Pierre Kaplan, a French process engineer who has been at the Port Arthur facility for nearly two years, was recently granted a patent with the World Intellectual Property for a system he developed to control and optimize refinery sulfur units.

Depending on varying circumstances at different facilities, the process could cut sulfur dioxide emissions by half, said plant manager Darrell Jacob.

Sulfur dioxide combines with water to form sulfuric acid, which is the primary component of acid rain, according to the Environmental Protection Agency. The toxic compound can also harm the respiratory system.

With industrial plants that produce many tons of emissions per year, a system that could cut those emissions in half is very valuable to society, Jacob noted.

"A great thing is, it takes science and the application of it to make advances," Jacob said. "Everybody's interested in cleaner air, but has to come from the principles of science to make it work. And Pierre made a sizable contribution to that in the area of sulfur emission."

The process likely will be put into use at plants that don't currently use pollution control equipment to capture sulfur, Jacob said.

The Port Arthur refinery, which already uses sulfur control equipment, likely won't employ the technology at this time.

Valero Energy on the Lookout for Acquisitions

Valero Energy Corp. sees some opportunities for acquisitions, the chief executive officer of the largest U.S. refiner said on December 3.

"The world has changed dramatically here and we think there is going to be some opportunities for Valero to look at acquisitions again," Valero Chairman and CEO Bill Klesse told analysts at the Merrill Lynch Large Cap Energy Conference in New York. He did not elaborate.

Fluor Wins Wood River Contract

Fluor Corp. announced December 4 that it was awarded a contract for the construction and construction management of process, utility and offsites in connection with a coker refinery expansion project by WRB Refining LLC, a joint venture between ConocoPhillips and EnCana. Fluor will book the undisclosed contract amount in the company's fourth quarter 2008.

"We are poised to assist WRB Refining in building a refinery that will produce clean motor and transportation fuels," said David Seaton, president of Fluor's Energy & Chemicals Group.

Fluor completed the front-end engineering and design in 2007 for all process and utilities and offsites for the entire refinery coker expansion project prior to this transition into detailed execution. The project is located in Roxana, Illinois, approximately 25 miles northeast of St. Louis, Mo. Earlier this year, Fluor was awarded detailed engineering and procurement for selected portions of the project that was booked through the second quarter of 2008.

Fluor's total scope of work for this project includes detailed engineering, procurement and construction services for the refinery's utilities and offsites as well as for retrofitting portions of the existing refinery to accommodate the new Canadian feedstock. Fluor will also provide owner management team support to WRB Refining throughout the project's duration.

Fluor began front-end loading engineering services in May 2006 with completion in late 2007. It is expected that about 500 professionals will work from Fluor's Calgary, Houston and New Delhi, India, office locations.

Exxon Plans FCC Overhaul in Baton Rouge

Exxon Mobil Corp plans to shut the 120,000 barrel per day gasoline-producing fluidic catalytic cracker No. 3 at its Baton Rouge, Louisiana, refinery for a four-week overhaul from early February into early March, sources familiar with the project said December 15.

An Exxon Mobil spokesman declined to discuss planned maintenance at the 503,000 bpd Baton Rouge refinery, which is the second-largest in the United States.

The Baton Rouge refinery has two FCCs, which can each process up to 120,000 bpd of feedstock into motor fuels. FCC No. 2 will continue to operate while FCC No. 3 is shut. Planning for the overhaul of FCC No. 3 has been going on for years, according to the sources.

While the FCC is shut, workers will also correct problems with the wet gas scrubber that serves both FCCs, the sources said.

Particulates, primarily the catalyst used in the FCCs, have increased in the past year because of degradation of parts of the wet gas scrubber, which is supposed to remove the material.

Exxon is also rebuilding a cooling tower that serves the alkylation unit at the refinery. The cooling tower was destroyed when Hurricane Gustav hit Baton Rouge with winds over 90 miles per hour (145 kph) on Sept. 1.

Construction of the new cooling tower is expected to finish by next spring.

EPA Seeks Comments for Amendments to Air Emissions Regulations

The Environmental Protection Agency is seeking comments on a small number of technical amendments to the June 24, 2008, new source performance standards for petroleum refineries.

The proposed amendments would require refineries to monitor the amount of excess gas and sulfur to be burned off in a process known as flaring. If a refinery relies upon flaring more than expected, the facility would be required to take corrective action. These proposed amendments reflect additional data and information EPA received since issuing the current standards.

This proposal is in response to requests for reconsideration of the final standards. EPA will accept comments on the proposal for 45 days after publication in the Federal Register.

Exxon to Spend $1 Billion to Boost Diesel Output As Others Cut Back

Exxon Mobil Corp., the world's biggest oil refiner, will spend more than $1 billion in the next couple of years to increase its global production of cleaner-burning diesel by about 10 percent, the company said December 15.

The announcement comes as many oil producers and refiners scale back spending because of the sharp decline in crude, dismal expectations for energy demand in 2009 and tight credit markets that have put many big capital expenditures out of reach.

When the upgrades are completed in 2010, Irving, Texas-based Exxon Mobil will account for about 8 percent of the world's diesel output, up about 1 percent from current levels, said Sherman Glass, the oil giant's president of refining and supply.

Exxon Mobil, which had $37 billion in cash at the end of the third quarter, will expand production at its refineries in Baton Rouge, La., Baytown, Texas, and Antwerp, Belgium. Baytown is the largest U.S. refinery.

While acknowledging the global economic downturn and its significant impact on energy consumption, Glass said there is growing global demand for ultra-low-sulfur diesel, also known as ULSD.

"We test our investments against a variety of scenarios, regardless of what the short-term economic environment is," Glass said. "Our view is these projects will be robust for a long period of time to come."

ULSD, which helps reduce emissions, was introduced for highway use in 2006 and already is available at gas stations across the United States. By December 2010, it will be the only highway diesel available at retail outlets, as mandated by the U.S. Environmental Protection Agency.

Over the next few years, locomotives and marine vessels also will be required to make the switch to cleaner-burning diesel to meet new federal emission standards.

"Virtually all the diesel here in the U.S. will be ... ultra-low sulfur by 2012," said Al Mannato, a fuels expert at the American Petroleum Institute.

Demand also is growing overseas. During the past decade, diesel demand in Europe has risen more than 15 percent, while gasoline demand has actually fallen 22 percent, according to statistics on the API Web site.

Mannato said fewer European exports coupled with rising diesel consumption at home are two reasons diesel is nearly $1-a-gallon more costly than gasoline in the United States.

Some Exxon competitors have recently delayed refining projects because of volatile global markets.

ConocoPhillips and the state-run Saudi Arabian Oil Co. said last month they'd postponed construction of a multibillion-dollar refinery in Saudi Arabia. The project was in the construction-bidding process, and the two partners said they'll rebid it in the second quarter of 2009.

Marathon Oil Co. also has delayed expansion of a gasoline refinery in Detroit because of market conditions.

Alaska Makes Safeguarding the “Upstream” Oil Production System a Priority

When oil spilled from corrosion-weakened Prudhoe Bay field pipelines in 2006 then-Gov. Frank Murkowski vowed quick and tough action on what were widely viewed as lapses in industry maintenance of facilities vital to the state's treasury and economy.

Murkowski ordered aggressive state inspections of field pipelines and production facilities not covered by federal pipeline regulators.

Alaska would become the first oil-producing state to introduce comprehensive government inspection and regulation of "upstream" production facilities.

The new inspection bureaucracy Murkowski contemplated sent apprehension through industry managers. There were visions of state inspectors crawling through processing plants and offshore platforms writing tickets.

Two and a half years later, there's a different ending to this story. BP has largely completed a reconstruction of its damaged Prudhoe Bay pipelines and has done a major overhaul of internal quality management procedures.

Murkowski's vision of state inspectors playing tough cop has been softened into a more pragmatic and effective approach.

That has largely been the work of Gov. Sarah Palin and Natural Resources Commissioner Tom Irwin, who have reputations for being tough on the industry.

In this case, though, Palin and Irwin quickly ordered the scaling down of Murkowski's plans for the large inspection organization just after the new administration took shape in early 2007. BP's efforts to repair its pipelines were well underway, Prudhoe Bay had resumed full production, and the political furor had died down. The new administration's approach was more level-headed.

Alaska Division of Oil and Gas Director Kevin Banks, was put in charge of the new, streamlined Petroleum Systems Integrity Office, or PSIO. The division is part of the Department of Natural Resources. DNR has the responsibility of managing state-owned lands and oil and gas leases, and has broad legal authority to protect the state's interests and the integrity of facilities that produce state-owned resources.

Banks made it clear from the outset that his mission was to cooperate with industry in encouraging good maintenance and management practices, to get people to start working together and sharing "lessons learned," and to get tough only as a last resort.

Allison Iversen, the Petroleum Systems Integrity Office's coordinator, says the core missions of the new PSIO are first, "to break people out of their silos" to share information, starting with state agencies; and, secondly, to educate other agencies on the benefits of quality management programs.

"The end goal is efficient and effective oversight of the petroleum industry," she said.

Iversen is an attorney by training, and was deputy state director of the Joint Pipeline Office before coming to head the PSIO. She has recruited two veterans to help her, Dan Rice and Michael Engblom-Bradley. Rice is a veteran engineer with years of experience at the Joint Pipeline Office and the state Department of Transportation.

Engblom-Bradley was with Alyeska Pipeline Service Co. and was in charge of Trans-Alaska Pipeline System quality management programs. He joined the PSIO last February. The agency is about to add two more engineers and two natural resources specialists, Iversen said.

The PSIO's task is complicated because the industry is already regulated heavily by several agencies and a significant problem is that there is often little coordination or communication between agencies. There are gaps in oversight as well as overlaps.

Pipelines, loading terminals and tankers have long been subject to federal and state regulation, and producing wells, in Alaska and other states, are inspected by state agencies like the Alaska Oil and Gas Conservation Commission. But field pipelines and oil and gas processing facilities have largely been left to industry, although the State Fire Marshall and the Departments of Labor and Environmental Conservation have oversight in certain areas.

Following the 2006 Prudhoe Bay spills, federal pipeline safety agencies extended their authority to in-field crude oil pipelines, like the ones that spilled oil, but no agency had overall responsibility for the networks of flow lines and major field processing plants.

That was the problem with the Prudhoe Bay field pipelines. The allegation, still in dispute, was that BP and ARCO Alaska, which previously operated the eastern side of the field, had trimmed maintenance spending when oil prices collapsed in the late 1990s.

Because there was a gap in regulatory oversight, there was no government agency to make sure the maintenance was being done.

Problems still occur. A recent rupture of gas in a gas-lift line in the Prudhoe Bay field caught BP and the state by surprise. It was apparently caused by external corrosion and it required two production pads to be shut down while BP made repairs and did inspections.

Things could have been worse. Luckily, no fire or injuries happened. BP's well and pad shutdown systems worked as expected, too. Still, it showed that problems are out there, Iversen said.

Meanwhile, the development of the PSIO is taken in measured steps.

The first objective is a comprehensive gap analysis now underway. Rice has done a paper study of gaps in authority among agencies, but a request for proposals has just been issued for a consultant to do a more comprehensive analysis of how different state agencies are actually using their authority.

"Most agencies have broad authority but they are all constrained by budgets and personnel," Iversen said.

The goal is to see if it's possible for agencies to coordinate and communicate better to provide cost-effective oversight, she said.

"We hope to have this completed in six months, but because we're working with many other agencies we're also dependent on their timelines," Iversen said.

One simple idea, although it's expensive, would be to have a state office in Deadhorse, near Prudhoe Bay, for all agencies to share. Working in the same office would facilitate communication.

Another PSIO objective is to encourage the use of quality management systems not only in industry but also by the state. The agency sponsored a major conference on quality management in Anchorage Dec. 9 and 10, which included industry but was also aimed at state agencies. The conference featured experts in the field both from the public and private sector.

"Our goal is to have state personnel get a better understanding of what quality management is. Most people in the agencies do not use quality management principles," Engblom-Bradley said.

"Too often, people think it's just making sure the machinery is being oiled properly," he said. "It's much broader than that. It's really about leadership to ensure productivity, safety and protection of the environment. Without a good management system those things don't happen."

Dan Rice said PSIO won't demand companies use uniform quality management systems, but just that they have one and that it is followed.

Meanwhile, the Department of Environmental Conservation has a separate, but related, initiative underway. It is a major petroleum infrastructure risk-assessment project.

Iversen said the two efforts are intended to complement each other because DEC shares certain types of regulatory authority with DNR over producing oil fields.

"Until we fully understand where the highest risks to the state are, we can't know which gaps to fill or overlaps to delete," Iversen said. "The PSIO needs the risk assessment to determine what next steps are appropriate once we identify the gaps and overlaps."

When it is complete, DEC's risk assessment may be the largest and most comprehensive of its kind in the world. Risk assessments have been done for major parts of the state's petroleum industry -- the Trans-Alaska Pipeline System, for example -- but there has never been anything that covers such a large geographic area or so many complex systems.

Doyon-Emerald, a consulting company, was retained by DEC to do the study, said Ira Rosen, DEC's manager for the project. An initial phase involving consultations with industry, agency and public stakeholders is complete and the contractor is now in phase two, developing a method to actually do the analysis, Rosen said. The methodology will be reviewed with stakeholders when it is complete.

The final phase is obtaining information and development of the model to be used. The end result will be a risk profile of all of the petroleum production and transportation systems in the state, from the North Slope to Cook Inlet, Rosen said.

Sunoco May Shut Down Tulsa, OK Refinery

Sunoco Inc. said December 15 it may shut down a refinery, a sign of how abruptly the fortunes of U.S. oil refiners have dimmed.

Sunoco Chief Executive Lynn Elsenhans said the company's Tulsa, OK refinery - which has been on the block for more than a year - would be converted to a terminal if a buyer isn't found by the end of 2009. The move, which would mark the first closure of a refinery of this size in the U.S. in at least a decade, comes as Elsenhans seeks to reinvent the Philadelphia-based refiner as it grapples with a downswing that has hit the sector broadly against a backdrop of falling gasoline demand.

While some refiners may be in a "cut-and-cope" mode, trying to reduce costs, but function normally, "we are trying to make meaningful cuts," said Elsenhans, who was appointed to lead Sunoco in August. She previously worked at Royal Dutch Shell PLC (RDSA).

Sunoco shares on December 15 closed 3.3% lower at $34.75.

That Sunoco even raised the possibility of a refinery closure underscores how quickly the business environment has deteriorated amid weak global demand for refined products. Refinery valuations skyrocketed in the middle of the decade as demand ran up against capacity constraints, lifting profits.

Refiners, in the past, have shied away from closing plants for fear of a political backlash. With the average gasoline price less than half of the $4-a-gallon mark, Sunoco may be betting that the sale of its Tulsa, Okla., plant, which has a processing capacity of 85,000 barrels a day, wouldn't reverberate as widely. Such a move could also lead the way for other refiners looking to cut costs. The average price for regular gasoline in the U.S. is about $1.66 a gallon, the lowest since February 2004.

Elsenhans also said she planned to run cheaper grades of crude oil and produce a more flexible slate of products, while cutting Sunoco's overall costs.

Such changes are a radical shift for Sunoco, which in the past has held to a more conservative strategy. Some of the changes Elsenhans advocates - such as investing in large, waterfront refineries and processing low-quality crude blends - are already at work at rivals.

In Tulsa, environmental regulations are forcing Sunoco's hand. The company would need to make a major investment in the plant in order to continue operating it.

This wouldn't gel with Sunoco's new strategy, which focuses on operating a narrow set of assets with a great deal of control over the crude they process and products they make.

Sunoco is likely to cut costs by more than 10%, Elsenhans said in an interview following the meeting.

To reduce spending, Sunoco will cut energy costs, services and "people costs," Elsenhans said. She didn't specify how many employees might potentially be laid off. She stressed that some "lifestyle" items would also be cut.

"The corporate jets are going to go," she said.

Refining is a cyclical business, subject to price shifts in the oil it must buy and changing demand for the products it produces. Even if profit margins were to improve dramatically, Elsenhans said she expects her cuts to remain.

Sunoco previously announced it had retained consultancy McKinsey & Co. to analyze its operations and create a plan for operating more efficiently.

If Sunoco's Tulsa plant closes, other refiners may follow suit.

"If current refinery margins remain where they're at, you can't rule that out," said Neil Earnest, vice president of Muse Stancil, a Dallas-based consultancy.

This year, refiners have been hit with surging crude oil prices, which set record highs above $145 a barrel in July, on top of weakening demand for products such as gasoline and diesel. This has squeezed their margins.

During the 1980s and 1990s there were widespread refinery closures in the U.S. as more stringent environmental regulations forced inefficient plants that couldn't afford to invest to shut.

The number of refineries in the U.S. fell from about 300 in 1980 to just 145 today. The cutback in refineries left primarily efficient, larger refineries in operation, said Earnest.

"The refining portfolio of North America has been highgraded," he said.

While Sunoco's Tulsa refinery is mid-size relative to the other U.S. refineries, it's one of the smallest operated by a large, publicly traded company.

The refinery makes a small quantity of fuel, but primarily produces lubricants, Earnest said.

In 2004, Shell attempted to close a refinery in Bakersfield, Calif. That effort was stopped by the state's attorney general, who said it could run economically, and the facility was subsequently sold. Sunoco's Elsenhans was responsible for Shell's U.S. refining operations at the time the company tried to shutter the Bakersfield plant.

Delek’s Tyler Texas Refinery should be Back Online May 2009 after $30 Mln in Repairs

Delek U.S. Holdings Inc.'s (DK) refinery in Tyler, Texas, should be wholly online by May of 2009 following a fatal blast in November, the company said December 12.

The Nov. 20 fire at the saturates gas unit at Delek's refinery killed two workers and injured others.

The crude unit, a critical refinery unit, and saturates gas plant share a control room, the company said.

Fixing the units should cost $30 million, the company said. The rebuilding of the units cannot start until the investigations into the blast are finished, the company said.

The U.S. Chemical Safety and Hazard Investigation Board, Occupational Safety and Health Administration, and the union representing Delek's workers are each investigating the explosion. The company is also investigating the blast.

The 60,000 barrels-a-day plant is Delek's only U.S. refinery.

Exxon to Pay almost $6.1 Million for EPA Violations

Exxon Mobil will pay nearly $6.1 million in civil penalties for violations of a court-approved Clean Air Act agreement, the U.S. Environmental Protection Agency and Justice Department said December 18.

The EPA said Exxon failed to monitor the sulfur content in some fuel gas streams burned in refinery furnaces, breaching a 2005 settlement between the oil company and federal regulators.

Exxon said in a statement that the company discovered some fuel gas streams that had not been addressed in the settlement while conducting an environmental self audit in November 2006 at its Baytown, Texas, refinery.

Exxon said it reported these findings to the EPA, and that all streams now meet EPA standards.

Under the original agreement, Exxon was already required to pay a $7.7 million civil penalty, $6.7 million in environmental projects in areas surrounding the company's refineries and to install pollution controls at six U.S. refineries.

"The 2005 settlement has already resulted in major reductions in air emissions from the company's refineries, but we need full compliance to realize all the benefits of the settlement," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance in a statement.

Three other Exxon refineries with EPA violations associated with the fine are located in Beaumont, Texas, Torrance, California, and Baton Rouge, Louisiana.

Tesoro to Close Anacortes Refinery for Maintenance

Tesoro Corp. said it would shut down all the units at its 120,000 barrel per day refinery in Anacortes, Washington for maintenance early next year due to poor margins.

"We had some other maintenance that we needed to do that can only be done with a plant-wide shutdown," said Sarah Simpson, a spokeswoman for the company.

"With the current environment of low demand and low margins, we decided to do the maintenance during the first part of the year."

Traders said that work was originally planned on the crude unit for mid-January, but weak demand and poor margins were instrumental in Tesoro closing the entire plant.

BP Pays $332,250 in Fines for Safety Violations at Whiting Refinery

BP America Inc. has paid $332,250 in fines after state regulators found more than a dozen safety violations at its oil refinery along Lake Michigan two years ago.

The Indiana Occupational Safety and Health Administration initially announced $384,250 in fines in November 2006, but an agency review board last summer downgraded or dropped half of the 14 original violations and reduced the accompanying fines by $52,000.

BP spokesman Tom Keilman said the company believes it has corrected all of the safety violations found by inspectors. A state report said violations at the 1,700-worker refinery included untested fire hoses, outdated safety procedures and broken equipment.

"We were pleased that BP was able to work with Indiana OSHA to reach a final conclusion to this matter," he said.

The 2006 inspection of the Whiting refinery was prompted by an explosion the year before at BP's refinery near Houston that killed 15 people and injured more than 170. The U.S. Chemical Safety and Hazard Investigation Board found BP fostered bad management at the Texas plant and that company cost-cutting moves were factors in the explosion.

Sean Keefer, deputy commissioner of the Indiana Department of Labor, said the agency and IOSHA were satisfied with BP paying the fine and the safety improvements.

Sunoco Refinery in N.J. Cited by OSHA for 34 Safety Violations and $305,000 in Fines

The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) has cited Sunoco Inc. for workplace safety and health violations, proposing $305,000 in fines. The Westville, N.J., oil refinery has 472 employees.

OSHA initiated its investigation as part of its National Emphasis Program focused on petroleum refinery process safety management. As a result of the investigation, the company was issued citations for 25 serious violations, with a penalty of $105,000, and nine repeat violations, with a penalty of $200,000.

"Sunoco Inc.'s failure to correct these hazards leaves its employees at risk of serious injury and possible death," says Gary Roskoski, area director for OSHA's Marlton Area Office. "The company can ensure future abatement of all serious hazards, as well as compliance with OSHA regulations, by establishing an effective safety and health management system."

The repeat violations are due to the company's inadequate process safety management procedures; failure to determine the presence, location and quantity of asbestos-containing materials at the worksite; and failure to affix labels to all products containing asbestos. OSHA issues repeat violations when it finds a substantially similar violation of any standard, regulation, rule or order.

The serious violations include dangerous floor conditions; ladder hazards; defective overhead piping systems; the company's failure to obtain and evaluate the safety and health programs of potential contractors; failure to inform contract employers of known potential fire, explosion or toxic release hazards related to the contractor's work; failure to develop and implement safe practices to control the entrance, presence and exit of contractors and contract employees in covered process areas; failure to develop and implement written procedures to maintain integrity of process equipment; failure to perform inspections and tests on all process equipment to maintain its mechanical integrity; failure to correct mechanical deficiencies in equipment before use or in a safe and timely manner; and failure to investigate incidents that could result in a catastrophic release of highly hazardous chemicals. A serious citation is issued when death or serious physical harm is likely to result from a hazard about which the employer knew or should have known.

Sunoco Inc. has 15 business days from receipt of its citations to contest them before the independent Occupational Safety and Health Review Commission.

EPA Seeks Comments on NSPS Amendments for Refineries

The U.S. Environmental Protection Agency is seeking comments on a small number of technical amendments to the June 24, 2008, new source performance standards for petroleum refineries.

This proposal is in response to requests for reconsideration of the final standards. EPA will accept comments on the proposal for 45 days after publication in the Federal Register.

Petro Star Extinguishes Fire at Valdez Refinery

Petro Star Incorporated (PSI), a subsidiary of the Arctic Slope Regional Corporation (ASRC), reported that a fire was extinguished at its Valdez refinery late on December 29. There were no injuries to employees or responders.

The fire damaged portions of the processing facility and associated piping. The cause of the fire is yet to be determined, however no foul play is suspected at this time. Senior executives from the PSI office in Anchorage traveled to Valdez to assess the situation.

Petro Star has a good OSHA safety record, and has no loss-time accidents since 2005.

PSI is conducting an incident review as required by Occupational Safety and Health Administration (OSHA) through a third party consultant. Supply options for and impact on PSI's customer base are being assessed, and the time frame to return to normal operations has yet to be determined. The facility currently has fuel supply in its storage tanks. PSI supplies less than 10% of the demand at Ted Stevens International Airport, and Elmendorf Air Force Base has another supply option for fuel.

PSI owns and operates a second refinery in North Pole, Alaska just outside of Fairbanks. Because of EPA restrictions, the North Pole refinery is limited in the amounts of diesel and heating oil it can produce and as a result has been trucking large volumes of fuel up from its Valdez plant. Company officials plan to seek Federal relief to lift those limitations so the North Pole refinery can meet more of the fuel needs of interior Alaska. The current cap at the North Pole refinery is 45 million gallons per year.

The Petro Star Valdez refinery has been in operation since 1993, and the facility draws approximately 48,000 barrels per day, produces approximately 13,000 barrels of product and returns the remaining residual to the pipeline. Of the products produced, approximately 9,300 barrels per day is jet fuel, 3,200 barrels per day is diesel and 300 barrels per day is LSR, a fuel used to generate electricity by the local utility.

CUBA

Cuba and Venezuela Ratify Expansion and Construction of Refineries

Venezuelan President Hugo Chavez and his Cuban counterpart, Raul Castro, have signed agreements to expand the capacity of two refineries in Cuba and to construct a third one.

Altogether, the expansion plans will see Cuba's refining capacity increased to 350,000 b/d from the current 87,000 b/d, according to a statement from Venezuela's state-owned Petroleos de Venezuela SA (PDVSA).

Under the agreements, the capacity of Cuba's Cienfuegos refinery will be stepped up to 150,000 b/d from the current 65,000 b/d, while the Hermanos Diaz refinery in Santiago will rise to 50,000 b/d from 22,000 b/d.

PDVSA said the proposed refinery in the port city of Matanzas will have a capacity of 150,000 b/d, and is to be managed by Cuvenpetrol SA—a new joint venture of PDVSA and Cuba's state-owned Cupet.

PDVSA did not reveal the respective stakes of the two sides in the joint venture or a schedule for the expansion of the existing refineries or the construction of the new one.

However, the Venezuelan firm said that Cuvenpetrol will control all refining interests in Cuba being pursued by the two countries, including the design and construction of an LNG regasification plant, gas pipelines, and other facilities.

The agreements mirror earlier ones between the two countries.

In April 2006, PDVSA entered into an agreement with Cupet to establish a joint venture company to refurbish and expand the Soviet-built facility at Cienfuegos that had been neglected since the start of the 1990s, when Soviet assistance to Cuba ended.

Under the earlier Venezuelan-Cuban JV, the refinery's capacity was initially raised to 65,000 b/d. The upgraded Cienfuegos refinery was inaugurated in late 2007 and started operations in January.

The Cienfuegos refinery is expected to close 2008 with production of 20 million bbl of fuel, according to deputy director, Raul Perez, who said the plan for the refinery envisaged output of 19.4 million bbl for the year.

Cuba imports 100,000 b/d from Venezuela in oil and products under special financial conditions that include bartering for Cuban goods or services such as doctors, teachers, and athletic trainers.

DOMINICAN REPUBLIC

Shell Sells $110 Million Refidomsa Refinery Stake to Dominican Republic

Shell Petroleum has successfully completed the sale of its 50% shareholding in Refineria Dominicana de Petroleo for $110 million, to the government of the Dominican Republic, which is now the sole owner of the refinery. This concludes a share purchase agreement signed in August 2008.

The Refineria Dominicana de Petroleo (Refidomsa) refinery was commissioned in January 1973.

With a processing capacity of around 34,000 barrels per day, it is the primary petroleum products refinery in the Dominican Republic and, along with its import terminal, supplies most of the fuel requirements in the country, according to Shell.

This decision to sell the shareholding is part of Shell's portfolio management to realize value for shareholders, and to refocus the downstream portfolio. Shell has said that it will continue to serve its customers in the Dominican Republic in a range of businesses including retail, lubricants and commercial marketing.

ECUADOR

South Korea’s SK Engineering Signs $187 Million Contract to Upgrade Ecuador Refinery

South Korean company SK Engineering and Construction has signed a $187 million contract to help Ecuador upgrade its largest oil refinery.

Ecuadorean officials say the Esmeraldas refinery now operates at 85 percent capacity because of structural problems and obsolete equipment.

State oil company Petroecuador said December 29 the deal aims to have the refinery at full capacity by 2011, processing 110,000 barrels of crude a day.

It said work will begin "immediately."

Ecuador produced nearly 500,000 barrels of crude a day in October, but output is failing to meet domestic demand.

Ecuador is the fifth largest oil producer in South America.

VENEZUELA

Venezuela’s Cardon Oil Refinery Power Failure Halts Operations

One of Venezuela's main oil refineries halted operations for several hours December 18 because of an electrical failure, state oil company PDVSA said.

Petroleos de Venezuela SA said the Cardon refinery went off-line in the early morning due to a problem with one of the turbines that provides it with electricity.

Power was restored and the refinery was operating normally by late afternoon, PDVSA later said in a statement.

The failure also affected some units in the nearby Amuay refinery, but that facility recovered and was soon operating normally, the company said.

PDVSA said that despite the outage, it had sufficient inventory of refined petroleum products such as gasoline to meet all its commitments, both domestic and international.

The refineries are part of the Paraguana Refining Complex in the northwestern state of Falcon. The complex has the capacity to process more than 900,000 barrels per day of crude, and produces some 200,000 barrels per day of gasoline.

Venezuela, the world's 10th-largest oil producer, is a member of the Organization of Petroleum Exporting Countries and the fourth-biggest supplier to the United States.

PDVSA’s Isla Refinery to Reach Full Capacity after Recent Shutdown

Petroleos de Venezuela SA’s Isla refinery on the island of Curacao will soon return to full capacity after a shut down December 19, the managing director of the power company supplying the plant said. The 360,000 barrel-a-day facility should restart “over Christmas,” Alan Wilson, managing director of Curacao Utilities Co., said.

The refinery is receiving a “substantial” supply of power and steam after a blackout caused the plant to shut down he said. The shutdown was at least the second time this year that the refinery went offline because of a lack of steam and power. Wilson said he didn’t have details on which units were still out of service and that the plant is in “recovery mode.” Petroleos de Venezuela, the state oil company known as PDVSA, declined to comment through a spokesman. He asked not to be identified, citing company policy.

ASIA

AUSTRALIA

Caltex Australia Shuts 110,000 Bpd Queensland Refinery

Caltex Australia Ltd, Australia's largest refiner, said on December 12 it had shut a refinery producing 110,000 barrels per day due to problems with its system, and that diesel supply at a terminal was at half its usual capacity.

The Lytton Refinery, one of Caltex's two refineries in Australia, was shut due to problems with its steam system, said Frank Topham, a media manager at Caltex. He gave no time estimate as to when the refinery will resume operations.

Topham said Caltex is assessing whether the shutdown will affect fuel supply in the northern Queensland state because the supply of diesel at the Lytton terminal is at half its usual capacity due to an unrelated problem that had also occurred recently.

The supply of diesel is approximately a third of the refinery's capacity, Topham said.

Caltex is 50 percent owned by U.S. energy major Chevron Corp. Its two refineries represent about 30 percent of Australian capacity.

"We are now looking at our inventory levels, and we are making an assessment of our supply situation," Topham said.

He said the problem at Lytton Refinery started when its pumps stopped feeding water to its boilers, halting the supply of steam.

The diesel supply was disrupted due to problems with the diesel hyrotreating unit, Topham said.

BP Resumes Full Production at Australia’s Kwinana Oil Refinery

BP Plc, one of four oil refiners in Australia, resumed full production at a plant in Western Australia, the largest in the country, after scheduled maintenance work that lasted two months.

The work at the Kwinana refinery was completed in the second week of December and production has reached full capacity, Chandran Vigneswaran, a Melbourne-based spokesman for BP’s Australian unit, said December 30. An additional 900 workers were on site at the peak of the work, in addition to the 500 workers usually at the plant, he said.

The Kwinana plant, one of Australia’s seven operating refineries, has a capacity to process 137,000 barrels a day of crude oil and is the only one in Western Australia. BP supplied customers with imported fuel during the shutdown.

The maintenance involved a “major overhaul” of the catalytic cracker, which produces gasoline, diesel, fuel oil and liquefied petroleum gas, Vigneswaran said. It also included servicing components, changing some internal equipment to improve performance and installing a sound reduction device in the stack, he said in an e-mail.

The work included maintenance of a crude distillation unit, the alkylation plant, a propane production unit, a sulfur recovery unit and the catalytic polymerization unit, Vigneswaran said.

BP Australia’s second refinery, near Brisbane in Queensland state, has been running at full capacity amid fuel shortages in the region due to an unplanned shutdown earlier this month of Caltex Australia Ltd.’s Lytton plant, Vigneswaran said.

The Lytton refinery should reach full production again by the first week of January, Georgie Wells, a spokeswoman at Sydney-based Caltex, said yesterday. The company is restricting supplies of unleaded and premium unleaded gasoline to retail sites, she said.

“With their refinery down there’s been greater pressure on our sites in terms of demand,” BP’s Vigneswaran said. “We’ve been supplying to our customers greater volumes where we can.”

BP’s Bulwer Island plant has a capacity to process about 101,000 barrels a day of crude oil. The company has made some import facilities such as wharves available to competitors to facilitate imports and is purchasing additional blending materials to increase yields to help alleviate premium gasoline shortages, Vigneswaran said.

Royal Dutch Shell Plc and Exxon Mobil Corp. also own oil refineries in Australia.

CHINA

CNPC Mulls Building Refinery in Central Henan Province

CNPC, parent of PetroChina is considering building a 10-mln-t/y refinery in central Henan province and has paid a visit to Shangqiu for selecting a refinery location, local media reported.

It would be CNPC’s first large-scale refinery in central China, one part of efforts for CNPC to set foothold in central China after planning to build Lanzhou-Zhengzhou-Changsha and Jinzhou-Zhengzhou-Wuhan oil products pipelines.

The report said CNPC has made a survey on land usage, power supply and environmental protection in Shangqiu, a city in the east of Henan province and close to Shandong province.

It is not yet clear if CNPC would select Shangqiu to build the 10-mln-t/y refinery, but it is sure that the refinery would strengthen CNPC’s presence in Henan, Shandong and neighboring provinces, all turfs of Sinopec. One of the problems ahead of CNPC’s refining plan, however, is lack of an oil source that also holds back Sinopec from building large-scaled refineries in central China where almost no oilfields can roll out sufficient oil to feed a 10-mln-t/y refinery.

A possible solution for CNPC is to lay a crude pipeline from the nearest Dagang Oilfield in Tianjin, length of about 900 kilometers.

Henan province, the most populous province in China, has two big refineries in Luoyang and Luohe with a total 10 million t/y refining capacity, both run by Sinopec; only just enough capacity for satisfying the provincial demand.

The future supply battle in central China will be launched between CNPC’s oil products pipelines and Sinopec’s refineries. CNPC’s Lanzhou-Zhengzhou-Changsha is capable of transporting eight million tons/year of oil products from western Lanzhou refinery to the farthest Changsha, capital city of Hunan province, and Jinzhou-Zhengzhou pipeline can pump 1.62-4.04 million tons of fuels from northeast China to central China.

CNPC to Expand Refinery Capacity in Lanzhou

National Petroleum Corporation (CNPC), one of China's three largest oil and gas monopolies, is planning to expand its refinery capacity in Lanzhou to 20 million tons a year; between 2006 and 2010, according to the Chinese-language 21st Century Business Herald.

To date, China has only two oil refinery bases with comparable annual capacities. One is in the northeastern city of Dalian, owned by CNPC and the other is in the eastern city of Ningbo, owned by Sinopec, another Chinese oil corporation.

Xuan Changwei, general manager of the CNPC Lanzhou branch, reportedly said that China's western regions also need a major oil refinery with 20-million-ton capacity.

CNPC Lanzhou is now the largest refinery in western China. The company's crude oil refining capacity stood at 10.5 million tons in 2007, and its 2008 operating income is expected to reach $8.76 billion (60 billion yuan).

Venezuela's Chavez Thinks China can Help Release U.S. Grip on Oil Exports

Like the U.S., Venezuela's President Hugo Chávez is worried about energy independence. But, Chávez is looking down the other end of the telescope. His concerns are about export, not import dependency.

And he's hoping China can become the alternative market Venezuela needs to reduce dependence on the U.S. market. Half of Venezuela's oil exports now go to America, which also buys petroleum products refined in the Caribbean from Venezuelan oil.

Though Citgo is a subsidiary of state-owned Petroleos de Venezela (PDVSA), Chávez also has three refineries and 14,000 gas stations in the U.S. PDVSA has direct joint-venture interests in two other U.S. refineries too.

China buys 4% of Venezuela's crude, but that's rising. At 330,000 barrels of oil a day, PDVSA is shipping twice as much as a year ago. Chávez wants to get that to 1 million barrels a day by 2012.

However there are two problems. First, the logistics of shipping the oil, which is on the Atlantic side of South America, to the Liaoyang refinery in northern China, are challenging. The Panama Canal is a bottleneck, and shipping around Cape Horn is expensive. There has been talk of building a pipeline to neighboring Colombia's Pacific coast, but that is unlikely anytime soon, given the state of relations between the two countries.

Second, Venezuela's crude is too heavy and too sulfurous for China's refineries once it gets there. U.S. Gulf Coast refineries are specifically configured to handle Venezuelan heavy crude varieties. For now, China has to blend Venezuela's oil with lighter crudes or sell it unrefined.

Chávez paid a three-day state visit to Beijing in late September, between stops in Havana and Moscow, an itinerary intended to emphasize Chávez's enmity toward Washington, though in Beijing his hosts kept his visit low-key.

Chávez has since struck deals for the two countries to build four oil tankers and to construct or upgrade more oil refineries in China capable of processing Venezuela's crude. PetroChina just upgraded the Liaoyang refinery to handle it. China and Venezuela also agreed to build a refinery in Venezuela's Orinoco Basin and launch a joint oil-development project there, potentially one of the world's largest oil fields.

And last year, as part of Chávez's nationalization drive, Venezuela forced Exxon Mobil and ConocoPhillips out of their participation in exploration ventures there, while France's Total, Norway's Statoil, BP and Chevron were pressed into signing new deals giving PDVSA greater stakes. China's oil companies are now involved in 15 fields in the basin.

VIETNAM

Vietnam Agrees to Invest $4.4 to $4.8 Billion in New Oil Refinery

Deputy Prime Minister Hoang Trung Hai agreed in principle December 18 to allow the Vietnam National Petroleum Corporation, or Petrolimex, to invest US$4.4 billion-US$4.8 billion in a new oil refinery, the government said on its website.

At a meeting with relevant ministries and agencies, the deputy PM assigned Petrolimex to prepare a feasibility study for the project. Priorities need to be given to environmental protection, technology, investment partners and crude oil suppliers.

The refinery will be located in the Van Phong Economic Zone in the central province of Khanh Hoa, about 450 kilometers north of Ho Chi Minh City.

The Nam Van Phong refinery, with a designed processing capacity of 200,000 barrels of crude oil a day, or 10 million tons a year, is expected to cover 300 hectares on the ground and 300 hectares on the sea in Ninh Hoa District.

Scheduled to start operations by late 2013, the refinery would supply liquefied petroleum gas, gasoline, kerosene, diesel, polypropylene, benzene and some other products.

The government website reported that Deputy PM Hai said the refinery was not in the list of the country’s important projects, and the government would hold a stake of less than 30% in the refinery.

Mr. Hai said there were seven refinery projects currently in Vietnam with combined processing capacity of 60-70 million tons of crude oil a year. Among them, the Dung Quat refinery in the central province of Quang Ngai will start operations soon.

PetroVietnam Starts Clearing Site for Second 130,000 bpd Refinery for Cost of $20.5 Million

The state-owned Vietnam Oil & Gas Group, or PetroVietnam, has started clearing a site south of Hanoi for construction of the country's second oil refinery, a company executive said.

Site clearance will cost $20.5 million (VND340 billion) and be completed within a year, said the executive, who didn't want to be named.

"This will pave way for the construction of the Nghi Son Oil Refinery (to start) in mid-2010," he told Dow Jones Newswires.

The refinery, to be the second in Vietnam after the Dung Quat Refinery in Quang Ngai province, will be located in Thanh Hoa province, 180 kilometers south of Hanoi.

PetroVietnam is expected to sign contracts to form a joint venture with Kuwait Petroleum International and Japan's Idemitsu Kosan Co. (5019.TO) to build the refinery.

The facility is expected to have the capacity to process around 150,000 barrels of crude oil a day. It will use imported crude for its operations.

The $2.5-billion Dung Quat Refinery is scheduled to start production early next year. It will have a capacity of 130,000 barrels per day.

EUROPE / AFRICA / MIDDLE EAST

THE NETHERLANDS

Fire Breaks Out At Pernis Refinery

A fire broke out at Royal Dutch Shell's Pernis oil refinery, Europe's biggest, police said December 4.

A Rotterdam police spokeswoman said the fire, which was mostly extinguished less than an hour after it broke out, started in a building called "cat cracker 2" and it was suspected that it was due to a leak in a pipe that carries an oil-like substance.

Shell was not immediately available to comment on whether production at the 412,000 barrels-per-day plant had been affected.

ROMANIA

Petrochemical Holding GmbH Chooses GTC Technology for Large Aromatics Project at Rafo

GTC Technology announced that Petrochemical Holding GmbH, has chosen eight of GTC’s proprietary process technologies, CrystPXSM, GT-BTX PluSSM, GT-BTX®, GT-IsomPXSM, GT-TransAlkSM, GT-Aromatization, Pygas Hydrotreating, and Hydrodesulfurization for a major petrochemical project in its 3 MM tpa crude oil refinery in Oneşti, Romania. The aromatics complex, operated by S.C. Rafo S.A. is designed to produce 400 kta of Paraxylene and 200 kta of Benzene.

The objective of the project is to generate paraxylene and benzene from low-value fuel streams. GTC’s innovative approach will upgrade the catalytic cracked products by direct recovery of aromatics from the FCC gasoline, with additional aromatics production from mixed olefins. The new configuration will completely eliminate motor gasoline production at the refinery. This approach is significantly less expensive and distinct from other processes, which recycle FCC gasoline to naphtha reforming as the means to generate aromatics.

Mr. Andrey Yurkevich, Deputy General Manager of Petrochemical Holding GMBH said, “This is one of the most important projects in our investment program which will take an obsolete refinery and make it a profitable first-rate petrochemical facility. We are pleased to work with GTC Technology as the licensor for this complex. ”

Mr. Joseph Gentry, Director of Technology for GTC added that “Rafo’s plant will have the maximum possible conversion of the hydrocarbons into high-value petrochemicals. GTC expects to re-use a substantial portion of existing assets at the site into the new mode of operation to lower the capital costs.”

ALGERIA

Hyundai Consortium Wins $400 Million Oil Refinery Project in Algeria

Hyundai Engineering Co Limited said that its consortium had won a US$400 million oil refinery project in Algeria.

Hyundai said in a statement that it had partnered with Hanwha Engineering and Daewoo International Corporation on the project to expand an existing oil facility at Arzew in Algeria.

ANGOLA

Sonangol Awards KBR Refinery Site Development Contract

KBR announced December 5 that it has been awarded a site development contract by Sonangol, E.P. to provide engineering, procurement and construction management services for the 200,000 barrel per day (bpd) Lobito refinery, located in Lobito, Angola.

The site development contract award follows KBR's Front-End Engineering and Design (FEED) contract awarded in November 2008. KBR will provide engineering, procurement and construction management services for the infrastructure necessary to support the construction of the refinery. This includes the development of a heavy haul road used to transport material and equipment to the refinery, as well as a marine facility that will be used to import and export both raw and finished hydrocarbon products. Work on the contract is expected to begin immediately.

"KBR is pleased to receive this second contract related to the Lobito Refinery," said John Quinn, President, Downstream for KBR. "This award demonstrates Sonangol's recognition of KBR's strong commitment to helping our client achieve their objective of reducing Angola's reliance on imported refined products."

IRAN

Iranian Construction of Seven Refineries Moving Ahead

MNA reported that the National Iranian Oil Refining and Distribution Company currently has the construction of 7 refineries across the country in hand.

The Mehr news agency reported that Khuzestan refinery, The Persian Gulf Star refinery, Shahriar refinery, Anahita refinery, Hormoz refinery, Caspian refinery and Pars refinery are the 7 planned refineries.

When these refineries are complete the nation’s refining capacity of crude oil and gas condensates will be raised by 1,560,000 barrels while 110 million liters will be added to its gasoline production.

1. Khuzestan Refinery

The Khuzestan heavy crude oil refinery will be built by 2011 by Iranian experts in Arvand Free Zone, 7 kilometers southwest of Abadan City.

The refinery would have the daily output capacity of 180,000 barrels and would cost EUR 2.8 billion to EUR 3 billion. The government and the parliament have approved that the refinery will be established and run by the private sector.

The refinery will refine the heavy crude oil produced in Azadegan and Yadavaran oil fields. It will also produce 10 million liters of super gasoline complying with Euro IV standard, 12.6 million liters of diesel oil, 3 million liters of jet fuel, 5 million liters of liquefied gas and 440 tonne of sulfur. The refinery is 1.4% complete now.

2. The Persian Gulf Star Gas

The Persian Gulf Star Gas Condensates Refinery in the southern region of Assalouyeh aims to refine 360,000 barrels of gas condensates per day and to produce gasoline, jet fuel and other valuable products. The refinery is now 10% complete and is supposed to come on stream in 2011.

3. Shahriar Refinery

More than EUR 2 billion will be invested to complete Shahriar refinery in the city of Tabriz. When the refinery becomes operational, 150,000 barrels daily will be added to Iran’s refining capacity and 70,000 barrels to the country’s gasoline production capacity.

The refinery aims at increasing oil products output and improving the quality of the products. Lowering gas oil’s sulfur content, complying gas oil with EURO-V standard and constructing an FCC unit are among the salient features of this project. Shahriar refinery is 3% complete now.

4. Anahita Refinery

Iran’s Anahita refinery in the western Kermanshah Province is supposed to come on stream in 2012. The refinery would have the daily output capacity of 150,000 barrels and would cost some USD 3.5 million.

5. Hormoz Refinery

Hormoz refinery with the capacity of refining 300,000 barrels of heavy and extra heavy crude oil per day is being built in Bandar Abbas. It is planned to maximize the nation’s production of gasoline and middle distillate products according to European standard. The refinery which is 5% complete now would cost USD 4 billion.

6. Caspian Refinery

Caspian refinery located in the city of Gorgan in the north eastern Golestan province is projected to daily refine 300,000 barrels of crude produced by the Caspian Sea region countries.

Caspian refinery will be completed in 4 years. The refinery will daily produce 20 million liters of gasoline and 11 million liters of gas oil while some portion of its products will be exported to neighboring countries such as Turkey, Afghanistan and Pakistan.

7. Pars Refinery

The implementation of Shiraz’s Pars refinery with the capacity of refining 120,000 barrels of crude per day would cost EUR 800 million. The refinery is 3% complete now and will come on stream in 2012.

IRAN / MALAYSIA

Iran, Malaysia Sign MoU’s for LNG and Refinery Deals

Iran and Malaysia have signed three memoranda of understanding aimed at boosting cooperation in the oil and gas sectors, the state Irna news agency reported December 2.

The MoUs were signed December 1 between National Iranian Oil Co., or NIOC, National Iranian Gas Export Co., NIGEC, and Malaysia's SKS Co. officials, according to Irna.

Iran's Oil Minister Gholam Hossein Nozari said the MoUs cover buyback agreements worth $5 billion-6 billion for the upstream sector and $6 billion-8 billion for the downstream sector.

Nozari said Iran is expected to export 250,000 barrels a day of heavy crude oil and 120,000 barrels a day of gas liquids to Malaysia, in accordance with one of the MoUs between Iran and Malaysia, according to Irna.

The first MoU is a framework agreement for cooperation between NIOC and Petrofield LNG Co., a subsidiary of SKS, Irna said.

According to the oil ministry's official Shana news Web site, the second MoU encompasses liquified natural gas, or LNG, cooperation between the two companies.

Under this MoU, the two sides aim to develop the Golshan and Ferdowsi gas fields and establish LNG production units, according to Shana. The preliminary agreement also includes setting up a joint shipping company to transport LNG, reports Shana.

The third MoU covers the refining of the Iranian heavy and ultra-heavy crude oil at Keda refinery in Malaysia, Shana adds.

IRAQ

Japan's Nippon Oil in $5-10 Billion Iraq Refinery Talks

Japan's Nippon Oil Exploration is in talks with the Iraqi government on the construction of an oil refinery worth $5-10 billion and investment in oil exploration for the same amount, a company official said December 5.

"We submitted a proposal and still discussion is ongoing," Ryunosuke Onogi, an executive and general manager at the company, which is a member of the Nippon Oil group, told Reuters at an energy conference in Baghdad.

"The construction of the refinery would cost about $5-10 billion. Probably the size of the (oil exploration) investment is the same upstream and downstream," Onogi said.

ISRAEL

Israel's Oil Refineries Ltd to Invest $670 Million in Haifa Refinery

Oil Refineries Ltd, Israel's largest oil refiner, said on its board approved the establishment of a hydro-cracking unit at the Haifa refinery, for an investment of $670 million.

The amount includes $37 million approved by the board in November 2007 to advance the project, which is part of the company's strategic plan adopted last year.

The unit, whose primary products will be diesel oil and kerosene (jet fuel), will be able to produce 25,000 barrels per day and is expected to be operational during 2011.

The company said it had already raised part of the required financing for the strategic plan in December 2007.

"The unit is expected to substantially contribute to our profitability and serve as a driving force for the company, as part of the company's planned expansion and core-business enhancement process," Yossi Rosen, Oil Refineries' chairman, said in a statement.

He said it will enable the company to manufacture cleaner and more environmentally friendly products.

"The board of directors reached the decision despite the turmoil in the global markets given their long-term vision and strong belief in the success of the project," he added.

Yashar Ben-Mordechai, Oil Refineries' chief executive officer, said the hydro-cracker will enable the company to produce higher added-value products with each barrel of oil.

Oil Refineries' facilities have refining capacity of 9 million tonnes of crude oil a year.

It is controlled by holding company Israel Corp.

KUWAIT

Kuwait Risks Confidence in Oil Sector by Scraping $17.4 Billion Dow Chemical Deal

Kuwait decided on December 28 to scrap a deal to form a $17.4 billion petrochemical joint venture with U.S. company Dow Chemical. Kuwait's last-minute decision to scrap its joint venture with Dow Chemical isn't just a body-blow for the U.S. company. The political infighting behind it also could damage Kuwait's own ability to attract much-needed foreign investment and expertise to bolster its infrastructure.

Unlike Saudi Arabia and the United Arab Emirates, Kuwait has been unsuccessful in attracting outside investment. Saudi Arabia and the U.A.E. had net foreign direct investment of $17 billion and $4.5 billion, respectively, during 2006 and 2007. Kuwait saw a net outflow in the two years of $22 billion. Kuwait remains a big investor overseas. Stakes in the likes of Citigroup and Merrill Lynch have provided plenty of fodder for internal criticism.

Yet foreign investment and expertise is critical for Kuwait's northern oil fields, where four major projects have stalled as parliamentarians have challenged terms offered to international oil companies. The government, dominated by the Al-Sabah family, also has struggled to get plans for Kuwait's fourth refinery off the ground.

The Dow Chemical joint venture depended on chemicals feedstock from that $19 billion refinery which in turn needed new output from the northern oil fields. The sudden demise of the Dow deal leaves a hole in Kuwait's long-term plan for its oil sector -- not to mention its credibility as a business partner.

SAUDI ARABIA

Saudi Aramco, Dow Chemical to Upgrade Ras Tanura

Saudi Aramco and The Dow Chemical Corporation will commence the first phase of the upgrade of the Ras Tanura integrated refinery and petrochemicals complex by the end of January 2009. The upgrade package will consist of the construction of an independent water, steam, and power project and an industrial gas plant. Both local and international developers, such as Jacobs Engineering, are expected to participate.

Saudi Aramco, Total, Award Jubail Refinery Contract

Saudi Aramco and Total have signed an agreement with Contracting & Construction Enterprises Ltd. of Saudi Arabia to build temporary facilities to support the construction of their joint Jubail oil refinery.

Under the arrangement, Contracting & Construction Enterprises Ltd. will develop 2.3 square miles with basic infrastructure in order to accommodate 33,000 workers and personnel. Construction of the oil refinery is scheduled to be completed by the end of 2012, with refinery operations set to begin in March 2012.

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