UOP LLC on May 2 announced a price increase of 15 percent for all solid phosphoric acid (SPA) catalysts used in the refining and petrochemical industries. The price adjustments are effective immediately or as contracts allow.

UOP is increasing the prices of SPA catalysts because of the continued high cost of energy and rising raw material prices. The products affected include UOP SPA-1 catalyst, UOP SPA-2 catalyst, UOP SPA-1C catalyst, UOP HO B1 catalyst, and UOP HO B2 catalyst.

UOP initially developed SPA catalysts in the early 1930s. They are used in the production of polymer gasoline, a gasoline blending component and higher olefins for the production of lube oil additives, surfactants, agricultural chemicals and coatings as well as cumene, a key intermediary in the production of phenol and acetone.

Valero to Sell LA Refinery to Alon for $333 Million

Valero Energy Corp. announced May 8 that it has agreed to sell its 85,000 barrel-per-day refinery in Krotz Springs, La., to Alon USA Energy Inc., for $333 million plus an earn-out provision currently valued in excess of $100 million. Both companies' boards of directors have approved the transaction, and the sale is expected to close in July 2008, subject to regulatory approvals. The transaction will also include working capital at the refinery, which will be valued at market prices at closing.

"The Krotz Springs refinery is a good fit for Alon, and this transaction is a good deal for Valero's stockholders," said Bill Klesse, Valero's Chairman and Chief Executive Officer. "This transaction is consistent with our strategy to concentrate on our core refineries where we see higher returns for the long run.

Valero had announced earlier this year that it would explore strategic alternatives for the Krotz Springs refinery. It is also exploring options for its refineries in Aruba, Memphis, Tennessee and Ardmore, Oklahoma. J.P. Morgan Securities Inc. acted as exclusive financial adviser to Valero on this transaction.

Big West Asks to Speed up Refinery Expansion Approval

As public controversy surrounds its proposed refinery expansion, Big West of California now faces another hurdle.

Citing a November deadline to use its multi-million dollar air pollution credits, refinery officials have asked to bypass the county planning commission review of its project and go straight to county supervisors for approval.

"We've just asked the county to please understand the schedule," said Big West Health, Safety and Environmental Director Bill Chadick.

Big West's project has been stalled for more than a year after county planning staff deemed an environmental impact report on the project insufficient. The approval process is expected to restart in June but will likely stretch into November under normal approval procedures.

Normally the planning commission would vote on the project and the Board of Supervisors would take up an appeal of that decision. But an appeal is guaranteed because of mounting opposition, so Big West argues the issue should go directly to supervisors.

County zoning ordinances allow circumvention of the planning commission in certain situations. But project critics object to use of the provision in this case, saying a refinery expansion requires a full vetting by the planning commission and public.

"This is such an important issue. To bypass the planning commission and the public input that (process) would provide would be very unfortunate," said Betsy Ramsey, spokeswoman for Bakersfield Citizens Against Hydrofluoric Acid, a group opposed to the refinery's plans to use modified hydrofluoric acid in its new operations.

There's another reason the planning commission should weigh in on the issue first, said Gloria Smith, a San Francisco-based attorney representing unions who work at the refinery, residents who live nearby and a valley clean air group.

"This isn't a time-wasting mechanism. The county planning commission has expertise that the Board of Supervisors does not have," Smith said. "They're the ones that do the heavy-lifting and analysis on all aspects of the project."

Losing the pollution credits could impact the feasibility of the expansion, refinery officials say, because new credits are expected to become scarce and skyrocket in cost following a review this November of how the San Joaquin Valley's pollution credit bank compares with U.S. Environmental Protection Agency standards.

Refinery officials have approached county supervisors and Kern County Planning Director Ted James in recent weeks about speeding up the process.

James, who would make the final decision on expediting the process, said it's premature to consider Big West's request now.

Supervisor Mike Maggard, who represents the district in which the refinery is located, said he hasn't taken a position on the expansion but he doesn't support skipping the planning commission's role in the approval process.

"The timing is very unfortunate and I commiserate with the refinery, but that doesn't mean the public gets disserved by the process," Maggard said.

The refinery isn't the only company that could lose its air pollution credits. Industries throughout the San Joaquin Valley are nervous about their credits being devalued this fall, said Leonard Scandura, a permit services manager with the San Joaquin Valley Air Pollution Control District.

The air district issues pollution credits to companies that take polluting equipment offline or install new equipment with pollution controls that exceed current requirements. The credits can then be used to offset pollution increases from future projects that exceed state and federal clean air limits. Companies can also sell their credits to other companies.

However, each year, the air district must show the U.S. Environmental Protection Agency that its offset requirements are equivalent to EPA's offset requirements. In past years, the district has been able to make this demonstration, but district officials don't expect that to happen this year for a pollutant called nitrogen oxides due to power plants and other large industrial projects built in the past year, Scandura said.

After this year's review, the district anticipates those pollution credits will only be worth about 5 to 10 percent of their current value.

Big West owns about 458 tons per year of nitrogen oxides credits. This fall, the credits' worth could drop to between 20 and 45 tons per year. Big West needs 70 tons per year of credits to offset increased pollution from their expansion.

Smith, the San Francisco attorney, said the pollution credit problem raises new concerns about the project.

"Air districts do have inflated credit accounts and it's not good policy for (companies) to get in there and take advantage of what could be a flawed account," she said. "I believe the air district should freeze all (new projects that require credits) until they get an accurate view of what the credits are."

Big West says it won't put up a fight to bypass the planning commission and speed up the approval process but it will do what it can to get the project approved by November.

"We're down to the wire and it's become an extremely serious issue," Chadick said.

Valero Expansions to Target Canadian Crude, Diesel

In anticipation of large volumes of Canadian crude coming to the U.S. Gulf Coast, Valero Energy Corp. (VLO) is expanding two of its Gulf Coast refineries to process larger volumes of heavy crude oil.

The company will be expanding its St. Charles refinery in Norco, La., and the Port Arthur, Texas, refinery by 2012.

"Canadian crude is going to end up on the Gulf Coast," said Bill Klesse, Valero's Chief Executive. Additional units will be installed to convert crude to diesel, which is currently seen as being more valuable than gasoline.

The $8.4 billion projects include installing a diesel-producing hydrocracker at both plants and expanding heavy-oil processing capacity with crude unit and coker expansions.

CHS Boosts Fuel Output At Montana Refinery

CHS Inc., a leading energy and grain-based foods company, on May 27 marked the completion of a two-year $400 million project that increases fuel production by more than 20 percent at its refinery about 10 miles west of Billings.

"At this time of concern over energy supply, we are proud of this investment -- the biggest in CHS history -- which means more gasoline and diesel fuel to the agricultural producers and consumers who count on us," said Leon Westbrock, CHS executive vice president and chief operating officer, Energy. "As a result, we'll continue to be a reliable supplier of quality fuel products, as we have been for more than seven decades."

The "Bottoms Upgrade Project" included a 15,000 barrel per day coker, a sulfur recovery unit and upgrades to process units throughout the refinery to incorporate the new production units into the existing refinery. While the refinery's overall through-put remains rated at 60,000 barrels-per-day, the addition of the coker will increase by over 400,000 gallons per day the volume of gasoline and diesel it produces. In addition, the refinery will produce about 300,000 tons of coke annually.

The refinery project also adds more than 35 new jobs, bringing to over 300 the facility's total employment.

South Dakota Voters Approve Rezoning at $10 Billion for First New U.S. Oil Refinery in Decades

Voters in Union County, SD have approved rezoning for what would be the first new U.S. oil refinery in more than 30 years.

Fifty Eight percent endorsed their county commission's rezoning of almost 3,300 acres north of Elk Point for the $10 billion refinery forty-two percent, opposed it.

Preston Phillips, a project executive for Texas-based Hyperion Resources, said he was ecstatic with the outcome.

"We'll continue to work with everyone in the county," he said. "We want to be a good corporate citizen. We want to be a good corporate neighbor."

Despite the approval of the rezoning, Phillips said Elk Point still is not the only site being considered and that the site selection process will continue.

"Any big project like this has to have options," he said.

Hyperion Resources had said it would leave Union County without a fight if voters rejected the rezoning.

Jason Quam of the group Citizens Opposed to Oil Pollution said his group will sit back and evaluate its next steps.

"It's going to be a long road before anything's done on it," he said of the refinery.

The vote was just one stop in a long process and must go through numerous environmental permitting steps, he added.

Mike Curran, who voted against the zoning change, said the company offered few specifics and instead embarked on a public relations pitch to sell the refinery. He said that when a representative called asking for his support, they couldn't give direct answers to any questions.

The refinery is proposed for land just east of Interstate 29 between state highways 48 and 50.

Company executives said it would help the United States reduce its dependence on overseas oil. The refinery would process 400,000 barrels of thick Canadian crude a day,

The company petitioned to put the issue on the ballot after the Union County Commission approved the rezoning in March.

Supporters cited economic development benefits from the refinery. Hyperion officials said the project would mean 1,800 permanent jobs and another 4,500 construction jobs over a four-year period.

Hyperion called it a "green refinery" and said it would produce ultra-low sulfur gasoline and diesel and be among the cleanest and most environmentally friendly in the world.

Opponents raised environmental and quality-of-life concerns, but one project executive said the refinery will have the lowest emission levels of any U.S. refinery and will improve the quality of life for the area.

According to an air quality permit application filed with the state, the center each year would emit nearly 2,000 tons of carbon monoxide, 773 tons of nitrogen oxides, more than 1,000 tons of particulate matter, 863 tons of sulfur dioxide and 473 tons of volatile organic compounds. It would also generate 17.2 million metric tons of carbon dioxide each year.

The South Dakota governor's office has supported the proposal.

Critics of the proposal hit hard on the quality of life issue, saying an oil refinery would produce millions of pounds of toxins during its lifetime. They also said it seemed as if the state and local governments allied themselves with Hyperion and had not asked critical questions.

Plans called for construction to begin in 2010 and last about four years.

Louisiana’s $10 to $15 Billion Proposed Refinery Project Vanishes

In late 2006, then-Gov. Kathleen Blanco completed a whirlwind economic development tour that took her to Japan, Taiwan, China and Kuwait.

In the Middle East nation, Blanco and then-Economic Development Secretary Michael Olivier divulged a bombshell via media teleconference: Louisiana and a state-owned petroleum company in Kuwait had agreed to negotiate building a potential refinery that would be the first constructed from the ground up in the United States in three decades.

The price tag: $10 billion to $15 billion.

From there, the project went under a confidentially shield allowed by state law and was never heard from again.

Sometime in 2007, the project died.

The refinery project, which could have qualified as the biggest industrial project in state history, points out the complexities of a state law that allows confidentiality for recruiting economic development prospects but shields them so that the public would be hard-pressed to discover, even in hindsight, where state resources are going in the hunt for jobs.

Senate Bill 343, awaiting final passage in the House, would extend that confidentiality for four more years but changes nothing about the process. Without the extension, the law expires July 1.

A public records request by The Advocate reveals eight current confidential prospects. Louisiana Economic Development officials say they’re bound by company requests not to discuss those projects, and they won’t cite a reason for the secrecy other than the law itself, Louisiana Revised Statute 44:22.

Confidentiality has ended on two projects — the much-chronicled Thyssen Krupp steel mill project that went to Alabama and the bid for the Kuwait National Petroleum Co. refinery project, one that LED Secretary Stephen Moret said ultimately moved to Kuwaiti turf.

“Other than Projects A and B, the remaining projects remain under the confidentiality provision as we still are actively pursuing all of them,” Moret said.

Sean Clancy, a spokesman for The Shaw Group, said the Baton Rouge-based engineering and construction company worked to open doors in 2006 so that Louisiana and Kuwaiti leaders could take the project from there.

“Being proud of its Louisiana roots and wanting to do its part to advance statewide economic development, The Shaw Group helped to facilitate an introduction between state officials and the Kuwait National Petroleum Co.,” Clancy said.

Shaw, he said, was “not a signatory to the memorandum of understanding signed between the state and (the company).”

A state document obtained by The Advocate shows Shaw’s role did go beyond acting as an emissary. An Aug. 16, 2006, document signed by Blanco and Olivier shows the company pinned high hopes on the project.

“It is anticipated that a Memorandum of Understanding can be reached between (Kuwait National Petroleum Co.), LED and Shaw that will incorporate basic parameters of performance leading to the negotiation and execution of a Cooperative Endeavor Agreement,” the state document reads.

In requesting confidentiality, Olivier’s department said the new refinery would involve investment of $10 billion to $15 billion, a commitment to permanent employment of 2,000 to 3,000 jobs and as many as 5,000 construction and support jobs during the period of project development.

“As part of that undertaking, Shaw has requested confidentiality and the LED has honored that request by not providing comment for attribution or other information as to the project to any outside source,” the August 2006 document reads.

From Kuwait, Blanco and Olivier talked with Louisiana reporters in November of that year about the possible 600,000-barrel-per-day refinery that would have been the biggest in the U.S. and one of the world’s largest. Last month, Kuwait announced the selection of four South Korean firms and one Japanese firm for construction contracts on a $15 billion, 615,000-barrel-per-day refinery to be built near Kuwait’s border with Saudi Arabia.

A Shaw competitor, Fluor Corp., will be a consultant on the project for an estimated $2 billion, said Faruq al-Zanki — chairman of the Kuwaiti company — in March.

Moret acknowledged that the Kuwaiti refinery sought in 2006 is no longer an active project for his department but that LED is open to recruiting a large greenfield refinery — industry parlance for a refinery built from the ground up on previously undeveloped land.

“Our understanding is that they started building their own refinery in Kuwait,” Moret said. “However, that does not necessarily mean that they would not be interested in considering a greenfield U.S. refinery in the future.”

Moret said his department is in active discussions with “a number of other prospects regarding unrelated refinery projects.”

According to the U.S. Energy Information Administration, two-thirds of all crude oil processed by U.S. refineries in 2007 was imported. And the Gulf Coast is the starting point for most major gasoline pipelines and the source of about 40 percent of the gasoline produced domestically, the EIA reports.

“The U.S. is still importing a large portion of the fuel we consume in America,” Moret said. “Domestic production would offset imports (and) Louisiana is one of the best locations that can logistically support a greenfield refinery.”

Moret declined to comment specifically on any of the refining or other projects being pursued by the state, citing the confidentiality statutes that cloak eight other development projects until September or later.

The state law shielding projects doesn’t require any reporting procedure for LED, such as one that would lead the department to tally the costs of its confidential project recruiting and report them to the public in a timely fashion. Failing that, taxpayers must track the filing dates of the confidential projects in legal ads and make follow-up public record requests at the time the projects reach their one-year anniversary or two-year anniversary dates.

So far, LED hasn’t taken confidentiality past a one-year cycle to a second year, Moret said.

Clancy, the Shaw spokesman, said his company isn’t actively involved in any other projects in Kuwait, save one: In February 2006, Shaw’s Stone & Webster unit was selected for engineering, procurement and construction services on a joint venture of Dow Chemical Co. and Kuwait Aromatics Co. to be built in Kuwait.

Shaw’s contract value wasn’t disclosed, but the work involved production of 500,000 metric tons per year of ethylbenzene and 450,000 metric tons a year of styrene monomer at a plant scheduled to open this year.

Conoco Refinery Flare Compressor Snags

A flare gas compressor at the ConocoPhillips 76,000-barrel-per-day (bpd) refinery in Rodeo, California, malfunctioned on June 8, according to a notice filed with state pollution regulators.

The upset triggered flaring at the refinery, according to the notice filed with California Office of Emergency Services.

A refinery's safety flare burns off hydrocarbons that cannot be processed when refinery units are shut. The flaring through giant stacks prevents explosions of the volatile substances.

Big West Shuts Sulfur Recovery Unit at Bakersfield Refinery

Big West of California LLC said it shut a sulfur recovery unit in Area 3 of its 66,000-barrels-per-day (bpd) Bakersfield, California, refinery on May 30 due to an instrumentation problem, according to a statement.

"The unit is being depressured to the flare and taken off-line according to established shutdown procedures," the company said.

A company representative could not be reached for comment.

Delaware Refinery Exempt from Pollution Reduction Plan

Delaware's participation in the nation's first regional effort to control greenhouse gas emissions through a cap-and-trade system likely will not include one of the state's biggest polluters.

Valero's oil refinery in Delaware City accounts for more than one-fifth of all carbon dioxide emissions in the state, but environmental officials plan to include an exemption for the refinery in Regional Greenhouse Gas Initiative regulations for Delaware.

The RGGI is a 10-state effort to reduce emissions of carbon dioxide from power plants in the Northeast by 10 percent by 2018.

Environmentalists believe exempting the refinery from the program is a mistake. But officials argue that the refinery should be exempt because the program is targeted at electrical utilities.

Current plans call for Delaware to have its RGGI rules in place by the end of the year.

Fuel Prices Prompt a Surge in U.S. Refining Capacity

Diesel fuel gets priority as petroleum refiners prepare to process more heavy oil.

U.S. petroleum companies are investing in new domestic refining capacity on a scale not seen in decades. Over the next five years the industry will add more than one million bbl/d of distillation capacity, according to the U.S. Department of Energy’s Energy Information Administration (EIA, Washington D.C).

"It’s a step change in expansion," says Rick Boyd, business development executive with Celerant Consulting (Lexington, MA). The main driver, he says, is fuel prices, which have not only enriched petroleum companies, but have improved the social climate for the industry. "Back in the 1990s it was difficult to get permits to expand and the public didn’t realize there were supply pressures. But now, with gasoline selling for $3 – 4 a gallon, people are more aware of the petroleum industry and regulators are more inclined to allow expansions."

Current U.S. refining capacity is approximately 17.6 million bbl/d, which is insufficient to meet the demand for fuels. For example, imports of gasoline blending components and finished motor gasoline have been averaging about 30 million bbl/mo in recent months.

As it happens, gasoline is not a major issue, says Joanne Shore, a senior analyst with EIA’s Petroleum Division. She notes that gasoline is available at relatively low prices from Europe, which has a gasoline surplus as Europeans continue to switch to diesel-powered vehicles. Also, U.S. demand for gasoline is expected to decline over the next 15 years because of government regulations that require higher fuel efficiency for light-duty vehicles and higher use of biofuels. At the same time, the demand for distillate will continue to grow, says Shore, "and this will be a challenge for refiners."

The expansion plans of the U.S. petroleum refining industry show the growing popularity of hydrocracking.

U.S. CAPACITY EXPANSION PLANS (Numbers are in barrels per day)
	Distillation	FCC	Hydro-cracking	Coking
Marathon	180		70	44
Motiva	325		75	80
Valero	125		100	55
Other	252	33	75	145
Creep and shutdowns	200	100
Total	1,082	133	320	324
Energy Information Administration

The biggest change facing refiners for the next few years will be an increasing use of heavy oils, particularly from Alberta oil sands. Consequently, much of the new capacity is being designed to upgrade heavy oil for the production of gasoline, diesel fuel and other fuels. Also, the growing demand for distillate is reflected in the amount of hydrocracking capacity that is being added, compared to the relatively modest capacity of fluid catalytic cracking (FCC) capacity for gasoline production (see table).

Other issues are: a new federal regulation that calls for the ethanol content of gasoline to be increased; the integration of biofuels into the refinery feed mix, and a federal rule that calls for the benzene content of gasoline to be reduced to 0.6% by January 2011. Looming in the background is a law that would limit carbon dioxide emissions, still under discussion in Congress.

Bitumen, the product of oil sands, typically has a specific gravity of less than 10 API and has a high content of sulfur, metals and total acid number (TAN). Coking followed by hydrotreating is the common way to upgrade heavy oil. These processes may be done in the field or at a refinery.

If upgrading is done in the field, the product is a synthetic crude (syncrude) of 25 – 30 API that can be shipped via pipelines. Otherwise, bitumen is treated in one of two ways to make it suitable for pipeline transmission. One is to dilute it with light syncrude to make "synbit" and the other is to mix it with a diluent (light ends) to make "dilbit." The dilbit method requires two parallel pipelines: one to ship the product and the other to recycle the diluent after the customer has separated it from the bitumen.

A new heavy-oil upgrading process that is said to achieve up to 100% conversion of the heaviest feedstock, thus avoiding the need for coking, has been developed by Chevron Corp.’s Technology Center (Richmond, CA). "We can put in heavy oil, of less than 10 API gravity, and produce a blend that is mostly gasoline, jet and diesel fuels," says James Murphy, business manager for the technology. In contrast, he says, conventional refining technology achieves less than 80% conversion.

Called Vacuum Resid Slurry Hydrocracking (VRSH), the process has been extensively piloted and will be tested in a pre-commercial plant at Chevron’s refinery in Pascagoula, Mississippi. Construction of the 3,500-bbl/d plant is scheduled to start later this year.

Heavy oil or vacuum resid is slurried with a proprietary catalyst, mixed with hydrogen and circulated through several reactors at temperatures ranging from 775 to 850°F and pressures of 2,000 – 3,000 psig. A small amount of catalyst is removed continuously through a slipstream and subsequently reactivated and returned to the process. Murphy adds that the cost of VRSH is expected to be similar to that of Lummus Technology’s LC-Fining hydrocracking process for heavy oil and residue, which is licensed by Chevron Lummus Global, a partnership.

A process for upgrading heavy oil that had not been actively marketed in the past because of low crude and product prices has been revived by UOP LLC (Des Plaines, IL), which has bought the rights from Natural Resources Canada (Ottawa). UOP has improved the process and is offering it for license. "At today’s crude and product prices the economics are attractive," says Dan Gillis, business manager for heavy oil.

In the slurry hydrocracking process, a base metal catalyst is mixed with heavy oil or vacuum resid and the slurry is fed into the bottom of an upflow reactor. Hydrogen is added in the reactor and more than 90% of the feed is converted to distillate and naphtha, which exit the top of the vessel. The reactions take place at 1,800 – 2,000 psig and 800 – 880°F.

A hydrotreating process whose applications include mild hydrocracking of FCC feed, treating of ultra-low-sulfur diesel fuel and severe gas oil hydrotreating is offered by DuPont Stratco Clean Fuel Technologies (Leawood, KS). An advantage of the IsoTherming process is that H2 is dissolved in the liquid feed before the liquid enters the reactor, thereby avoiding a high volume of H2 in the vapor phase. IsoTherming uses standard catalysts and operates under standard hydrotreating conditions, but is said to be less expensive than conventional hydroprocessing. Valero plans to install an IsoTherming unit in its Paulsboro, N.J., refinery, where it will further the company’s goal of producing more distillate for ultra-low-sulfur-diesel fuel.

The rapid growth in heavy-oil processing is providing a bonanza for hydrogen suppliers. As an illustration, Air Products (Lehigh Valley, PA) is now starting up its third hydrogen plant in Canada. Located near Edmonton, Alta., the 105-million-scfd plant is interconnected with a 71-million-scfd plant that started up in 2006. The two plants will serve Petro-Canada’s Edmonton refinery, plus several additional customers. Air Products’ third plant, of 80 million scfd, started up in Sarnia, Ont., in 2006 and supplies two nearby refineries. All use natural gas-based steam-methane reforming.

Stephen Losby, general manager for Air Products in Canada, estimates that about 1 billion scfd of hydrogen is now being produced in Alberta for petroleum processing and expects the demand will grow to 2.5 – 3 billion scfd when syncrude production reaches 3 – 4 million bbl/d. At the same time, he estimates that the U.S. will install up to 1.0 billion scfd of additional hydrogen capacity.

The prospect of having to use a lot more hydrogen has prompted a search for a less-expensive source than steam methane reforming (SMR) of natural gas. Since many refineries have or are installing cokers, one possibility is coke gasification.

The capital cost of a coke-gasification plant is about 2.7 times that of an SMR plant, says Dale Simbeck, vice-president of the consulting firm SFA Pacific, Inc. (Mountain View, CA). However, with coke priced at $1/million Btu versus $6.60/million Btu for natural gas, plants using either process would have the same hydrogen cost, assuming a five-year payback on the investment. At higher natural gas prices, or after the payback of the investment, coke gasification can have a cost advantage, he says.

Simbeck adds that the economics of coke gasification require large scale and spare capacity to assure a steady supply of hydrogen. The economics can also be improved by polygeneration. For example, an installation might consist of three gasifiers, with two producing hydrogen and a standby unit that is used for cogeneration when it is not needed for hydrogen production.

Gasification also offers flexibility in terms of feed and products. Shell Global Solutions (US) Inc. (Houston), for instance, offers two variations of gasification technology — one for solid feeds such as petroleum coke, coal and biomass, and the other for liquids such as oil distillates and refinery residues. The processes have been installed in several refineries and make a variety of products, including hydrogen, syngas for fuel, ammonia, methanol and oxo-chemicals.

A pressure-swing-adsorption (PSA) process for recovering hydrogen from process streams that is said to provide a mass-transfer rate up to 100 times higher than that of conventional PSA is being marketed jointly by ExxonMobil Research and Engineering Co. (Fairfax, VA) and QuestAir Technologies Inc. (Burnaby, B.C., Canada). Called Rapid Cycle PSA, the process employs structured adsorbent rather than beads and uses two rotary valves to switch gases between adsorbent beds, at up to 100 cycles/min. The installed cost is said to be 30 – 50% lower than that of conventional PSA. A demonstration unit that was installed at an ExxonMobil affiliate refinery in France went into commercial operation in March.

A controversial issue in the U.S. refining industry is the Energy Independence and Security Act of 2007, which mandates that 9 billion gal of renewable fuels (mostly ethanol) be blended into the transportation fuel supply this year, increasing to 36 billion gal in 2022. In a statement before the Senate Energy and Natural Resources Committee in February, Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA, Washington, D.C) protested that it was doubtful enough ethanol would be available to meet the near-term requirement.

Drevna also pointed out that most vehicles cannot use fuel blends greater than E-10 (10% ethanol, 90% gasoline) because ethanol is corrosive, but such blends may be needed to meet the mandate by 2010. The only vehicles able to use these blends are E-85 vehicles, he said, but these represent only 6 million out of more than 240 million registered vehicles.

As an alternative to ethanol, which is simply blended with gasoline, some organizations are developing processes that produce fuels compatible with petroleum-derived products. The goal is to integrate bioprocesses into a conventional refinery, says Jennifer Holmgren, UOP’s director of renewable energy and chemicals.

UOP and Eni S.p.A. (Milan, Italy) have jointly developed a process in which vegetable oils and animal fats are converted to a "green" diesel that can be blended with petroleum-derived diesel fuel. The UOP/Eni Ecofining process will be commercialized in 2009 – 2010 in refineries in Italy and Portugal. In each case the Ecofining plant will contribute 100 million gal/yr to the diesel fuel pool, says Holmgren.

Within the next two years UOP expects to commercialize a process that will convert cellulosic waste to gasoline, diesel and jet fuels. The company’s partners in the development are the National Renewable Energy Laboratory (NREL, Golden, CO) and the Pacific Northwest National Laboratory (Richland, WA). The partners have piloted the process, in which waste is subjected to fast pyrolysis to obtain pyrolysis oil, which is then upgraded to transportation fuels via UOP hydroprocessing technology

A drawback of bio-oil is that it contains 10 – 40% oxygen, versus essentially none for petroleum, as well as a high percentage of water. Holmgren says that UOP has developed ways to take out both the oxygen and water, but declines to give details except to say the oxygen is removed by hydroprocessing, followed by a second hydroprocessing step to obtain fuel.

Refiners are preparing to meet a new regulation from the U.S. Environmental Protection Agency (EPA; Washington D.C) that calls for the benzene content of all gasoline to be reduced to an average of 0.62 vol% by Jan. 1, 2011. At present the limit is 1% for reformulated gasoline only. In addition, refiners will have to meet a maximum average benzene standard of 1.3 vol%, effective July 1, 2012.

Reformate from catalytic reforming accounts for about 50 – 75% of the benzene in the gasoline pool, so a popular way to reduce the benzene content is to fractionate the naphtha feed to the reformer and remove benzene precursors (C6 paraffins, cyclohexane and methylcyclopentane). However, this method is not expected to be sufficient for the new standards.

A new process called BenZap that is said to reduce the benzene content of reformate by more than 99% has been developed by GTC Technology (Houston). BenZap is situated downstream of the reformer and employs hydrogenation in combination with a platinum catalyst to convert benzene to cyclohexane and other more acceptable compounds.

ExxonMobil Research and Engineering Co. (EMRE) offers Benzout, a reformate alkylation process in which benzene-rich streams are reacted with light olefins such as ethylene or propylene. Benzout converts benzene to high-octane alkylate, with a 2 – 5 gain in octane numbers, thus avoiding the octane loss and H2 consumption of conventional processes, according to EMRE.

A pervaporation membrane that selectively removes benzene (or other aromatics) from aliphatic compounds has been developed by PolyAn GmbH (Berlin). The membrane has been tested in combination with extractive distillation to obtain pure benzene. PolyAn is working with Borsig Membrane Technology GmbH (Gladbeck, Germany) to scale up the process.

Other companies that offer benzene-reduction technology include Axens North America Inc., (Houston), CDTech, (Houston), and UOP.

CANADA

North West Upgrading Awards KBR Contract for Bitumen Refinery

KBR announced May 28 that it has been awarded a $275 million (CAD) contract for construction and fabrication of an LCFiner unit by North West Upgrading, a Calgary-based, privately owned company building an independent, heavy oil upgrader in Sturgeon County, Alberta.

The LCFiner unit scope will include the prefabrication of 40 modules to be later assembled as part of the North West Upgrading project. The project is expected to last approximately 30 months and will peak with approximately 450 personnel.

David Zimmerman, President, KBR Services said "This award further demonstrates KBR's commitment to growth in the Canadian oil sands market."

KBR was awarded the construction and fabrication services subcontract for the project gasifier by Lurgi AG of Frankfurt, Germany in 2007. The North West Upgrading project will have an initial design capacity to process 77,000 barrels of oil sand's SYNBIT/DILBIT mix bitumen feed per day. Two subsequent phases, each of identical capacity, are planned for implementation in the future.

ARUBA

Vacuum 3 at Valero's Aruba Refinery Resumes Operation

Valero Energy Corporation (San Antonio, Texas) has resumed operation of the vacuum 3 (V3) unit at the San Nicolas refinery in Aruba. The 160,000-barrel-per-day (BBL/d) V3 processing unit was forced to go offline after a fire broke out in January.

ARGENTINA

Buenos Aires Seek Cleanup of Shell Refinery

Following a scathing government audit of the Argentine affiliate of Royal Dutch Shell and a globally unprecedented preventive closure of its refinery in Buenos Aires, local groups May 28 filed a formal international complaint against the company seeking relocation and redress.

The complaint cites Shell Capsa "for the flagrant and officially documented violation" of the Guidelines for Multinational Enterprises issued by the Organization for Economic Cooperation and Development, OECD.

The complaint calls for immediate action by the company to redress the social and environmental harms caused to the community and to the local environment by the refinery at the Polo Petroquímico Dock Sud during decades of abuse and irresponsible corporate behavior.

Representing the residents of Villa Inflamable, the local nongovernmental organizations Foco Inpade and Friends of the Earth Argentina presented parallel complaints to the governments of Argentina and the Netherlands against Shell Capsa, Shell's Argentine affiliate.

The Shell Capsa facility occupies a total of 106 hectares in the Matanza Riachuelo Basin and is the only refinery in South America belonging to the Shell Group.

It is located four kilometers from the center of Buenos Aires, in the suburban locality of Avellaneda, where the inhabitants are described in the complaints as suffering from "extreme socio-economic vulnerability" which hás evolved over time and in parallel to the petroleum refinery industry, largely dominated by Shell.

The crude oil is transported from the oil fields to the refinery primarily by sea, although some is transported by pipeline. Shell Capsa has its own fleet of ships that unload the raw material at its dock for flammable materials near the refinery, from which the crude oil is pumped into storage tanks to be processed.

Shell also owns two gas plants which obtain butane, propane, and propylene.

The complaints denounce Shell for a long list of national, provincial, municipal and international law violations that are not only claimed by the community against the company, but that have been confirmed in an audit carried out in August and September 2007 after accidents that occurred at the facility on August 2, 2007, generating hazardous waste.

The National Environmental Authority of Argentina then ordered a preventive closure of the facility for failure to comply with national environmental laws.

The environmental and social violations found at Shell's facilities in Argentina include failing to provide Environmental Impact Assessments and withholding information about impacts and accidents from the local community and to public authorities.

The violations include extracting 18 million liters of water per hour from the local Riachuelo River with no permit to do so.

The complaints allege that Shell Capsa is maintaining undeclared and dangerous high pressure petroleum containers, that there are visible petrol leaks on the premises as well as illegal and dangerous manipulation and storage of toxic waste, and many other violations cited in the audit.

The complaints state, "Various studies have determined that this area has a high grade of contamination by substances such as lead and chromium found in bodies of water above ground, in subterranean water as well as in the soil. The atmospheric contamination covering all the industrial zones, such as Dock Sud, is alarming."

The complaints quote from an August 2006 article published online by Indymedia that states, "It is common knowledge that the residents of Villa Inflamable ... suffer from epidermal, ocular, pulmonary, neurological, and other diseases, as a result of the presence of toxic metals, carcinogenic dioxins and other dangerous wastes that fill the trash; they live in precarious conditions, and in many cases extreme. The fragile and unstable connections of drinking water come from far away and cross the contaminated canals… The houses are sinking and the water poisons all that it touches … Near the banks of warehouses for oil storage there runs a 132,000 volt electrical installation. Hundreds of combustible fuel storage tanks are tremendously deteriorated and the gas containers are found less than a convenient distance away, which means that a chain explosion would provoke an expansive wave of more than three kilometers … The roads exhibit enormous holes, five meters in diameter, where trucks carry fuel, compromised gas, toxic waste, etc…"

Residents say these are the sorts of irresponsible activity typical of Shell in Argentina since its founding in 1931. But no one, until now, has ever done anything about it.

Shell initially denied the findings by the Argentine National Environmental Authority, but later, following the preventive closure and the multimillion dollar losses accrued each day from the company's inability to maintain the production line, capitulated, and signed an agreement to correct the violations and invest some US$80 million to improve its sub-standard environmental management.

Now the community wants immediate action to repair damage, including relocation of the refinery to an environmentally safe site. The complaints seek investment by the company in medication, medical attention, studies, and other health necessities.

They also seek investment of the company in the environmental cleanup of the area, including the cleaning of the banks of streams and rivers, as well as areas nearby bodies of water of the neighborhood.

Finally, the complaints seek "creation of a permanent communication mechanism with the community" that permits Shell Capsa to redress community impacts the company has had on health, the environment and homes in the neighborhood.

The complaints highlight the fact that SHELL is under scrutiny all over the world, including in places like the Philippines, Ireland, Russia, the UK, the Netherlands and the United States. They call on both governments, Argentina and the Netherlands, to engage Shell to work out a solution to the systemic and historic violations faced by Shell's neighbors.

CUBA

Cuba’s Cienfuegos Refinery Set to Produce 10,000 Bpd of New Derivative

The Cienfuegos refinery in south-central Cuba is set in July to open a new facility capable of producing 10,000 barrels per day of turbo-diesel fuel, state media said May 27.

Turbo-diesel will be the seventh derivative to be obtained from Venezuelan crude by this refinery reinaugurated in December 2007 and which is already producing liquefied gas, naphtha, gasoline, turbo-fuel, diesel and fuel oil, a news program on state television announced.

As well as the new plant built with Italian technology, two tanks with greater storage capacity will be constructed in the coming months.

The Camilo Cienfuegos refinery, located some 250 kilometers (137 miles) from Havana, is the most important project of the Bolivarian Alternative for the Americas, or ALBA, being promoted by Cuba, Venezuela, Bolivia and Nicaragua.

ALBA was conceived by leftist Venezuelan President Hugo Chavez in opposition to the now-moribund U.S. proposal for a Free Trade Area of the Americas.

Originally built with Soviet technology two decades ago, the refinery shut down in 1995 amid the Cuban economic crisis that followed the collapse of communism in Europe, and was rescued in 2005 through a joint venture of Venezuelan state oil giant PDVSA and Cuban counterpart CUPET.

It was re-inaugurated last December after part of the reactivation works were completed with an investment of $166 million.

The authorities estimate that a total investment of $1.4 billion will be needed to boost storage and processing capacity to 150,000 barrels per day by 2013.

According to official data, since the refinery resumed operations last January it has processed more than 5.5 million barrels of petroleum.

Its current capacity is 75,000 bpd.

DOMINICAN REPUBLIC

Dominican Government to Purchase Shell’s Stake in Refinery for $110 Million

The Dominican government announced that has it reached a $110 million deal to buy out Royal Dutch Shell’s share in a jointly owned oil refinery.

If the agreement is finalized, the Dominican government will boost its stake to 100 percent. Santo Domingo and the Anglo-Dutch oil company have each owned 50 percent in the Refidomsa facility, located on the outskirts of the Dominican capital, since its founding in 1972.

The negotiation will conclude in a period of no more than 90 days, during which time the government will identify the source of the funds, Finance Minister Vicente Bengoa said in a statement.

The official announcement brings an end to Shell’s bid to sell its shares in the refinery, a process that began last year.

The Dominican government said it hopes the acquisition of Shell’s stake will allow it to expand output at the refinery and stabilize fuel prices.

PANAMA

Refinery Project Part of Panama’s Plans to Become Regional Energy Hub

The Panamanian government has presented the cornerstones of its plan to become a fuel supply and distribution center in the region.

The minister of Commerce and Industry, Manuel Jose Paredes, said May 15 at a regional forum on energy security that that is the goal being pursued by President Martin Torrijos's administration.

Among the projects being contemplated is a refinery for Puerto Armuelles, a town on Panama's Pacific coast near the border with Costa Rica.

That project, feasibility studies for which are being carried out by a consortium made up of U.S.-based Occidental Petroleum and state-owned Qatar Petroleum, "is part of our national hydrocarbon policy ... which, if brought to fruition, could play an important role in supplying the country" with energy, Paredes said.

The study, expected to be completed before the end of 2008, will definitively determine whether the construction of the refinery is viable, the official said.

Paredes also unveiled Panama's plans with regard to energy security and cooperation with its regional neighbors on changes needed given the growth in energy demand.

The forum on energy security was organized by Caribbean-Central American Action, an independent organization that promotes private sector-led sustainable economic development in the Caribbean Basin.

Speakers at the event pointed out that continued economic growth in the Central America countries - all net importers of fuel products - depends in large part on the supply of energy from outside the region.

ASIA

CHINA

PetroChina's Gets Green Light for Sichuan Refinery

PetroChina's plan to build a 10-million-t/y refinery in southwestern Sichuan province was recently approved by China's top economic planner National Development and Reform Commission, reported Shanghai Securities News.

With a designed a refining capacity of 10 million t/y and ethylene capacity of 800,000 t/y, Sichuan refinery will cost 38.6 billion yuan co- invested by PetroChina and the local provincial government.

The completion time is still unknown but it is guessed that the refinery may not come onstream until Sino-Myanmar crude pipeline is fully built.

Likely to feed on crude from Myanmar, PetroChina's Sichuan refinery is regarded a new threat to competitor Sinopec's under-construction 10-million-t/y Qinzhou refinery in southwestern Guangxi Autonomous Region.

As China's largest oil and gas producer, PetroChina has exerted itself in expanding its refining sector. As early as in 2006, PetroChina planned to invest 180 billion yuan to build five 10-million-t/y class refineries within five years, respectively, in Dalian (Liaoning), Qinzhou (Guangxi), Huludao (Liaoning), Yunan and Sichuan.

Sino-Kuwait 300,000 - 350,000 bpd Refinery Set to Move Forward In 2008

Kuwait Petroleum Company said May 6 that its joint refinery with China's Sinopec in Nansha, Guangdong Province will hand in its feasibility study next month to National Development and Reform Commission, China's policy regulator, and it expects to get the green light this year.

Mohammad Rashed Jasem, vice president in KPC International Company, said the two sides will take their respective one-half stakes in the joint venture.

He also said KPC will supply 500,000 - 700,000 barrels per day of crude oil to the Nansha joint refinery and to Sinochem's planned refinery in Quanzhou by 2015.

The Nansha joint refinery, with a forecast investment of US$5 billion, is designed to process 300,000 - 350,000 barrels of oil per day, accounting for 10 percent of China's total imports from Kuwait.

Aramco says China’s Fujan Refinery Boost to Start this Year

New units to process 160,000 barrels per day (bpd) more oil at China's 80,000 bpd Fujian refinery will start up this year and be fully on line by the end of the first quarter 2009, Saudi Aramco said recently.

Aramco is involved in a project to boost the plant's capacity with China's Sinopec and U.S. oil giant Exxon Mobil.

The project was 75 percent complete, Aramco said.

JAPAN

Nippon, CNPC to Form Refining JV in Japan

Japan's biggest oil refiner, Nippon Oil Corp., and China National Petroleum Corp. (CNPC) said on May 7 they have agreed to set up an oil refining venture in Japan.

According to a memorandum of understanding the two companies will establish the joint venture using the Osaka refinery operated by Nippon Oil's refining subsidiary.

The Osaka facility currently has a capacity of refining 115,000 barrels of oil a day.

Nippon Oil will take a majority 51 percent stake in the venture, while CNPC will hold the remaining 49 percent, according to the memorandum.

Other financial details are subject to further study.

The venture will also sell the refined oil products in Asia and the Pacific Rim markets.

Separately, Nippon Oil said it has also agreed to boost the amount of oil it refines on behalf of China Oil, the unit of CNPC, to 70,000 barrels a day, up from the current 50,000 barrels a day.

SOUTH KOREA

South Korea to build 40,000 bpd Diesel Hydrocracking Unit at Inchon Refinery

South Korea-based SK Energy Co. plans to build a 40,000 bpd diesel-producing hydrocracking unit at its refinery in the port city of Inchon, 40km west of Seoul. The unit will process heavy oil into transportation fuel. The project aims to increase exports of lighter, higher-value products to China and SE Asia. The new unit will produce naphtha, diesel, and kerosene using low-priced bunker-C fuel as feedstock.

The facility will eventually increase SK Energy's overall heavy oil-processing capacity to 202,000b/d from the current 162,000b/d. It also will expand the ratio of SK Energy's heavy-oil processing facilities to overall refining ones to 17.6% from the current 14.5%. SK Energy said construction on the unit, expected to cost 1.5 trillion won, is scheduled to start in June, with commercial production to go online in June 2011.

EUROPE / AFRICA / MIDDLE EAST

EUROPE

Possible Emissions Trading Scheme Concerns European Refiners

UKPIA, the trade association representing petroleum refining companies in the UK, and its sister organization in Europe, EUROPIA, have voiced grave concerns about the possible introduction of auctioning of allowances under EU ETS in 2013, that could place European refineries at a competitive disadvantage to refineries outside the EU.

In January 2008, the EU Commission published a draft directive, on which the UK Government is currently consulting, to improve the EU ETS for the period after Phase II ends in 2012. Proposed changes included provisions to tighten up the amount of available allowances for carbon dioxide (CO2) emissions and requiring some industry sectors to pay for all or part of their CO2 allowances. The refining industry is one sector that may be affected by this proposed change on the basis that it is not exposed to full international competition.

Ian McPherson, UKPIA's Director of Environment, Health and Safety, commented:

"The assumption that UK and other EU refineries are not exposed to international competition is wrong. Refineries are highly exposed to international competition with low barriers to import of oil products from non-EU countries that don't have significant carbon constraints. For example, the EU imports substantial amounts of jet fuel from Middle East refineries and increasing amounts of diesel from Russia. EU refineries also have a significant export trade in gasoline to the United States."

He continued: "It is essential for the future of EU refining and our energy security of supply that we get this right. The industry faces major challenges in meeting changing demand patterns and ever tighter fuel and emission standards. This requires continued substantial investment in refineries. For industries that are exposed to international competition, auctioning of allowances would be premature until non-EU competitors face similar costs. It would discourage investment in EU refineries and result in increased emissions of CO2 in areas such as the Middle East and Russia, increased EU imports of diesel and jet fuel, reduced EU exports of petrol, and reduced energy supply security."

An independent report has been commissioned by EUROPIA from NERA Economic Consulting to examine the implications of the proposed changes to the EU ETS. They concluded that EU refineries were open to international competition, that it was unlikely that the full additional costs of EU ETS allowances would be recovered from consumers and that this would impact ultimately upon the investment attractiveness of EU refineries.

SPAIN

Spain’s Tenerife Refinery to Perform Annual Maintenance Turnaround in the Catalytic Cracking Area

The Tenerife Refinery (Tenerife, Spain) owned by Repsol (Madrid, Spain) will undergo the annual planned maintenance turnaround in the Catalytic Cracking Area (Catalysis Area) soon.

ROMANIA

Technip wins Contract to Provide Romania’s Petromidia Refinery with Hydrogen Plant

Technip has been awarded by Rominserv and Rompetrol Rafinare (both members of The Rompetrol Group), a lump-sum contract, worth approximately 40 million, for a hydrogen plant to be constructed at the Petromidia Refinery in Constanta, Romania.

Based on Technip's proprietary technology, the plant will have a capacity of 40,000 normal m3/hour of 99.98% purity hydrogen, and will also deliver approximately 40 tons/hour high pressure steam.

Technip's operating center in Zoetermeer, The Netherlands, will execute the contract, which covers licensing and basic design, detailed engineering, procurement and supply of main equipment and materials. Technip will also provide operator training and technical assistance during construction, commissioning and start-up. Rominserv (general contractor of The Rompetrol Group) will procure the remainder of the equipment and materials, and carry out the construction of the plant.

The plant, which represents an overall investment of approximately 65 million, is scheduled to be completed in 2010. It is part of a major investment program to increase the Petromidia Refinery's hydrofining capacity, to bring product qualities exclusively to Euro 5 standards, and to increase processing capacity to 5 million tons per year.

GHANA

Samsung Cancels Plan for Stake in Ghana Refinery

Samsung C&T Corp., South Korea's construction and trading company, said May 29 it has decided to cancel its plan to buy a controlling stake in a Ghanaian state-run refinery.

The Ghanaian government's withdrawal of its plan to privatize Tema Oil Refinery Ltd. prompted Samsung C&T to stop its work to acquire the refinery, the South Korean company said in a regulatory filing.

Ghana has been pushing for the expansion of the refinery, Samsung C&T said.

Tema Oil Refinery has maintained a closer cooperation with Samsung C&T and SK Corp., former South Korea's biggest refinery, which separated into the holding company SK Corp. and the operating company SK Energy Co. in July 2007, since the mid-1990s.

SOUTH AFRICA

Petrosa Ups Capacity at Planned $11 Billion Coega Refinery

Corporation of South Africa (PetroSA), the country's state-owned oil company, has increased the size of a planned refinery at Coega near Port Elizabeth.

The plant, which will cost about $11 billion, will have a capacity of 400,000 barrels a day, rather than the previously proposed 250,000 barrels a day (kbpd). The board approved this increase in May, after evaluating the conclusions of a recently completed pre-feasibility study undertaken by a leading US-based refinery engineering company, KBR.

The Coega refinery (known as Project Mthombo) will be the lowest cost producer in sub-Sahara Africa. This is due to economies of scale, proven world-class technologies and crude processing flexibility. "This will enable it to accomplish a balancing role and sustain a competitive advantage in open market conditions within both local and export environments while meeting the highest global standards of product quality and environmental responsibility," PetroSA Vice-President of New Venture: Midstream, Joern Falbe, said May 22.

"The design configuration to process a wide spread of feedstock, with prominence given to lower-cost heavy, sour and acid crudes, is the primary driver in maximizing commerciality as well as security of supply." By 2014, when the refinery is due to be commissioned, South Africa will already be experiencing a shortfall of locally refined product of about 200,000kbpd. This will be due to its projected economic growth and low investment in existing refineries. This shortfall will be met by importing product - an expensive solution that has a major impact on foreign exchange and increases potential supply vulnerability.

PetroSA's original base case of a 250kbpd crude refinery on the east coast of South Africa proved robustly attractive to meet the country's medium term fuel growth requirements.

However, acknowledging the National Oil Company's mandated role to reduce external dependency in national energy security requirements, combined with input from potential international partners who recognize the flexibility of Coega to supply diverse markets and mitigate risk, the Board of PetroSA has approved expanding the planned refining capacity to 400kbpd.

"After evaluating all operational, logistical and environmental considerations, 400kbpd was deemed the most suitable configuration," said Mr Falbe. He added that this increase from 250 to 400kbpd increased project funding. "However, due to the economies of scale, the investment cost per barrel reduces by 20 percent and operating costs improve by 30 percent, boosting the original project economics substantially.

"A recently-completed logistics study has confirmed that crude supply in 'VLCCs' [very large crude carriers] via a SPM [Single Point Mooring] is technically and operationally feasible, and PetroSA now awaits the outcome of an environmental and engineering analysis to determine the most suitable location for the facility," said Mr Falbe.

The positioning of this highly competitive, world-class mega refinery will help to diversify crude and product supply structures in South Africa by providing an essential strategic supply alternative to the country's main inland markets.

A future product pipeline from Coega to Gauteng, commercially viable, becomes a justifiable reality in the medium term. Fast track project projections indicate that the streaming of Coega remains on target for 2014.

SYRIA

China, Syria to Build 5-million-ton Oil Refinery

China National Petroleum Corp. (CNPC), one of the country's three oil tycoons, has recently formed a partnership with the Syrian Ministry of Petroleum & Mineral Resources to build a 5-million-ton oil refinery in eastern Syria.

In May, both parties entered into two cooperation agreements and intended to be responsible for the construction of their new oil refinery via a Syria-based joint venture, indicating that the cooperation between China and Syria had been further expanded to the downstream oil sector.

In addition, Petroleos de Venezuela, S. A. (PDVSA) announced on April 4, that it would establish a joint-venture petroleum services subsidiary together with CNPC. Recently, PDVSA bought the drilling platform from its Chinese peer, and they planned to jointly build a factory focusing on drilling platform in Venezuela in the near future.

The Venezuelan oil company also said that its new business unit named PDVSA Servicios had joined hands with an engineering services affiliate of CNPC to inaugurate an integrated energy joint venture, with a view to satisfying an about 30% oil demand in Venezuela within five years.

UKRAINE

PKN Orlen Might Join Ukraine $5 Billion Refinery Project

Polish oil company PKN Orlen would consider taking part in the construction of a refinery in Ukraine worth $5 billion, although it has seen no offer yet to take a role in the project, company officials were quoted as saying May 7.

The idea of building a refinery near the town of Brody in western Ukraine was floated during the recent visit in that country of Polish Prime Minister Donald Tusk, the daily Rzeczpospolita reported giving no details of its source of that information.

Quotes in the paper appeared to keep the company's options open.

"Ukraine is an interesting country for us, but for now mainly as retail and wholesale market," PKN Chief Executive Wojciech Heydel said. "If we receive the refinery project we will consider it."

Company spokesman Dawid Piekarz said later that PKN had received no such offer to bid for the refinery.

"Ukraine is of course interesting for us but in the sales segment," he told PAP state news agency. "Our current refining capacities are sufficient."

Rzeczpospolita said the refinery could be linked to a planned Odessa-Brody-Gdansk pipeline carrying crude from the Caspian Sea region to Europe and Azeri national oil company Socar had previously expressed interest in the project.

PKN Orlen became central Europe's largest refiner by production capacity after it bought Czech Unipetrol four years ago and acquired Lithuanian refinery Mazeikiu Nafta for $2.5 billion in 2006.

IRAN

Iran Inaugurates New $256 Million Gas Refinery

Iran's oil minister Gholam Hossein Nozari on May 24 officially inaugurated Masjed Soleiman gas refinery in the southwestern province of Khuzestan, Iran Daily reported May 25.

The refinery can produce one million cubic meters of gas per day, and has the potential to increase the figure to 1.4 million cubic meters.

"Masjed Soleiman gas refinery which is one of the most modern of its kind in the world was constructed at a cost of US$256 million in 40 months," said the manager of the refinery.

Gholam Hossein Nozari will also inaugurate some other gas and oil projects to mark the centenary of oil drilling in Iran and the Middle East.

The first modern oil wells of the Middle East were discovered and drilled in Masjed Soleiman. The first oil drilling in the Middle East took place in a region called Naftoon in the center of the city.

KUWAIT

Kuwait Considers Integration of New Refinery at Al-Zour with Petrochem Complex

Kuwait is mulling integration of its new 615,000 bpd refinery at Al-Zour, currently under construction, with a massive petrochemicals complex. The $15 bln Al-Zour refinery was originally geared towards providing fuel oil for the state's power plants. However, in 2006, discovery of the state's first non-associated gas reserves has changed the scenario. The discovery has led to the optimism that Kuwait will be able to use gas for power generation instead, enabling Al-Zour to get converted to a full conversion refinery.

The first non-associated gas is due to be produced by state upstream operator Kuwait Oil Company (KOC) in June. The first phase will produce 175 mln cubic feet a day of gas. Start up has been delayed by two months because of poor winter weather. The first condensate production from the plant, of 50,000 bpd began at the end of May.

SAUDI ARABIA

Saudi Aramco, ConocoPhillips to Form JV for 400,000 bpd Yanbu Project

Saudi Aramco and ConocoPhillips on May 16 announced they have approved continued funding for the development of the Yanbu Export Refinery Project.

The Saudi Aramco and ConocoPhillips project would construct a grassroots, 400,000 barrel-per-day, full-conversion refinery in the Yanbu Industrial City, in The Kingdom of Saudi Arabia. The refinery is being designed to process Arabian heavy crude which would be supplied by Saudi Aramco. The refinery would produce high-quality, ultra-low sulfur refined products that will meet current and future product specifications. Saudi Aramco and ConocoPhillips would each be responsible for marketing one half of the refinery's production. The refinery is targeted to start up in 2013. No information was disclosed on the size of the investment.

Costs to build the refinery have doubled to $12 billion since the two companies signed a memorandum of understanding to pursue the project in 2006, Saudi Arabian newspaper Al Watan reported Sept. 16.

The companies have completed the initial evaluation and front end engineering and design (FEED) outlined in the May 2006 Memorandum of Understanding (MOU). The next phase will include the solicitation of bids, commitment of long lead items and site preparation work.

"We're pleased to be entering the next stage of development for the Yanbu export refinery project, together with our partner, ConocoPhillips," said Khalid G. Al-Buainain, Saudi Aramco senior vice president for Refining, Marketing & International. "This facility will bolster the Kingdom's refining capacity, and provide additional quantities of high quality refined products for global and domestic markets. This partnership is important to Saudi Aramco, and this initiative is an important aspect of our company's expanding downstream business portfolio," he added.

ConocoPhillips and Saudi Aramco are planning to form a joint-venture company, with equal interests to own and operate the proposed new refinery. Subject to required regulatory approvals, the parties plan to offer an interest in the refinery to the Saudi public.

Total says Jubail Refinery Cost to exceed $10 Billion

French oil major Total SA (TOT) Chief Executive Christophe de Margerie said May 16 said the 400,000 barrel a day refinery it intends to build jointly with Saudi Arabian Oil Co. at Jubail on Saudi Arabia's Persian Gulf coast will cost in excess of $10 billion to build.

That compares with an original price tag of $6 billion estimated in 2006.

The companies announced a final agreement to build the unit May 14, saying it should be ready by the end of 2012.

Speaking on the sidelines of the company's annual general meeting of shareholders, de Margerie told reporters the project would clearly cost in excess of $10 billion.

He declined to be more specific, noting that the companies plan to call a tender and he didn't want to "send a message to contractors" that might encourage them to inflate costs.

Oil services contracts have soared recently amid record oil prices and labor and materials bottlenecks.

Saudi Arabian Oil Co. and Total plan to release invitations to bid for the project's construction in June 2008 with a view to awarding all packages during the first quarter of 2009.

Total will own 37.5% of the Jubail refinery.

Saudi Jizan Oil Refinery Hits New Delay

Saudi Arabia has for a third time delayed a tender for bids for a 200,000 barrels-per-day oil refinery in the southern province of Jizan, it was reported on June 1.

"We were informed of the delay on May 29 and we are awaiting more clarifications," Watan quoted a source from one of the consortiums bidding for the project as saying.

Unlike the two previous delays, the Petroleum and Mining Ministry did not set a new date for submitting bids, the newspaper reported, without saying how it obtained the information.

A ministry spokesman was not available for comment.

Spiraling costs have cast doubt over the viability of new oil refineries worldwide and industry observers have been skeptical over the Jizan plan as it is a long distance from crude production facilities.

U.S. Bechtel and Foster Wheeler, France's Technip and Italian Snamprogetti are among foreign companies that have set up consortiums with Saudi firms such as Tasnee 2060.SE to bid for the project, Watan said.

The government unveiled plans to build the refinery in 2006 and said it would be 100 percent privately owned with an initial public offering taking place once the refinery was deemed viable.

Watan quoted the source as saying bidding consortiums were growing concerned over the project.

McIlvaine Company,

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