Marathon Oil Corp. announced June 20 that construction of the estimated $1.9 billion heavy oil upgrading project at its Detroit refinery is underway following issuance of an air quality permit by the Michigan Department of Environmental Quality (MDEQ).

With expected completion in late 2010, the project will increase the refinery's total capacity from 102,000 barrels per day (bpd) to 115,000 bpd, which will include an additional 80,000 bpd of heavy oil capacity. The increased refining capacity will supply more than 400,000 additional gallons of clean transportation fuels a day to the marketplace.

"The Detroit Heavy Oil Upgrade Project is illustrative of strategic investments we're making across our downstream business to increase coking capacity, lower feedstock costs as well as increase efficiency and flexibility, so we can continue providing competitive returns in a challenging downstream environment," said Gary R. Heminger, executive vice president of Marathon and president of the company's refining, marketing and transportation operations.

Marathon's Detroit Heavy Oil Upgrade Project will require an average of 800 construction workers a day until its completion. In addition, the expansion will increase the refinery workforce by 135 full-time employees. Currently there are 480 full-time employees at the refinery.

"By sourcing additional crude oil from our North American neighbors in Canada, this important project will provide improved crude oil supply security for Michigan's only refinery. Since purchasing the refinery in 1959, Marathon has made substantial investments in the facility, including the completion of a more than $300 million expansion and clean fuels project in 2005. Safety and environmental stewardship will continue to be our primary focus during the construction of the Detroit Heavy Oil Upgrade Project," Heminger said.

In addition to compliance with the stringent environmental requirements set out by the MDEQ permitting process, Marathon has committed to going beyond compliance with additional environmental enhancements that include:

Retrofitting 150 Detroit Public Schools' buses with diesel emissions controls;
Adding eight additional continuous air emission monitors on process unit stacks to further monitor compliance with permit requirements;
Installing at least four ambient air monitoring stations on the refinery perimeter to monitor air quality;
Capturing emissions from trucks hauling petroleum coke at the refinery;
Enhancing street sweeping of paved roads near the refinery;
Collaborating on the city/county emergency notification system; and
Sharing emissions data with the refinery's Community Advisory Panel and community-based organizations near the refinery.

Fluor Corp. will provide integrated engineering, procurement and construction services for the refinery project.

In addition, an associated pipeline project in six Monroe County, Mich., townships and one township in Wayne County will require hundreds of temporary construction jobs for the duration of the project. Construction on the 29-mile segment of pipeline is expected to begin in the second quarter of 2009 with completion in 2010.

Shell’s Washington Refinery Cited for Safety Violations

Washington state's Department of Labor & Industries said on June 25 it found 23 serious safety and health violations at Shell Oil's 145,000 barrel per day (bpd) refinery in Anacortes, Washington.

Shell said it was weighing a possible appeal of the agency's citation, which could lead to fines totaling $109,600.

The Labor & Industries Department's findings came after inspectors spent two days a week for two months in the refinery and poured over 10,000 pages of documents.

The inspection is part of the federal National Emphasis Program to conduct detailed safety inspections at U.S. refineries to prevent a repeat of the 2005 explosion at BP's Texas City, Texas, refinery, which killed 15 workers and injured 180 other people.

Among the serious violations found at the Shell Anacortes refinery were failures to identify and control hazards that could lead to releases of highly hazardous chemicals and deficiencies in the development of mechanical integrity programs, the Labor & Industries Department said.

"A serious violation is cited when there is the potential for death or serious physical injury from the violation," the agency said in a statement.

A Shell spokesman said much of the citation concerned documentation of safety programs at the refinery.

"The refinery is reviewing the citation at this time," said Shell spokesman Brian Sibley. "We have 15 days to review this."

A health and safety specialist for the United Steelworkers union, which represents workers at the refinery, said the Labor & Industries Department's findings were similar to those seen in other inspections across the country.

"Everything we saw as contributor to the Texas City explosion, we saw in these inspections," said the USW's Kim Nibarger. "You'd think at $4.00 a gallon for gasoline, they'd be able to fix things."

A U.S. Chemical Safety Board investigation of the BP Texas City blast found numerous failures to recognize the risk of a catastrophic release of explosive chemicals and maintain the refinery's equipment.

$700 Million Big West Refinery Expansion Report Issued

County planners were out in June with their revised environmental impact report on a major expansion project at Big West Refinery in Bakersfield.

The document assesses practically every aspect of the controversial "Clean Fuels" project.

What it doesn't contain, is an endorsement of Big West's proposal to use a modified form of hydrofluoric acid in the refining process.

The $700 million Clean Fuels project would allow Big West to increase by more than half, the amount of diesel fuel and gasoline produced at its Rosedale refinery, rather than trucking secondary refined gas oil to southland refineries for processing.

16 months in the making, the 2000-page revised EIR on the project is out.

Division Chief Lorelei Oviatt says, "we feel this document discloses everything and we're interested in public comments."

It identifies a wide array of environmental impacts from Big West's proposed use of modified hydrofluoric acid in the alkalation process and ways to offset those impacts.

Many refineries in the U.S. use sulfuric acid instead, contending that it’s safer.

Modified HF is less tested than sulfuric acid, but both are extremely toxic chemicals, and pose significant health hazards if spilled.

But county planners say Big West has overlooked another alternative to using acids. It's called hydrocracking.

"It's the same process they use now. It produces more diesel fuel than gasoline," says Oviatt. "You either use an acid to reform the hydrocarbons or you use a hydrocracking system using steam and boiling to reconform these hydrocarbons. Alkalations must use some acid. That's the crux of the issue with regards to safety and hazards. We picked alternative D as the environmentally superior alternative in that it reduced the most impacts."

Oviatt and Cheryl Casdorph drafted the revised EIR. They picked the hydrocracking as the environmentally superior alternative because it reduces the most impacts.

Casdorph says if Big West produces more oil here at home, dramatically reducing truck trips to southland refineries, and uses its emission reduction credits, increased emissions of ozone pollutants from the expanded refinery will essentially be offset.

But, Casdorph says, the two year construction period will generate additional air pollution that can't be completely offset.

"Pollution from construction will be significant, says Cheryl Casdorph of the Kern County Planning Dept. "From the running of equipment to the 1200 workers coming on site every day."

Big West is also proposing to plant one thousand big trees on the property to offset increased carbon dioxide, or greenhouse gas emissions from the refinery.

Casdorph says decision makers will have to reconcile increased air quality impacts with the economic benefits of the clean fuels project.

If decision makers approve this project, they'll have to do an override.

Big West has issued a statement, saying, "the Clean Fuels project will have tremendous benefits for our company, Kern County and the state of California. We are hopeful that the project will be approved once the intensive public review and multi-agency permitting process is complete."

Lorelei Oviatt said it's crucial for concerned citizens to review this document, to make an informed opinion that isn't shaped by the current media campaigns being run by the refinery and clean fuels opponents.

"It can't be boiled down into a five minute promotion," says Oviatt. "That's not what we need for our decision makers and our public."

Despite a request by Big West to bypass the county's planning commission and fast track the EIR straight to supervisors, that won't be happening.

Several workshops are being set up. There's a 45-day public comment period, and the planning commission will hold a full hearing on September 25th.

BP California Refinery Warns of Flaring

BP Plc's 265,000-barrel-per-day Los Angeles-market refinery in Carson, California, filed notices of flaring at the refinery June 26.

In the first notice, BP said an unplanned release of the safety flare system was underway at the refinery June 26 and could last through the afternoon of June 28.

The notice filed with the South Coast Air Quality Management District, said the flaring was not due to an equipment breakdown.

A BP spokesman said he did not have information immediately available about the unplanned flare notice.

Two notices warning of planned flaring were filed moments after the unplanned notice was sent.

CB&I Wins $90 Million California Refinery Deal

CB&I has been awarded a contract for a large-scale hydrogen plant at a California refinery. The project is valued at approximately US$90 million.

CB&I's scope of work for the project consists of the engineering, procurement and fabrication of a 100 million standard cubic feet per day plant that will supply high purity hydrogen to help the refinery meet new clean fuel standards. The plant will use CB&I's proprietary HYFORMINGTM box furnace technology. CB&I’s contract is scheduled to be completed in early 2010.

Delek to Pay $1 Billion for U.S. Refinery

Delek US Holdings Inc. is in exclusive negotiations to buy a yet unnamed U.S. refinery with a price tag estimated at roughly $1 billion dollars, reported Dow Jones Newswires.

While the deal is expected to be cemented by the end of July, Paul Pierce, vice president of marketing for Delek's Mapco brand, told CSNews Online he was unable to discuss particulars. "We can’t talk about anything right now," he said. "Our release says it all, which we were required to do by law."

Analysts' speculation has centered on two Oklahoma-based refineries -- Valero Energy Corp. and Sunoco Inc. -- which recently entertained offers. The Brentwood, Tenn.-based energy company did describe the assets in question to the Securities and Exchange Commission (SEC) as having a capacity between 75,000 and 100,000 barrels a day, metrics which fit the aforementioned refineries.

Delek is also considering buying or entering into wholesale supply agreements with 400 to 450 stores, according to a filing with the SEC. Pierce declined to comment on the nature of those agreements.

When asked when the name would be released, Pierce said: "We are public company and will have a highly orchestrated response with regards to public information."

Industry analysts stated the proposed purchase is daring, considering U.S. refining margins have decreased with high oil prices and weakened gasoline demand. Dow Jones reported that Delek has been seeking to acquire a second refinery since it first went public. Currently, the company operates a single plant in Tyler, Texas, according to the report. In its first filing to the SEC, the company expressed its interest in expanding by acquisition.

Analysts also claim Delek is in the running for another Valero refinery located in Memphis, Tenn., although the plant is larger than its Oklahoma counterpart. "We are not saying anything officially about which companies have expressed an interest in our assets," Bill Day, a spokesman for the San Antonio-based refiner, told Dow Jones.

BP Buys Whiting Plant for $210 Million

BP Alternative Energy has bought the 525 megawatt natural-gas fired combined-cycle cogeneration power plant; Whiting Clean Energy facility in Indiana from NiSource for $210m.

BP said the facility provides an efficient and consistent source of steam for the group's Whiting refinery and offers the opportunity to sell lower-carbon power into the local power market.

“BP's purchase of the Whiting Clean Energy facility will enhance the efficiency of our Whiting refinery and serve as a reliable source of energy for the Midwest,” said Bob Malone, BP America president and chairman.

BP said it has received all necessary approvals from regulatory authorities and has taken over the day-to-day operational control of the plant. No staff reductions are expected as a result of the acquisition, it added.

TriMas' Lamons Gasket Co Awarded Contract for Motiva Port Arthur Refinery Expansion Project

TriMas Corporation, a diversified growth company of specialty niche businesses – has announced that its Lamons Gasket Company has been awarded a contract for the Motiva Port Arthur Refinery Expansion Project in Port Arthur, Texas.

This contract calls for Lamons to supply all of the gaskets needed to complete the project, which is expected to require hundreds of different pipe-size and pressure-rated gaskets for the piping process.

"Lamons is very excited to be part of this major project over the next few years, especially since we have a local facility in Beaumont, Texas which can supply emergency requirements throughout the project duration," said Richard Owen, President of Lamons Gasket.

The Motiva Port Arthur Refinery Expansion Project is expanding the existing refinery's current capacity to more than 600,000 barrels per day (bpd), making it the largest refinery in the United States and among the top ten in the world. A joint venture of Bechtel Corporation and Jacobs Engineering Group is the prime engineering, procurement and construction contractor on the expansion.

Big West Open to Alternative Refining Process

Big West of California officials said June 30 they’re open to a new proposal that would allow the company to boost gas and diesel output without introducing new hazardous chemicals into the community.

The company’s comments were the first in response to a revised environmental impact report released June 28 that detailed an alternative option with fewer environmental impacts than the company’s plan, which involves the use of a toxic acid.

“We still think the current proposed system is a good one but we also think (the new alternative) would work,” said Big West Health, Safety and Environmental Director Bill Chadick. “The county will ultimately make that choice and we're comfortable either way.”

“Alternative D,” as it’s called in the report, would convert gas oil into gasoline and diesel by building a new processing unit similar to one currently operating at the refinery. Not only would it reduce hazards from toxic chemicals but it would also reduce air pollution, greenhouse gases and create less odor, the report said.

Critics of the refinery’s original plan were cautiously optimistic about the new option.

“I think the fact that people organized around this issue, put pressure on the company to come up with a less toxic alternative, is a win for local residents,” state Sen. Dean Florez, D-Shafter, a vocal critic of the refinery’s plans to use the hazardous chemical modified hydrofluoric acid, said.

Big West should get credit, Florez said, for “including a less toxic alternative” in the environmental report.

Asked why the refinery hadn’t considered the alternative previously, Chadick said the decision to expand the refinery was made by executives with parent company Flying J when it purchased the Bakersfield refinery more than three years ago. The design is based on processes used at Flying J’s only other refinery, located in Ogden, Utah.

But with community concern raised here about the use of dangerous chemicals, Chadick said managers at the local refinery decided to look at other ways the facility could be expanded.

Chadick has agreed that “Alternative D” was “clearly the environmentally superior project” but cited several reasons the company prefers its original plan.

The company’s proposal would allow it to produce its own alkylate, a highly sought-after and key blending component for the production of clean-burning fuels. “Alternative D” would require that Big West continue to purchase alkylate from other producers.

“It’s a smart business decision to be able to have your own ... so we're not subject to whatever people want to sell it for,” Chadick said.

The company has also already placed orders and paid for equipment needed for the project design it proposed. It’s likely another company could buy the equipment but not without some financial loss, Chadick said. He didn’t immediately know how much the company could lose.

Gloria Smith, a San Francisco-based attorney representing local residents and environmental groups concerned about the expansion, said “Alternative D” may be a good option to address concerns about toxic chemical risks. But she said other environmental issues are still a concern.

For example, soil around the refinery is known to be contaminated with heavy metals such as lead and chromium. Smith’s clients are concerned the contaminants might get swept into nearby neighborhoods by winds during construction.

Smith has hired experts to review the new report and said she would comment further once they’ve conducted a full review.

The release of the report June 28 started a 45-day comment period leading up to a vote on the project by the Planning Commission in September and the Board of Supervisors in October.

Kern County Planning Department Division Chief Lorelei Oviatt said the agency is interested in public input on the project and “Alternative D.”

Planning Department staff will eventually make a recommendation on whether the Planning Commission should approve or deny the project. The department could condition approval by requiring Alternative D, Oviatt said.

Following a planning commission vote, the project will require final approval by the Board of Supervisors because the county is also seeking to adjust the refinery’s current “by-right” zoning so that any significant projects in the future must undergo environmental review and public decision-making.

The county suggested the zone change due to the refinery’s location in a heavily populated area.

Since the 1950s, the refinery has been under “by-right” zoning, meaning that, with a few exceptions, new industrial development or modifications can take place on the property without county approval or environmental review.

Environmental review was only required for the expansion because certain conditional use permits were needed for storage tanks, injection wells and height exceedences on some equipment.

Kern County Planning Director Ted James said the new zoning would give “the county a better way of controlling and providing information to the public about land use changes on this property.”

Citgo Faces Penalties after Calcasieu Spill

Citgo Petroleum could face millions of dollars in penalties in a federal Clean Water Act lawsuit filed in recently for a June 2006 oil spill at the company’s Lake Charles refinery.

The U.S. Environmental Protection Agency and the state Department of Environmental Quality are seeking reimbursement related to the response and fines of up to $4,300 for each of the estimated 53,000 barrels of slop oil that leaked into area waterways.

Citgo declined comment on the litigation through spokeswoman Shawn Trahan.

The spill, among the largest in state history, forced the closure of parts of the Calcasieu Ship Channel for more than two weeks as crews worked to contain the slop oil — a mixture of oil, water and other waste substances from the refinery process.

The waste product is generally held in tanks and reprocessed to capture the usable oil.

The June 2006 spill occurred after a storm dumped 11 inches of rain over a short period, causing two slop oil tanks to overflow into a containment area, according to DEQ records.

About 2.2 million gallons of the slop oil then seeped out of the containment area, according to the lawsuit.

DEQ has alleged that the spill occurred because Citgo allowed too much waste oil to build up in the tanks, partly because of faulty equipment.

Citgo is scheduled to meet next month with state and federal officials to discuss a possible settlement to the Clean Water Act lawsuit, DEQ attorney Ted Broyles said.

Citgo is already facing an administrative compliance order from DEQ that could result in additional penalties.

Broyles said the DEQ action also addresses past alleged environmental violations at the refinery from 2001 to 2006.

He said no firm numbers have been worked up on the potential penalties and recovery cost, and he could not speculate on what Citgo might be asked to pay in the massive spill.

“I don’t think we have had a precedent of this magnitude,” Broyles said.

Scientists continue to investigate the long-term impact of the spill, which spread oil for several miles in the Calcasieu River, the Calcasieu Ship Channel, the Indian Marias lagoon and other area waterways.

DEQ staff scientist John Demond said research is under way to evaluate the impact to plants and animals in an area of the state known for its fish and bird life and expansive marshes.

“We are seeing recovery. It may be a while longer before it reaches an endpoint,” Demond said.

Citgo has worked to replant some heavily damaged marsh areas, Demond said, and the company will likely be expected to fund restoration projects to offset environmental damage caused by the spill.

No specific projects have been proposed.

“This is a significant spill, so I imagine there will be a sizable restoration as a result of this,” Demond said.

The research on impact and recovery plans is done under a group of federal and state agencies and the Louisiana Oil Spill Coordinator’s Office.

EnCana Confident of OK for U.S. Refinery Expansion

EnCana Corp. has tried to assure investors its $4-billion-plus Illinois refinery expansion will move forward despite environmental opposition.

Canada's largest energy company by market value, which next year will split into two independent corporate entities, was dealt a setback this month. An appeals board for the U.S. Environmental Protection Agency turned down the project's air permits.

The decision came after two environmental groups intervened on a 2007 ruling by the Illinois EPA to grant the permits to ConocoPhillips, which operates the Wood River refinery as part of an oilsands partnership struck in 2006 between Conoco, the refinery's original owner, and EnCana.

EnCana is confident the permits will be granted within the next several months, although costs to add heavy oil coking capacity and to expand the facility's output are rising, said Brian Ferguson, the designated chief executive of the new EnCana oilsands company.

"We take a very high degree of confidence that we will be able to get all the approvals, even if it's on a little bit longer time frame than we expected," Ferguson said at EnCana's investors day in Calgary. "But it's an important project in terms of supply of gasoline and transportation fuels in that part of the United States."

John Brannan, an executive vice-president with the still unnamed integrated oilsands firm, said three out of five points raised in the appeal are being worked on "feverishly" by Conoco with the Illinois EPA in hopes of clearing a path forward, although he said none of the unresolved issues could "derail" the expansion.

"The first two issues are completely off the table and not available for further appeals," Brannan said. "The remaining three points are relatively minor issues (related to emergency flaring) with limited ability to impact engineering and design. They are issues that can be replied to with adequate documentation procedures and potentially some additional instrumentation on a couple of the upset emergency flares."

The Wood River expansion would increase capacity at the 10th largest refinery in the U.S. from the current 158,000 barrels a day to about 215,000 barrels and add coker units to process 65,000 barrels a day of heavy oil.

Ferguson declined to give a new cost estimate for the expansion but said even with the cost pressures, it is about half the price of building new capacity for upgrading bitumen from the oilsands within Alberta.

EnCana, surprised the Canadian oilpatch in May when it announced it would split into two separate firms to get better investor recognition.

EnCana shares have risen since and Eresman said investors welcomed the move, although as the price of oil plummeted almost $5 Thursday, EnCana shares fell $5.35 from a record high to $92.06. It was EnCana's biggest one-day drop in 18 months.

EnCana has established a leading position in gas shale ventures in northeastern British Columbia's Horn River play and in the Haynesville shale in Texas and Louisiana, each of which could yield up to one billion cubic feet of natural gas a day.

Eresman said that EnCana will likely increase its capital budget this year. Its current program is set at about $6.9 billion. Eresman said new money will allow EnCana to buy more land and do more drilling at the new areas and at EnCana's existing Texas gas fields.

Ferguson, meanwhile, said even with sky-high oil prices, development work will not be accelerated at Christina Lake and Foster Creek, properties in the ConocoPhillips-EnCana partnership. The two projects are due to grow to produce a combined 400,000 barrels a day over the next few years.

CANADA

Plans for Newfoundland $4.6 Billion Placentia Bay Refinery Back on Track

A plan to build a new $4.6-billion refinery in Newfoundland and Labrador is still alive, after the company behind the new facility was granted protection from creditors by the province's Supreme Court.

Newfoundland and Labrador Refining Corp. (NLRC), a joint venture between mining firm Altius Minerals Corp., based in St. John's, and a group of European investors, is seeking to build a new 300,000 barrel a day refinery in Placentia Bay to supply the northeastern United States, but has been unable to raise the necessary financing for the project because of the global credit crunch.

In June, engineering firm SNC-Lavalin Group Inc. tried to have NLRC declared bankrupt. However, the Supreme Court of Newfoundland and Labrador instead gave the company protection from its creditors. The decision means it will now be able to put in place a restructuring plan that could involve bringing in a partner or selling assets.

"We can now pick up where we were before and look to attract a partner or financing," said managing director Brian Dalton in an interview. "We are talking to a broad range of potential participants, including those who could contribute financially or strategically."

Newfoundland already has one refinery, Harvest Energy Trust's 105,000 b/d Come-by-Chance facility. But with oil prices skyrocketing, in part because of a shortage of refinery capacity to meet demand for petroleum products, companies are keen to build new refineries on Canada's sparsely populated East Coast so they can supply the lucrative New York and Boston markets.

NLRC is now in talks with potential investors in the Middle East and India, and is still eager to pursue the refinery, which could take three years to build once sufficient financing has been found and whose location is well suited to supplying jet and diesel to Europe, as well as to North America, Mr. Dalton said. "We still believe the project makes a lot of sense."

Altius's partners in NLRC include Irish billionaire Dermot Desmond, the founder of Dublin-based International Investment and Underwriting and a director of association football club Celtic F.C. Harry Dobson, a mining entrepreneur and one of Scotland's richest men, and British private venture capitalist Stephen Posford also own substantial stakes in the venture.

Aside from NLRC, closely held Irving Oil is seeking to build a new $7-billion refinery in Saint John, N.B., in partnership with U.K.-based BP PLC.

CUBA

Cuba to Raise Santiago Refinery Capacity by 50,000 bpd

Cuba plans to raise the capacity of a refinery in the eastern city of Santiago to 50,000 barrels a day, more than double current output, the island's foreign investment minister said on June 27.

Minister Martha Lomas, speaking on Cuban television, said socialist ally Venezuela will pick up the tab, but she did not say how much the expansion would cost or when it would be completed.

"The expansion of the Santiago de Cuba refinery with help from Venezuela will allow the doubling of production from that plant, with greater quality and efficiency," she said.

The plant, located about 500 miles (800 km) east of Havana, was a Texaco refinery before it was nationalized after Cuba's 1959 revolution.

With a current capacity said by Venezuela's PDVSA to be 22,000 barrels per day, it processes part of the 92,000 bpd Venezuela provides to Cuba under preferential financial terms.

Venezuela, under President Hugo Chavez, has become Cuba's biggest benefactor and last year invested $150 million in modernizing a Soviet-era refinery en Cienfuegos, 150 miles (240 km) south of Havana.

The Cienfuegos facility has a capacity of 65,000 bpd, with plans on the boards to raise it to 150,000 by 2013.

Cuba Seeks India’s Help to Set up 150,000 bpd Refinery

Cuba has invited Indian firms to invest in a planned 150,000 barrels a day refinery in the island nation, India's oil ministry said in a statement.

It also sought India's help in upgrading and expanding its existing refineries at a meeting in Madrid on June 30 between Indian Oil Minister Murli Deora and his Cuban counterpart Yadira Garcia Vera, the statement added.

The two countries have finalized the India-Cuba Hydrocarbon Agreement for co-operation in the oil and gas sector, it added without elaborating.

ONGC Videsh Ltd, the overseas investment arm of state-run explorer Oil and Natural Gas Corp, has stakes in nine exploration blocks in Cuba, and total ownership of two.

CURACAO

Curacao’s 320,000 bpd Isla Refinery Continues to Operate, despite Emissions Violations

An oil refinery dating from World War I billows toxins over the Caribbean island of Curacao, but under the pressure of local economic need Curacao allows it to continue operating.

The Isla refinery, operated by Venezuelan state oil company PDVSA, faces growing complaints by residents and several lawsuits charging its industrial emissions cause health problems ranging from chronic coughing to cancer.

A Curacao court last year threatened to close it if it cannot meet emissions standards, citing a study estimating that each year 18 people die prematurely from exposure to contaminants.

Curacao commissioned the study from Dutch consulting company ECORYS in 2005, but didn't make it public.

The court decision is a rebuke to PDVSA, which prides itself on social responsibility inspired by Venezuelan President Hugo Chavez.

But PDVSA is under pressure to keep the 320,000 barrel per day facility running as it struggles with repeated outages at its own refineries in Venezuela.

Gasoline from Isla is exported mainly to other Caribbean nations and South America.

With little money or support for upgrading Isla and in need of the jobs generated by the refinery, Curacao seems content to let PDVSA keep running it as long as the courts allow.

"There is no scientific study whatsoever that the refinery is causing death or anything like that," said Charles Cooper, a Curacao legislator whose party is allied with Curacao's governing party and who also works for PDVSA.

Public Health Commissioner Humphrey Davelaar did not respond to requests for comment. An Isla spokeswoman said she could not comment and a PDVSA spokesman did not respond to a request for comment.

Located 40 miles (60 km) off the Venezuelan coast, it is a territory of the Netherlands Kingdom and attracts tourists with its beaches, scuba diving and the Dutch colonial architecture of the capital, Willemstad.

Shell opened Isla on the site of a former Willemstad slave market in 1918 to process Venezuela's first crude oil, and the refinery supplied the Allies in World War II.

By 1985, it was obsolete and plagued by environmental woes, and Shell sold it to Curacao for a symbolic $1. The island quickly leased it to Venezuelan state oil company PDVSA, which has made few major investments to reduce emissions.

Humane Care Foundation, a local environmental group, said emissions of sulfur dioxide, which can cause permanent lung damage, are about twice the limits allowed by Isla's license. The group says the data was collected by the refinery itself.

It also says refinery emissions of particulate matter, fine dust that can cause cancer, are dangerously high. Isla has denied excessive particulate matter emissions.

Critics also say PDVSA, which has been in talks to buy the refinery for two years, provides few benefits to the island.
They note this accusation almost mirror Chavez's charges that private oil companies "looted" Venezuela by dodging taxes and failing to make investments that would have curtailed environmental damage.
Curacao took in less than 1 percent of Isla's 2007 sales of $5 billion, receiving a rent payment of less than $20 million and almost no taxes. By contrast, PDVSA says that in Venezuela some 45 percent of its sales in 2007 went to government coffers and social programs.
Critics note that islanders pay around $1.20 per liter for gasoline produced at Isla, compared with the $0.03 per liter paid by Venezuelans, who have the world's cheapest.

They also say the refinery's 1,500 jobs are only around 2 percent of the island's workforce of some 70,000. Government officials did answer requests for official workforce figures.

Refinery Director Pedro Jimenez in May said Isla was being singled out for polluting and that it would only address the problem in conjunction with other polluting industries.

Many on the island defend the refinery because of the jobs it provides and talk of closure alarms even those who suffer from the emissions.

JAMAICA

Jamaica Refinery Upgrade Cost Hits $720 Million

Petrojam in June was recognized by the Jamaica Exporters Association with its 'Million Dollar Award' for racking up US$408 million (J$28b) of sales to foreign markets, which loosely translates to about one-third its top-line income.

The energy company manufactures and sells asphalt, diesel oil, unleaded gasoline, turbo fuel, heavy fuel oil, liquid petroleum gas, and kerosene - some of those finished products are supplemented by imports, mainly from Trinidad - but also derives income from its shipping and bunkering operations.

The 35,000 barrel per day refinery is fed crude from supply markets, chiefly Venezuela under the PetroCaribe agreement, but also Mexico under the long-standing San Jose Accord, and Ecuador through spot market purchases.

The refinery is at the early stage of a three year upgrade, a US$720 million (J$51.8 billion) project, financed partially by US$130 million of equity.

The project was last estimated at US$500 million, but Petrojam managing director Winston Watson had warned previously that the price could shift depending on the outcome of the precursor FEED assessment that would determine the depth of engineering works required on the Kingston plant.

Total spend to date is $2.18802 billion, with another $1.271 billion projected this year.

The idea is to retool to levels that allows the plant to handle 50,000 barrels of oil per day, but also capable of processing heavier and, by implication, cheaper grades of crude.

The project is a joint venture between Jamaica and Venezuela's PDVSA, which has acquired 49 per cent of Petrojam for US$63 million as part of the deal and is expected to contribute additional equity financing.

It's not clear whether the US$130 million of equity is to be entirely financed by Venezuela.

Petrojam is a profitable company, cushioned by a growing surplus of $4.7 billion and largely unencumbered by debt, outside of $1.8 billion of long-term borrowings last year.

Its multibillion invoicing levels notwithstanding, the energy company's annual profit is counted in the millions.

Last year, when the refinery outputted 17.7 million of finished products, its procurement and production costs ratcheted to $85.4 billion.

Revenues in the same period to March 2008, rose by $12 billion or 16 per cent to $89.8 billion - up from $77.4 billion at March 2007 - but gross profits were flat at $4.3 billion, while operating profit dropped by more than 50 per cent and net profit by 37 per cent to $291 million.

Petrojam estimates that it will sell 18.24 million barrels of finished products this year - just under six million of which is targeted for external sales and another 12 million barrels for the local market - and that it will cost $86.7 billion to finance raw material purchases, other imports, and production.

"Petrojam is expected to maintain 83 per cent of the local Petroleum market share on the assumption of a slightly more stable price market," the finance ministry said back in March in its public sector bodies report.

The Kingston refinery is projecting revenues of $92 billion this year and profit of $467 million, but events - the violent movements in world energy prices year to date, some pushed by speculation - might since have overtaken those forecasts.

VENEZUELA

Lukoil Doesn’t Plan to Quit Venezuela despite Contract Delays

Russia's Lukoil does not plan to quit the Venezuelan market despite delays with the signing of agreements on oil production projects, Lukoil President Vagit Alekperov said.

"Unfortunately, the signing of agreements on projects in Venezuela has dragged on. We adjust them constantly. The laws, which the government of the country adopt today, are burdensome for the economy," Alekperov said in an interview with the Kommersant newspaper.

The oil company cannot "run the risk of considering these projects as a source for Cuban refineries," and "it is irrational to buy a refinery [in Cuba] for the sake of a refinery if there is no logistic [infrastructure] for oil deliveries," Alekperov said.

"We think that this region has unique reserves of oil and gas, in which Lukoil must be present," he said. "We are interested in producing and refining oil in the region, because we are present on the U.S. retail market," Alekperov said.

The Lukoil chief recognized that this retail business in the United States is not profitable now. "But we cannot fail to be present on the market which consumes 30% of the world's oil and on which we sell 8 billion tonnes of oil products per year. The project has prospects to develop, which are in particular linked to the fact that we have new refining assets," Alekperov said.

ASIA

CHINA

Sinopec Starts 23 mtpy Expansion of Zhenhai Refinery

China Petroleum & Chemical Corp (Sinopec) has started the expansion of its Zhenhai refinery in eastern China's Zhejiang province, parent Sinopec Group said.

After the expansion, the refinery's capacity will rise to 23 million tons per year. Completion is expected by September 2009.

The expansion will help provide feedstock for a one-million-ton-per-year ethylene facility now under construction, which is also due to be completed in September 2009.

Sinopec Group has set a target of 19.5 million tons of crude oil to be processed by the Zhenhai refinery this year, up from 18.61 million tons in 2007.

Sinopec Zhenhai will remain the company's largest refinery after the expansion.

PetroChina to Build 10 mtpy Refinery in Huludao

PetroChina will build a 10-million-tpy refinery in the northeastern city Huludao in Liaoning province, according to local government.

Scheduled to start construction in 2009, the refinery is expected to go into operation in 2011 by feeding on Russian crude oil piped through the Siberia-Asia Pacific crude pipeline's China branch.

The investment involved would amount to 18 billion yuan.

The coastal Huludao city, located in southeastern Liaoning province, currently has a crude run capacity of seven million t/y from PetroChina's Jinxi Petrochemical.

Besides Huludao refinery, PetroChina also plans to expand refining capacity of its Dushanzi refinery in northwestern Xinjiang autonomous region and double the output capacity of Daqing Petrochemical to 1.2 million t/y, according to PetroChina.

Sinopec Completes Part of $582.9 Million Wuhan Refinery Expansion

Sinopec Corp, Asia's top refiner, has completed construction of the first phase of a $582.9 million expansion at its Wuhan refinery in central China's Hubei province.

With the new 1.9 million tonne-per-year (tpy) hydrotreating unit for diesel and kerosene delivered on June 25, Wuhan has raised its crude processing ability by 30 percent to 130,000 barrels per day (bpd), a report by parent Sinopec Group, said.

Construction of three other facilities in the first phase, including a 100,000 bpd crude unit, a 1.2 million tpy delayed coking unit and a 60,000 tpy sulphur recovery unit, had been completed and operations were normal, the report said.

"The expansion will help ease diesel and gasoline shortages in central China, while directly supply high-quality jet kerosene to airports in the region," it said.

Wuhan refinery will eventually expand its crude processing capacity to 160,000 bpd by 2010, which includes the addition of a 2 million tpy hydrocracker in the second phase of the expansion.

The expansion is in part to supply feedstock, naphtha, to a $2 billion, 800,000 tpy ethylene complex being built by Sinopec at the same site that SK Energy agreed in May to buy a 35 percent stake in.

The 160,000-bpd refinery is less than half the size of such coastal refineries as Sinopec Zhenhai, but would be the largest in central China where local fuel demand is surging ahead with strong economic growth.

Sinopec Corp is now setting its eyes on expanding refining units in the country's heartland after nearly two decades of rapid expansion on the booming coast.

Sinopec's plan to boost inland refining capacity covers almost all its plants by the Yangtze river -- Baling and Jingmen refineries in Hubei province, Anqing plant in Anhui province and Changling refinery in Hunan province, the company has said.

Shell Signs On with PetroChina for Possible Refinery

Royal Dutch Shell PLC said it has signed a letter of intent with PetroChina Co. and the international arm of Qatar Petroleum to study the feasibility of a new refinery and petrochemical complex in China.

Shell has long signaled its desire to gain a stake in a refinery in China, which it sees as a key growth market for oil products, even though state caps on gasoline, diesel and jet-fuel prices mean domestic refineries are losing money right now.

The pact comes a little over two months after the three companies were involved in a 25-year agreement to ship three million metric tons of liquefied natural gas to China from Qatar, starting in 2011.

China is expanding refining capacity to meet rising demand for fuels, boosted by record economic growth. It imported 33.8 million metric tons of oil products last year and 163 million tons of crude oil, meaning that its dependency on foreign oil is around 50%.

Shell and Qatar Petroleum International will each have 24.5% stakes in the potential refinery and petrochemical facility, with PetroChina having majority control with a 51% interest.

The trio plan "to commence joint preliminary studies to assess the viability of building a refinery and petrochemical-manufacturing complex and marketing its products in China," Shell said.

Shell didn't disclose the likely scale of investment in the project, nor which locations were being considered for the refinery and petrochemical complex. However, Shen Diancheng, vice president and general manager of PetroChina's chemical and marketing unit, said on May 6 that PetroChina and Qatar Petroleum were in talks on building a refinery in the eastern province of Zhejiang with crude to be supplied from Qatar.

China's state-owned oil companies have been aggressively courting Middle Eastern countries -- Qatar in particular -- offering access to their rapidly growing market in exchange for long-term energy supply deals.

INDIA

ONGC to Sell Kakinada Refinery Stake to GMR Group

Ending months of speculation, Oil and Natural Gas Corporation (ONGC) on June 23 decided to exit from the proposed Rs. 25,000-crore refinery and petrochemical complex at Kakinada in Andhra Pradesh, terming it as an unviable venture. Leading infrastructure and power giant GMR is likely to pick up the 51-per cent stake in the refinery.

The decision is learnt to have been taken at the meeting of the board of Kakinada Refinery and Petrochemicals Limited (KRPL). First when ONGC Chairman and Managing Director R. S. Sharma announced the decision to exit and the second meeting where GMR was inducted as the new partner with 51 per cent stake. ONGC also made an official announcement about its exit from the project.

One of the major reason’s being cited for ONGC’s exist is that it had sought from the Andhra Pradesh Government tax incentives worth Rs. 16,000 crore over eight years to make the project viable. The State Government had declined the request.

ONGC had signed an agreement with the Andhra Pradesh Government in September 2006 to set up the refinery. However, there was no official word on the deal from both sides. The present ONGC Chairman was also not keen on the project that had been conceived by his predecessor Subir Raha.

The refinery was originally planned with 7.5 million tonne capacity but was enhanced to 15 million tonnes after the smaller refinery was found to be financially unviable. “Refineries are not our business. We will continue to concentrate on exploration and production,” a senior ONGC official remarked.

ONGC has a 46-per cent stake at present in the refinery and petrochemical project through its subsidiary Mangalore Refinery and Petrochemicals (MRPL). IL&FS has 51 per cent stake and the Andhra Pradesh Government 3 per cent stake through Kakinada Seaports.

Sources said GMR was interested in the project as it felt that it would be set up in a special economic zone and that Kakinada has a seaport.

Indian Oil Gears up for Paradip Refinery Work

Indian Oil will initiate the process of appointing the project management contractor for setting up the Paradip refinery, early next month.

The company has already appointed SBI Capital for tying up finances for the proposed grassroot refinery at an estimated cost of Rs 30,000 crore.

“We are expecting SBI caps to tie-up finances in next couple of weeks so as to seek the final board approval on project expenditure tentatively within next two months,” a company source said.

“In the meantime, banking on the preliminary approval by the board, we will float the tender for appointing the PMC which is the first step towards project implementation,” the source said, adding, the company has already identified the technology for setting up the refinery.

In view of phenomenal increase in the project costs during the last two years, IOC has recently changed its original plan to set up an integrated-refining-cum petrochemicals complex at Paradip at a cost of Rs 25,000 crore.

According to previous estimate, IOC planned to set up an integrated refining and petrochemical complex at a total investment of Rs 25,000 crore.

In the changed scenario, the company now proposes to set up the refinery alone in the first phase.

Meanwhile, a relatively higher volatility in product prices–especially that of diesel and aviation turbine fuel (ATF) – in the international market helped the company in posting a record refining margin during the first quarter of 2008-09.

“We have witnessed historic increases in margin in May and June,” a company source said.

SOUTH KOREA

Shaw to Lead Hyundai Oilbank Refinery Expansion

The Shaw Group Inc. announced June23 that its Energy & Chemicals Group has been selected by Hyundai Oilbank Co. Ltd. to lead a consortium that will provide professional services and procurement of critical equipment for a major grassroots expansion of Hyundai Oilbank's refinery complex in Daesan, South Korea.

Shaw, along with consortium partner Hyundai Engineering Co. Ltd., will provide front-end engineering design for the integration of 15 refinery process units, including a 52,000 barrels per day residue fluidized catalytic cracking unit and a 66,000 barrels per day atmospheric residue desulfurization unit. The consortium will also provide front-end engineering design for associated utilities and infrastructure, procurement of critical equipment, as well as project management services.

The expansion project will allow for conversion of high-sulfur fuel oil to higher value refining products while also upgrading the refinery to meet future fuel specifications in Korea. The value of Shaw's contract, which will be included in the company's third quarter fiscal 2008 backlog of unfilled orders, was not disclosed.

Shaw recently completed the integration of 14 process units and related services for the addition of a 60,000 barrels per day fluid catalytic cracking unit at a refinery in Ulsan, South Korea, for SK Corporation.

EUROPE / AFRICA / MIDDLE EAST

ALBANIA

U.S., Swiss Investors Buy Albanian Oil Refiner for $198 Million

Albania has sold state-owned oil refiner ARMO to US and Swiss investors for US$198 million, (128 million euros) the government said June 18.

Refinery Associates of Texas and Swiss-based Anika Enterprises and Mercuria Energy Group made the winning bid, Prime Minister Sali Berisha said. With the sale, the consortium will hold 85 percent of AMRO's shares.

ARMO operates refineries at Ballsh and Fier as well as a network of petrol stations in Albania. Other bidders were independent trader Vitol and British-based Petrofac.

Berisha called the sale "one of the best and successful" privatizations since communism fell in Albania.

BULGARIA

LUKoil Bulgaria Considers Multi-million Refinery Upgrades and Plans Network Expansion

LUKoil Bulgaria unveiled plans to invest hundreds of millions of U.S. dollars in a new capacity at its Bourgas refinery, LUKoil press office said on June 26. The news is consonant with the statement of LUKoil president Vagit Alekperov, who during his recent visit to Bulgaria said investments in the refinery would reach $1 billion through 2013.

The company, which is the sole producer and one of Bulgaria's largest fuel distributors, plans to have the capacity operational by 2013. Its product line will be low-sulfur fuels conforming to the Euro 4 environmental standard.

Part of the planned investments, are to enhance the capacities of its desulphurization installations as well as the ones to produce black fuel.

Currently, LUKoil Neftochim processes 7.5 million tonnes of crude oil a year, just as much as the market needs are. The production capacity of the refinery is nine million tonnes of crude oil.

LUKoil Bulgaria director general Valentin Zlatev attributed the key reasons for the surge in crude oil prices on international markets was the hike in excise duties and VAT, the low revenues and the purchasing power of the population.

Meanwhile, parent company LUKoil said it would double the number of petrol stations on the Balkans to at least 350, Russian media quoted LUKoil vice president Leonid Fedun as saying. The expansion would be coordinated through its Bulgarian unit, LUKoil Bulgaria, Fedun said.

In mid-July, Zlatev told reporters the company planned to set foothold in Albania and through its flagship office to draw up a business development strategy.

Presently, the Russian company has offices in almost all Southeastern European countries, namely Bulgaria, Romania, Macedonia, Montenegro, Serbia and Bosnia and Herzegovina. Recently, the company also acquired Croatia-based fuel retailer Europa-Mil and said it would build 28 new petrol stations before the year expires.

The volume of investments of the Russian corporation, have been estimated at $700 million.

LUKOIL Bulgaria Refinery Invests $249 Million to Upgrade

Bulgarian refinery Neftochim Burgas, controlled by Russia's LUKOIL, will invest $249 million this year to produce cleaner motor fuels and meet stringent European Union emission standards, it said June 30.

"The refinery will use most of the funds this year to upgrade and build new hydrocrackers to meet the EU standards as of 2009," the refinery spokeswoman said.

Brussels has adopted strict caps on sulfur content in diesel fuels, which has to be cut to 10 ppm from 2009 from 50 ppm at present to limit air pollution.

Neftochim, the Balkan country's only operational refinery, said earlier this month it plans to boost crude oil processing up to 7.3 million tonnes this year (146,200 barrels per day), from 7.05 million in 2007.

EUROPE

Lukoil Interested in Other European Refineries

Lukoil, said in June it had agreed to buy into an oil refinery in Sicily, and is still interested in other downstream assets in Europe.

"Our latest deal does not mean we aren't interested in other refineries in Europe," Leonid Fedun, the Russian oil major's vice president, told reporters.

"We hope to bring you some good news by the end of the year," he said.

Lukoil currently has 60 million tonnes of refinery throughput capacity. Fedun said it needed 85 million tonnes to achieve a balance in refining at current rates of oil production.

GERMANY

Petroplus Announces Flaring At Ingolstadt

Petroplus Holdings AG on June 16 announced that its Ingolstadt refinery had flaring in connection with a loss of power to the refinery's control systems.

There were no injuries and based on preliminary assessments there was no damage to refinery units. As a precaution, the refinery was safely shutdown. The cause of the power disruption was being determined and the refinery was expected to resume full operations within a few days.

ITALY

Lukoil, Italian ERG Form Refinery Joint Venture

OAO Lukoil reported it will pay ¬1.3 billion to acquire a 49% stake in a new joint venture with Italian refiner ERG SPA. The JV will jointly operate ERG's Isab refining complex at Priolo, Sicily.

ERG will have a 51% share in the JV and Lukoil may be able to increase its stake in the future under the agreement. Both parties require approval from the European Commission and other antitrust bodies.

The complex 320,000 b/d Isab refinery is on the coast and will meet growing middle distillate demand in Europe, mainly kerosine and diesel fuel.

According to their equity stake, ERG and Lukoil will source its own share of oil to refine and market the products. "The Isab refinery has the flexibility to process crudes such as Urals, and Lukoil intends to fully integrate its share of the refinery into its supply chain," Lukoil said.

Lukoil Pres. Vagit Alekperov said the company's refining capacity would increase by 13% and its overseas refining capacity by 60%. "The refinery's advantageous location and an opportunity to process Russian crude make this project very attractive. In ERG, Lukoil acquires an experienced and reliable partner in one of the world's energy centers."

ERG Chief Executive Officer Alessandro Garrone said ERG would use the money from this deal to "strengthen its capital structure and increase its financial flexibility to exploit potential growth opportunities in its areas of activity, both in Italy and abroad."

The deal is expected to be completed in the fourth quarter.

LITHUANIA

Lithuanian Refinery Resumes Operations

AB Mazeikiu Nafta on June 17was returning to its normal process operations and gradually restarted the process units after an emergency shutdown June 16. The shutdown stemmed from an interruption of the electricity supply.

The company said that an investigation to determine the causes of the incident and losses arising from it is underway.

THE NETHERLANDS

BP Nerefco Refinery in Partial Unplanned Outage

British oil major BP has shut part of its 400,000 barrels a day Nerefco refinery in the Netherlands in an unplanned outage, an industry source said on June 27.

Details of the cause of the outage or the units involved were not immediately available.

BP declined to comment on the refinery.

BP to Shut Crude Unit at Rotterdam Refinery for Work

BP Plc will shut a crude-oil unit at its Dutch refinery, Europe's second-largest, for repairs, cutting fuel production at a time of record prices.

``It will be an unscheduled, but controlled outage,'' Robert Wine, a London-based BP spokesman, said June 27. Repairs to one of two crude-distillation units at the 400,000-barrel-a-day plant in Rotterdam were planned to begin as soon as the weekend and last until about mid-to-late July, two people familiar with the work said earlier, declining to be identified because the information is confidential.

``If you lose such a significant contributor like BP Rotterdam, then it's going to support crude and distillate prices,'' Harry Tchilinguirian, an analyst at BNP Paribas SA, said June 27.

Diesel and gasoline prices have surged on increasing Asian demand and soaring costs for crude, which surpassed $142 a barrel for the first time in New York today. Oil traded at $140.17 as of 4:34 p.m. U.K. time. Gasoil, a form of heating oil, has doubled this year to $1,266.50 a metric ton on London's ICE Futures Europe exchange.

The unit needs to be idled because of pollution from the mix of crude oils being used, one of the people said.

A crude-distillation facility separates oil into components for fuels including jet fuel, diesel and gasoline, which may require further processing in other units.

Royal Dutch Shell Plc runs Europe's biggest refinery, at Pernis in the Netherlands, with a capacity of 416,000 barrels of oil a day.

KENYA

Essar Loses Kenya Refinery Acquisition to Libya

Within a week of losing American steel firm Esmark to Russian metals giant Severestal, another overseas acquisition has gone bad for the Ruias of Essar. The Kenyan government has replaced the Mumbai-based group in favor of a Libyan company for a 50 per cent stake in a refinery project in Mombasa.

Essar officials said they are still negotiating with the Kenyan government so that they can invest in the project. "We have not yet received any official communication from the Kenyan government on this. We are still in the race," an Essar official reiterated.

Informed sources told Business Standard that after the acquisition, the Libyan company, Tamoil, will decide whether Essar should be given a part of the stake or not.

In January this year, Essar Energy Overseas Ltd, a subsidiary of Essar Oil, had signed a memorandum of understanding with the Kenyan government to pick up 50 per cent in Kenya Petroleum Refineries Ltd from Shell, Chevron and BP Africa Ltd. The Kenyan government held the rest of the stake and the crucial right of first refusal.

Essar had planned to invest $450 million in the Kenyan refinery — its first refinery investment outside India — excluding an undisclosed acquisition cost. The acquisition was to take the Essar group closer to its goal of refining one million barrels of crude oil per day.

Industry insiders said hectic lobbying by Tamoil made the Kenyan government take a decision in favor of the Libyan firm. According to the arrangement put in place by the Kenyan government, Essar could be accommodated in the refinery business by offering some shares only after the Libyans close the deal.

The sources say, Essar will now be at the mercy of Tamoil for a stake in the refinery.

Earlier in June, Essar officials had said the company might end up getting a 25 per cent stake in the refinery.

The share of Essar Oil fell 11.11 per cent to Rs 176.80 on June 30 on the Bombay Stock Exchange. In the last one month, Essar Oil has crashed 21 per cent in the sagging Indian stock markets. The refinery in Changamwe, Mombasa, has a capacity to process about 72,000 barrels of crude oil per day.

The intended modernization program is aimed at raising the production of liquefied petroleum gas from 30,000 tonnes to 120,000 tonnes per year.

SOUTH AFRICA

Shell Sells Stake in South Africa's Biggest Refinery to Thebe Investment Corp

Royal Dutch Shell Plc, which owns half of South Africa's biggest refinery, sold 25 percent of its local refining unit to Thebe Investment Corp. to meet government requirements for ownership by black investors.

The transaction will take effect in October, Dennis Matsane, Shell's spokesman in South Africa, said, adding the value of the deal won't be disclosed.

The purchase gives Thebe 12.5 percent of Sapref, which Shell co-owns with BP Plc. Sapref can process 180,000 barrels a day of oil, or 23 percent of total refining capacity in South Africa, the biggest economy on the continent.

Oil companies operating in South Africa have agreed to sell a quarter of their business to black investors by 2010 as part of a government plan to redress racial imbalances caused by white rule under apartheid, which ended in 1994.

PetroSA Seeks Strategic Engineering Partner for 400,000 bpd Coega Refinery

National oil company PetroSA is looking to appoint a strategic engineering partner to manage the various project phases of its new 400,000 barrel a day fuel refinery at Coega, in the Eastern Cape.

The company advertised the multi-million rand tender on July 1.

CEO Sipho Mkhize said that engineering partner would execute the feasibility, front-end engineering design and project management through to commissioning of the refinery, dubbed Project Mthombo.

“PetroSA believes that the appointment of one strategic engineering partner to manage the various project phases will provide enhanced focus and continuity,” he said.

The company also announced that it had appointed KBC Advanced Technologies as the project’s technical/commercial adviser and that it would appoint Merchant Bank as its financial adviser shortly.

The Port Elizabeth-based refinery would come on stream in 2014, and was seen as a strategic investment to alleviate South Africa’s reliance on Durban, which handled 75% of the country’s crude imports.

PetroSA head of new ventures Joern Falbe commented that each phase of the project would be expected to meet targeted milestones to ensure sustainability and alignment with the company’s objectives in addressing South Africa’s strategic fuels supply concerns.

The Energy Security Master Plan - Liquid Fuels, gazetted by the Department of Minerals and Energy recently, recommended that PetroSA procured at least 30% of all crude oil consumed in South Africa. The initiative to build a new crude refinery is in part response to this mandate.

Falbe added that PetroSA also recognized that this mega-project must be fully leveraged in the national interest to drive much-needed engineering skills and supplier development for the country.

“With this objective in mind, and in addition to standard benchmarked commercial measures, key selection criteria will require the engineering contractor to demonstrate their ability, through commitment, proven capability and their global track record to contribute to this national obligation.”

The South African government gave the project the official stamp of approval in June, when Minerals and Energy Minister Buyelwa Sonjica said in her budget vote that the State fully endorsed the project.

Project Mthombo would be one of the biggest post-2010 investments in South Africa. It was estimated that the project would generate about 8 000 direct jobs during operations and 39,000 indirect jobs.

It would also significantly improve South Africa’s fuels import bill.

“This project will further redefine South Africa’s energy landscape. The demand for automotive fuels in Southern Africa already exceeds the local production capacity and South Africa is becoming increasingly dependent on the import of refined automotive products,” Mkhize stated.

RUSSIA

Korean, Italian Firms Win $900 Million Refinery Order in Russia

South Korean builder GS Engineering & Construction Corp. said June 13 that it has teamed up with an Italian firm to clinch a US$900 million order for a refinery project in east central Russia.

The refinery, which will have a daily production capacity of 150,000 barrels, will be built in Nizhnekamsk, 170 kilometers east of Kazan, the capital of the Republic of Tatarstan, by 2011, GS Engineering & Construction said in a regulatory filing.

GS Engineering & Construction said it had formed a consortium with Italian engineering group Maire Technimont SpA to get the order from Russia's Tatneft OAO.

QATAR

Qatar's Ras Laffan Refinery Ready in 2009

Qatar's 146,000 barrel per day Ras Laffan refinery will come online in 2009, Oil Minister Abdullah al-Attiyah said, rather than this year as previously expected.

"The Laffan refinery will be in operation next year. Qatar Petroleum is studying the expansion of Ras Laffan condensate refinery as phase one is fast nearing completion," Attiyah told the Gulf Times daily newspaper in remarks published June 26.

"We are now diligently studying the condensate refinery expansion plans."

Qatar had expected to complete the new condensate-fed refinery at Ras Laffan in 2008 and finish a study for a possible doubling of its size by 2012.

Gulf Times said Ras Laffan was a joint venture among Qatar Petroleum, which controls 80 percent, ExxonMobil and Total. The refinery will be 100 percent export-oriented and produce liquefied petroleum gas, naphtha, kerosene, propane and butane using North Field condensate.

SAUDI ARABIA

Saudi Aramco, Total Sign Core Agreements to Build Full-conversion Jubail Refinery

The Saudi Arabian Oil Co. (Saudi Aramco) and Total on June 22 signed the Shareholders Agreement and other core agreements for the establishment of their joint venture, the Jubail Refining and Petrochemical Co. The signing of these agreements in Jiddah by Abdallah S. Jum'ah, President and CEO of Saudi Aramco, and Christophe de Margerie, CEO of Total, marks an important step for the planned construction of this 400,000 barrel per day world-class, full-conversion refinery in Jubail, Saudi Arabia.

On May 6 and May 8, 2008, respectively, the Executive Committee of Total and the Board of Directors of Saudi Aramco decided to launch the project.

"The Jubail refinery reflects the leadership of Saudi Aramco and Total in our strategic alliance to address the existing mismatch between refinery infrastructure and types of crude oil on the market, and the resulting tightness in the refining sector," said Jum'ah. "It also demonstrates our commitment to increase capacity to meet various global markets' needs for refined products."

The refinery will process Arabian Heavy crude to high-quality refined products that will meet the most stringent global product specifications and is expected to begin operations at the end of 2012. As a full-conversion refinery, Jubail will maximize the production of diesel and jet fuels. In addition, the project will produce 700,000 tons per year (t/y) of paraxylene, 140,000 t/y of benzene and 200,000 t/y of polymer-grade propylene.

The refinery will benefit from its proximity to the Arabian Heavy crude supply system and from the excellent facilities of the Jubail Industrial City such as King Fahad Industrial Port, power and water grids, and residential areas.

Following the signing of the agreements, the Jubail Refining and Petrochemical Company will be formed during the third quarter of 2008. Saudi Aramco will initially own 62.5 percent of the company and Total will own the remaining 37.5 percent. Subject to required regulatory approvals, the parties are planning to offer 25 percent of the company to the Saudi public while the two founding shareholders each intend to retain a 37.5 percent ownership interest. Saudi Aramco and Total will share the marketing of the refinery's products.

Saudi Aramco and Total have just released invitations-to-bid for the project's construction, with a view to awarding all packages during the first quarter of 2009. The first orders for long-lead items will be placed in July 2008 and the project will be introduced to the lending community in the second part of 2008, with a targeted financial close in early 2009.

YEMEN

Al-Qaeda Claims Rocket Attack on Yemen Oil Plant

The Yemen branch of Al-Qaeda said on June 30 it had fired three rockets against an oil refinery east of Sanaa, but witnesses said the attack was abortive.

Al-Qaeda said in a statement posted on an Islamist website that its Jund al-Yemen (Soldiers of Yemen) group launched three Katyusha rockets against the Safir refinery in the Maarib province.

The attack was aimed at "drying up the supply of fuel of the Zionist and Crusader (regime of President President Ali Abdallah Saleh)," it said.

Yemen has not announced any attack but witnesses in the area, some 200 kilometers (125 miles) from the capital Sanaa, told AFP that two rockets had been found intact and not been fired, while the third missed its target.

Besides the refinery, the area has around 40 oil wells.

Al-Qaeda in Yemen has claimed numerous attacks against oil installations, the latest being early this months against the Aden refinery in the south of the country. The authorities say they have not caused any damage.

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