jan 08 update

BP's 160,000-barrel-per-day refinery in Toledo, Ohio, completed a restart in December following planned maintenance, a source familiar with operations said.

The Toledo refinery's two crude units were restarted recently and the last of the refinery's two cokers was scheduled for restart December 7, according to the source.

A final unit, the refinery's sulfur unit, was scheduled to restart the following week, said the source.

The Toledo refinery went down for extensive maintenance in September. At the time, a company spokesman said it was the biggest turnaround in the refinery's history.

BP to Invest $2.5 Billion in Oregon Refinery, Enter Partnership

BP PLC’s suburban Toledo refinery will get a $2.5 billion investment and team up with a Canadian oil company to increase production and use heavier crude, which officials said would assure the operation for at least 50 years.

The partnership with Husky Energy Inc. would boost the Oregon refinery’s output to 170,000 barrels a day, up from 135,000. Not many new jobs are expected at the 88-year-old refinery, however.

But the process will shift from traditional crude oil to thicker, molasses-type crude from Husky’s oil sand fields in northern Alberta. Husky will kick in $3.5 billion into the partnership. The partnership is effective Jan. 1 and after regulatory approval, the deal is expected to close in the first quarter of 2008.

“The unconventional oil field reserves in North America are absolutely huge,” said Mike Daly, BP’s vice president for exploration. The crude from the oil sands is more expensive to produce than most current oil sources but less expensive than some other options.

“The important thing here is that you’re doing it on your doorstep [and that] brings you domestic security of supply,” he said.

Work at the Husky fields is to start soon, including installing wells to pump in steam that will help extract the crude, where it then will be thinned and shipped via pipeline to BP’s Toledo refinery.

Engineering of the work at the refinery is to begin in 2010, with construction to begin a year later and be completed by 2015, said CJ Warner, a BP vice president for refining. The plant is BP’s smallest in the United States.

Asked why the Toledo refinery was chosen. Ms. Warner and Mr. Daly said its location and existing capabilities made it the logical choice for the investment.

BP has been spending $1 billion to upgrade the refinery and committed another $1.5 billion through 2015. After the investment is completed, the refinery will have increased its capacity to 170,000 barrels per day of heavy oil, up from its current capacity of 60,000.

The plant, with a capacity of 155,000 barrels a day, currently processes about 135,000.

“It’s a bit of a turnaround in strategy for BP, who has not previously been involved with oil sands,” said Jason Kenney, an Edinburgh analyst for ING Wholesale Banking. “It’s not a minor investment, nor is it over the top in oil sands, which have seen costs escalate.”

BP has been slow to invest in oil sands after rivals including Royal Dutch Shell PLC poured billions of dollars into so-called unconventional oil projects that require higher prices to make them profitable.

Toledo plant manager Ron Unnerstall said the project would generate hundreds of construction jobs locally but would not result in major added employment at the plant. The facility has 525 employees and 350 contract employees. “Today our refinery is well positioned to meet the needs of our customers in the Midwest,” he said.

Rick Schwamberger, group chairman and vice president of Local 1-346 of the United Steelworkers Union, which represents about 300 workers at the Toledo refinery, said, “It should be a very positive thing for the long term.

Husky’s Sunrise Oil field, which will serve as the Toledo refinery’s main supplier after 2015, is about 30 miles northeast of Fort McMurray in Alberta in what is called the Athabasca Deposit. Geologists believe Athabasca may hold 160 billion barrels of oil trapped as bitumen, or oil sands.

Alberta’s oil sands contain the largest oil reserves in the world behind Saudi Arabia, the provincial government estimates. The surge in oil prices made extraction of the heavier crude more attractive.

Once the crude is brought to the surface in Alberta, the sands and other solids will be removed from the oil by Husky, and the oil will be shipped via pipeline from nearby Hardisty, Alberta.

Husky, controlled by Hong Kong tycoon Li Ka-shing, recently acquired the former Valero refinery in Lima, Ohio, and the BP agreement “complements us in terms of the region,” Husky spokesman Graham White said.

The Lima refinery will be converted to using more of the heavy crude, although one Husky official indicated it might continue to use more conventional oil. The refinery can process 160,000 barrels of oil a day.

“The Toledo plant is much more complex” than Lima, said Donald Ingram, head of Husky’s midstream and refined products business. Toledo’s processing of “the much heavier bitumen allows for much better economics.”

Hyperion Asking for Special Zoning for $10 Billion South Dakota Refinery

A Texas company that's considering Union County as the site of a huge oil refinery has filed for a special type of zoning for the $10 billion project. If Hyperion Resources gets approval and finally decides to build the refinery, it would be the largest construction project in South Dakota history. Company officials say the Elk Point area is not the only one it's considering in the Midwest for the fuel factory.

The zoning request indicates that Hyperion intends to drill shallow wells near the Missouri River to get 8 to 12 million gallons of water a day.

The Gorilla Project as it's been called is not without opponents. They threaten to put the issue on the ballot if the site gets the final nod from Hyperion and county officials approve the zoning change.

Tesoro may Spend $175 Million to Upgrade Hawaii Refinery

Tesoro Corp. said it may spend up to $175 million to upgrade its oil refinery in Kapolei as part of a $5-billion capital reinvestment plan that will increase its capacity to produce fuel.

The Kapolei project was one of several discussed by Tesoro executives in a presentation to analysts December 5.

Tesoro said starting next year it will spend $1 billion a year for the next five years to upgrade its plants.

Regarding its Hawaii operation, the company said only that the upgrade was "under study" and that it would start in late 2008 if the decision is made to go ahead.

The project would cost between $100 million and $175 million and would essentially enable the refinery to more efficiently turn crude oil into gasoline and improve the quality of the fuel.

Tesoro operates one of the two oil refineries in Hawaii.

Marathon Awards Fluor $1.6 Billion Refinery Contract

Marathon Oil Corp. has awarded engineering services company Fluor Corp. a $1.6 billion contract to provide integrated engineering, procurement and construction services for the Houston oil giant's Detroit refinery expansion.

Irving-based Fluor said construction on the $1.9 billion refinery project will begin this year with completion scheduled for late 2010.

The expansion will increase the Detroit refinery's heavy oil processing capacity to about 80,000 barrels per day. Total crude oil refining capacity will increase to 115,000 barrels per day.

Marathon approved the Detroit expansion project in October.

Chevron Reports Fire at Pascagoula Refinery

A small fire was quickly extinguished at Chevron's oil refinery in Pascagoula, Mississippi, January 3 with little impact seen to production, a company spokesman said.

"We don't expect much impact to production," said Steve Renfroe, public affairs manager at the 325,000 barrel per day refinery.

He said the fire was in a RDS unit which treats the feed to gasoline-making catalytic cracking unit.

The refinery is still recovering from a big fire in August that forced shut a 160,000 bpd crude unit. The crude unit is slated for restart in early 2008, Chevron has said.

Graham Corporation has announced that it received in the third quarter of fiscal 2008, which ended December 31, 2007, an order valued at $3.7 million for an ejector system to be installed in an oil refinery located in the U.S. The refinery is being reconfigured in order to be able to process synthetic crude oil produced from the Canadian oil sands region. Revenue for this contract will be recognized on a percentage of completion basis, with final shipment planned for the fourth quarter of fiscal year 2009, ending March 31, 2009.

Graham also announced that orders for the third quarter of fiscal year 2008, which comparisons are indicative of future business trends.

U.S. Refining Mergers and Acquisitions Seen Active in 2008

Another round of mergers and acquisitions is forecast for the U.S. refining industry in 2008, with buyers undeterred by a downturn in refining margins during the second half of 2007.

Plants from New Jersey to California may land on the auction block as larger refiners and integrated oil companies work to slim down their portfolios. Recent record-high oil prices again have added additional pressure to refiners' bottom lines. On January 2, oil futures hit $100 on the New York Mercantile Exchange, and though gasoline prices have increased somewhat, refiners expect the lag to squeeze their margins.

Valero Energy Corp. (VLO) and Royal Dutch Shell PLC (RDSB.LN) have said that as profits to be had from processing a barrel of crude oil weaken, the assets that will perform best are large facilities that can refine the cheapest grades of crude oil. Valero said it plans to "explore strategic options" for two small landlocked refineries. But as refinery owners discard smaller plants, niche refiners, international players, and those hoping to enter the sector are already expressing interest.

While some of these smaller and less sophisticated facilities may fit into a particular refiner's strategy, the interest they have sparked indicates that refiners don't see a return to the refining doldrums seen as recently as 2003. The refining industry is considered to be cyclical, but the low points of the cycle are expected to be much higher than in previous downturns.

"There's a wide range of beliefs as to what the future profitability of refining assets is going to be," said Jeff Dietert, a Houston-based analyst with Simmons & Co. International. In 2008, Dietert said margins would still be " healthy, from a historical perspective."

The next deal may be close at hand. Officials at Petroleos Brasileiro S.A. ( PBR), or Petrobras, say they're in talks to acquire the remaining 50% share in a Houston refinery it jointly owns with Astra Oil. The 100,000 barrel-a-day refinery is small in comparison to the giants that dot Houston's ship channel, but is expanding, and increasing its ability to process the types of crude that Petrobras produces.

U.S. refining margins during the second half of 2007 fell to about half the levels seen in the first two quarters, prompting speculation that the end of the three-year refining boom is in sight.

Still, constrained refining capacity is likely to swell fuel profit margins in the run-up to times of seasonally high demand or during severe supply disruptions, but analysts predict that it's just as likely that changing market conditions will cause margins to deflate.

Chief among them is softening gasoline demand in the face of persistently high prices. Regular infusions of imported fuel, especially gasoline, are also keeping a lid on the market.

The U.S.'s newly increased mandate to use biofuels is also expected to bolster the supply pool of ethanol-blended gasoline and road diesel.

Producers will make about 400,000 barrels a day of ethanol by 2009, and expect to triple that production by 2022. While that volume is equivalent to the capacity of just one large U.S. refinery, Bear Stearns analyst Nicole Decker suggests the impact will be even greater. Because refining capacity is measured in inputs, and not in gasoline produced, and ethanol facilities are measured by the quantity produced, 400,000 barrels a day of ethanol production could displace gasoline produced at two or three refineries.

Margins may narrow more as additional capacity comes on line - refiners who saw prices soar in 2005 began to announce projects for expanding their assets. While some smaller projects were scrapped, others moved ahead. Refinery expansions in Garyville, La.; Pascagoula, Miss.; and Wood River, Ill. are slated to start coming on line in the second hlero and Shell to each sell a small U.S. refinery in 2007, and executives from both companies have said more refinery sales are possible or likely in the year to come.

Shell has sold $12.5 billion worth of downstream - refining and marketing - assets globally, accounting for nearly half of its total downstream holdings, said Rob Routs, the executive director of the company's downstream operation.

Valero, which operates 16 U.S. refineries, is paring down its asset base. The company plans to sell its Aruba refinery in the first half of 2008 and may sell other assets, including its plant in Ardmore, OK.

While Sunoco Inc. (SUN) doesn't focus on refining cheap crude, the company may sell one of its smaller refineries. The company has received unsolicited offers for its 85,000-barrel-a-day Tulsa, Okla., refinery.

With these assets on the table, energy companies and financial players haven't been discouraged by moderating refining profit margins. Rather, some anticipate a downturn in asset values and fresh opportunities for acquisition.

Privately held refiners like Colorado-based Gary-Williams Energy Corp., Kansas-based financial player Coffeyville Resources (CVR) and Frontier Oil Corp. (FTO) are among the potential domestic buyers.

International players that may join the fray include Petrobras and Russian giant OAO Lukoil Holdings (LKOH.RS).

Petrobras, in addition to seeking total ownership of the 100,000-barrel-a-day Pasadena Refining Systems refinery, recently bought an 87.5% stake in the Nansei Sekiyu KK refinery on Okinawa, Japan, from Exxon Mobil Corp. (XOM).

Lukoil's refineries have become increasingly profitable, so the company is stepping up its efforts to increase production of fuels, possibly by the acquisition of refineries, said Vice President Leonid Fedun.

"Refining in Russia is very good now, similar to what it was in the U.S. a year ago," Fedun said. Improvements to Russian refineries are getting "huge returns," he said.

As U.S. refining margins cool, refinery valuations should also fall back, Fedun added. Easing asset values along with greater cash flow from Russian refining may enhance Lukoil's ability to acquire plants abroad.

"Hopefully, we will be able to acquire assets," he said. "We're hoping to buy more in Europe and the U.S."

BP Spent about $1 Billion Repairing Refinery

Texas City’s 2007 sales tax revenues came in more than $5 million over budget, a windfall city officials attributed to purchases related to repairs at the refinery.

The revenues will help the city fund $5.8 million in capital projects in the new fiscal year.

Dogged by thousands of lawsuits and a criminal case that has yet to wrap up, BP’s completion of repairs at the refinery will come as a major boon to a company that has struggled to resurrect its image and improve its position in the marketplace.

The first quarter of 2008 will bring an entirely different and more familiar rhythm to the nation’s largest petrochemical complex.

“I think what we’ll see is a refinery in which there’s less going on and continued, increasing focus on day-to-day operations,” Chappell said.

Among the changes to its operations, the refinery has revamped its training procedures, adding more face-to-face interaction instead of training at computer terminals, he said.

As a condition of probation in its criminal case, BP must comply with the terms of settlement agreements with the Occupational Safety and Health Administration and the Texas Commission on Environmental Quality.

Those agreements require various process safety improvements at the plant.

The explosions happened after a blowdown stack at an octane-boosting unit overfilled with flammable liquid, creating a vapor cloud that investigators suspect was ignited when the engine of a nearby vehicle started.

BP has eliminated the blowdown systems in Texas City.

The London-based company pleaded guilty to a felony violation of the Clean Air Act for operating under unsafe conditions. In the plea bargain with the U.S. Department of Justice, BP agreed to pay a $50 million fine. Victims’ families are still challenging the agreement, saying the fine, which will be paid to the U.S. treasury, was too lenient.

The company has exhausted $1.6 billion it set aside to settle death and injury claims.

It also pleaded guilty to a violation of the Clean Water Act after the largest spill ever on Alaska’s oil-rich North Slope, and a federal grand jury has indicted four former BP employees on charges they conspired to manipulate propane markets in February 2004.

BP Refinery Nears End of Repairs

BP PLC’s Texas City refinery should be near full capacity by the end of January or beginning of February, a company spokesman said.

The refinery has been operating at about half its capacity of 470,000 barrels a day since March 2005, when a series of explosions killed 15 workers and injured almost 200 more. The end of repairs will have consequences not only for the company and industry as a whole, but also for Texas City, which will reach another milestone in a long and painful recovery from the disaster.

Three of four major processing units at the plant have been repaired and put into operation, and a fourth, which processes sour crude oil, should be commissioned in January or February, BP spokesman Ronnie Chappell said. That will take the refinery to about 400,000 barrels a day, he said.

For nearly three years, scaffolding has been a fixture of the Texas City skyline. Chappell said conventional wisdom at the plant says it’s enough scaffolding to stretch up and down Mount Everest several times.

At various times, up to 5,000 contract workers have been in the plant working on repairs, in contrast to about 1,600 members of the BP work force. Most of the contract workers will leave.

CANADA

Husky Set to Spend $235 Million at Lloydminster, Lima Facilities

Husky Energy Inc. on December 13 announced a capital expenditure program of $3.7 billion for 2008. The program is targeted to maintain production in Western Canada and support the Company's ongoing exploration and major project development in the oil sands, offshore the East Coast of Canada and internationally.

"Our 2008 capital expenditure program concentrates on medium and long term project development and is approximately 28 percent above our forecast for 2007," said John C.S. Lau, President & Chief Executive Officer of Husky Energy Inc. "The Company's strategy is to focus on growth and high return projects offshore the East Coast of Canada, China and Indonesia as well as enable the Company to move forward with its integrated bitumen development at Sunrise."

In addition to the capital program of $2.9 billion in 2007, the Company had net acquisition and divestitures of approximately $1.7 billion, including the acquisition of the Lima refinery for $2.0 billion and proceeds of $330 million from divestitures of approximately 5,500 barrels of oil equivalent per day in Western Canada.

Given the current low gas price environment, capital expenditures for natural gas development will be allocated to higher return areas, particularly in enhanced oil recovery and in conventional and heavy oil development. The exploration expenditure of $170 million will be spent on high impact opportunities in British Columbia and shallow depth opportunities in Alberta.

In the oil sands business, Husky will spend $300 million, including $100 million at the Tucker Oil Sands development, and $160 million to progress the first 60,000 barrel per day phase of the joint venture Sunrise project.

In Midstream, Husky will spend $300 million of which $75 million will be spent on plant maintenance at the Lloydminster Upgrader and $225 million in the pipeline, infrastructure and other businesses.

The Refined Products group plans to spend approximately $300 million, with $160 million allocated to the Lima refinery for maintenance and for front end engineering to reconfigure the plant to process heavy oil. The remainder of the capital will be for maintenance of our refining and ethanol assets and remodeling of our retail stations.

2007 production is expected to average approximately 380,000 barrels of oil equivalent per day reflecting a reduction in natural gas development and divestitures in Western Canada. For the year 2008 production guidance, Husky estimates production of 385,000 to 410,000 barrels of oil equivalent per day. Light oil and natural gas liquids production is estimated to be 139,000 to 148,000 barrels per day; medium oil production is estimated to be 28,000 to 29,000 barrels per day; heavy oil/bitumen production is estimated to be 114,000 to 124,000 barrels per day; and natural gas production is estimated to be 625 to 655 million cubic feet per day.

BRAZIL

Petrobras, PDVSA to Form Mixed Company for Abreu e Lima

Petrobras and PDVSA have decided to incorporate a mixed corporation in Brazil aiming at building and operating the Abreu e Lima Refinery, in the state of Pernambuco, Northeastern Brazil.

Interest in the company will be shared at the rate of 60% for Petrobras and 40% for PDVSA, and staff from both companies will operate the plant. The refinery will be capable of processing 200,000 barrels of oil per day, and a supply agreement for 100,000 barrels of oil per day, coming from the Carabobo 1 block, in the Orinoco oil range, will be signed to provision it.

DOMINICAN REPUBLIC

Dominican Republic Seeks Tender to Value $183 Million Refinery Stake

The Dominican Republic planned to hold an international tender in December to establish a fair value for the 50 percent stake in an oil refinery owned by Royal Dutch Shell Plc, officials said on December 5.

The government of the Caribbean country announced in November that it hoped to buy the 50 percent it does not already own in the Dominican Petroleum Refinery from Shell for $183 million. Shell has been seeking a buyer for its stake since January.

"We are not going to give Shell a penny more or a penny less than the fair price for these shares," said Finance Minister Vicente Bengoa.

Shell's president in the Dominican Republic, Rafael Maradiaga, reiterated that the price of the stake was $183 million. Company and government officials met on to discuss how to conduct the international tender.

Officials at the International Monetary Fund, which have helped the Dominican Republic recover from a deep economic crisis triggered by the collapse of a major bank, have indicated they would prefer to see the refinery transferred into private hands.

The government of President Leonel Fernandez says owning 100 percent of the refinery would allow the authorities to receive all the 50,000 barrels of crude per day offered to them on preferential terms by Venezuela under the Petrocaribe deal.

Chavez, Lula Da Silva Ratify Joint Venture to Unite PDVSA, Petrobras

President of the Bolivarian Republic of Venezuela Hugo Chavez and President of the Federative Republic of Brazil Luiz Inacio Lula Da Silva attended a ceremony where state-run oil companies PDVSA and Petrobras initialed an agreement on a joint venture to build the Abreu E. Lima refinery in Pernambuco, Northeast Brazil.

"The agreement entered into by PDVSA and Petrobras could lead to an alliance for oil drilling at the Orinoco oil belt and paves the way to keep on working on the Great Pipeline of the South," said the Venezuelan head of state. The idea is to establish the Caracas-Brasilia-Buenos Aires axis within the current South American geopolitical dynamics to consolidate a strengthened pole in full freedom.

Petrobras will have a 60-percent interest; the remaining 40 percent will go to PDVSA. The joint venture will operate with labor of both nations. Oil processing capacity is expected to stand at 200,000 bpd. The output will be traded in new markets in order to have multiple partners throughout the world.

The long term, 100 bpd of oil from the wells drilled at bloc Carabobo 1, Orinoco oil belt are to be provided. The output is estimated to start in a two-year period approximately," said People's Power Minister of Energy and Petroleum and PDVSA CEO Rafael Ramirez. To date, PDVSA and Petrobras have certified 45.5 billion barrels of onsite original oil in that bloc.

According to President Chavez, the joint venture showcases Venezuela's steady economic growth over the past few years. In this regard, he invited Brazilian businesses to invest in Venezuela in order to bolster productivity and economic diversification in agricultural industry and the petrochemical sector, among others.

ASIA

AUSTRALIA

WorleyParsons Wins Five-year Potential $70 Million BP Contract

WorleyParsons Ltd has been awarded a five-year, potentially $70 million contract to provide on-site engineering and support services at BP's Kwinana oil refinery in Western Australia.

The contract covers ongoing projects and modifications at the refinery, which is the largest in Australia, processing about 135,000 barrels of oil per day.

The contract will be worth about $70 million if levels of activity that have been typical in the past year continue.

WorleyParsons has held the equivalent contract for the past six years.

"The ongoing performance of this contract is a testament to our expertise in delivering projects in a complex `brownfield' environment," WorleyParsons chief executive John Grill said in a statement.

CHINA

Sinopec's Qingdao Refinery to Begin Operation next March

Sinopec's under-construction Qingdao refinery is expected to start operation next March, Xinhua- run China Securities Journal quoted Sinopec sources as saying.

Sinopec will complete the construction of the 10 million ton/year (200,000 bpd) Qingdao refinery in east China's Shandong province by the end of next January, according to the company.

Feeding on crude from the world's top oil producer Saudi Arabia, the refinery is designed to annually produce four million tons of diesel, 2.5 million tons of gasoline, and 500,000 tons of kerosene.

China saw no big refineries come on-stream in 2007, but several "heavyweight" refineries are scheduled to start operation in the following years.

PetroChina Completes Huabei Refinery Expansion

PetroChina has completed the expansion of its Huabei refinery in Hebei province near Beijing, raising daily crude processing capacity to 13,000 tons from 10,000, its parent China National Petroleum Corp (CNPC) said.

The expansion project also increases Huabei refinery's fuel output by over 30 percent, CNPC said in a statement on its website.

The expansion started in April 2005, including a 5-million-ton crude oil unit, a 1.6-million-ton catalytic cracker and 200,000 cubic meters of crude storage, it said.

CNPC Plans 10 Million Tonne East China Refinery

China's top oil and gas producer, China National Petroleum Corporation (CNPC), plans to build a refinery in eastern Shandong province, with capacity of more than 200,000 barrels per day, the China Daily in December. The parent of Hong Kong- and Shanghai-listed PetroChina has signed an agreement with the provincial government to cooperate on large projects and oil and gas retail networks, the official paper said, citing a company source.

The refinery is planned for coastal Weihai city, the report added, but did not say when construction or production at the planned plant might start.

CNPC plans a similar 10 million tonne refinery in land-locked southwestern Yunnan province and has signed deals with Henan and Gansu provinces for further cooperation, the paper said.

China is reliant on foreign oil to meet nearly half its oil needs but prefers shipping in crude to importing refined oil products, so is keen to build new refineries to satisfy rapidly growing domestic demand.

But because of worries about energy security, Beijing is also pushing its firms to boost domestic crude output.

PetroChina has produced 20 million tonnes (146 million barrels) of oil from its Changqing oilfield in the northern Ordos basin this year, making it the country's third-largest field after Daqing and Shengli, the official Xinhua news agency said.

Production at the Karamay field in northwestern Xinjiang province also nudged up from 2006 levels to reach 11.97 million tonnes, Xinhua reported.

INDIA

Name of Bhatinda Refinery Changed to HPCL-Mittal Energy Ltd

With billionaire Lakshmi N Mittal picking 49 per cent stake in Hindustan Petroleum Corp Ltd's Bhatinda refinery, the name of the company implementing the Rs 18,919 crore project has been changed from Guru Gobind Singh Refineries Ltd to HPCL-Mittal Energy Ltd.

The Board of Guru Gobind Singh Refineries Ltd in its meeting on November 14 in Mumbai, approved changing name of the company to HPCL-Mittal Energy Ltd, company sources said.

The board also decided to rename the Punjab Refinery Project (the Greenfield refinery at Bhatinda in Punjab) as Guru Gobind Singh Refinery.

Mittal Energy Investment Pte Ltd and HPCL hold 49 per cent stake each in the nine million tons a year refinery project while financial institutions would take the remaining two per cent.

Sources said the board also appointed state-run Engineers India Ltd as Project Management Consultant for the refinery.

Mittal has named his close aides Sudhir Maheshwari and B P Banka on the board of the company. Mittal has a right to appoint three members on the board. HPCL has its Chairman Arun Balakrishnan, Director (Finance) C Ramulu and Director (Refineries) M A Tankiwala on the board. Balakrishnan will be the chairman of the company for first two years after which the post would go to a nominee of Mittal.

The sources said the refinery project, which was delayed for about a decade for want of a strategic partner, has been put on fast track since the entry of Mittal.

Punj Lloyd Wins Vadodara Upgrade Project from Indian Oil

Punj Lloyd Limited has secured a Rs. 590 Crore contract to build the delayed coker unit and coker LPG merox block for Indian Oil Corp. Limited's Residue Upgradation project at Vadodara Refinery in Gujarat. The lump-sum turnkey contract entails engineering, procurement, construction and commissioning assistance (EPCC) services and has been bagged amid international competitive bidding.

The scope of work includes a 3.7 MMTPA delayed coking unit and a 150 TMTPA LPG merox unit. The project is scheduled to be completed within 28 months.

Punj Lloyd has extensive experience in refinery process units, including hydrocracker, sulfur recovery units, hydrogen generation unit and motor spirit quality (MSQ) upgrading projects for all the major PSUs in India. This project adds to this vast portfolio in refinery processing.

The project acquires strategic importance for Punj Lloyd because many similar delayed coking units are expected to be set up in the major refineries in India. Further, Punj Lloyd will gain experience working with renowned process licensor M/s. Foster Wheeler.

With this latest contract, the order backlog for the Punj Lloyd group on consolidated basis has gone up to Rs 18,484 crore. This is the total value of unexecuted orders as of September 30, 2007, and new orders received till date.

Hill/SDPM to Consult on Kuwait Refinery Projects

Hill International announced December 11, that the joint venture of Hill and System Development & Project Management (SDPM) has received a contract from Kuwait National Petroleum Co. (KNPC) to provide consulting services during the construction of a new refinery located in the Al-Zour region of Southern Kuwait and during the Clean Fuels Program of existing refineries located at Mina Al-Ahmadi and Mina Abdullah. The five-year contract has an estimated value to Hill exclusive of its joint venture partner of approximately $20 million.

The new refinery, which is expected to cost approximately $15 billion, will be one of the largest in the world with a refining capacity of 615,000 barrels of oil per day. Construction is expected to begin in 2008 and be completed by 2013. The upgrade of the existing refineries in connection with the Clean Fuels Program is expected to cost approximately $7 billion.

Services to be provided by Hill/SDPM under the contract include on-call consulting services, contract and commercial management, interface management, quality assurance and quality control (QA/QC), and claims avoidance and management services. Hill is a 65% partner in the joint venture and SDPM is a 35% partner.

"The new refinery project at Al-Zour and the Clean Fuels Program for the existing refineries are large, complex projects whose success is vitally important to the Kuwaiti petroleum industry," said.

JAVA

Pertamina, Mitsui to Build $1.5 Billion Cilicap Refinery Gasoline Unit

Indonesian state oil firm Pertamina and Japan's Mitsui & Co will team up to build a residue fluid catalytic-cracking (RFCC) unit at the Cilacap refinery, a senior Pertamina official said December 28.

The unit will produce gasoline with a capacity of around 60,000 barrels per day (bpd).

"Mitsui will have an 80 percent stake and Pertamina 20 percent in the firm," Pertamina President Director Ari Soemarno said.

"The project will cost about $1.5 billion. The product will be sold to the domestic market."

Processing director Suroso Atmomartoyo had said previously that Pertamina planned to start building the RFCC by 2008 at the latest and expects it to begin operations in 2010.

Pertamina's Cilacap refinery, located in Central Java, has two crude distillation units with a capacity of 118,000 bpd and 230,000 bpd, respectively.

The refinery also has a 29,000-bpd gasoline-making reforming unit and a 50,000-bpd visbreaker.

The biggest gasoline-making facility in Indonesia is Pertamina's 83,000-bpd residual cracking unit at its Balongan refinery.

Indonesia is Asia's top diesel and gasoline importer, floating a tender each month for large spot volumes that can drive up benchmark regional prices.

OPEC member Indonesia has nine oil refineries scattered across the archipelago with a total combined capacity of around 1 million barrels per day (bpd), but about 30 percent of the country's oil products consumption are still imported.

EUROPE / AFRICA / MIDDLE EAST

LITHUANIA

Baltic Refiner Mazeikiu Nafta Submits Plan for Products Pipeline

AB Mazeikiu Nafta, the only refinery in the Baltic States, has submitted to Lithuania's Ministry of Economy a development plan for the transportation of petroleum products. The development plan provides for measures that will allow the company to ensure its uninterrupted refining activities while continuing to strengthen the energy security of Lithuania, Mazeikiu Nafta said in a written statement.

The plan is a part of Mazeikiu Nafta's Value Creation Program and has been prepared by PKN Orlen, the major shareholder of the company. This plan is designed to ensure stable operations of the Mazeikiai Refinery and the transportation of petroleum products for export. The development plan provides for two scenarios of construction of the petroleum product pipeline: Mazeikiai-Butinge and Mazeikiai-Klaipeda.

The company is looking for more efficient and environmentally safer ways of petroleum product transportation; therefore, it is analyzing several routes of the product pipeline construction. The most appropriate scenario of development of the petroleum product transportation pipeline will be selected following the completion of the territory planning and environmental impact assessment phases.

The new pipeline will allow Mazeikiu Nafta to expand its technical capabilities and to increase safety of export petroleum product transportation. Currently, petroleum products are shipped to AB Klaipedos Nafta's terminal by railway. The company has posted the information about its development plan for the products pipeline on its website.

AB Mazeikiu Nafta exports more than 70 percent of its products to Western Europe, the USA, Canada and other countries. In 2006, the company's exports accounted for almost one quarter of the national exports.

POLAND

Technip Wins Project Management Contract for Poland's Gdansk Refinery

Technip has won a project management services contract for the Gdansk refinery in Poland. The French oil services company did not disclose the value of the deal. Under the deal, Technip will manage several projects with the aim of upgrading the refinery and increasing capacity.

The group's Italian operating center in Rome will carry out the contract with support from its Warsaw center.

Technip was recently awarded a contract for the implementation of a hydrocaking unit in the Gdanks refinery.

LIBYA

Five Japanese Firms Eyeing Construction of Libya Refinery

A coalition of five Japanese firms, including Nippon Oil Corp. (5001), Inpex Holdings Inc. (1605) and Japan Petroleum Exploration Co. (1662), are in negotiations to construct an oil refinery in Libya, it was reported December 14.

The parties are discussing a facility capable of refining some 200,000 barrels per day, with the total cost of the project estimated at Y400 billion to Y500 billion. If a deal is reached, this would be the first Japanese-led project to construct a refinery overseas.

The group, which also includes JGC Corp. (1963) and Nippon Yusen KK (9101), is discussing the establishment of a joint venture with Libya's state-run oil company. A possible site is on the coast on the outskirts of the capital Tripoli. The group is proposing an advanced refinery that would include equipment for producing gasoline and other products from heavy oil, which is a low-value byproduct of the crude refining process.

The petroleum products refined at the facility would be sold in nearby Europe. But through such means as swap transactions, the refinery would also help in securing oil products for the Japanese market.

The Japanese government is poised to provide public funds to finance the project on the assumption that it would help in securing interests in oil fields, providing another avenue of supply for crude oil. So the coalition of five firms will likely borrow most of the funds needed for the project from such government-affiliated lenders as the Japan Bank for International Cooperation.

Libya's confirmed crude reserves are the eighth-largest in the world at 41.5 billion barrels. It was a major oil producer in the past with output of more than 3 million barrels per day, but development of natural resources and improvements to refining facilities ground to a halt due to economic sanctions imposed on the country for its part in international terrorism, such as the bombing of Pan Am flight 103 in 1988. Its daily crude output in 2006 was 1.84 million barrels, down to 15th in the world.

The U.N. lifted the sanctions in 2003 after the Libyan government accepted responsibility for its role in the bombing over Lockerbie, Scotland. Libya also announced that it will scrap plans to develop weapons of mass destruction, and in 2004 it began attracting foreign capital by holding auctions for mining and development rights.

Japanese firms, including Nippon Oil, Japan Petroleum Exploration and Inpex Holdings units Inpex Corp. and Teikoku Oil Co., have already acquired mining rights for eight mining areas and have started test drilling.

NIGERIA

Work on 100,000 Bpd Nigeria Refinery to Begin 2008

Construction of a new 180 billion naira (1.55 billion) oil refinery is to begin in the first quarter of 2008 at the Onne Oil and Gas Free Zone in the oil city of Port Harcourt in southern Nigeria, it was reported December 21.

Starex Petroleum Nigeria Ltd. refinery will process 100,000 barrels of crude a day and employ 25,000 workers when it reaches full production.

Dandyson Chujor, chief executive of Starex, said the government through Nigerian National Petroleum Corp., which gave the company sovereign guarantee for crude oil, has 15% equity stake in the project. Indigenous stakeholders own 25%, while unnamed "core investors" retain 60%.

Chujor said the company would have mobilized its engineers to the site long ago, but for the activities of militants across the Niger Delta region, which scared away its initial foreign investors.

SOUTH AFRICA

Calls for Relocation of South Africa’s Engen Oil Refinery

The south Durban community around Merebank and Austerville has called for the relocation of the Engen Oil Refinery to an uninhabited area. This follows recent fires and pollution which left residents complaining of inhalation problems.

The community has said the toxic gases are posing serious heath hazards. Chairperson of the South Durban Environmental Alliance, Desmond Desay, says the community will embark on a series of protests and court battles against Engen.

The KwaZulu-Natal Department of Agriculture and Environmental Affairs said it will hold a meeting with the Engen Oil Refinery management, the municipality and the Durban South Basin community to discuss the recent fires at the plant. Spokesperson for the department, Mbulelo Baloyi, says the meeting will discuss ways of involving the community in the city's disaster management plan.

Yesterday large flames and a thick plume of smoke were seen coming from a vacuum tower at the Engen Oil Refinery. The incident comes two weeks after a massive blaze at the refinery burned for 60 hours.

KBR to Perform Study for $6 Billion South Africa Refinery

PetroSA has awarded KBR a contract to conduct the pre-feasibility study to build a US$6 billion crude oil refinery in Coega, Port Elizabeth in South Africa's Eastern Cape Province.

The proposed crude oil refinery, called Project Mthombo, is expected to come on stream in 2014/2015. Project Mthombo, which could produce more than 200,000 barrels of fuel per day, will be one of the largest post-2010 investments in South Africa.

"KBR has a well-established track record developing downstream projects, accessing global resources and crude oil refining. We look forward to applying this expertise to PetroSA's world-scale refinery project," said John Quinn, President, Downstream for KBR.

The pre-feasibility study focuses on determining the economic optimum configuration for the refinery including crude oil type and costs, required product slate, prices and specifications, and capital and operating costs. The study is expected to take about six months to complete and will be conducted out of KBR's Houston offices with support of KBR South Africa and Ilitha, a local engineering company. After the configuration has been approved, Project Mthombo will move on to the feasibility phase, which will define the engineering scope of the refinery.

The project will also generate approximately 20,000 direct and indirect jobs in one of the most impoverished provinces in South Africa, beginning with numerous South African personnel assigned to work on the study.

"PetroSA is using this opportunity to develop job skills capacity in South Africa and has selected several promising candidates from previously disadvantaged South Africans, who will be assigned to KBR for the duration of the study," said Jorn Falbe, vice-president, new ventures--midstream for PetroSA. "The development of these engineers, who are essential for the successful construction and operation of the refinery, is part of a well-defined strategy by PetroSA in anticipation of future needs,"

Project Mthombo underpins South Africa's security of energy supply and reduces South Africa's dependency on imported automotive fuels. Project Mthombo, which is nominally sized for 200,000 barrels of fuel per day to satisfy the South African demand, could be expanded to allow for exports or other growth opportunities and could be integrated with downstream petrochemical opportunities.

SIBERIA

Imperial Energy Building $116 Million Siberia Refinery

Russia-focused oil company Imperial Energy will hold a majority stake in a small refinery being built in the West Siberian region of Tomsk, a regional official said on December 6. Vice-governor Vladimir Yemeshev said the refinery, with an annual capacity of 1 million tonnes (20,100 barrels per day), will come on stream in the second or third quarter of 2009 and will cost 80 million euros ($116 million).

He said Imperial will hold 70 percent in the refinery, while the rest will go to small energy firms.

Imperial's spokeswoman declined to comment on Yemeshev's statement. She said the company was, in principle, interested in obtaining refining capacities.

The London-listed firm, which owns a number of oil licences in the Tomsk region, plans to invest over $600 million in 2008-2010 to bring production to 35,000 bpd by the end of 2009 from the current 10,000 bpd.

UKRAINE

LUKoil Considers Further Expansion at Odessa Refinery

Russian oil major LUKoil is considering a further increase in refining capacity at the Odessa Oil Refinery from 2.8 million tonnes to five million tonnes a year, technology director at the refinery Sergei Bliznichenko said at the third international conference on the Ukrainian petroleum products market on December 6.

The business plan for the refinery has two scenarios - to maintain refining at 2.8 million tonnes or increase it to five million tonnes, he said.

The company also plans to bring the depth of refining to 85-90 percent and produce Euro standard fuels.

LUKoil in August 2005 began a massive reconstruction of the Odessa refinery that was completed in October of this year. The depth of refining grew 23.3 percentage points to 80.3 percent as a result and recovery of light petroleum products grew 22 percent. The company will begin producing Jet A-1 aviation kerosene. The Odessa Oil Refinery is owned by LUKoil.

Ukraine Refinery to Boost Output, Build New Unit

Ukraine's Shebelinsky refinery, which processes rare light domestic crude as well as gas condensate, said on December 6 it hoped to process more oil in 2008 to make up for fuel output lost elsewhere.

Ukraine's largest refinery, Kremenchug, is running at half its normal capacity because of a management dispute with its main Russian supplier, leaving Ukraine, once self sufficient, short of domestically produced fuel.

Industry sources said the planned 20 percent increase at Shebelinsky could partially compensate for the 50 percent loss in production at Kremenchug.

The Shebelinsky refinery, in the eastern Kharkhiv region, also plans to build its first crude distillation unit next year, allowing it to process more oil and increase capacity to 1.6 million tonnes per year by 2011.

"With a stable supply our capacity will reach 1 million tonnes of crude this year," the head of gas processing department of the state Ukrgazdobycha gas company, Olexander Kakarov, told reporters.

The plant processed 875,300 tonnes of mostly Ukraine-origin gas condensate in 2006 and planned to process at least 1.2 million tonnes in 2008 after launching oil cleaning facilities.

The plant's feedstock is 75 percent condensate and 25 percent oil.

"We have limited volumes of condensate; and all surplus could be achieved by an increase in oil refining," Kakarov said.

Ukraine is eager to reduce its energy dependence on its larger neighbor, which has wielded its energy wealth to influence nearby states. But with little or no domestic crude to spare, Shebelinsky's output increase is not a sure thing.

The country has argued repeatedly with Russia over oil supplies to its refineries in addition to more public battles over Russian gas import pricing that led Russia to cut supplies off two years ago.

Russia's Tatneft cut deliveries to Kremenchug after former manager Pavel Ovcharenko took the plant over, saying a court had reinstated him.

Ukrtatnafta, the company operating Kremenchug, said recently it would increase processing of crude by 20 percent to 360,000 tonnes a month as of December, but still far below its average 500,000 to 600,000 tonnes a month earlier this year.

It also said Kremenchug is working on restarting a second distillation unit that had been closed due to the shortage.

Since taking over, Ovcharenko has managed to buy several deliveries for November and December -- 170,000 tonnes for each month at Ukrainian auctions and 165,000 tonnes bought from an undisclosed Russian producer.

But Shebelinsky says it will start competing for about 4 million tonnes of Ukrainian crude by 2011.

"Once we have the distillation unit we will compete with Kremenchug and others for Ukrainian oil," said another head of Ukrgazdobycha Yuri Smyslov.

Ukraine is likely to consume about 11.1 million tonnes of oil product in 2007 compared with 10.4 million in 2006 but the seven leading Ukrainian refineries cover only about 70 percent of the needs. Only two are working to full capacity.

These refineries could in total process over 50 million tonnes of oil per year, but they work at about 50 percent of capacity due to shortage of oil and obsolete equipment.

ABU DHABI

Neste, Takreer, OMV to Build 500,000 Tpy Base Oil Plant in Abu Dhabi

Neste Oil of Finland, Takreer of Abu Dhabi, and the Austrian oil and gas group OMV are proceeding with their plans to form a joint venture company and build a plant to produce sulfur-free, Very High Viscosity Index (VHVI) Group III base oil at Ruwais, Abu Dhabi. The parties have signed the Heads of Terms agreement in Abu Dhabi, covering the basic principles for the design, construction, and operation of the facility and the commercial terms of the project. The joint-venture company will be 60% owned by Takreer and 20% by Neste Oil and OMV each.

The planned facility will be capable of producing 500,000 tons a year of base oils used for blending top-tier lubricants. Feedstock for the base oil facility will be provided from Takreer's hydrocracker unit. Neste Oil will bring technology and production know-how and will initially be responsible for marketing the products. OMV will bring know-how in base oil blending and marketing experience.

The Front End Engineering Design (FEED) of the project is expected to commence by the second quarter of 2008. The final investment decision will be made later, based on the investment cost estimates obtained during the FEED phase.

Demand for high-performance, sulfur-free base oils, is increasing globally due to their ability to meet current and future performance requirements and more stringent environmental standards.

Takreer is a refining company with an overall crude and condensate processing capacity of about 500,000 barrels per day. With its fundamental strength in oil refining, Takreer is now working on expanding its activities in the downstream sector to identify and deploy products and process technologies that would provide a competitive edge. With a vision to become a leading diversified oil refining company, Takreer is now interested in expanding its product portfolio into the production of high-quality base oils.

Neste Oil, headquartered in Espoo, Finland, is refining and marketing company focused on advanced, clean traffic fuels with a strategy that prioritizes growing its refining and premium- quality biodiesel businesses. Neste Oil has a total refining capacity of approximately 250,000 barrels a day; and is an industry leader in manufacturing and marketing Very High Viscosity Index (VHVI) base oils under its Nexbase brand.

OMV is the largest listed industrial company in Austria with more than 26 million metric tons of annual oil refining capacity and a retail network of more than 2,500 filling stations in 13 countries. OMV sells more than 14 BCM of gas a year. With the acquisition of a majority stake in Petrom of Romania, OMV has become the largest oil and gas group in Central Europe. OMV is active in refining and marketing in 13 countries, and in exploration and production in 20 countries and on five continents.

The project combines the strengths of all three parties in the design, production, and marketing of high-performance base oils.

Neste Oil's other project to increase base oil production in Bahrain is also progressing.

BAHRAIN

Bahrain Opens $725 Million LSDP unit at Bapco Refinery

Coinciding with the 75th anniversary of the discovery of oil in Bahrain, the Prime Minister Shaikh Khalifa bin Salman Al Khalifa officially inaugurated the Low Sulphur Diesel Production (LSDP) facility at Bapco refinery December 5.

The project completed at a cost of $725 million is considered as a milestone for the company's long-term plan for its ongoing Strategic Investment Programme.

The LSDP project promises to reduce the current high-sulfur content in Bapco's diesel pool ensuring sales in the international diesel market, therefore keeping it competitive and profitable as a major international export refiner.

The Prime Minister emphasized that the government was taking all steps to set up more industrial facilities to complement the existing infrastructure for oil and other sectors.

The centerpiece of the LSDP project is the 60,000 barrels per day hydrocracker, which is one of the largest in the world. At the heart of this unit are two large reactors. The first reactor weighs over 1,000 tonnes and the second over 400 tonnes. Transporting the super-heavy equipment was a major challenge and took over a month to complete. Two cranes were required for the lifting and positioning of the reactors which took four weeks to build and the journey by sea barge from Mina Salman to Muharraq Jetty took six hours as the vessel traveled at less than 1mph.

He praised Bapco as a key company that laid the very foundations of modern industries in Bahrain, stressing that the government was keen on diversifying income sources while laying a special emphasis on the energy sector which is still the main engine of the local and global economies. For this reason, the government continues to develop transformational industries which reinforce the role of energy in boosting the national economy, Shaikh khalifa added. In the pre-oil era, Bahrain had maintained the lead in the commercial, industrial and economic fields which have been further developed with the discovery of oil thanks to a package of projects launched by the government to boost the national economy and contribute to the promotion of industries in all vital sectors.

Dr Mirza said that Prime Minister gave the green light for the beginning of the project in 1998 noting that it is considered one of the biggest and most advanced projects in the history. If the project had not started at that stage, it would have cost more than $2 billion today. The minister also shed light on the goals that the project would achieve for national economy.

IRAN

Work Begins on New $2.6 Billion Refinery in Southern Iran

A new oil refinery project in Omidiyeh, located in southern Iran, has begun.

The project contractor said the project was approved by the president on his tour of Khuzestan province. He added that this refinery will have a capacity of producing 180,000 barrels of light and heavy crude oil. The project will be carried out by the private sector, with an investment of more than US$2.6 billion.

Mr Iranpur said that the project will be completed in four years. He said the refinery is situated 7 km from Omidiyeh and will be producing liquid gas, normal petrol, aircraft fuel, paraffin, diesel fuel, fuel oil, oil coke and sulfur.

He said the project will create 3,700 employment opportunities for young people of the region.

Iran to Build Seven New Refineries

Iran will make an 11.7 billion euro investment to build seven refineries and refining plants in four corners of the land according to the latest European standards.

The Persian Gulf Star Gas Condensates Refinery in the southern region of Assaluyeh is among the future projects that aim to refine 360 thousand barrels of gas condensates per day and to produce gasoline, jet fuel, and other valuable products.

Gas condensates are used for production of gasoline, jet fuel, propylene, and other valuable products. The refinery will be constructed through investing some 1.7 billion euros in 36 months.

Homuz Oil Refinery in Bandar Abbas, as another important project, will refine 300 thousand barrels of heavy and super heavy oil per day and is to produce gasoline according to the highest European standards.

The project will be carried out in 42 months with an about three billion euro investment. Bandar Abbas, a port in southern Iran, will turn into the largest oil refining region in the Middle East when investment plan and 20 refining and stockpiling projects are implemented.

Out of the 20 projects, some aim to construct new refineries, to develop the existing refineries, and to transfer and store products that will help update the industry and lift gasoline output from 16 to 36 percent.

The projects also help the southern port refine one million barrels of crude oil per day. The great objective is achieved through building five giant refineries and carrying out six projects on development, improvement, and optimization of existing refineries and increase of their capacities.

KUWAIT

Hill/SDPM to Consult on Kuwait Refinery Projects

"The new refinery project at Al-Zour and the Clean Fuels Program for the existing refineries are large, complex projects whose success is vitally important to the Kuwaiti petroleum industry," said Raouf S. Ghali, President of Hill's Project Management Group (International).

KNPC to Receive Bids for $14.6 Billion Al Zour Refinery

Kuwait National Petroleum Corp. has given companies vying for the contract to build a new $14.6-billion refinery an additional 10 days to prepare their bids, a company official said December 16.

International companies that were prequalified earlier this year to bid for four separate packages covering the construction of the 615,000-barrel-a-day Al Zour refinery now have to submit their proposals on Dec. 26, a KNPC official, who declined to be named, told Zawya Dow Jones.

"Companies requested more time. We expect at least three bids for each of the four packages," the official said, adding that the project's budget stood at 4 billion Kuwaiti dinars ($14.6 billion).

Foster Wheeler Ltd. and Snamprogetti are among the more than 17 companies pre-qualified to bid for the project's four packages, comprising processing units, marine work and tank farms, according to the ABQ Zawya projects monitor.

Kuwait earlier this year decided to raise the budget for the Al Zour project after bids came in at more than double the original $6.3 billion budget in December 2006.

Project cost in the Middle East have soared in the past three years as governments are spending record oil revenues on building and expanding industries and infrastructure, leading to shortages in contractors, raw materials, equipment and qualified labor, and in turn driving up prices.

The Al Zour refinery, Kuwait's fourth, will mainly produce low-sulfur fuel oil for the country's power plants by 2012.

Kuwait, the fourth largest oil producer in the Middle East, presently has three refineries with combined capacity to process about 930,000 b/d of crude oil.

OMAN

Oman, Indian Firms Eyeing Ventures

Oman Oil is in talks with Reliance Industries, the largest company in India by market value, and Tata for ventures to meet rising demand for fuels and chemicals.

The ventures may be in both Oman and India, Oman Oil's chief executive, Ahmed Al Wahaibi, said in New Delhi. The company may raise its stake in a refinery being jointly built with a state-run firm, Bharat Petroleum, the chief executive said.

The Sultanate may offer its natural resources to companies like Reliance Industries which, according to Gulf News, plans to invest $24 billion on petrochemical projects in the Middle East.

SAUDI ARABIA

Petrochemical and Refining Integration Seen as a Key to Saudi Growth

Saudi Arabia is rapidly changing. With one of the world’s highest rates of population growth and more than 54% under the age of 30, there is a need to provide for future generations. Through its refining and petrochemical initiatives, Saudi Aramco said getting closer to meeting that need.

It was on that note that Abdulaziz M Judaimi, Vice President of New Business Development, opened the Dhahran Geoscience Society meeting last month. His speech, 'Investing in Generations: Opportunities in Downstream Petrochemicals and Refining', made the case for integrating refineries with petrochemicals.

Saudi Aramco’s challenge of supplying the Kingdom’s growing demand for refinery fuels could be met by building more world-scale refineries, he said.

That would contribute to the Kingdom’s GDP, but would do little to provide new jobs, diversify the economy or stabilize refining profitability, he said.

On the other hand, integrating those refineries with petrochemical complexes, and developing industrial clusters, would. It also would increase the Kingdom’s GDP impact, generating even more jobs.

Judaimi said that a single world-scale complex refinery typically would generate about 2,000 jobs, but a refinery that is integrated to a basic petrochemical complex, with potential to integrate further, would generate more high-skilled jobs.

“We must approach our business with the proper balance of analysis and action, of preparation and implementation, of caution and speed,” Judaimi said. “It’s a bit like putting the pieces of a puzzle together. It starts with crude oil and refining, and then to create higher value, we extend into petrochemicals to enable the secondary and tertiary industries to be formed.”

Saudi Aramco’s efforts to meet the Kingdom’s fuel demands are ideal opportunities for human and economic development, Judaimi continued. The capital program for existing refineries, are part of these efforts, including a Ras Tanura Refinery crude oil expansion and the Fuels Quality Specification Road Map. The company is also constructing two state-of-the-art 400,000-barrel-per-day deep-conversion refineries in Yanbu‘ and Jubail, with partners Conoco-Phillips and Total, and integrating Rabigh and Ras Tanura refineries with petrochemical and industrial parks to provide raw materials for the downstream industries with partners Sumitomo and Dow.

McIlvaine Company,

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