pareja said the state company hasn't ruled out receiving an offer from Venezuelan state-run company PDVSA to better the coastal refinery.

Ecuador has already asked Venezuela for an urgent shipment of 200,000 barrels of diesel in May to meet the domestic demand due to the Esmeraldas repairs.

PANAMA

Panama, Qatar, U.S. firm Occidental Petroleum Sign Refinery Study Deal

Panama, Qatar and U.S. energy firm Occidental Petroleum signed an agreement on May 15 to study the feasibility of a joint-ventured refinery in Puerto Armuelles in southeastern Panama.

The agreement was signed by Panamanian Minister of Commerce and Industry Alejandro Ferrer Trade, Qatari Vice Prime Minister Abdullah Bin Hamad al-Attiyah and John Morgan, president of Occidental Petroleum.

The studies, including infrastructure analysis, will cost some 15-20 million U.S. dollars.

Occidental Petroleum said the refinery's planned production capability will reach 350,000 barrels a day.

Ferrer said if the refinery is completed, Panama will become a world-class energy center.

The location of the refinery, Puerto Armuelles, is a deep-water port along the Pacific Ocean and close to the Trans-Istmico oil pipeline.

Morgan said Panama is an ideal location for a refinery, noting that the May 15 agreement will strengthen the links between his company and Qatar Petroleum in the oil and gas business.

Al-Attiyah said the agreement will allow state-owned Qatar Petroleum to develop its foreign investment and seek a larger international market share.

2. ASIA

CHINA

Beijing Refinery Can Now Produce Euro IV-compliant Gas

China Petroleum & Chemical Corp (Sinopec), Asia's largest refiner, has completed a facility at a Beijing plant capable of producing low-sulfur fuel ahead of the launch of stricter city emissions regulations for the Olympic Games, the China Petroleum and Chemical Industry Association said.

Yanshan refinery, the main fuel supplier to Beijing, has installed a new 1.2-million-ton-per year desulfuring facility capable of cutting sulfur content in gasoline to below 10 parts per million (ppm), it said.

The gasoline produced by Yanshan refinery will meet the Euro IV emission standard when it comes into operation.

In the run-up to the Olympics, fuel in the capital city needs to be made Euro IV-compliant at 50 ppm sulfur content. Most of the country is Euro II-compliant at 500 ppm and some cities are Euro III-compliant at 150 ppm.

China's revised gasoline standard will lead to the withdrawal from the market of gasoline with sulfur levels of up to 500 ppm on Dec 31, 2009.

Guangdong to Build China's Largest Refinery Project at $5 Billion

The Guangzhou branch of China Petrochemical Corporation (Sinopec) is likely to build an oil refinery with an annual output of 13-15 million tons with Kuwait National Petroleum Corporation in Guangzhou.

With an investment of US$5 billion, the refinery will be China's largest joint venture project, taking the place of the US$4.3 billion Nanhai project of CNOOC and Shell Petrochemicals Co., Ltd.

The new refinery will bring huge economic benefits and ease tense oil supply. There are three large refineries in Guangdong Province, with an annual output of 12 million tons. However, they only supply 5 million tons of oil products to China yearly.

The Guangzhou branch of China Petrochemical Corporation is also building an expansion project of a US$4.3 billion refinery.

After this project and another ethene expansion project with an annual output of 800,000 tons are completed and put into service, the Guangzhou branch will become a world-class petroleum- and chemical-integrated base.

According to the eleventh Five-Year Plan for the Guangdong's petrochemical industry, its total output value will be CNY 73 million with an annual growth rate of 20% by 2010.

FIJI

Venezuela may set up Oil Refinery in Fiji

According to the Fiji Times, on May15, at a meeting between Fiji Public Enterprises Minister Poseci Bune and the Venezuelan representative to the United Nations Aura Mahuampi, Bune was informed of the willingness of the Venezuelan government to build an oil refinery in Fiji and then to supply low cost oil to Fiji.

"They are not only looking at the option of the supply of low cost oil to Fiji but are also willing to explore the possibility of setting up an oil refinery plant in Fiji to serve the Pacific region," said Bune.

Bune said Venezuela had also extended an invitation to him and the Fiji government to visit the country to, not only discuss these energy issues but to strengthen the diplomatic relations between the two countries.

"It is high time to strengthen diplomatic relations with this very important partner after 24 years of the signing of relations between Fiji and Venezuela. A visit later this year will do well to further pursue what transpired from this first initial exchange, "said Bune.

3. EUROPE / AFRICA / MIDDLE EAST

GERMANY

Burgmann Industries Provides Seal Service at Shell’s Rheinland Refinery

Burgmann Industries GmbH & Co KG of Wolfratshausen/Germany has signed a master order agreement with Shell Deutschland Oil GmbH Rheinland Refinery for mechanical seal services at the Godorf and Wesseling plants. The Shell Rheinland refinery has an annual capacity of around 17 million tons and is Germany’s largest refinery.

The goal of the contract is to significantly increase the service life of the mechanical seals. The services provided by Burgmann also reduce the workload on Shell’s maintenance, materials, purchasing and production staff. In order to achieve the agreed goals, Burgmann has an engineer on-site at the plants as well as a team of engineers in the Cologne Service Center which is located nearby. The procedures for repairs and seal upgrades are documented in workflows, as are the responsibilities.

In order to avoid malfunctions and thus repairs in the future, the engineers analyze failure profiles and causes and conduct joint discussions to define corrective action which is then documented, monitored and logged in SEPRO. Burgmann developed its Internet-based SEPRO software to analyze and manage service contracts. Burgmann now provides a comprehensive range of services to Shell. Markus Hampel, Rotating Equipment & Reliability Engineer at Shell Rheinland, made the following observations on the new arrangement: “The contract with Burgmann has significant advantages for Shell. We are saving more than we are spending on the service. Why is this joint effort so successful? The real secret is the close, constructive relationship between Burgmann and Shell.” Over the course of the first few months, improvement potential has already been identified, which can benefit both partners.

Standardization of mechanical seals reduces the number of variants and makes it possible to optimize warehousing operations. Management of the several thousand seals in stock at the service center in Cologne is steadily improving. The mere on-site presence of Burgmann personnel at the plants and the proximity of the service center ensure that the partners work closely together. “Both Shell and Burgmann get all the benefits of the close proximity enabled by the setting up of this new service center,” explains Fred Kirchmayr, Service Manager Germany at Burgmann Industries.

HUNGARY

Hungary’s MOL Announces $420 Million in Upgrades to Duna Refinery

Hungarian oil and gas company MOL Nyrt has announced a US$420 million investment program at its Duna refinery.

The investment is aimed at increasing MOL's production of diesel oil by an additional 1.3 million tonnes per year in order to harness growing demand for diesel, the company said.

The project is scheduled for completion in 2010.

Under the project, MOL says it will revamp a distillation unit, currently used for domestic crudes to increase its processing capacity of heavy and sour crudes, such as Ural and Kirkuk, to 1.3 million tonnes per year.

On the conversion level, the company will build a new treatment facility, known as vacuum gas oil (VGO) "hydrocrack unit," with a capacity of 1.5 million tonnes per year.

The investment will include an upgrade to facilities that process heavy residues, adding an additional 300 kilotonnes capacity per year in this area.

MOL also says it will build a new hydrogen generation unit.

"Diesel demand has seen double-digit growth in recent years driven by car fleets adoption of diesel and the growth in transportation, which is expected to continue in the coming years," said MOL in a statement.

"This investment is in line with MOL's strategic aim of increasing crude oil product sales and diesel production ..., [and] demonstrates our intention to grab organic growth opportunities," they further stated.

ROMANIA

Azeris Plan Long-term Oil Deal with Romania, Eye Refinery

Azeri state oil firm Socar will sign a long-term crude oil supply deal with Romania's Rompetrol and is also considering buying a stake in one of its refineries, sources at Socar said May 18.

One source said oil supplies would start in June and Socar would deliver one million barrels of Azeri Light crude a month either from Black Sea ports or the Turkish Mediterranean port of Ceyhan to Romania's Constanta port.

"Rompetrol is selling 25 percent in one of its refineries, and Socar could buy the entire stake or part of it," one source told Reuters, adding that a Rompetrol delegation will come to Baku for talks in May.

The shares of Rompetrol Rafinare, the refining arm of Romania's second largest oil firm Rompetrol Group NV, were up over 4 percent at 12:00 p.m. GMT.

Socar is seeking to expand its crude oil client base as its production is rising fast as part of a production sharing deal with BP Plc and other oil majors developing large offshore Caspian Sea oil fields.

Earlier this year, Socar signed a one-year deal to sell one million barrels of Azeri Light a month to Thai energy firm PTT. The deal was the first term supply agreement for Socar, whic had been offering all its cargoes via tenders.

Socar is holding similar talks with oil companies in China, Japan and some Mediterranean countries.

One source said Socar would sign a similar long-term deal with a major Indian oil company on direct crude oil sales to one of the firm's refineries before the end of May.

Socar has a 10 percent stake in a BP-led Caspian Sea project, which is expected to produce an average of 700,000 barrels per day this year. Production will rise to over 1 million barrels per day by the end of this decade.

Socar controls two refineries in Azerbaijan with total designed capacity of over 400,000 barrels per day, but which are severely under-used as they are outdated and produce low-quality products.

In March, Socar said it would bid for Turkey's 51 percent stake in petrochemicals firm Petkim and build a 200,000 barrels per day refinery at the Mediterranean port of Ceyhan.

TURKEY

IOC to Build $4.9 Billion Oil Refinery in Turkey

Turkey's energy regulator will approve an application by Indian Oil Corp Ltd, India's state-run oil refiner, and the Turkish construction company Calik Group to build a refinery at Ceyhan on Turkey's south coast. The work is part of IOC's plans to expand its business in Turkey.

Permission for the construction of the refinery, which Calik says will cost $4.9 billion and process 15 million tonnes of crude a year, may be given as early as May 25, Yusuf Gunay, the regulator's chief, said May 21.

IOC also plans to expand its oil and gas business in Africa, the Middle East and the Commonwealth of Independent States, the Business Line newspaper reported.

The deal in Turkey marks the first time a foreign company has built a refinery in Turkey.

IOC has said the proposed refinery would be an export-oriented unit because of its location.

IOC also said it would acquire a 12.5 percent stake in the Trans-Anatolian Pipeline Company, which is promoted by Calik Energi. It would lay an approximately 300-mile crude oil pipeline of 50 mmtpa capacity connecting Samsun and Ceyhan.

Turkey may agree "shortly" to a partnership of Petrol Ofisi AS and OMV AG and a venture between State Oil Company of the Azerbaijan Republic and Turcas Petrolculuk AS to each build a refinery at Ceyhan, after the completion last year of a pipeline to carry crude to Ceyhan from the Azeri capital of Baku.

The total investment in the three refineries will be about $11 billion.

UNITED KINGDOM

Planning Glitch Slows Key UK National Grid Gas Link

A key British gas transport facility got planning permission May 16 but too late for it to be ready in time to help keep UK homes warm this winter.

The approval was not granted in time to get the pressure reduction station at Cilfrew in Wales built before winter, a spokeswoman for network operator National Grid said.

National Grid won local council planning permission for the second time after a judge had ordered building work to stop in March, pending a review of the original permission granted in September last year.

The delay to the decision to allow part of a project to link new liquefied natural gas import terminals in Wales to the rest of Britian, means gas companies will not be able to transport as much gas as expected from them in winter.

The terminals are South Hook and Dragon LNG at Milford Haven.

"We won't be able to operate the pipeline at full capacity (next winter)," the spokeswoman said, adding that the station in south Wales, needed to run the rest of the link at full capacity, would now not be built until early 2008.

"It will be delayed until spring next year," she said, adding that the pipeline itself would open on time this autumn.

The force majeure National Grid declared in April on contracts it has with gas companies to use the pipeline remains in effect, pending a review of what impact the May 16 second planning consent has on the construction schedule, National Grid said in a statement.

The company warned last month that planning problems on the project to link the terminals to the grid could reduce the capacity available to shippers by about 40 gigawatt hours a day, out of total daily capacity of 450 GWh contracted from October.

The Cilfrew pressure reduction plant will take natural gas from the new Milford Haven-to-Aberdulais pipeline, reduce its pressure and feed it into the existing lower pressure network serving South Wales.

Once completed, the pipelines will carry over 20 percent of gas Britain needs.

ANGOLA

Angola’s Sonangol to Construct $3 Billion Lobito Oil Refinery

Angola's national oil company, Sonangol, is taking upon itself the construction of the Lobito Refinery, the Angola Press Agency (ANGOP) reported May 16.

Sonangol Managing Board Chairman Manuel Vicente was quoted as saying that preparations for the construction of the refinery are underway.

"When the refinery is put into operation in 2010," he said, "Angola will not only save 500 million U.S. dollars a year in import of oil derivatives, but also have a surplus for export."

The construction of the refinery is estimated at US$3 billion, he said, adding that it will have a designed refining capacity of 240,000 barrels a day.

Currently, Angola, which produces about 1.4 million barrels of crude oil a day, has only one refinery. The plan was built in the 1950s in the suburbs of the capital Luanda, with a limited daily refining capacity of 40,000 barrels.

"The construction of Lobito Refinery will solve the shortage in the supply of fuel," he said.

Angola is the second-largest oil producer in sub-Saharan Africa after Nigeria, with its oil reserves estimated at 12 billion barrels and crude output of 1.4 million barrels per day.

EGYPT

Essar to Invest $3.4 Billion in Egypt Refinery

India's Essar Global will invest $3.4 billion in a proposed 300,000 barrels per day oil refinery in northern Egypt, an Egyptian government official said May 14.

"The planned refinery will cost $3.4 billion and we are expecting it to come on stream in 2010," said a government source who declined to be named.

"The Egyptian government could approve the proposal in a few weeks," he added.

In India, an Essar spokesman said: "As a group we keep looking at growth opportunities. This is one such proposal being looked at, hence it's too premature to comment on this."

Egypt is drawing interest from international firms, keen to help tap the most populous Arab country's oil and gas reserves.

Egyptian Oil Minister Sameh Fahmy has said the country plans to increase its oil output, which declined from peak levels of close to one million bpd in the mid-1990s, by 100,000 bpd to 800,000 bpd in 2008 by developing recent discoveries in the Gulf of Suez and the Western Sahara.

A source at the ministry said that the government may decide not to have the project wholly financed by Essar.

"There are some talks at the moment that some refineries should be joint ventures between the foreign companies and the government due to their importance," the source said.

Last month, Egypt put on ice a plan to privatize its 100,000 bpd Middle East Oil Refinery (Midor) in Alexandria on account of its strategic importance.

The new 300,000 bpd Egyptian refinery is part of Essar's plan to have a bigger presence in the Middle East, where oil fuelled growth and a construction boom have boosted domestic consumption, squeezing supplies to Europe and Asia.

The company is in talks with Iran to develop the country's biggest oilfield Azadegan to ensure fuel for a planned refinery and steel plant in the Islamic nation.

The diversified, family-owned holding company, with interests from telecoms to construction, plans to set up four steel plants in the Middle East, including a plant in Egypt that entails an investment of $590 million, tapping the north African country's gas and iron ore resources.

Other Indian oil companies have been looking at investment opportunities in Egypt to meet rising global demand.

Indian Oil Corp.'s (IOC) has proposed participation in a crude pipeline project from the Mediterranean to the Red Sea coast. The project is to enable oil to flow to Asia, bypassing the Suez Canal.

Egypt last year received a proposal from Astra Horizons, a London-based consultancy firm, to build a refinery. The project has not received final official approval.

NIGERIA

Nigeria Strike Blocks Refinery Deliveries

A strike by workers from the Nigerian National Petroleum Corp. stalled deliveries to Nigeria's four oil refineries May 24. The workers are protesting the privatization of the Port Harcourt refinery the week of May 13. The president of the National Union of Petroleum and Natural Gas Workers said that if workers' demands are not met soon, the strike will be extended to the upstream sector, Reuters reported.

ZIMBABWE

Iran to Rehabilitate Zimbabwe’s Oil Refinery

Iran is to rehabilitate Zimbabwe’s idle Feruka Oil Refinery, as part of a wide-ranging investment in the Southern African country, the Iranian Ambassador, Rasoul Momeni, has said.

He said technical experts were already “studying the rehabilitation work at the refinery.’’

The refinery, was built years ago, in the eastern city of Mutare, with assistance from Tehran.

The facility, connected by pipeline to the Mozambican port city of Beira, from which the bulk of Zimbabwe’s fuel is imported, has been dormant for years due to lack of maintenance. Momeni did not say how much the repair would cost Iran.

IRAN

Iran Announces Self-Sufficiency in Refinery Reactors

Iranian experts have announced the Islamic Republic has become self-sufficient in producing reactors used in gas refineries.

The experts have designed and produced four reactors for gas refineries at the South Pars Gas Field in the Persian Gulf.

Producing the reactors in Iran's main manufacturer of oil/gas and power plant equipment, Machine Sazi Arak Co., has reportedly been more economical than importing similar models from foreign producers.

New Progress in Iran’s South Pars Project

An Iranian oil official says the refinery of the 6th, 7th and 8th phases of South Pars gas field would start production in the by the end of May.

Head of the onshore section of the project Rahim Tabrizi also estimated that the production capacity of the refinery would be 8-10 million cubic meters per day, Shana news agency reported.

He said that the auxiliary facilities, dehydration system and production units are ready for commissioning.

He added the preliminary production of the refinery would depend on receiving the gas yields of the 2nd and 3rd phases of South Pars field.

"The production capacity of the refinery will reach a total of one billion cubic feet per day (25 million cubic meters per day) in the next three months," the official noted.

He stressed the refinery would reach full production capacity by the end of this Iranian year.

The onshore section of the project, inclusive of preparation of site and construction of the refinery, has reportedly made 97% headway so far.

The project to develop South Pars phases 6-8 is aimed at production of 80 million cubic meters of gas, and 120,000 barrels of condensate per day.

The annual production of 1.2 million tons of liquefied petroleum gas (LPG) for exports purposes is sought as well.

Once operational, the said three phases will be adding some $ 4.5 billion to the entire revenues of the country.

IRAQ

Iraq Asks Iran for Oil Refinery Help

Iraq has invited Iranian firms to bid for contracts to build at least four oil refineries across the country, Iraq's oil ministry said May 16 in a sign of growing ties with the United States' regional foe.

"Today, the Iranian firms have been invited to bid in building refineries which the ministry has already announced it was planning to build," spokesman Asim Jihad said.

Iran and Iraq, which fought a bitter war in the 1980s, have been strengthening ties since the U.S.-led invasion in 2003, arousing concern among Iraq's once dominant Sunni minority and other Arab states as well as in the United States.

Washington, which considers Iran part of an "axis of evil", accuses Tehran of meddling in Iraq. But the two countries, which broke ties in 1979 after Iran's Islamic Revolution, have said they will hold talks within weeks in Baghdad to discuss helping the Iraqi people.

Mustafa Alani, senior consultant and director of the security department at the Dubai-based Gulf Research Centre said the invitation for Iran to bid was probably politically motivated. Iran was unlikely to be able to meet Iraq's refining needs.

"It doesn't make sense," he said. "First of all Iran doesn't have the know-how and the technology. Secondly, they are suffering from their own problems. They are short of supplies themselves and are looking at rationing oil products."

Iraq wants to build at least four refineries to help it solve chronic fuel shortages. The ministry said last year that it wants to build Nahrain, just south of Baghdad, with a capacity of 140,000 barrels per day. A second refinery at Kuya in the north, is projected at 70,000 bpd.

Iraq also plans to build a refinery in Nassiriya, south of Iraq, for export purposes with a capacity of 300,000 bpd and another in southern Amara.

Iraq has eight oil refineries, none of which were damaged during the invasion. Oil officials say that the plants are operating at only 50 percent-75 percent of capacity, forcing Baghdad to import most of its fuel.

Jihad said that Oil Minister Hussain al-Shahristani agreed with the Iranian ambassador to activate an agreement to build a pipeline to carry about 200,000 bpd of Iraqi crude to Iran's southern refineries.

"They have agreed that the technical committees should begin within days mutual visits to discuss costs and the time they need to build the pipeline," Jihad said.

"The Iranians will buy the crude based on market price."

Iraq needs to attract investment from international oil companies to develop its oilfields and increase production.

Oil multinationals are waiting until a new hydrocarbon law, which sets the rules of investment in Iraq to be passed by the parliament before pumping cash into Iraq. International oil firms are eyeing its giant and largely underdeveloped oilfields.

Oil is the country's main source of the hard currency needed to rebuild its economy, and the energy sector is struggling to recover from years of mismanagement and sanctions.

Iraq to Invite India and Iran to Build Refineries

Iraq will invite Indian and Iranian companies to bid for contracts to help it build three new refineries to meet rising domestic fuel demand in the country, an oil ministry official said May 17.

Iraqi Oil Minister Hussein al-Shahristani, due to visit India, was scheduled to call on Indian companies during his trip to participate in the refinery projects, oil ministry spokesman Assem Jihad said.

Shahristani also told Iranian ambassador to Iraq, Hasan Kathimi Qumi, that companies from the Islamic republic would be invited to carry out refinery projects in the country, Jihad said.

Iraq's existing oil facilities including refineries are in poor condition due to poor maintenance, under-investment and targeted attacks from militants.

The country also has a serious shortage of skilled labor, and oil workers are under constant threat of being kidnapped and killed by militants. As a result, Western companies have been hesitant to bid for major Iraqi projects, Jihad said.

Iraq has the world's third-biggest proven oil reserves after Saudi Arabia and Canada, but only about 10% of the country has been explored, according to the U.S. Energy Information Administration.

Iraq's refinery plans cover a new facility called Al Nahrain to be built near Kerbala, 70 kilometers south of Baghdad. The refinery is designed to process 140,000 barrels a day and the government has already allocated more than $1 billion to build it, Jihad said.

Another refinery is planned for Nasiriya, in southern Iraq, with a designed capacity of 300,000 barrels a day. A third will be located in Koya, in the northern Kurdish-ruled province of Suleimaniya, with a total daily capacity of 70,000 barrels, Jihad said.

In a separate move, Al-Shahristani and Qumi agreed to set up a joint committee to reactivate an agreement signed by Tehran and Baghdad in 2005 to build a pipeline to transport 200,000 barrels a day of crude from southern Iraqi oil fields to the Iranian city of Abadan.

The price of crude that Iraq would sell to Iran through the pipeline would be based on international market prices, Jihad said.

Iran also expressed interest in buying fuel oil produced from Iraq's southern oil fields at international market prices, Jihan added.

The Iraq projects would be part-financed by a loan worth about $1 billion, previously extended by Tehran, Jihad said.

The officials also agreed to renew a contract to supply Iraq with oil products, which is due to expire in June, Jihad said, without providing additional details.

ISRAEL

Oil Refineries to Set up Fuel Terminal in Ashdod with $50-60 Million Investment

Three months after Israel Corp. and Israel Petrochemical Enterprises Ltd. acquired control of Oil Refineries Ltd., the company is making its first strategic move against Paz Ashdod Refinery Ltd., controlled by Bino Holdings Ltd. through Paz Oil Company Ltd.

Sources have said that Oil Refineries is negotiating to set up a fuel storage and distribution terminal in central Israel at an estimated investment of $50-60 million. Oil Refineries has begun searching for a site for the terminal in the Ashdod area, which will serve central and southern Israel.

Before the split up and privatization of Oil Refineries, the Haifa refinery delivered fuel products to the Ashdod refinery and the adjacent Pi Glilot Petroleum Terminals and Pipelines Ltd. terminal, which distribute the products to customers. Following the split of the company and the sale of the Ashdod refinery to Paz, Oil Refineries had problems marketing fuel products in the south, and lost its storage facilities at Pi Glilot’s Ashdod terminal after Pi Glilot leased Oil Refineries’ tanks to a third party.

The fuel market considers the Ashdod area to be strategically important because of its proximity to the Eilat-Ashkelon Pipeline Co. (EAPC) dock in Ashkelon and Pi Glilot’s terminal in Ashdod itself. Building a new terminal in Ashdod will give Oil Refineries better fuel distribution and marketing capability in central Israel. It will also help the company expand its crude and refined oil import and export capacity through the EAPC dock.

In February, Ofer Brothers acquired Oil Refineries through Israel Corp. together with a consortium of Petrochemical Enterprises and Glencore International AG of Switzerland. Oil Refineries CEO is Mordechai Ben-Shach and its CEO is Ohad Marani. Israel Corp will reportedly obtain a control permit for the company by the end of May, and Petrochemical Enterprises will join the controlling core later, when Glencore obtains a permit.

Kuwait Doubles Budget for Oil Refinery to $12 Billion

Kuwait has doubled its budget for building the country's fourth oil refinery, earmarking $12 billion for the project, a senior oil official.

Sami al-Rsheid, the chief executive officer of the state-owned Kuwait National Petroleum Co., said the decision was made May 8 and still needs the approval of the Supreme Petroleum Council, the country's highest oil authority, according to the Kuwait News Agency.

KNPC had earmarked $6.3 billion for the new refinery, but bids from international companies interested in building the facility were much higher.

Al-Rsheid said his company would call for bids in July, and the installation would be built by 2011 instead of 2010 as originally planned.

The refinery with a capacity of 615,000 barrels a day would mainly produce environment friendly fuel for the country's electrical power and water desalination plants, according to the state-owned news agency.

KNPC owns and runs three refineries - Shuaiba, Mina al-Ahmadi and Mina Abdullah - with a total capacity of 930,000 barrels a day.

Fifteen Companies Expected to Bid for Kuwait´s Fourth Refinery

At least 15 companies are expected to tender bids for the fourth refinery that Kuwait National Petroleum Company (KNPC) intends to construct in al-Zour, southern Kuwait, the official KUNA news agency has reported.

KNPC's Deputy Managing Director Asaad al-Saad was quoted as noting that the construction budget has been brought up from US$6 billion to US$12 billion after the first bid failed.

Al-Saad explained that raising the project's budget was to counter increased cost of construction material resulting from the hike in global oil sector investments, especially in the Gulf region.

Moreover, he noted that KNPC had held a meeting recently with top companies that had not placed bids the previous time but were willing to take part now.

The official then urged oil companies that did not bid for the first time to do it now, according to the report.

KNPC had allocated a budget of six billion dollars for the construction of the fourth refinery in Kuwait, but tendered bids exceeded this by at least double the costs, compelling the company to cancel the bid and call for a re-bid.

According to KUNA, the new refinery in Al-Zour will produce environmentally-friendly fuel to operate electricity and water plants around the country, and will produce petrochemicals for export.

The refinery was to come into operation in 2010, whose designed production capacity will be 615,000 barrels per day.

Accounting for 10 percent of the world's proven oil reserves, Kuwait boasted proven oil reserves of about 101.5 billion barrels and now produces 2.45 million barrels of crude oil per day.

OMAN

$7 Billion Price Tag for Proposed Oman Oil Refinery

Oman's oil minister said on May 6 that a proposed refinery and petrochemical complex on Oman's south-east coast could cost more than $7 billion to develop.

Oman is considering building the refinery, the country's third, with a capacity of 200,000 to 300,000 barrels per day, a Ministry of Oil official said in December.

International Oil Daily reported in February that the government had hired Britain-based Jacob's Engineering to advise on the project and said it could cost as much as $7 billion to develop.

"It could be more than that," Mohammad bin Hamad al-Rumhy told reporters on the sidelines of a conference in Muscat when asked about the $7 billion cost. "We are discussing the initial feasibility study of the project submitted by our consultants."

Oman currently has two state-owned refineries -- Oman Refinery Company with a capacity of 106,000 barrels per day and Sohar Refinery Company with 116,400 barrels per day capacity.

SAUDI ARABIA

Foster Wheeler Awarded Delayed Coker Contract for New Aramco/Total Refinery in Saudi Arabia

Foster Wheeler Ltd. announced May 24 that its subsidiary Foster Wheeler USA Corporation, part of its Global Engineering and Construction Group, has been awarded a contract by Aramco Services Company and Total France for a process design package for a new delayed coker. The delayed coker is part of the Jubail Export Refinery, a grassroots full-conversion refinery designed to process Arabian heavy crude, to be built in Jubail Industrial City, Kingdom of Saudi Arabia. The delayed coker unit, one of the largest in the world, will be based on Foster Wheeler’s leading Selective Yield Delayed Coking (SYDECSM) process. The coker design package will be developed by Foster Wheeler’s Houston, Texas, office.

The terms of the award, which was included in the company’s fourth-quarter 2006 bookings, were not disclosed.

Foster Wheeler’s SYDECSM process is a thermal conversion process to upgrade heavy residue feed and process it into high value transport fuels. The SYDECSM process achieves maximum clean liquid yields and minimum fuel coke yields from high sulfur residues. By installing a SYDECSM unit, a refinery owner is able to process heavier crudes, which sell at a discount to the benchmark light, sweet crudes, thereby allowing the owner to receive the benefit of increased refining margins.

YEMEN

New $196 Million Oil Refinery to be Set up in Yemen

The Yemeni-Gulf Oil Services Company (YGOSC) would carry out an oil refinery in Ras Essa area of Hodeidah province for $196 million.

The chairman of YGOSC, Ahmed al-Aesy, said the company would complete the first stage of the project in August, 2009, affirming that the production process would start in October 2009, with a total capacity of 45.000 barrels of oil and gas per day.

Al-Aesy pointed out that the project would provide more than 1000 jobs.

YGOSC, which includes the Trade Al-Aesy Group of Yemen and the Oil al-Hussam Company of Saudi Arabia, had signed an agreement in May 2006 with an Indian oil company to implement the first stage of the oil refinery project.

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