The refining industry is already feeling the impact of the falling growth in global oil demand, with North America and Europe the hardest hit by the downturn, said participants at the European Fuels Conference in Paris March 11-12. The conference was organized by London-based World Refining Association together with Energy Exchange Co.

Globally, refinery yields are reflecting greater destruction of fuel oil demand and increased production of middle distillates. Indeed middle distillates remain the key market driver (along with naphtha for petrochemicals), according to Jonathan Leitch, senior products analyst at Wood Mackenzie.

Refiners in North America and Europe, he said, will be forced to cut runs more than other regions, but even after utilization is reduced, the global gasoline surplus will continue to grow well into the next decade.

However, European refiners will cut runs slightly less due to the regional diesel deficit, and their gasoline surplus capacities will continue to be pushed into the U.S. where demand is also on the wane.

At the same time, U.S. refiners will maximize diesel production, which will be drawn into Europe.

Johannes Benigni, managing director of Vienna-based JBC Energy GMBH, who foresees 4.9 million b/d of U.S.-European refining capacity at risk, described the Atlantic Basin market as "the main battlefield" because demand in that area is expected to decline by 3 million b/d by 2020.

He suggested, nonetheless, that refining capacity might grow by 1.4 million b/d but with biofuels replacing about 1 million b/d of refinery fuels by 2020.

Pointing out that the only support for demand in 2008 came from gas oil-diesel, resulting in a 600,000 b/d gasoline surplus, Benigni said the full impact of the economic slowdown will be felt this year, with the difference between gasoline and gas oil expected to be 50,000 b/d. European refining capacity is more endangered in northwestern Europe than in Europe's eastern, central, or Mediterranean areas.

In the U.S., Benigni expects refinery-based gasoline demand to drop to 6.78 million b/d in 2020 from 8.91 million b/d in 2007. Gasoline production is being replaced by middle distillates "where the money is," noted Benigni as he pointed to "the sudden export of these products." He noted that "the U.S. is quickening the pace of change from what used to be several years now happening in months" with exports to Latin America, the Mediterranean—including France—and Northwest Europe.

As matters now stand, the middle distillates market is becoming "very crowded" because gas oil exports to Europe currently are the highest since October 2008 due to a particularly weak Asian market, he added.

More globally, Benigni saw Organization of Economic Cooperation and Development countries under strong pressure, with refinery shutdowns already planned in Japan and being considered by various European companies. The Middle East could be a "key relief" in coming years if refinery projects continue to be delayed, subsidies remain, and oil prices rise.

While Asia as a whole is unlikely to provide an outlet—it has its own refining investments and surplus barrels from OECD Europe—the Mediterranean could emerge as a new trading hub as it already has volume exchanges with all world regions.

Speaking for the European Petroleum Industry Association, Europia, Secy. Gen. Isabella Muller expressed concern that Europe's "major diesel-gasoline supply-demand imbalance" will continue to grow as the investments needed in conversion capacity are being hindered by challenges accumulating in the European Union.

"Refining is a long-cycle industry," she told the conference. "To maintain investments in the EU, the industry needs a long-term, predictable policy framework." The challenges the industry has to face regarding sustainability include the cumulative effect of climate change and renewable policies, upward pressure on CO2 emissions from refineries due to stringent product specifications, and continuous demand changes with the gasoline-diesel imbalance.

Energy efficiency improvements, she said, cannot offset this upward pressure as continuing diesel demand growth and specifications would raise the diesel CO2 footprint and require more imports.

"The refining sector in the EU," Muller insisted, "is uniquely affected by three EU legislations: air quality, climate policy, and fuel quality-renewables."

Accordingly, EU-only CO2 costs, in the absence of similar constraints elsewhere, would make investments in the EU less attractive, increase incentives for importers to the EU, and provide advantages to non-EU competition in export markets—all of which would jeopardize supply security.

Total SA, which has no plans to close any refineries in Europe, is planning to consolidate its refining and petrochemicals operations in France and restructure its refining base to reduce the gasoline-diesel imbalance. To this end it will reconfigure and downsize the world-scale, 16.4 million tonnes/year Normandy Gonfreville refinery in northwestern France by reducing its capacity to 12 million tonnes/year at a cost of some €770 million.

Gasoline production will be reduced by 60%. At the same time, the distillate hydrocracker commissioned in 2006, will be upsized to produce 500,000 tonnes/year more diesel—a 10% increase. The reconfiguration also will reduce carbon emissions from the refinery by about 25%, or 1 million tonnes/year, the company said.

The move, which is to take place over 3 years to 2013, is timed to take advantage of the refinery's 5-year turnaround scheduled for 2011. It will involve the loss of 249 jobs with no layoffs planned but internal replacements, retirements, early retirements, and the introduction of a furlough system planned.

Unrelated to the refining restructuring, Total is introducing, over the same period, the upgrading and consolidation of its petrochemicals in France. Part of the project will involve some €230 million to improve the energy efficiency and competitive strength of the steamcracker and high-density polyethylene unit at Gonfreville and to consolidate the polystyrene production at the Carling facility in eastern France.

The program will lead to the closure of loss-making units: a low density polyethylene line and a polystyrene line in Gonfreville. The project will streamline production facility organization, concentrate customer technical support at the Feluy complex in Belgium —currently provided in part by the Mont facility in southwestern France, and rescale Paris headquarters operations to the company's new scope.

The Lacq research unit in southwestern France will be expanded to focus on state-of-the-art activities for all Total's businesses. In addition, Total Petrochemicals France will close the Notre-Dame-de-Gravenchon facility in Normandy, which produced secondary butyl alcohol for one remaining customer, Arkema, which has terminated its supply contract.

There will be no layoffs for the 306 jobs that will be lost through 2012 but personnel will be reassigned through internal replacement and retirements.

AMERICAS

U.S.

Valero Port Arthur Crude Unit Restart Continues

Valero Energy Corp said on March 3 that the restart of a crude unit at its 325,000-barrel-per-day Port Arthur, Texas, refinery continued following an exchanger fire on February 27.

Bill Day, a spokesman for the largest U.S. refiner, dismissed as "inaccurate" a news report that the restart of the crude unit had failed at the Port Arthur plant when problems were encountered.

"The start-up of the crude unit at Port Arthur continues. We expect this process to take a couple of days," Day said.

Emerson Flue Gas Analyzers Certified for Hazardous Areas

Emerson Process Management has enhanced its Rosemount Analytical X-STREAM Oxygen Analyzers and attained certification for hazardous areas, now offering capability to refining and petrochemical facilities that require Class I Zone I and ATEX Exd IIB approvals. Better analysis of flue gases exiting the combustion process permits plant operators to improve the efficiencies of large boilers and process heater furnaces, and also provides immediate reduction of carbon dioxide (CO2) emissions with minimal investment.

These analyzers provide information to control the fuel-to-air ratio in furnace burners, much in the same way it's done on today's automobiles. The X-STREAM O2 probe offers improved AccuMaxTM accuracy specifications, extended temperature capability, and now offers FM, CSA, and ATEX approvals for hazardous areas.

According to Doug Simmers, worldwide product manager for Rosemount Analytical, large process heater furnaces often burn waste fuel gases from different areas within a facility, and the BTU value of these waste fuels can vary significantly from day to day, and hour to hour. A reliable reading of oxygen permits the operator to fine tune his combustion fuel-air ratio despite changes in fuel BTU and air density going into the burners.

According to Emerson, the X-STREAM line of combustion O2 probes offer long life in this difficult service, and are now designed to be repaired without removing the probe from the furnace duct. Additionally, they can provide indication of reducing conditions that may occur inside the furnace during plant upsets.

ConocoPhillips Slows Montana Refinery Expansion Work

ConocoPhillips has notified Montana environmental regulators it has delayed the expansion of its 60,000-barrel-per-day refinery in Billings, Montana, for about a year.

According to Jim Hughes, a senior environmental specialist with the Montana Department of Environmental Quality, the company sent the agency a letter February 11 saying it was delaying the expansion of the refinery for about a year.

The expansion, which was expected to start in January 2009, would have upgraded the crude and vacuum units from about 75,000 to 79,000 bpd.

During a January 28 meeting with analysts to discuss fourth-quarter 2008 earnings, the company said it would cut back on deferring upgrades at some of its refineries but declined to elaborate which ones.

Conoco also announced upgrades at its three West Coast refineries.

Bill Stephenson, a spokesman for ConocoPhillips, said the company would not comment on capital spending until its March 11 analyst meeting.

U.S. Judge Approves BP Guilty Plea in 2005 Explosion

A U.S. judge on March12 approved BP Plc's agreement to pay $50 million -- the largest U.S. criminal environmental fine ever -- after pleading guilty to charges stemming from a 2005 explosion that killed 15 workers at a Texas refinery.

BP's plea agreement had been held up after families of victims complained the penalty was too lenient, pointing out that regulators found that BP sacrificed safety at the plant to cut costs.

But U.S. District Court Judge Lee Rosenthal approved the agreement in which BP's U.S. unit pleaded guilty to criminal charges stemming from the blast, which also injured 180 workers at the Texas City refinery, 40 miles (64 km) southeast of Houston.

The plea deal also requires the U.S. unit of London-based BP to serve three years on probation during which it must comply with worker safety, process safety and environmental standards set down in agreements with the U.S. government.

If it fails to live up to those agreements, BP could be subject to further prosecution for other environmental violations the U.S. government may have had evidence of at the time the agreement was reached in 2007.

The ruling brings an end to nearly four years of legal battles between survivors and BP over the March 23, 2005, explosion at BP's Texas City refinery, the third largest in the United States.

"We deeply regret the harm that was caused by this terrible tragedy," said BP spokesman Daren Beaudo. "We take very seriously the commitments we've made as part of the plea agreement."

The deal, negotiated in 2007 by federal prosecutors in Houston and BP, was held up after the U.S. Fifth Circuit Court of Appeals in New Orleans ruled it violated the rights of relatives of the dead and blast survivors to be consulted by prosecutors prior to the agreement.

The U.S. Supreme Court rejected an appeal by victims to intervene in the case.

The Court left it up to Rosenthal to decide if the plea agreement could still be accepted.

Rosenthal said she did not have the power to change the plea deal, only to approve or dismiss it as a whole.

Specifically, BP pleaded guilty to failure to comply with federal environmental law to prevent accidental releases of regulated substances.

Survivors have argued the fine was a paltry sum to BP, which reported a net profit of $21.2 billion for 2008.

The U.S. Justice Department acknowledged in a statement that the plea deal will not ease the pain of those who suffered.

"It demonstrates that the federal government takes seriously its mission to prosecute those who knowingly violate the nation's environmental laws," department spokesman Andrew Ames said.

A U.S. Chemical Safety Board investigation of the blast showed BP had allowed refinery process safety and reliability to dangerously erode at the Texas City refinery in the years leading up the explosion in part due to cost cutting efforts after BP bought the refinery in a 1998 merger with Amoco.

"We will continue the work we're doing at Texas City and our other facilities to reduce risk, improve plant integrity and environmental compliance to prevent something like this from happening again," BP's Beaudo said.

Hundreds of lawsuits stemming from the explosion forced BP to set aside $2.1 billion to pay claims. No single case was decided by a jury as BP was able to reach settlements.

Tesoro says L.A. Refinery Coker Work to Cut Output

Tesoro Corp said it plans to perform about two weeks of maintenance beginning March 13 on a coking unit at the company's 100,000 barrel per day (bpd) Los Angeles refinery that will reduce refinery production.

Yuma County Refinery Project still Going Forward

Backers of a proposed oil refinery in Yuma County say the project is still moving forward.

Arizona Clean Fuels CEO Glenn McGinnis says he remains upbeat about the project despite the many delays and current state of the economy.

Project officials are holding out hopes to break ground on the refinery by 2010, a date by which they had originally expected the refinery to be operational.

McGinnis says he's still pursuing financing and has been negotiating with two serious investors.

The refinery would be Arizona's first and the first such project built in the United States in nearly 30 years.

A Tesoro spokesman did not say by how much production will be reduced.

Conoco Shutting Wilmington Refinery after Outage

ConocoPhillips said its 139,000-barrel-per-day (bpd) Los Angeles-area refinery in Wilmington, California, was safely shutting down after a complete power failure on March 11.

The company does not yet have a schedule for restarting the refinery, said Conoco spokesman Bill Stephens in a statement.

There were no injuries reported due to the power outage, Stephens said. The cause of the outage was unknown.

"We're working to shut down safely until the problem is resolved and the restart can be done safely," he said.

The price for gasoline blended to meet California's strict environmental standards initially climbed 1.5 cents on news of the power outage, West Coast refined products traders said.

Foster Wheeler Wins EPCm Contract at BP’s Whiting Refinery

Foster Wheeler AG announced March 17 that its Houston-headquartered subsidiary, Foster Wheeler USA Corp. (FWUSA), part of its Global Engineering and Construction Group, has been awarded the full Engineering, Procurement and Construction Management (EPCm) services contract from BP Products North America Inc. for the Coker Pillar Project at its Whiting Refinery in Whiting, Indiana.

This award is an increase in role for Foster Wheeler through the addition of the Construction Management (Cm) services beyond the engineering, procurement and fabrication work for this project currently being executed by FWUSA.

The value of the contract was not disclosed. The additional Construction Management award will be included in the company’s first-quarter 2009 bookings.

The Coker Pillar Project is part of the overall BP Whiting Refinery modernization project. This upgrade project will allow the refinery to increase its ability to process Canadian heavy crude and provides the potential to increase motor fuel production.

Mustang Completes Placid Refining Low Sulfur Gasoline Project near Baton Rouge

Mustang, a subsidiary of international energy services company John Wood Group PLC, has announced the successful completion of its Low Sulfur Gasoline Project at Placid Refining Company LLC's refinery in Port Allen, La.

Mustang provided the engineering, design, procurement and construction management for a grassroots 20,000 BPD FCC gasoline hydrotreater to make low sulfur gasoline. The new unit, along with other improvements, will enable the refinery to meet all applicable clean fuel standards for its products.

"We were excited to support Placid Refining in meeting the growing demand for low sulfur gasoline in Louisiana," stated Chick Houseman, president of Mustang's Process Plants Business Unit. "Teamwork between Placid, Mustang and the contractors was key to completing the project on schedule and under budget."

The $63 million project, the largest single capital project in Placid's history, is part of the refinery's $300 million upgrade and expansion to increase the refinery's capacity from 55,000 barrels to 80,000 barrels per day while reducing total air emissions by about 50 percent. Construction and successful startup of the new hydrotreater unit were completed in September 2008.

Valero Extends Delaware City Shutdown until May

Valero Energy Corp said March 23 it was extending the boiler maintenance at its 180,000 barrel-per-day refinery in Delaware City, keeping the refinery totally shutdown until the beginning of May.

"Valero has decided to conduct additional boiler inspections and related boiler maintenance work at Delaware City during the current shutdown," said Bill Day, a spokesman for the refinery which has total throughput of 210,000 bpd.

"As a result, the shutdown will continue longer than originally anticipated, and the refinery will remain shutdown until we are confident that the steam system can be operated safely and reliably," he said.

Repairs were initially expected to be completed by the middle of April.

Alon Plans 2010 Krotz Springs FCC Overhaul

Alon USA Energy Inc plans to overhaul a 34,000 barrel per day (bpd) gasoline-producing fluidic catalytic cracking unit at its 80,000 bpd Krotz Springs, Louisiana, refinery in the first quarter of 2010, Chief Operating Officer Joseph Israel said on March 23.

The work is planned to upgrade unit machinery and electrical systems, Israel said.

MEXICO

Mexico Ready to Announce Site of New $9.5 Bln Refinery in April

Mexican President Felipe Calderon said the site of a new oil refinery, the country's seventh, will be announced on April 15 after a public debate on proposals submitted by the nine states in competition.

During the celebration of the 71st anniversary of the nationalization of Mexico's oil industry, the president said March 18 that the government has received proposals from the states of Campeche, Tabasco, Oaxaca, Veracruz, Puebla, Tamaulipas, Tlaxcala, Hidalgo and Michoacan.

All the candidates want the refinery - to be operated by state oil monopoly Petroleos Mexicanos, or Pemex - to be located in their state.

Calderon said the choice of site for the new facility, which experts say could cost as much as $9.5 billion, is "a decision that will involve a significant and historic amount of investment and is of the greatest national interest."

The head of state, who addressed roughly a thousand Pemex employees at the onshore Chicontepec oil project in the eastern state of Veracruz, said the company's directors and technicians already have analyzed several proposals.

Calderon also acknowledged that he himself has "repeatedly received" plans sent to him by several of the country's governors.

But he promised that "the new Pemex refinery will be built in the place and under the conditions that are most conducive to the development of national industry."

The president added that the final decision on the giant petroleum facility "will be made on the basis of technical-economic and not political criteria."

Given the "transcendental importance" of this decision, the debate should not be restricted to the offices of Pemex or the government, but rather be opened up to the public so there is full transparency, Calderon said, without providing specifics on how the public debate will be conducted.

The refinery is key to Mexico's goal of becoming a "nation that is self-sufficient in the production of gasoline and fuels," the president said.

During the anniversary event, Pemex CEO Jesus Reyes Heroles said that Mexico refined a total of 1,261,000 barrels of crude per day at its six refineries in 2008.

That amount is insufficient to cover domestic demand, however, and Pemex estimates that it will import 350,000 barrels of gasoline per day in 2009.

The last refinery built in Mexico dates back to 1979 and is located in Tula, a town in the central state of Hidalgo, although the different facilities have been upgraded in recent years to boost capacity.

The new refinery project is the fruit of energy reform legislation approved last year by Congress to give Pemex greater autonomy and leeway to revive Mexico's oil industry, amid criticism over dwindling production in recent years at its largest field.

Mexican Governors Compete To Host New Refinery

Six more governors are scheduled to lobby for placement of the new Pemex refinery in their home states. The governors of the states of Tabasco, Guanajuato, Oaxaca, Puebla, Tlaxcala and Veracruz will make their cases to the energy forum March 27.

Four governors made their pitches to the forum, touting existing infrastructure, cost-benefit analyses and security guarantees.

President Calderon said that a final decision on the site of the new refinery will be announced by April 15.

Although speculation still centers on Tula, Hidalgo, and the state of Campeche as the likely choice, the governors of Michoacan and Tamaulipas also made attractive presentations to the panel of experts.

After the hearings, all four governors joined in calling on the government to build more than one new refinery.

The current project is designed to have a refinery up and running within six years, with a $10 billion investment.

Nine of the 10 states are led by Institutional Revolutionary Party governors, while Michoacan Gov. Leonel Godoy is a member of the Democratic Revolution Party.

BRAZIL

Petrobras, Marubeni Reach Refinery Project Agreement for Feasibility Study

Brazil's state-operated Petroleo Brasileiro (Petrobras), playing down contrary reports in the Brazilian press, said it signed a memorandum of understanding in January with Marubeni Corp. for a feasibility study on a 600,000-b/d refinery in Maranhao state.

"The memorandum is based on Marubeni's interest in being a potential project partner and is aimed at performing joint studies to analyze the Japanese corporation's participation in the project," Petrobras said.

It said the MOU does not represent any further obligation beyond the feasibility study for Marubeni, nor did the document create any financial obligation for Petrobras.

The Petrobras clarification followed an earlier denial by Marubeni that it would foot the entire cost of the project.

"So far, we've only agreed to discuss possibilities," a Marubeni spokesman said. "No letter of intent has been signed, and common sense dictates that Marubeni would not foot the whole bill in any case."

The statements by Petrobras and Marubeni follow a March 12 newspaper report saying the Japanese firm had agreed to finance the $8.58 billion (20-billion-real) refinery in exchange for a stake in the complex and sales of oil products.

The report in Valor Economico cited comments from Brazilian Mines and Energy Minister Edison Lobao, who said: "(The Japanese) visited Petrobras, and they've already signed a protocol of intentions. It's a firm proposal."

Lobao told the paper that initial discussions included Marubeni's assuming a possible 10-15% stake in the refinery.

"Lobao is positive the negotiations should progress and believes groundbreaking to start by December," the paper said.

It added: "A letter of intentions has been signed with Petrobras around the 600,000 b/d project, with the first stage of 300,000 b/d to be ready by 2013 and the second by 2015."

The Maranho refinery is one of five the Brazilian company is aiming to construct in an effort to increase refining capacity. Others include the 30,000 b/d Guamare unit in Rio Grande do Norte, due in 2010; the 200,000 b/d Abreu e Lima plant in Pernambuco, due in 2011; the 150,000 b/d Rio de Janeiro Comperj complex, due in 2012; the 600,000 b/d Maranhao facility, due in 2016; and the 300,000 b/d unit in Ceara state, due in 2016.

Petrobras Signs Five Major Agreements for Construction of Abreu e Lima Refinery

Petrobras has signed five major agreements worth BRL2.89 billion, for the construction of the Abreu e Lima refinery in Pernambuco, Brazil.

According to the company, the construction agreement encompasses all buildings, such as the administrative building, the integrated control center, equipment maintenance and inspection workshops, warehouses, the product quality lab, security area buildings, in addition to the safety, environment and health, telecommunications, and industrial safety buildings. The agreement, worth BRL591.32 million and with a 638-day term, was signed with EIT and Engevix.

It said that, two other agreements are for the construction of storage tanks. Lot I, worth BRL527.5 million and with a 1,115-day term, foresees the construction of 11 tanks with total capacity for a million cubic meters to store oil, intermediary products, and final products.

Intermediary products are those that leave a unit and will still be treated in other ones until becoming finished products such as diesel fuel, naphtha, fuel oil, which will supply the refinery's customers. Techint, Usiminas, and Confab are parties to the agreement.

Lot II, for 63 tanks with total capacity for a million cubic meters, was signed with Alusa, Galvao and Tome. Worth BRL730.75 million, the agreement's term is for 1,145 days, said the oil major.

Refinery substation electrical equipment and technical assistance devices for all deployment stages are part of the global electrical agreement signed with Orteng. The agreement, worth BRL269.54 million and with a term of 1,260 days, in addition to the gains in scale it will allow for, will also provide for the standardization of the plant's electrical equipment and allow the vendor to incorporate its know-how to the project.

Veolia to Provide MBR in Petrobras Refinery Wastewater Treatment Plant

Veolia Water Solutions & Technologies Brazil (VWS) has been selected by PETROBRAS to provide a turnkey contract for a new 300 m3/h (1320 gpm) wastewater treatment plant at its Henrique Lage (PETROBRAS REVAP) refinery. The project will include a membrane bioreactor (MBR) process that will form an integral part of the overall refinery wastewater treatment plant.

The REVAP refinery is located in Sao Jose dos Campos and is PETROBRAS' fourth largest refinery in Brazil. The refinery produces gasoline, diesel fuel, jet fuel, LPG, asphalt and sulfur. The new wastewater treatment plant will treat the high salinity wastewater (800 to 2000 ppm chlorides) from the desalter and from drainage of the crude oil tank bottom. The complete system consists of multiple steps: API type oil/water separation, coagulation and flocculation, dissolved air flotation (DAF), nutshell filtration for free oil polishing, equalization and secondary treatment with membrane biological reactors (MBR).

PETROBRAS selected VWS and the technologies after a long period of pilot studies with several applications and suppliers. The contract with VWS also includes the supply of a 700 m3/h (3083 gpm) ACTIFLO clarification plant for the existing wastewater treatment plant, which will polish wastewater from secondary clarification prior to its reuse.

ASIA

CHINA

Fujian JV Quanzhou Refinery to Begin Ops in 1H of 2009

China Petroleum & Chemical Corp. (SNP) and partners will start operations at the expanded Quanzhou refinery in Fujian during the first half of this year, Wang Jiming, a consultant for Sinopec, said March 4.

Construction of the refinery will finish in March and it is scheduled to come online in June, Wang said on the sidelines of the annual convention of the Chinese People's Political Consultative Conference. The CPPCC is Beijing's top government advisory body.

His comments come amid market speculation many major domestic refinery upgrades could be delayed or canceled due to weak cash flow at state-owned refiners and stagnating Chinese oil demand.

Sinopec began cutting capital expenditure last summer after racking up heavy losses as a result of China's system of state-set caps on oil product prices, which prevented the full cost of higher crude oil prices from being passed on to consumers.

Wang said Sinopec's capital spending this year will broadly match 2008 levels, without giving specific figures.

"Projects which are already under construction should be accelerated...while some projects in the planning phase should be postponed accordingly," Wang said.

The capacity of the Quanzhou refinery is being tripled to 240,000 barrels a day.

Sinopec and the Fujian provincial government together own 50% of the refining joint venture, with Exxon Mobil Corp. and Saudi Arabian Oil Co., known as Saudi Aramco, holding 25% each.

Wang added Sinopec would begin raising output of high-value petrochemicals at the expense of low-value products in order to minimize potential losses during a major downturn in the global petrochemical industry.

Heavy investments in expanding petrochemical output in China and the Middle East made when demand was strong and crude oil prices were high are now prompting fears of an oversupply that could hurt margins for years.

Petrochemicals account for a large slice of Sinopec's revenues. The company owns 55.56% and 42% of Sinopec Shanghai Petrochemical Co. (SHI), which is China's largest ethylene producer by capacity, and Sinopec Yizheng Chemical Fibre Co. (1033.HK), respectively.

PetroChina, Venezuela to Build $8 Bln Guangdong Oil Refinery

PetroChina Co. and Venezuela will build a refinery in Guangdong province that will rival the biggest Chinese oil-processing plant by capacity as the two nations reinforce their energy ties.

PetroChina, the country’s largest oil company, will “further realize” the agreements with Venezuela on the 400,000 barrel-a-day refinery when energy officials from the South American nation visit Beijing this month, Chairman Jiang Jiemin said March 13. The capacity will match the size of China Petroleum & Chemical Corp.’s plant in Zhejiang province.

Venezuela, the world’s fifth-biggest oil exporter, and China plan to boost oil production from their joint ventures in the South American nation by more than 10-fold in the next six years to 1 million barrels a day. China’s oil and natural-gas shortages will persist in the “long term,” PetroChina’s Jiang said on January 12.

China National Petroleum Corp., PetroChina’s parent, signed an accord with Guangdong to construct the $8 billion (55 billion-yuan) refinery, the Guangzhou Daily reported. PetroChina will own more than 51 percent of the plant and Venezuela will have the rest, Jiang said in Beijing.

“We will start building the Yuedong plant as soon as we get government approval,” said Jiang, who added that a proposal to construct the refinery will be submitted this year to the National Development and Reform Commission, China’s top economic planner. Construction may begin next year, Guangzhou Daily said.

The refinery will source heavy crude oil “mainly from Venezuela,” Jiang said.

Venezuela’s oil is “at the service of China,” Chavez said on February 17. “All the oil China needs for the next 200 years, it’s here. It’s in Venezuela.”

Venezuela has reached out to China and Russia in an attempt to obtain financing for projects in the South American country in exchange for oil and reduce dependence on the U.S. Petroleos de Venezuela SA, known as PDVSA, will provide 200,000 barrels a day to the Asian country to pay down a $4 billion loan from China Development Bank.

The two countries agreed in May 2008 to build a refinery in China and create a joint venture to drill for oil in the Junin 4 area, where China National has been quantifying and certifying reserves. Venezuela plans to export 1 million barrels of oil a day to China by 2011 or 2012, Chavez said then.

China, the world’s second-largest energy consumer, entered into oil-for-loans accords with Venezuela, Brazil and Russia last month, tapping its $1.95 trillion foreign-exchange reserves at a time when credit is scarce.

PetroChina shares rose as much as 6.3 percent on March 13, the most since January 29, and were at HK$5.73 at the midday break. The main Hang Seng Index advanced 3.8 percent.

Ineos Technologies Wins HDPE License Contract in China

Ineos Technologies Ltd. has licensed its Innovene S Process for the manufacture of high and medium density polyethylene (HDPE and MDPE) to China Petrochemical International Company Ltd. for use at Sinopec Wuhan Co. in Wuhan, China.

The 300,000 ton/yr plant will produce a full range of Ziegler-Natta and Chrome monomodal and bi-modal products. It is part of a major petrochemical expansion of Sinopec’s existing refinery at Wuhan.

This is the second time that INEOS has licensed this process to Sinopec. The Innovene S process was licensed to Sinopec Tianjin in 2006.

Total Plans Refinery, Petrochemical Projects in China

Total SA plans to set up new refining and petrochemicals projects in China, the China Daily reported March 20, citing a company official.

Total wants to take advantage of China's new oil products pricing system, which allows competitive pricing and an appropriate profit margin for oil refiners, the newspaper said.

"The Chinese government is going towards a more competitive pricing. We like competition because we think we are better and we can win," said Jacques de Boisseson, chairman and general representative of Total China.

Total currently operates one refinery and has no petrochemicals plant in China. Recently, it set up a natural gas venture with PetroChina Co. (PTR) in the South Sulige block with an expected annual capacity of 3-4 million metric cubic meters.

"We have to prepare for production in three to five years. We have to invest now, otherwise the consequences will be felt in a few years time when demand for oil goes up," Boisseson said.

INDIA

RIL Absorbs RPL, to be among World's Top 20 Refiners

Reliance Industries on March 2 offered its one share for every 16 held in Reliance Petroleum to absorb the refining unit, a move that will catapult it to top 20 oil refiners in the world, with a market capitalization of about USD 47 billion at present price level.

RIL set April 1 for the date for amalgamation with RPL after boards of the two firms at separate meetings agreed on the share swap which will boost earnings.

As a precursor to the merger, RIL will buy back five per cent of the stake Chevron Corp of US held in RPL at Rs 60 apiece, the same price at which the US firm had acquired the interest in April 2006.

"The merger will unlock significant operational and financial synergies that exist between RIL and RPL," RIL said. "There will be further gains from reduced operating costs arising from synergies of a combined operation." The merger will help RIL displace state-owned Indian Oil as the top refiner in the country with a combined capacity of 62 million tons a year. It will also push Chevron down on the world list to take its 13th position.

RIL CFO Alok Agarwal said the merger will be tax neutral for both the entities. The parent firm's 33 million tons export-oriented refinery and RPL's just commissioned 29 million tons SEZ refinery would be accounted separately. "Both refineries will retain their tax benefits."

Foster Wheeler Wins Contract for Paradip Refinery in India

Foster Wheeler AG announced that subsidiaries in its Global Engineering and Construction Group, Foster Wheeler Energy Limited and Foster Wheeler (G.B.) Limited, have been awarded a contract by Indian Oil Corporation Limited (IOCL) for a grassroots petroleum refinery at Paradip, Orissa State, India.

Foster Wheeler will include the booking, representing in excess of four million man-hours, in its first-quarter 2009 bookings.

Foster Wheeler will undertake the role of Managing Project Management Consultant for the major part of the development of the new 15-million metric tons per year refinery and will also execute the engineering, procurement and construction management (EPCm) for fifteen of the key refinery process units, plus offsites, utilities and infrastructure.

Foster Wheeler’s EPCm scope includes the crude distillation units, reforming, alkylation and butane isomerization units, plus significant offsites, utilities and infrastructure. The project will be executed from Foster Wheeler’s offices in the U.K. (Reading) and in India (Delhi, Chennai, Kolkata and the Paradip site).

Jacobs Engineering Receives Estimated $100 Mln Phase-III Refinery Project Contract from India’s MRPL

Jacobs Engineering Group Inc. announced in March that it received a contract from Mangalore Refinery Petrochemicals Limited (MRPL) to provide engineering, procurement and construction management consultancy services for a Crude Distillation/Vacuum Distillation (CDU/VDU) project as part of the Phase III expansion program at MRPL's refining complex in Mangalore, India. The project involves the CDU, VDU unit, LPG treatment, and ATF merox unit.

Officials did not disclose the contract value, but estimate the overall project cost at $100 million.

In making the announcement, Jacobs Group Vice President Chris Nagel stated, "We are delighted to work with MRPL to help them ensure that their facility continues to meet their customers' expectations for a high-quality product."

Jacobs, with over 55,000 employees and revenues exceeding $12.0 billion, provides technical, professional, and construction services globally.

MALAYSIA

Work on Malaysian Oil Refinery Complex to Start In July

Work on a crude oil refinery complex, part of the Sungai Limau Hydrocarbon Hub (SULIHH) project off Yan will start in July.

Menteri Besar Azizan Abdul Razak said the project that would take three years to complete include a 320 km crude oil pipeline from Yan, Kedah to Bachok, Kelantan.

Sungai Limau Hydrocarbon Hub (SULIHH) was formerly known as the Yan Petroleum Industry Zone (ZIPY).

"We expect to receive the environmental impact assessment (EIA) approval soon to be followed by land reclamation work.

"The Kedah population will gain from the offshore project as it will create artificial reef good for fish breeding," he told reporters after chairing the State Exco meeting in Alor Setar, Malaysia on March 3.

Azizan said SULIHH would start operation after three years generating revenue of US$80mil (RM297 million) annually to the Kedah state government.

The mega project is supported by two large oil companies namely Merapoh Resources Sdn Bhd (oil refinery) and Hijaz Refinery Sdn Bhd (oil storage).

Investments in SULIHH was expected to reach some RM83 billion capable of offering numerous job opportunities to people in Kedah.

Azizan said another company, SKS Refinery Sdn Bhd proposed to build an oil refinery center at Kota Putra, Bukit Kayu Hitam.

The oil refinery project involves the construction of a 50 km pipeline to transport crude oil from Kuala Jerlun to Bukit Kayu Hitam.

SINGAPORE

Exxon to Shut Singapore Refinery Units for 6 Weeks

Exxon Mobil Corp said on March 2 it has shut down a couple of units in its refinery and chemical plant in Singapore for six weeks of planned maintenance, confirming a Reuters report.

"The shutdown will affect a couple of units in the Singapore refinery and chemical plant," Reuters was told without giving details of the units.

On February 19, Reuters also reported that ExxonMobil will partially shut its mainland Singapore refinery and some petrochemical units at its Jurong Island facility for a month or more from March for routine maintenance, quoting six industry sources.

The spokeswoman said that despite the shutdown, Exxon expects to be able to meet the product needs of its customers during this period.

The U.S. energy giant will close a number of secondary units in the 309,000 barrels per day (bpd) mainland refinery from early-March to mid-April.

ExxonMobil's more than 900,000 tonnes a year naphtha cracker -- the largest such unit in Southeast Asia -- and aromatics plant, the core facilities in the Jurong Island petrochemical operations, will also be shut during March, the sources said.

Sources had said that the March turnaround at Jurong Island would include the aromatics unit that can produce more than 300,000 tonnes of benzene a year, while a cracking facility will start its month-long turnaround in May.

One industry source said the visbreaking units at both the mainland and Jurong Island refineries would be shut in stages during the period.

The shutdown of the visbreakers comes at a time when the viscosity spread between 180- and 380-centistoke fuel oil has stayed narrow at less than $3.00, after hitting a low of around $1.50 in mid-February on waning demand for the 180-cst grade from China.

The Jurong Island plant has a capacity of 296,000-bpd, making Exxon's facilities in Singapore the fifth-biggest refining complex in the world.

The mainland refinery, which has two crude distillation units (CDUs) -- one with a capacity of more than 200,000 bpd and the other with up to 100,000 bpd -- was shut for major maintenance in June 2007.

The refinery on Jurong Island, also called the Pulau Ayer Chawan (PAC) facility, operates two CDUs with a capacity of about 115,000 bpd and 185,000 bpd. The smaller one was shut for over two weeks in May 2007 after a fire.

TAIWAN

Taiwan's CPC Sees Downstream Demand Outlook as Murky

Taiwan's CPC Corp., a government-controlled refiner, will proceed with its plan to shut down its smallest naphtha cracker in March because the outlook for downstream demand in the next few months remains murky, CPC's petrochemical division head Hwang Deng-Hsiang said March 3.

"February and March are good because of inventory restocking, but there's no visibility for April and May," Hwang said.

Hwang said the company's petrochemical division posted a loss in January but swung to a profit in February thanks to strong demand for products such as ABS, or acrylonitrile butadiene styrene, and SM, or styrene monomer.

But the division will post a loss again in March because rising naphtha prices have caused the spread between naphtha and ethylene to narrow, he said.

"We need the spread to be at least US$300 to make a profit," said Hwang. The spot price for naphtha is currently around US$430 to US$450 per metric ton, while ethylene is around US$670/ton, he said.

CPC said earlier it expects to post a pretax loss of NT$136.3 billion (US$3.88 billion) in 2008, compared with a net profit of NT$11.83 billion in 2007.

The company has said it will take its No. 3 cracker naphtha cracker, with a capacity of 230,000 metric tons of ethylene, off-line in mid-March.

The running rates at the company's 350,000-ton No. 4 cracker and the 500,000-ton No. 5 cracker will be raised to about 95% from 90% after the smaller unit is shutdown, Hwang said, declining to say when it will be brought back online.

Separately, he said CPC's ethylene imports may rise by about 100,000 tons in the second half of 2012 as the company shuts down its No.3 naphtha cracker before completing a revamped version by the end of 2012.

CPC said in a statement March 3 that it has to import around 400,000 tons of ethylene each year because its own output is short of the total 1.5 million tons needed to feed annual downstream demand in Taiwan.

The company plans to spend NT$6.5 billion this year to revamp its 30-year-old No. 3 naphtha cracker, replacing it with a larger version next to the current site at the Linyuan Petrochemical Park in Kaohsiung, southern Taiwan.

CPC plans to spend a total of NT$46.9 billion on the No. 3 cracker by the end of 2012, raising its annual ethylene production capacity to 720,000 metric tons and bringing CPC's total annual ethylene output to 1.57 million tons.

EUROPE / AFRICA / MIDDLE EAST

BELGIUM

ExxonMobil Boosts Global Cogeneration Capacity at its Antwerp Refinery

ExxonMobil on March 23 inaugurated its newest high efficiency cogeneration plant at its Antwerp refinery in Belgium.

Cogeneration is the simultaneous production of electricity and useful heat or steam used for industrial processes. In addition to generating 125 megawatts, the new plant will reduce Belgium's carbon dioxide emissions by approximately 200,000 tonnes per year, the equivalent of removing about 90,000 cars from Europe's roads.

"Energy efficiency is one of the most effective tools available for reducing greenhouse gas emissions," said Sherman Glass, president of ExxonMobil Refining & Supply. "Since 2004, ExxonMobil has invested in over 1,500 megawatts of cogeneration capacity in five countries."

With the inauguration of the Antwerp facility, ExxonMobil now has interests in about 4,600 megawatts of cogeneration capacity in about 100 individual installations at more than 30 sites around the world. This is enough capacity to supply the needs of more than 5 million homes in Europe.

"This new cogeneration plant allows for the efficient generation of electricity to run pumps, compressors and other equipment in our facilities, while at the same time, producing additional steam that is needed in processes that transform crude oil into refined products," said Gilbert Asselman, manager of the Antwerp refinery.

"With the latest technology, cogeneration is significantly more efficient than traditional methods of producing steam and power separately. This results in lower operating costs and significantly less greenhouse gas emissions."

Additional new facilities under construction in Singapore and China will increase ExxonMobil's cogeneration capacity to more than 5,000 megawatts in the next three years.

The Antwerp Refinery is the second largest ExxonMobil refinery in Europe and has a capacity of approximately 305,000 barrels per day.

Antwerp's new cogeneration plant will be capable of generating more than 125 megawatts of electricity. Construction of the facility required over 1 million man-hours. Antwerp's cogeneration facility is more efficient than many traditional cogeneration plants because of its heat recovery system. In addition to generating steam, the cogeneration facility utilizes heat created in the gas-turbine exhaust to heat crude oil – the initial step in the process of converting crude oil into refined products. This alternative heat recovery technology is what sets Antwerp apart from other cogeneration units.

ITALY

Jacobs Receives Three Framework Contracts from Eni for Front-End Engineering Services

Jacobs Engineering Group Inc. has announced that it received three framework contracts from Eni S.p.A. (Eni) to provide multidisciplinary, front-end engineering services to three of Eni's operating units: Refining and Marketing, Exploration and Production, and Polimeri Europa.

Officials did not disclose the contract values, yet noted that each has a 3-year duration.

Jacobs will develop extended basic design packages and cost estimates for some Eni projects and will execute the work from its office in Milan, Italy.

SPAIN

Foster Wheeler to Supply Heat Recovery Steam Generator in Portugal

Foster Wheeler Ltd. has announced that a subsidiary of its Global Power Group has been awarded a contract for a heat recovery steam generator (HRSG) by UTE IBERESE-SOMAGUE -- a business alliance formed between Iberese and the constructor, Somague, a Portuguese subsidiary of the Spanish construction group Sacyr Vallehermoso.

The boiler will be integrated in a cogeneration plant that REPSOL is constructing at the SINES Refinery in Portugal. Foster Wheeler has received a full notice to proceed on this contract. The terms of the award were not disclosed, and the contract value will be included in the company's bookings for the fourth-quarter of 2008.

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 Siemens SGT-800 combustion turbine, with a total installed ISO rating of 47 MWe (gross megawatt electric). The HRSG will produce high and low-pressure steam for the refinery process. Commercial operation of the HRSG is scheduled for the second quarter of 2010.

EGYPT

Technip Awarded Contract for MIDOR Refinery in Egypt

Technip has been awarded by Middle East Oil Refinery (MIDOR) an EPC (1) contract, estimated at approximately Dan 43 million, for the expansion of the delayed coking (2) unit of its refinery in Alexandria, Egypt. Engineering, procurement and supply of equipment and materials will be delivered on a lump sum basis; construction activities will be charged on a reimbursable basis.

Technip's operating center in Rome, Italy, will execute the contract.

The delayed coking unit, based on ConocoPhillips technology, will have a production capacity of 30,000 barrels per day. It is scheduled to be delivered by the third quarter of 2010.

This award attests to the successful collaboration between Technip and MIDOR, for whom the Group built the Alexandria refinery in the 1990's.

(1) EPC: engineering, procurement and construction

(2) Delayed coking: thermal conversion of crude residue to produce distillates (naphtha and gas oil) and petroleum coke.

IVORY COAST

Ivory Coast Plans to Build $7 Billion Refinery with Venezuela’s Arevenca

Ivory Coast is in talks with Venezuela-based Arevenca to build a $7 billion refinery in the western port of San Pedro, Fraternite-Matin reported.

The oil company plans to build the facility “to expand its activities to other markets,’’ the Abidjan-based newspaper reported, citing Moise Koré, an adviser to Ivorian President Laurent Gbagbo.

“Ivory Coast will become the Rotterdam of Africa,” Koré was quoted as saying. Arevenca executives plan to travel to Ivory Coast next month to assess the proposed project, it said.

MOZAMBIQUE

Mozambique Firm Secures Funding for $8 Bln Refinery Study

Mozambique's OILMOZ has secured $50 million from financiers to fund feasibility studies for construction of an $8 billion oil refinery in Maputo, the company's chairman said on March 18.

"We have got $50 million from financiers to pay all necessary studies...these are engineering, market and environmental studies. The studies will be complete by October," OILMOZ chairman Leonardo Simao told Reuters.

Simao said this would be the company's first investment in the 350,000 barrels per day refinery project, and would include construction of housing for employees, water and electricity facilities.

"If the government approves the (feasibility study) document, we will start building by the end of this year, and at latest, as early as 2010 in order to meet our 2013 deadline of having the refinery up and running," Simao said.

OILMOZ is in partnership with Shell Global Solutions International B.V., a unit of Royal Dutch Shell Plc for the study and design of the project.

The project is expected to employ 15,000 people in the construction phase and 2,000 once it is at full capacity.

"We are in talks with potential financial partners to secure the bulk of the remaining investment capital, there are many investors interested because there is a profitable market, this is a real investment," he said.

About 95 percent of the refined fuel would be exported to other Southern African Development Community countries.

In 2007 the government approved construction of a $5 billion refinery project in Nacala-a-Velha in Nampula.

That refinery, which will be about 70-percent owned by Ayr Logistics, a firm registered in Texas, is expected to be operational by 2015.

Both refineries could help ease an energy crunch in Mozambique, a former Portuguese colony with limited energy supplies that is reliant on foreign oil and gas.

Mozambique's only oil refinery closed 24 years ago, leaving the country dependent on imports.

SOUTH AFRICA

Chevron Cape Town Refinery Maintenance Notice

From February 20th to April 8th 2009, the Milnerton Refinery at Cape Town will undergo a scheduled maintenance and safety inspection.

RUSSIA

Russia Pipeline Fire Cuts Supply to Refineries

Oil supplies to three refineries and the Black Sea port of Tuapse were cut off by a fire and leak on a central Russian pipeline, in addition to the port of Novorossiisk, Russia's pipeline monopoly said on March 5.

Transneft spokesman Igor Dyomin said supplies had been cut off to the Volgograd and Saratov refineries in Russia and the Lysychansk refinery in Ukraine. The leak and fire occurred March 2.

"The missing volumes will be compensated throughout the course of the month," Dyomin said.

A source at the Volgograd refinery, owned by LUKOIL , said oil deliveries had been limited as a result of the accident.

TNK-BP, the Russian oil firm half-owned by BP Plc, owns the Saratov and Lysychansk refineries.

TNK-BP's Ukrainian unit said it had been informed its Lysychansk refinery would not receive crude for three days between March 5 and March 7 and that it would be required to limit loading to a minimum.

The company said, however, that it would not stop its refinery: "We plan on fulfilling our monthly production plan in its entirety and to make up for the lag in this period."

The accident on a trunk pipeline in central Russia has disrupted deliveries of Urals crude to Lysychansk and Novorossiisk, Russia's main Black Sea port.

Supplies of Siberian Light crude to the smaller port of Tuapse and domestic deliveries to the Saratov and Volgograd refineries via the Samara-Tikhoretsk pipeline were also disrupted.

Rosneft operates a refinery in Tuapse. Transneft did not say whether this refinery had also been affected.

Urals crude differentials rose to a four-month high in the south on March 4 after the pipeline accident.

KUWAIT

KNPC Cancels Fluor's Refinery Contract

Fluor Corp. on March 20 announced that it has received notification from Kuwait National Petroleum Co. (KNPC) to stop work on the utilities and offsites for the al-Zour refinery. Fluor has approximately 300 employees performing engineering work on the project. The remaining contract value of approximately $2.1 billion will be removed from the company's backlog in the first quarter.

Fluor as a FORTUNE 200 company had revenues of $22.3 billion in 2008.

SAUDI ARABIA

Saudi Arabia to Cut Spending On Refining Projects from 2009-2014

Saudi Arabia, the world's biggest oil exporter, is expected to cut investment in oil drilling and refining projects over the next five years, a senior Saudi oil official said March 18.

The spending cutbacks underscore the extent to which the ailing global economy and weak oil prices are hurting investment in future oil production capacity and clouding expectations about the health of crude demand over the next few years.

Dozens of smaller oil companies, starved of cash and facing stiff financial constraints from low oil prices, have in recent months slashed project spending, though most big privately run oil firms like Royal Dutch Shell PLC have maintained their spending plans for 2009.

The Saudi official spoke following a report in the Saudi daily, al-Watan, that Saudi Aramco - the world's biggest oil company by production and reserves - plans to ax spending on drilling and refining projects from 2009-2014 to just $60 billion.

That would be just half the level that the company expected back in early 2008. The official said the theme of the al-Watan report was basically correct but disputed the accuracy of the numbers in the story.

"There will be a reduction in spending, but the details I am not sure about," the official said.

Saudi Arabia has sunk many billions of dollars into new projects in recent years and is expected to raise its pumping capacity to a huge 12.5 million barrels a day, up about 11% from current levels, by summer.

In Vienna at an energy conference, Saudi oil minister Ali Naimi said the kingdom will continue to invest in oil drilling projects but wouldn't comment on whether Aramco would tighten its purse strings over the next five years.

"We have said we will stay the course (and invest), and we will stay the course," Naimi said. "We (Saudi Arabia) are going to be idling with 4.5 million barrels per day of capacity (by summer). That's a lot of spare capacity. So yes, we will invest as needed."

Earlier in the day, Naimi said that weak oil prices were crimping the global oil industry's spending on new projects.

"Harmfully low prices are creating a damaging ripple effect, with diminished sector investments threatening the availability of much-needed future supplies," Naimi told oil ministers and executives.

IHS Global Insight energy analyst Samuel Ciszuk said the expected cuts to the kingdom's oil project spending were rational to the extent that project development costs are starting to fall after surging in recent years. Those lower costs are helping to decrease the need for added investment dollars.

"Saudi Aramco expects project costs to continue falling sharply ... leading to lower investment needs at its projects, and faltering global demand is likely to make it continue its strategy of delaying projects, pushing some of them out of the coming five-year plan," Ciszuk said in a research report.

Like many other energy-producing states, Saudi Arabia is expected to rake in much lower oil revenue in 2009 because of weak oil prices. This is forcing oil states to roll back social spending and, in the case of Saudi Arabia, run substantial budget deficits.

McIlvaine Company,

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