march 08 update

UOP LLC announced that Hunt Refining Co. has selected UOP to supply technology, basic engineering services and equipment as part of Hunt's plan to double its gasoline and diesel output for the Southeastern U.S.

Hunt will install two new units at its Tuscaloosa, Ala., facility using the UOP CCR Platforming Process and the UOP Unicracking Process. The units will help to increase crude throughput by more than 30 percent to 69,000 barrels per day (bpd) and double production of gasoline and diesel. Hunt also plans to convert an existing UOP Fixed-Bed Platforming Process unit to a UOP Par-Isom Process unit to enable a gasoline product that will meet future benzene regulations. The U.S. Environmental Protection Agency (EPA) has mandated that refineries adhere to annual averages of 0.62 percent benzene content in gasoline by 2011.

Construction on the new units will begin in 2008. They are scheduled to come on line in late 2009. The revamp is scheduled for completion in 2010.

"As fuel demand has increased, Hunt Refining has continuously found ways to grow," said John Matson, president of Hunt Refining Co. "In this project, UOP technology, expertise and support has helped us to expand our capacity while meeting environmental regulations."

The highly energy-efficient CCR Platforming Process is a continuous catalytic reforming process used in the petroleum industry to produce high-octane gasoline from naphthenes and paraffins.

Unicracking technology upgrades light cycle oil feedstocks to produce ultra-low sulfur diesel and naphtha. The Par-Isom technology processes light naphtha to produce high octane gasoline blending components with low benzene content.

"This project demonstrates the strong, longstanding relationship between UOP and Hunt Refining," said Pete Piotrowski, senior vice president for UOP's Process Technology and Equipment business unit. "We have worked closely with them to identify the right equipment, technology and products that will best suit their operation as well as their business goals."

UOP has installed more than 200 CCR Platforming units since 1971 and more than 185 Unicracking units since 1962.

Valero Says Plant Outages Cost It $2 Billion

Valero Energy Corp.'s managers said that unplanned outages at its refineries cost the company $2 billion in "lost opportunities" last year.

Major unplanned outages at Valero's plants included a February fire that prompted a two-month shutdown of Valero's McKee refinery near Sunray in the Panhandle, a power outage at its Aruba plant in the Caribbean in October and a power disruption at its Texas City refinery in December. Also, the company's massive Port Arthur plant had recurring problems with key units that produce gasoline.

Valero's managers, in a presentation to investors, also attributed some plant downtime to more stringent fuel specifications and environmental regulations. In addition, the use of more inexperienced workers has sometimes lengthened maintenance days, the company noted during a presentation at a Credit Suisse Energy Conference.

While San Antonio-based Valero said its unplanned outages are likely to exceed industry averages in 2008, CEO Bill Klesse has said he will make reliability a key initiative for 2008, emphasizing the point during the company's fourth-quarter conference call on Jan. 29.

Valero spokesman Bill Day said, "Our chances of being more profitable are much greater with increased reliability." Valero, the nation's biggest refiner, also reminded investors of projects that will boost output at its plants, including $1.4 billion to be spent at its St. Charles plant in La., to be completed by 2010. By the end of March, Valero will decide whether to add two units to its Port Arthur refinery at a cost of about $2.1 billion.

Other, more tentative projects include a coke gasification unit for the Port Arthur plant that would cost $2.4 billion and start up in 2012, and $2 billion in new units, including those that would produce aromatics, at its St. Charles plant by 2012. Aromatics can be used as petrochemical feedstocks that have many applications.

Valero reiterated that it has postponed spending $1.8 billion to add two units at its Quebec refinery.

With the exception of Quebec, should all its projects go forward, Valero would spend about $8 billion on projects that it estimates would add almost $2 billion to annual earnings before taxes.

In its presentation, Valero didn't go beyond earlier statements that it will focus on its core refineries, which use cheaper feedstocks, while it evaluates its noncore plants in Aruba, Krotz Springs, La., and Memphis, Tenn. Valero sold a fourth non-core refinery in Lima, Ohio, for $1.9 billion last year.

Citgo Refinery in LA Hit by Proposed $169,000 Fine

The feds have proposed $169,000 in fines against Citgo Petroleum's refinery in Lake Charles, Louisiana, over safety concerns.

Allegations were raised that Houston-based Citgo failed to protect employees from hazardous working conditions.

A spokesman for Citgo, which also has refineries in Texas and Illinois, did not immediately comment.

The Occupational Safety and Health Administration today announced three Citgo citations alleging willful failure to follow safety requirements and 12 citations alleging serious violations.

The company, which has about 1,400 employees at the refinery, has 15 days to comply, request an informal review conference with OSHA officials or contest the citations and fine.

Exxon Breakdown Triggers L.A. Refinery Flare

An equipment breakdown at Exxon Mobil Corp's 150,000 barrel per day (bpd) Los Angeles-area refinery in Torrance, California, triggered the plant's safety flares on February 11, according to a notice filed with Los Angeles air pollution regulators.

The refinery was beginning 11 days of planned "minor maintenance" at the refinery. That work was not expected to affect production, Exxon has said.

An Exxon representative was not immediately available to discuss refinery operations.

Conoco Plans March Crude-Unit Work at NJ Bayway Refinery

ConocoPhillips (COP) planned to perform two weeks of planned turnaround maintenance in March at its Linden, N.J., Bayway refinery crude distillation unit and reformer, said a person familiar with plant operations on February 11.

The exact timing of the maintenance wasn't clear, but the work is not expected to affect gasoline-making and distillate production as the refinery's fluid catalytic cracking unit would remain in service utilizing feedstocks on hand, the person said.

The Bayway refinery is able to process up to 238,000 barrels of crude oil a day, and its fluid catalytic cracking unit - one of the largest in the country and the largest on the Atlantic Coast - is rated at 145,000 barrels a day. The aromatics-producing catalytic reformer's capacity is 32,000 barrels a day.

Shell Hits a Brief Snag at Deer Park Crude Unit

Shell Oil reported a brief problem with a crude unit at its 333,000 barrel per day refinery in Deer Park, Texas, a spokesman for the company said on February 13.

"It was a 5 minute emission event at the larger of our two crude units The unit is running at planned rates, which is to say reduced rates due to current maintenance turnaround." said David McKinney, a spokesman for the refinery, which is owned on a 50-50 basis by Shell oil and Mexico's state-owned oil company, Pemex.

In a filing with the Texas Commission for Environmental Quality, the company said it immediately reduced steam flow to the column and began to depressure the column to reduce and stop the release.

South Dakota Bill Allows Strict Controls on $10 Billion Refinery

Legislation that would allow South Dakota regulators to write stricter pollution controls for oil refineries cleared a Senate committee February 11.

The measure was pushed by Vermillion Democrat Sen. Ben Nesselhuf, whose district borders Union County, a leading contender for Hyperion Resources' proposed $10 billion oil refinery and power plant.

Though Hyperion insists its "green" energy center would be the cleanest ever built, Nesselhuf noted the state currently lacks the legal authority to hold the Dallas, Texas-based company to its promises.

The Senate State Affairs Committee agreed to repeal a provision in state law that prevents the state from imposing more stringent emissions and other environmental standards for refineries than the minimum set by the federal Environment Protection Agency.

"In general, I think it's foolhardy, on any issue, to turn over your rule-making authority to the federal government," Nesselhuf said in an interview. "I think the case was made in committee why it is very important for DENR to have this power."

Earlier in the day the panel, by a 6-3 vote, rejected Nesselhuf's original bill, SB196, which would have modeled South Dakota's environmental protections after laws in California, the state with the toughest air quality standards. That vote came after Steve Pirner, state environment secretary, argued that SB196 might actually impede the state's ability to regulate Hyperion's refinery.

Through some parliamentary maneuvering, Nesselhuf revived his bill later in the day. Committee members unanimously agreed to advance the bill with the understanding it would be amended on the Senate floor, stripping out the provision that prohibits state regulations greater than the federal minimum.

Nesselhuf said he expects the full Senate to debate the amendment as early as February 13. Under legislative rules, a bill must pass one chamber by February 13 to technically stay alive this session.

The amended bill's prospects in the House are unclear.

Republican Gov. Mike Rounds' office had opposed SB196, while opponents of the Hyperion refinery had lobbied Senate committee members to pass the bill.

Ed Cable, a leader of Save Union Committee, a local opposition group, expressed satisfaction with what Nesselhuf accomplished in committee. He contends one reason Hyperion wants to build in Union County is the state has cleaner air than in some other states.

"They would be permitted to build with fewer improvements, and therefore permitted to have greater amounts of emissions than if they built somewhere else," Cable said. "Our whole hope and purpose of the bill was to permit the residents of South Dakota to enjoy the same rights that other states have, which is to provide for more restrictions than the EPA presently calls for refineries in general."

Hyperion has pledged to use the most environmentally advanced technology to refine 400,000 barrels of crude per day from Alberta, Canada. The refinery, which would be the first built in the United States since 1976, would create an average of 4,500 construction jobs over four years, and 1,800 permanent jobs when it's up and running.

The Union County Board of Commissioners is expected to set a public hearing on Hyperion Resources' zoning application at its meeting February 13.

The county planning and zoning commission has recommended approval of the company's application to rezone 3,882 acres just north of Elk Point from agriculture to a planned development district.

The five-member county commission was set to discuss the rezoning request February 13 at the county courthouse in Elk Point.

Chevron Finishes Repairs to Mississippi Refinery, Plans $500 Million Upgrade

Chevron Corp. has fixed its fire-damaged Pascagoula, MS, refinery and has resumed production there, the company said February 14.

The No. 2 crude unit at the refinery, which is on the Gulf Coast between Mobile, Ala., and Biloxi, Miss., was knocked out by a fire Aug. 16. The loss of production there bit into Chevron's subsequent profit.

San Ramon-based Chevron also plans to spend about $500 million on work to upgrade the Pascagoula refinery. That upgrade should be done by 2010 and could boost production there by 10 percent or 600,000 gallons per day. The upgrade, called the Continuous Catalyst Regeneration Project, will add some 700 jobs to the refinery.

Tesoro says Restarts Hawaii Refinery after Fire

Tesoro Corp said on February 18 processing units at its 95,000 barrel per day (bpd) Kapolei, Hawaii, refinery were "gradually being brought back into operation" so production can resume after a February 16 power outage and fire.

Electrical power has been restored at the refinery located on the island of Oahu, said spokeswoman Sarah Phipps.

Tesoro did not provide an estimate of the length of the restart process but only said the restart process will take "awhile."

Tesoro has declined to say which unit had the fire after the power outage.

The company said it would be able to meet its long-term supply obligations.

The Hawaii refinery had returned to full production on Dec. 22, after being shut on Nov. 4 when a thunderstorm damaged a reformer unit.

The November-December problems at the Hawaii refinery took a toll on Tesoro's fourth-quarter results, the company said last month, contributing to a net loss of $40 million, or 29 cents per share, compared with net income of $158 million, or $1.14 a share, in the year-earlier period.

In the fourth quarter, the Hawaii refinery had a pretax operating loss of $86 million as the unplanned outage in its reformer unit resulted in costs of about $30 million, including $10 million in higher repairs and maintenance expenses.

The additional remainder of the $86 million loss was due to the rapid climb in crude oil prices while refined products prices lagged behind.

Snag Trips Exxon Beaumont, Tex. Refinery Compressor

A coking unit wet gas compressor at Exxon Mobil Corp's 349,000-barrel-per-day (bpd) Beaumont, Texas, refinery tripped offline February 16, following a malfunction, according to a notice filed with state pollution regulators.

The wet gas compressor was restarted about five hours after the upset occurred, according to the notice filed with the Texas Commission on Environmental Quality.

Valero Refinery Still Emitting Air Pollutants

Uneven recovery efforts continued to release odors and other pollution around Valero's Delaware City Refinery on February 17, one week after a power failure drastically shook operations at the 210,000-barrel-per-day complex.

Department of Natural Resources and Environmental Control officials reported that the plant diverted acidic gases and hydrocarbons to safety incinerators five times during the weekend.

Company officials said the failure of a single basic electrical component cut power to much of the plant, forcing shutdowns or cuts in major production units and crippling normal pollution-control processes.

Although the company reported bringing idled systems back on line quickly, attempts to restore smooth operations and emissions controls have taken longer.

Although plant officials have yet to fully return to regular operations, DNREC reported that Valero has applied for upgrades and possible production increases at its 191,000-barrel-per-day first-stage crude oil processing unit and a unit that processes petroleum coke, a leftover from other refining processes.

DNREC Air and Waste Management Director James Werner termed these recent problems as among the worst at the refinery in recent memory. Agency officials are still investigating the cause and awaiting a company report on emissions, due within 30 days of the mishap.

Valero already has acknowledged unplanned releases of sulfur dioxide, smelly hydrogen sulfide, nitrogen oxides, soot and ammonia.

Alon CEO Buying Fuel to Supply Big Spring Customers

The fire at Alon USA's refinery in Big Spring damaged several sections of the plant and could keep the facility idle for as long as two months.

Alon chief executive Jeff Morris said February 20 he's buying fuel to supply refinery customers, preventing shortages. But the fire and explosion on Monday could hit the Dallas company's bottom line.

"The plant is damaged. There's no question about it," he said. "We're getting started today rebuilding.

"I'm hopeful we'll have portions of the plant operating in 60 days or so."

Fire broke out at the West Texas refinery, halfway between Dallas and El Paso, February 19. No one was killed, but four workers were injured.

Refining operations in Big Spring and California provide nearly all of Alon USA's revenue. The company doesn't say how much money the Big Spring refinery brings in, but the Texas plant refines about half the fuel the company makes.

Mr. Morris said employees were returning to the refinery February 20. They'll begin inspecting the equipment and working on repairs.

He doesn't know what caused the fire in the central part of the plant. The company will have to replace a propylene splitter, but that piece of equipment isn't necessary to refine fuel. The fire damaged other equipment, which can be repaired rather than replaced, he said.

"There's not major long-lead equipment that needs to be replaced. It's more piping, instrumentation, smaller vessels," he said. "Stuff that can just be done with good hard work, and we're gearing up to do that."

The refinery's insurance policy has a $2 million deductible. Mr. Morris said the biggest financial hit will be interruption of business. If the plant is idle for more than 45 days, insurance kicks in to cover the loss of earnings, he said.

He said it will probably take at least that long to get the plant back online.

The Big Spring plant, built in 1929, is relatively small for a refinery. Previous owners considered shutting it down for financial reasons in the 1990s, but Mr. Morris challenged workers to make the plant run so well that the owners wouldn't dare.

Employees rewrote safety procedures, and Mr. Morris asked each worker to take personal responsibility for safe operations.

He also switched the wage model for the plant. Wages are now based on the level of training a worker achieves, not the job the worker does.

This system gives Mr. Morris a well-trained, flexible workforce. And it helped the Big Spring refinery become one of the most efficient in the nation, according to industry group Solomon Associates.

Valero Approves $2.4 Billion Expansion at Port Arthur

Valero Energy Corp.'s board of directors has approved the company's largest-ever capital investment project -- an expansion at its refinery in Port Arthur, Texas, that will involve the construction of a 50,000 barrel-per-day hydrocracker, a 45,000 barrel-per-day coker, and revamps and expansions of numerous other units.

The project's $2.4 billion cost includes interest and overhead. The expansion is expected to boost the refinery’s overall throughput capacity to 415,000 barrels per day, making it one of the country’s largest refineries and giving Valero more capacity to process heavy, sour feedstocks that trade at discounts to light sweet crude oil. The hydrocracker project is expected to be finished in the fourth quarter of 2010 and the coker project is expected to be finished in the second quarter of 2011.

"As with the St. Charles expansion project that we announced last year, the Port Arthur expansion project emphasizes ultra low sulfur diesel production – reflecting the significant projected growth in demand for diesel both in the U.S. and around the world," said Bill Klesse, Chairman of the Board and Chief Executive Officer of Valero Energy Corporation. "The Port Arthur and St. Charles expansion projects signal major investments in Valero’s internal growth strategy, and coupled with the stock buyback program, is part of our continued effort to maximize shareholder value by taking a balanced approach to allocating our cash flow."

CANADA

Diesel Demand May Make Canada’s Port Placentia Refinery More Viable

Growth in demand for diesel on both sides of the Atlantic may make a proposed oil refinery on Canada's East Coast more viable than other projects slated for North America.

The proposed 300,000 barrel-a-day facility will be on Port Placentia, an ice-free point of entry that can ship products out of the product-heavy peninsula to waiting markets on the U.S. East Coast or in Europe, said James Smith, vice president of Newfoundland & Labrador Refining Corp. "The refinery has a global purview," he said.

Still, the project faces major financial hurdles, according to industry watchers.

"To the U.S. East Coast, we're an offshore New York Harbor refinery, and to Europe, we're an offshore Rotterdam refinery," Smith quipped in an interview during the Cambridge Energy Research Associates conference.

The company, founded in 2005, has already obtained many of the necessary permits and ordered some of the largest refinery vessels, which require significant lead-time to obtain. Assuming all permitting goes as planned, NLRC will do initial site development this spring and could complete construction by 2011, Smith said.

Globally, growth in demand for diesel has outstripped that for gasoline. Middle distillate products like diesel, heating oil and jet fuel, are projected to account for more than half of world oil demand growth between 2007 and 2020, according to a report from CERA. As demand grows, a middle distillates deficit of about 3 million barrels-a-day is expected.

"As we move beyond 2010, the key challenge for the refining industry will be adding the appropriate type of conversion capacity - particularly hydrocracking - and not necessarily adding more volumes of simple crude distillation capacity," said Olivier Abadie, CERA director for downstream Europe.

Unlike most North American refineries, which convert about two-thirds of crude to gasoline and the remainder to diesel, the proposed Newfoundland facility would be skewed toward producing diesel, and reformulated gasoline blendstock would only account for about 35% of the facility's production, he said.

European markets are also significantly short on diesel fuel, and the refinery's ability to export to Western Europe could also give it an edge over interior North American refineries.

The exposure to diesel markets could protect the refiner from competition from biofuels, which at this time consist largely of gasoline substitutes like ethanol.

Two other proposed North American refineries, slated for Yuma, Ariz., and Elk Point, S.D., lack NLRC's waterfront access, which would allow the Newfoundland refinery greater flexibility to ship its products to growing diesel markets.

The Yuma project has floundered and has been unable to secure adequate funding for the multi-billion-dollar price tag. In particular, investor interest has been damped by the project's lack of an easily accessible crude supply.

The South Dakota project aims to run heavy Canadian crude, but that project, too, will require substantial investment to be realized.

While NLRC has backing from its shareholders, additional financing will be needed to realize the project. Smith didn't disclose the price of the project, but it is expected to be less than the $10 billion South Dakota plan. Still, the project might have difficulty securing financing, particularly given the tight conditions in credit markets.

"We're in the middle of a 'problem area,'" said Bruce Bilger, head of the energy practice for Lazard. But, he said, loans will become more available as credit markets loosen in the second half of 2008. This might create an opportunity for NLRC and other projects that are currently seeking financing.

The project, Smith admitted, is not yet a sure thing. But as vessel orders, engineering, permits and financing gradually fall into place, he said, it will become more certain. "There could be some slippage, but we're not forecasting any yet."

Alberta Approves North West Upgrader Project

North West Upgrading Inc. said February 20 that it has received final regulatory approvals from Alberta Environment, under the Environmental Protection and Enhancement Act of Alberta, for the construction, operation and reclamation of the three phases of the North West Upgrader project.

North West also received its license under the Water Act of Alberta to divert water for process uses. These approvals, together with the Alberta Energy and Utilities Board Approval No. 10994 granted in September 2007, and municipal approvals granted by Sturgeon County, largely complete the regulatory requirements enabling the project to proceed to full implementation.

"Further to the comprehensive Environmental Impact Assessment reviewed by Alberta Environment and the Alberta Energy and Utilities Board, these approvals confirm that the technology and plans being implemented by North West respect the Government of Alberta's intent to sustainably support the environment, and social and economic development within Alberta's heartland region," said Robert Pearce, President of North West Upgrading.

"We are very pleased to have achieved this important milestone, and we look forward to funding and completing the Project and adding significant value to Alberta's tremendous oil sands resource."

The Upgrader will significantly increase the economic value of Alberta's bitumen and heavy oil production by producing light, low sulfur products such as Ultra Low Sulfur Diesel and diluent. An important element of the Project is its use of gasification to make hydrogen from the heaviest components of the bitumen, and its "carbon capture ready" design. A commercial arrangement to sell carbon dioxide for utilization in Enhanced Oil Recovery, thereby effectively sequestering the majority of its greenhouse gas emissions, has been concluded. The Upgrader will have a total processing capacity of 231,000 barrels per day of blended feedstock over three phases. Site preparation has started and all three phases are expected to be operating by 2016.

ARGENTINA

Petrobras Refinery in Argentina Rocked by Explosion

Petroleo Brasileiro said one of its refineries in Argentina has been rocked by an explosion. The company said in a statement no one was injured and it immediately carried out a plan of emergency and took control of the situation.

The explosion, which caused a fire, took place in one of the ovens of the complex owned by the Brazilian state oil company in the Rosario region, 300 km north of Buenos Aires.

ECUADOR

Ecuador and Venezuela to Finance 300,000b/d Refinery

Ecuador and Venezuela plan to jointly finance and build a 300,000b/d refinery in Ecuador's coastal province of Manabi, according to Ecuador's Mines and Oil Ministry.

The ministry said representatives of state oil companies Petroecuador of Ecuador and PDVSA of Venezuela met in Quito, Ecuador, to discuss project details. Plans call for the completion of a feasibility study for the project in June, with construction to be completed within 4 years.

No date for the start of construction was provided. Ecuador's oil minister Galo Chiriboga Zambrano said the refinery will be financed equally by the two countries and supplied largely with crude from Ecuador. "But later on, it would use Venezuelan oil when ours is depleted," the minister said.

JAMAICA

Trinidad and Tobago to Build Second Refinery

Trinidad and Tobago's Minister of Energy and Energy Industries Conrad Enill has announced that the twin-island nation will construct a $3-4 billion refinery next to its existing 168,000 b/d refinery at Pointe-a-Pierre.

The Minister said, although the final figure is not yet in, he expects the refinery's capacity to be in the order of 200,000 b/d.

Enill said the new refinery would be export oriented. "As a producer of approximately 150,000 b/d of oil, the country would benefit from being able to refine its own crude and convert it into saleable products for the fuels retail market," Enill said.

The energy minister said bottom-of-the-barrel products from state-owned Petrotrin can be utilized as feedstock for the new facility.

The government is close to hiring a contractor, Enill said, but the final figures are not in so the final cost has not yet been determined.

ASIA

MALAYSIA

Qatar Firm to Build $4.55 Billion Refinery in Malaysia

A company from Qatar will build a 15 billion ringgit (US$4.55 billion) oil refinery in Manjong, Malaysian northern Perak state, Kuala Lumpur reported on February 18.

The Perak government and Gulf Petroleum (Malaysia) Sdn Bhd signed a memorandum of understanding February 17.

The project will be developed over three phases. It will comprise an oil refinery, a petrochemical plant and storage facility. It is expected to be completed in three years.

The project, located on a 400-ha site, will further boost the investment climate in Perak.

The company hoped to start work on the project in the next few months, said Abdulaziz Hamad Al-Delaimi, president of Gulf Petroleum.

The crude oil would be supplied by the company's oil field in the Middle East and would be refined here before being distributed locally and other countries.

"We are looking at a production capacity of 150,000 barrels a day. We also intend to produce liquified natural gas," the New Straits Times quoted Abdulaziz as saying.

Gulf Petroleum is an integrated oil and gas group with activities and interests spanning the Middle East, North Africa and Europe.

Gulf Petroleum to Build $5 Billion Refinery in Perak

Qatar-based Gulf Petroleum Ltd has identified an area in Manjung, Perak as a possible site for its RM16bil (US$5bil) oil refinery and petrochemical project.

Its president Abdulaziz Hamad A. Al-Delaimi said a feasibility study would be conducted on the project in Manjung following the signing of a Memorandum of Understanding (MoU) between the consortium and the Perak government February 17.

Caretaker Mentri Besar Datuk Seri Mohamad Tajol Rosli Ghazali witnessed the signing held at a hotel here on behalf of the state government.

"We hope that the feasibility study would take within five to six months to complete so that we can start our project by the third quarter of this year," said Abdulaziz.

He said the 400ha area in Manjung was selected because it was located close to the sea.

"The suitability of the soil and the nature of the land also suggest that the area is a good location," he added.

He said the total investment for the project was estimated at about RM16bil.

"The first phase of the project is to build an oil refinery which will cost between RM4.8bil and RM6.4bil," he said, adding that it had a capacity of handling 100,000 to 150,000 barrels of crude oil daily.

Abdulaziz added that the whole project would take about three years to complete.

Separate investments estimated between RM4.8bil and RM6.4bil would be allocated to the petrochemical project while some RM3.2bil would be for building storage facilities, he said.

He added that the refinery would also create employment opportunities for thousands of people.

EUROPE / AFRICA / MIDDLE EAST

ALBANIA

Albania to Privatize Its Sole Oil Refinery

The Albanian Ministry Of Trade, Economy and Energy, METE, announced on February 19 an international tender for the privatization of the country’s sole oil refinery, ARMO.

Under the tender, 85 percent of ARMO’s stock will be sold. The company is currently 100-percent owned by the Albanian government.

Bids will be assessed at the end of May. The American company Patton Boggs will act as legal adviser to the Albanian government.

Albania’s center-right government is planning a major round of privatizations in 2008. This will end public ownership of the last major assets still controlled by the state.

In addition to ARMO, the distribution branch of Albania’s power utility, KESH, the state-owned insurer, INSIG, will all be sold off later this year, according to a privatization plan presented by Prime Minister Sali Berisha.

“This year will be marked by a privatization wave, because we see ourselves as a liberal government that believes in free enterprise,” Berisha said at a cabinet meeting in January.

Berisha also detailed plans to conclude concessionary contracts with private companies for the construction of new hydro-electric plants.

The Austrian utility company AVN AG has already won a tender to build three hydro power plants in southern Albania with a total estimated value of €612 million.

The power plants to be constructed on the Devoll River will have a total output of approximately 400 megawatts.

Over the past two years, Albania has been hit by an acute energy crisis, with regular power cuts throughout the country, including in the capital Tirana.

The government's sweeping privatization plans follow the introduction at the start of this year of a flat-rate tax system at the exceptionally low rate of 10 percent.

GERMANY

Conoco, Preem Refineries still being Run at Lower Rate

ConocoPhillips' Wilhelmshaven refinery in Germany is still operating at reduced rates due to poor margins, an industry source said on February 12.

The company has lowered the run rates of the 275,000-barrels-per-day plant since the beginning of this year.

"Nothing has changed," the source said.

The cut was about 10 percent and the source did not know when the refinery would return to normal operation.

The company has not finalized a date for scheduled maintenance, which should take place in the first or second quarter of this year.

Preem's 113,000 barrel-a-day Gothenburg refinery, which cut runs last month, has also not yet resumed full production, a trade source said.

Wilhelmshaven and Preem are among a number of refineries across the globe that have cut runs in January as high crude oil prices and sluggish oil product demand have squeezed their profit levels.

Some other refiners have started shutting down their plants for scheduled maintenance. The combination of run cuts and maintenance pulled oil product inventory levels in Europe to much lower than a year earlier.

Citigroup said in a research note Europe would have about 400,000 bpd of crude distillation capacity offline in February.

That accounts for about 2.5 percent of Europe's total capacity of about 16 million bpd.

ITALY

Eni Plans Upgrades to Sannazzaro Refinery and Maintenance to Four Others

Italy's Eni will continue to upgrade its Sannazzaro refinery after it launches a new diesel unit in early 2009, and will do maintenance this year at four of its Italian plants, its refining chief said on February 15.

The company expects to commission a new 23,000 barrels per day unit using a proprietary hydroprocessing technology at Sannazzaro in 2012, bringing production of high value middle distillates, such as diesel fuel, to 43 percent of output, Angelo Caridi said.

"We are starting this year with the new plant, an industrial plant where deep conversion technology is applied," Caridi told an earnings conference.

That project, as well as a similar deep conversion unit on an experimental scale of 3,000 bpd, now under construction at Taranto, should take pressure off refining margins, reducing the break even point by $1.

The upgrade projects are designed to protect the company's refinery margins from expensive crude and weak prices for partially refined products, such as fuel oil, by maximizing output of diesel, Europe's deficit oil product.

They will also help the company squeeze maximum profit out of cheaper heavy sour crudes from Russia and the Middle East.

Eni said it enjoyed a discount of $4.50 to Brent crude last year but expected it to narrow further.

Caridi said the new Sannazzaro hydrocracker was about 80 percent finished but did not mention any associated down time at Sannazzaro, and he told reporters after the conference that the refinery would undergo no maintenance at all this year.

A full shutdown is planned at Eni's 80,000 bpd plant in Venice, while partial turnarounds are planned at the 241,000 barrels per day Milazzo refinery, 105,000 bpd Gela refinery, and 84,000 bpd Taranto refinery, he said. He gave no dates.

Gela will do work on topping and coking units, while Taranto will partly shut for work on its residual hydrotreater and decoking of the visbreaker and Milazzo will shut a hydrocracker and its LC finer, another upgrading unit which processes bitumen, he said.

The company said it expected refinery throughputs to rise this year from the 37.15 million tonnes reported in 2007, adding that throughput gains in the coming years would come partly from termination of low margin processing deals.

"We never thought to increase our exposure to refining," Caridi said, adding the company was focusing on making its refining exposure more efficient.

Higher throughputs are expected this year at the Czech oil refiner Ceska Rafinerska, in which Eni holds a minority stake together with Royal Dutch Shell.

POLAND

PKN Orlen Plans 19 Percent Refining Output Boost In 2008

Poland's largest oil company PKN Orlen expects its refining output to grow 19 percent this year, helped by a lack of shutdowns at its previously troublesome Lithuanian plant Mazeikiu Nafta, the company said.

In a presentation on the company's fourth quarter results, PKN said it expected minor shutdowns at its Chemopetrol and Anwil plants as well of the diesel and Olefin units at its main Plock refinery.

A shutdown of Czech refinery Kralupy has already concluded, it said, adding refining would grow 11 percent at Czech unit Unipetrol and 80 percent at Mazeikiu.

Extensive shutdowns at the two plants were the main driver of a worsening of PKN's results compared to expectations in the second half of last year.

"The shutdowns which are planned for this year are standard and in no way can be compared to the shutdowns at Mazeikiu and Unipetrol last year," Waldemar Maj, PKN's chief financial officer, told reporters.

"The macroeconomic environment has not changed in comparison with the last quarter. We are still moving forward with the repairs to the Unipetrol call-box installation. It should be completed by the middle of May.

"Sales should rise this year. If market conditions do not alter significantly, profits should also rise.

SPAIN

Foster Wheeler Awarded Contract for Heat Recovery Steam Generator for Spain Refinery

Foster Wheeler Ltd has announced that Foster Wheeler Energia S.A., a Spanish subsidiary of its Global Power Group, has been awarded a contract for a heat recovery steam generator (HRSG) through Sener Ingenieria y Sistemas S.A. for Petronor. The boiler will be integrated in a cogeneration plant that Repsol-YPF/ Petronor is constructing at the Petronor Refineria de Somorrostro in Bilbao, Spain.

Repsol-YPF owns 85% of the Petronor Refinery. Foster Wheeler will design, supply and erect the HRSG, and will also provide start-up supervision for the HRSG, which will be coupled to a General Electric PG-6581 combustion turbine, with a total installed capacity of 42Mwe. The HRSG will produce medium-and low-pressure steam for the refinery process. Commercial operation of the HRSG is scheduled for the second quarter of 2009.

UNITED KINGDOM

ALGERIA

Algeria Plans New 300,000 Bpd Oil Refinery

Algeria is set to build a new oil refinery with a capacity of 300,000 barrels per day at Tiaret, about 350 km southwest of Algiers, the country's energy and mines minister, Chakib Khelil, announced on February 11.

"We are going to add 300,000 (bpd)," he said, adding that this would take total Algerian refining capacity to 800,000 barrels per day.” Chakib Khelil said the objective was to refine half of crude production locally.

"It is going to be located in the Tiaret region," the Algerian energy and mines Minister told reporters.

CONGO

Saudi's Rawabi Holding Wins $868 Million Congo Refinery Deal

Saudi Arabia's Rawabi Holding Company has won a 390 billion CFA franc ($868 million) contract to quadruple capacity at Congo Republic's CORAF refinery, the Central African country said on February 15.

The expansion will take at least two years and should increase capacity at the plant to 100,000 barrels a day from current levels of 25,000, the presidency said in a statement.

CORAF, which entered operation in 1982, is dogged by technical problems and operates at a tiny fraction of its capacity. Nonetheless, it accounts for 70 percent of the Congo State Oil Company's (SNPC) refined products.

Rawabi had also signed a deal to build a 19.5 billion CFA franc ($43.38 million) bitumen plant beside the refinery, with a capacity of 100,000 tonnes a year.

The production will be used to tarmac a new road from the capital Brazzaville to the Gulf of Guinea port of Pointe Noire and to surface a second runway at the international airport.

Congo vies with neighboring Gabon for the title of sub-Saharan Africa's fifth largest oil producer, with a capacity of around 250,000 barrels a day.

EGYPT

Citadel Capital Appoints Banks for $2.25 Billion Cairo Refinery Financing

Citadel Capital has appointed banks to prepare the terms for the $2.25bn financing of a refinery near Cairo, the largest ever project finance deal in North Africa.

The local private equity company has appointed four international banks and two local institutions to work on the financing of the estimated $2.4bn refinery project at Mostorod, 10 kilometers from the capital. The financing is expected to be completed in April.

Bank of Tokyo-Mitsubishi, HSBC, Calyon and Sumitomo Mitsui Banking Corporation will work on the international portion of the financing, while Commercial International Bank and Banque Misr will concentrate on the local portion.

The six banks will carry out due diligence before drawing up a bankable term sheet, on which the project financing will be based.

They will also be given first refusal to become lead arrangers for the financing in the second half of March. The loan will then be syndicated to other banks.

Two export credit agencies have also been appointed. They will cover $1.7bn of the debt, either through direct loans or guarantees to debt raised by commercial banks. Societe Generale is the financial adviser.

"The government has a lot of old refineries producing low-quality products and 50 per cent oil residue"

Source close to Mostorod project The refinery will enable Egypt to reduce its fuel imports. It will process 4.2 million tonnes a year of fuel oil residue from existing refineries to produce 2.3 million t/y of high-grade diesel and 700,000 t/y of petrol. It is due to come on stream in October 2011.

"Egypt has a large diesel production deficit, which by 2011 will exceed 2.3 million t/y," says a source close to the project. "The government has a lot of old refineries producing low-quality products and 50 per cent fuel oil residue. As natural gas continues to supplant fuel oil in the energy industry, it is logical to convert it into diesel."

A joint venture of Japan's Mitsui and South Korea's GS Engineering & Construction is set to complete front-end engineering and design work in the second quarter, and will begin construction in the second half of 2008.

The refinery will be operated by Egyptian Refining Company, Citadel's local subsidiary.

The engineering, procurement and construction phase will now be carried out on a lump-sum turnkey basis, insulating the developers from the impact of rising costs.

State-owned Egyptian General Petroleum Corporation has signed a take-or-pay agreement under which it will buy all refinery output at international prices.

LIBYA

Libya Changes Position, Gives State-run Fund Full Control of Tamoil Refining Company

The Libyan government has given its state-run investment fund full control of the country's European refining company, Tamoil, Libya's top oil official said February 29, in a move that may well end U.S. private equity group Colony Capital's plans to buy a big stake in the company.

The Libyan government reached an agreement in June to sell a 65% stake in Tamoil to Los Angeles-based Colony Capital LLC. The private equity group would pay around $3.5 billion for its 65% stake in Tamoil, which has remained in the Libyan government's hands since the deal was made public.

The deal was hailed at the time as a clear signal by the North African country to open the country to foreign investment more than two years year after the U.S. and U.K. renewed trade ties with Libya. Those developments followed Libyan leader Moammar Gadhafi's promise to dismantle Libya's weapons of mass destruction program and cooperation with militant groups.

But Libya, an OPEC member whose state coffers have swelled amid record oil prices, has had an apparent change of heart about the Tamoil deal, which was supposed to have been finalized at the end of 2007.

"Tamoil was transferred to the control of the LIA (Libyan Investment Authority) last week," Shokri Ghanem, head of the Libyan National Oil Co., said from Tripoli. "It's now up to the board to decide if the Tamoil deal (with Colony Capital) happens."

But a separate Libyan oil official said it was unlikely the Colony Capital deal will happen in its current form. "I don't believe the government would transfer control of Tamoil to the LIA for nothing," the official told Dow Jones Newswires.

"The deal may still happen but if it does it will be in a different form," and this could include Colony taking a minority stake in Tamoil, the official said.

Tamoil owns refineries in Germany, Italy, Spain and Switzerland, where it is based, and operates more than 3,000 filing stations in Europe.

Colony Capital declined to comment on the developments.

Another factor that could be at play in the Libyan government's change of heart on selling a majority stake in Tamoil is proposed U.S. legislation that aims to compensate victims of terrorism.

This has irritated the Libyan government because it feels it has failed to see any big dividends from the U.S. government since it renounced its nuclear weapons program and cooperation with terrorists.

The proposed legislation would put Libya at risk of having to cough up additional money to victims' families because of its past links to militant groups prior to renouncing those ties four years ago.

RUSSIA

Russia to Construct 180,000 bbd Oil Refining and Petrochemical Complex

Mr Pyotr Sumin, governor of Chelyabinsk region and UAE-based Quality Energy Petro International Ltd, have signed a preliminary investment agreement on the construction of an oil refining and petrochemical complex in Korkino in Chelyabinsk region.

The oil refinery is to have the capacity of 180,000 barrels of crude oil per day. Quality Energy plans to invest USD 4.5 billion into the project and will own 75% of the newly created JV and the Chelyabinsk will hold 25%. Start-up of the construction is scheduled for the end of 2008.

Conoco, Preem Refineries still being Run at Lower Rate

ConocoPhillips' Wilhelmshaven refinery in Germany is still operating at reduced rates due to poor margins, an industry source said on February 12.

The company has lowered the run rates of the 275,000-barrels-per-day plant since the beginning of this year.

"Nothing has changed," the source said.

The cut was about 10 percent and the source did not know when the refinery would return to normal operation.

The company has not finalized a date for scheduled maintenance, which should take place in the first or second quarter of this year.

Preem's 113,000 barrel-a-day Gothenburg refinery, which cut runs last month, has also not yet resumed full production, a trade source said.

Wilhelmshaven and Preem are among a number of refineries across the globe that have cut runs in January as high crude oil prices and sluggish oil product demand have squeezed their profit levels.

Citigroup said in a research note Europe would have about 400,000 bpd of crude distillation capacity offline in February.

That accounts for about 2.5 percent of Europe's total capacity of about 16 million bpd.

Refineries to Take more of Russia's Crude

Up to 10 million to 15 million tonnes of Russian crude per year (200,000-300,000 barrels per day) could be sucked into a few well placed Russian refineries over the next 3-5 years, a senior refining executive said on February 19.

As crude production growth flags, that could mean a cut in exports.

Tony Considine, executive vice president for downstream at Russo-British energy company TNK-BP said he thought Russia's refining industry had now reached its "natural limits", mostly due to logistical bottlenecks, despite a remaining cushion of old distillation capacity.

Among the upgrades expected in Russia this year, Considine said TNK-BP would bring online a 1.7 million tonne per year diesel hydrotreater at Ryazan refinery which would bring diesel output at the company's largest refinery to 10 parts per million of sulfur, in line with incoming European emissions standards.

The company will conduct maintenance at its Lysychansk refinery in Ukraine for 50 days in September and October, and run down the 300,000 barrels per day Ryazan refinery by a third during the summer to do maintenance on some older distillation units, as well as a reformer and hydrotreater, Considine said.

Foster Wheeler to Execute Project Management Contract for New Hydroprocessing Complex in Russia

Foster Wheeler Energy Limited, the UK-headquartered subsidiary of engineering and construction major, Foster Wheeler, has been awarded a project management consultancy contract to build a new hydroprocessing complex in Russia by OJSC Khabarovsk Oil Processing Refinery, a 100 per cent subsidiary of OJSC Oil Company Alliance (Alliance), at its refinery.

The Foster Wheeler contract value for this project was not disclosed and will be included in the company's fourth-quarter 2007 bookings.

The new hydroprocessing complex comprises a hydrocracker, hydrotreater, hydrogen unit, amine regeneration unit, sour water stripper and sulfur recovery unit. The hydrogen plant is based on Foster Wheeler's own proprietary Terrace-Wall steam methane reforming technology.

The capacity of the complex, which is scheduled for completion in early 2011, will be as follows: the diesel fuel and kerosene hydrotreater unit 1.18 million tons per year, and the hydrocracker unit 0.5 million tons per year.

"We have already completed the front-end engineering design for the entire hydroprocessing complex, and have undertaken the basic design for the hydrogen production facility," said Stephen Culshaw, managing director, commercial operations, Foster Wheeler Energy Limited.

Foster Wheeler will execute the project from its Glasgow operation in the UK. The company will manage the selected engineering, procurement and construction contractor and will provide ongoing advice and assistance to Alliance on commercial matters.

UKRAINE

Ukraine Says Odessa Refinery to Start Output by April

Ukraine's Odessa oil refinery, owned by Russia's second-largest oil firm LUKOIL, is likely to resume output by April 2008 after a 3-year upgrade, Fuel and Energy Minister Yuri Prodan said on February 19. "Odessa refinery is likely to be launched by April," Prodan told Reuters. "By that time, the first volumes of fuel will appear on the market."

A refinery official declined to comment. Last year, LUKOIL said it had finished reconstruction of a vacuum distillation unit and would in the first quarter of 2008 complete modernization of a visbreaking unit to allow it to cut fuel oil output and raise production of vacuum gas oil.

Refining depth will increase to 80 percent from 56 percent.

The plant was shut for reconstruction in 2005. LUKOIL said at the time the work would take three years and that the project involved investment of about $320 million.

The company has said annual production of high-octane gasoline would double after reconstruction to 740,000 tonnes, with output of diesel at about 960,000 tonnes.

IRAN

New 300,000 bpd Refinery in Iran’s Golestan Province

National Iranian Oil Engineering & Construction Co. (NIOECC) is planning to build a new refinery called Caspian Refinery in Golestan Province. The Caspian Refinery will have 300,000bpd capacity. On Iran's foreign investments in this field, Mr Ali Asghar Sajedi engineering & construction chief of NIOECC said that Iran has signed MoUs on refinery construction with Syria, Indonesia and Malaysia and the last project is to be launched soon.

He added that Iran's shares in Syrian, Malaysian and Indonesian refinery construction projects will be 20%, 30% and 30% respectively and Iran will also supply these plants after their construction.

Mr Sajedi further added that Malaysia is planning to invest in a refinery to be constructed in Pars Province. He said that this refinery, when completed, will have a capacity of 120,000bpd and will be fed from the Pars Special Economic Energy Zone.

IRAQ

Iraq to Build New $1 Billion Oil Refinery in Nasiriyah

Iraq's Oil Ministry is negotiating with international firms to build a massive refinery in Nasiriyah to help alleviate fuel shortages throughout the country.

Oil Minister Hussain al-Shahristani, in a recent visit to Nasiriyah, capital of Thi-Qar province in the south, touted his plans to build the refinery, the Al Mashriq newspaper reported.

"Most of the oil that we produce is crude oil, but we are working in order to transform to petroleum products," Shahristani said.

Iraq currently has a 598,000 barrel per day refining capacity, according to the U.S. Energy Department's data arm, the Energy Information Administration, but the refineries usually don't work at maximum when online. The new Nasiriyah refinery would add 300,000 barrels per day capacity.

Mashriq reports the refinery will cost $1 billion to build and Canadian and American firms have submitted bids.

"Instead of importers we will become exporters of oil products," Shahristani said. "The Oil Ministry has begun negotiating with the world's largest companies; there are just a few in the world. Projects like this require the largest companies to carry them out."

The ministry is working with the local government to "select the best site for the oil refinery," an Iraq news agency reports.

SAUDI ARABIA

Aramco says Total and Conoco Refinery Plans Ongoing

State oil company Saudi Aramco said on February 18 its plans to build two refineries with U.S. oil major ConocoPhillips and French peer Total were "progressing well", despite some industry concerns.

Higher labor and raw material costs have caused delays and cancellations across the world's oil and gas industry, and weakening refining margins have made crude processing projects especially vulnerable.

Some in the industry had begun to speculate that the two 400,000 barrel-a-day refineries in Jubail and Yanbu could be stalled, scaled back or even cancelled.

Saudi Aramco executive Khalid al-Buainain told a conference in London that although construction costs had risen for the refineries, it remained optimistic on the economics of the projects.

"Like everyone else, we have seen an escalation of costs, but it has not deterred us," al-Buainain said.

Aramco Splits New Jubail Refinery Contracts to Minimize Cost Risks and Invites Fixed-price Bids

Saudi Aramco is seeking to minimise the impact of rising costs at its new refinery in Jubail by splitting the contracts into smaller, more manageable packages and asking contractors to submit fixed-price bids.

The strategy has come to light after additional costs of $700m were being incurred by contractors working on engineering, procurement and construction (EPC) contracts on the Qatargas II project.

Costs on Aramco's 400,000-barrel-a-day Jubail export refinery, which is being developed in a joint venture with France's Total, have spiralled to $13bn from $6.4bn.

The state-owned oil company has now split its four original packages into eight smaller ones, in an attempt to spread the risk attached to the crucial EPC deals among contractors.

But contractors are also expected to bid for work on a fixed-price or traditional lump-sum turnkey basis, where the contractor takes almost all responsibility for the project and the risk.

It marks a change in strategy for Aramco, which had started to share project risk with contractors by signing convertible lump-sum deals. These meant the initial phase of an EPC contract was done on a cost-reimbursable basis.

EPC contractors are already struggling to deal with rising costs in the region, with some firms forced to take charges of several hundred million dollars.

However, despite the transfer of all the risk to the contractors, 13 companies had submitted interest in the eight packages by the February 6 deadline.

The packages cover: distillation and hydrotreating; a conversion unit; sulfur and amine saltwater treatment; aromatics; a coker unit; flare control and electrical systems; a cooling tower and project management; and plant utilities.

Companies indicating an interest in specific packages include Canada's SNC Lavalin; Australia's WorleyParsons; Foster Wheeler, Bechtel and Fluor of the US; Italy's Snamprogetti and Techint; Paris-based Technip; Spain's Tecnicas Reunidas and four South Korean firms.

Aramco has previously indicated that South Korean companies will be excluded from bidding because of the high levels of technical expertise required for the project.

The final cost estimate on the new refinery is due later this year from Technip, which is handling the combined front-end engineering and design and programme management services contracts.

Total has yet to formally commit to an investment decision on the refinery, but is expected to confirm its participation by the end of June, according to an executive close to the project.

He says the joint venture has already awarded a technology deal to Axens for the aromatics unit and has initiated exploratory talks over constructing an ethylene complex.

"Total is already quite far down the line over Jubail, so I would be very surprised if it were to pull out now," says the executive.

He adds that Total's recent decision to pull out of the South Rub

al-Khali (Srak) gas exploration hunt in Saudi's Empty Quarter makes Jubail "strategically vital" for the French oil major's relationship with the kingdom.

UNITED ARAB EMIRATES

Takreer to Build New Refinery in Abu Dhabi

The Abu Dhabi Oil Refining Company (TAKREER) of the United Arab Emirates (UAE) announced on February 25 that it will build a new refinery in Abu Dhabi Emirate to boost its refinery capacity, Emirates News Agency reported.

When completed by 2013, the new refinery will have a capacity of 417,000 barrels per day (bpd), representing 86 percent of TAKREER's current installed refining capacity, according to the report.

The refinery is in the design phase and will be located in Ruwais, some 240 kilometers from Abu Dhabi City, the UAE capital.

The project is driven by demand and the need to meet stringent product quality requirements and environmental legislation, TAKREER's general manager Jasem Ali Sayegh said.

TAKREER was established in 1999 to take over the responsibility of refining operations previously undertaken by the Abu Dhabi National Oil Company (ADNOC).

It currently manages Abu Dhabi Refinery and Ruwais Refinery whose capacities stand at 85,000 bpd and 400,000 bpd, respectively.

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