REFINERIES UPDATE

 

May 2009

 

McIlvaine Company

www.mcilvainecompany.com

 

TABLE OF CONTENTS

 

INDUSTRY ANALYSIS

AMERICAS

U.S.

U.S. Refinery Status: Unplanned and Planned Production Outages

Petrobras Announces Put Option Price for Pasadena Refinery

Holly Corp Plans $215 Mln Upgrade of Tulsa Refinery

Modules Leave Port Arthur for Motiva Expansion

Shell to Settle Deer Park Refinery Pollution Suit

Linde to Supply Hydrogen for Deer Park Complex

MEXICO

Pemex Initiates $12.2 Bln Plan to Add New Refining Capacity

BRAZIL

Petrobras, PdVSA Continue $4 Bln Refinery Deal Talks

Brazil’s Petrobras Denies Having Refinery Talks with Mitsui

ASIA

INDIA

India’s ONGC Mittal Energy to Build Refinery in Nigeria

INDONESIA

Indonesia may Provide More Incentives for New Oil Refineries

Indonesian Govt Considers Establishing Fuel Refinery Agency

Two Refineries Proposed for Indonesia's Batam Island

PAKISTAN

Pakistan's Bosicor to Invest $500 Mln in Refinery, Oil Storage, Petchem

Pakistan Refineries Need $1.5 Bln for Upgrade

MALAYSIA / INDONESIA / SYRIA

NIOC to Participate In Malaysia, Indonesia, Syria Refinery Projects

VIETNAM

Work on $6 Bln Oil Refinery in Vietnam Starts

EUROPE / AFRICA / MIDDLE EAST

FINLAND

Neste Oil Postpones Isomerization Project at Finland’s Porvoo Refinery

ITALY

Eni Restarts Coking Unit after Fire at Gela Refinery

KENYA

Essar Oil to Acquire Fifty Percent Stake in Kenyan Oil Refinery

NIGERIA

Nigeria’s Oando PLC Completes Feasibility Study of 240,000 bpd Greenfield Refinery

RUSSIA

South Korea’s GS Engineering & Construction Cancels $900 Mln Russia Refinery Order

MIDDLE EAST / SOUTH AMERICA

Graham Corp Awarded $2.5 Mln in Surface Condenser Orders

IRAN

Senators Push for Iran Business Sanctions

IRAQ

Foster Wheeler Wins $128 Mln Iraq Refinery Contract

JORDAN

Jordan, Swiss Banks Reach Initial $1.5 Bln Refinery Deal

KUWAIT

Kuwait’s $15 Bln Zour Oil Refinery not Cancelled, Official Says

QATAR

Qatar Delays Al-Shaheen Refinery to Take Advantage of Lower Construction Costs

Indonesia may Provide More Incentives for New Oil Refineries

 

 

 

 

 

INDUSTRY ANALYSIS

 

AMERICAS

   U.S.

U.S. Refinery Status: Unplanned and Planned Production Outages

The following table lists unplanned and planned production outages at U.S. refineries as reported by Dow Jones Newswires. The information is compiled from both official and unofficial refining sources and doesn't purport to be a comprehensive list.

 

Most recently, ConocoPhillips (COP) delayed until April 3 the restart of a fluid catalytic cracking unit at its Bayway refinery in Linden, N.J.

 

Valero Corp. completed a turnaround of the hydrocracker at its Benicia, CA refinery on April 2, and began a restart.

 

Tesoro Corp. (TSO) on March 28-29 restarted a coker unit and a reformer unit at its Wilmington, Calif., refinery following two weeks of scheduled maintenance. The units are expected to be at normal operating rates by some time the following week.

 

The FCCU at Frontier Oil Corp.'s (FTO) Cheyenne, WY, refinery is back at planned rates on March 27, following two weeks of scheduled maintenance; the refinery is operating at reduced rates due to economic factors.

 

Frontier Oil's El Dorado, KS, hydrotreater unit is expected to produce products by March 28-29 following its restart earlier during the week, the company said on March 27. The El Dorado refinery is also operating at reduced rates.

 

And ConocoPhillips (COP) on March 27 began work at FCCU No. 29 at its Borger, TX refinery. The unit wasn't shut for the repairs, but may be taken off-line if necessary.

 

Motiva Enterprises LLC shut several units at its Port Arthur, TX refinery due to a lightning storm on March 24. During the shutdown process, two of the units had small fires, according to state environmental reports.

 

Total Petrochemicals U.S.A. also shut key units at its Port Arthur, TX refinery March 24. The shutdowns were due to economic factors, according to people familiar with the refinery.

 

For more detailed information, search Dow Jones Newswires using the code N/REF.

 

UNPLANNED

Operator      Refinery      Capacity          Description                        Restart

(in 000s

bbl/day)

 

EAST COAST

Conoco        Linden           238.0         Reformer shut due to fire           Mar. 30

                    NJ                                    on Mar. 21.

Hess            Port                70.0           65,000-b/d FCCU back              Mar. 18

                    Reading, NJ                     at normal rates on Mar.

                                                            20 after shutting down on

                                                            Mar. 18 due to a power

                                                            failure.

Sunoco      Philadel-         335.0         10 workers hospitalized               n/a

                  phia, PA                            Mar. 11 for evaluation after

                                                           vapor release at alkylation

                                                           unit.

Valero      Delaware         210.0          Boiler system inspection and       May 3

                 City, DE                             repair extends refinery down-

                                                           time by one mo. to early May.

                                                           Entire refinery shut Mar. 4

                                                           for 30 days maintenance

                                                           at coker unit which has been

                                                        shuttered since Feb. 15.

                                                        FCCU at reduced rates since           n/a

                                                        mid-Dec. for economic reasons.

 

CARIBBEAN

GULF COAST

Conoco      Borger, TX    152.0    Work will begin Mar. 27 to                 Apr 10

                                                     repair an air blower while      

                                                     FCCU No. 29 remains opera-

                                                     tional. The unit may be shut

                                                     if necessary.

Delek US    Tyler, TX     60.0       Refinery expected to be wholly          May

                                                     on-line by May 2009, following

                                                     Nov. 20 fire at sat. gas unit

                                                     killed two workers and injured

                                                     others.

Total          Port Arthur,      232.0   Work to repair leak at                       Mar 25

                  TX                               unit 812 starts Mar. 11.

                                                     Unit not identified other

                                                     than by number.

Valero       Corpus           340.0    Crude and Vacuum Unit

                 Christi, TX                   shut Mar 18

                                                     restarted Mar. 18 following

                                                     one day of repairs to fix

                                                     a leak at an exchanger.

Valero      Port Arthur,      325.0   FCCU at reduced rates since            n/a

                 TX                               mid-Dec. for economic reasons

 

MIDWEST

WEST COAST

Conoco      Wilmington,   105.0    Refinery ramping up to-                     Mar 12

                   CA                             wards normal operations

                                                     after Mar. 11 power failure.

Flint            North Pole     210.0   One of three processing                     n/a

Hills             AK                             units has been shut due

                                                     to low jet fuel demand,

                                                     the co. confirmed on Mar.

                                                    19.

PetroStar    Valdez, AK    48.0     Refinery shut due to Dec.                  n/a

                                                     28 fire.

Tesoro        Martinez        166.0   Hyrdrocracker production                  Feb 27

                   CA                             slowed while work done on

                                                     valve. Co. expects rate to

                                                     return to normal at the end

                                                     of week of Feb. 23

Tesoro        Kenai              72.0    Power outage, refinery to be             Feb. 24

                   AK                              restarted by end of Feb. 24th

 

PLANNED

CANADA

North          Newfound-    115.0    Plant-wide shutdown will begin           Early

Atlantic        land                          first week of April for 21                      May

                                                     days of planned maintenance.

                                                     Upgrade work at hydrotreater

                                                     will take an additional 14

                                                     days.

EAST COAST

Conoco      Linden           238.0   145,000-b/d FCCU shut Feb.              April 3

                   NJ                            18 for about 45 days of

                                                      planned turnaround mainte-

                                                      nance. In restart April 3.

Sunoco      Philadelphia   330.0    Reformer unit shut in early                 n/a

                   PA                              Oct. for economic reasons.

                                                      Shutdown to last one to six

                                                      months.

Valero      Delaware         210.0    82,000-b/d FCCU operating                n/a

                 DE                               at reduced rate for eco-

                                                      nomic reasons, Co. said on

                                                      Dec. 16.

Valero      Paulsboro        160.0    27,000-b/d coker unit to                      n/a

                 NJ                                shut in April for 35-days

                                                      of planned work, the Co.

                                                      said on Mar. 11.

 

GULF COAST

BP             Texas City       437.0    Ultraformer in restart Mar.                Mar. 26

                  TX                                23 following maintenance.

Chevron     Pascagoula     330.0   Pre-commercial heavy oil                  2010

                  LA                                conversion project delayed

                                                       from 2008 to 2010 due to

                                                       economic factors.

Flint            Corpus           288.1    $250 mil. project for new                    Spr

Hills            Christi, TX                   diesel desulfurization,                         2010

                                                       sulfur recovery unit to begin

                                                       in Fall 2008. Construction

                                                       to last 18 months.

Marathon    Garyville         245.0    Project to increase crude oil               4Q

                    LA                               refining capacity by 180,000-             2009

                                                       b/d expected to conclude in

                                                       4th-quarter, 2009.

Marathon    Texas City       76.0      Platformer and UDEX shut for            n/a

                    TX                               annual planned maintenance

                                                        and catalyst change on Feb. 4.

Total           Port Arthur       232.0    Key process units shut due                 n/a

                   TX                                to poor economic conditions

                                                        on Mar. 24

Valero        Corpus             340.0   West Plant Crude Unit No. 1             Mar 19

                   Christi, TX                    restarted Mar. 19. The unit

                                                        was shut in mid-Jan. for

                                                        turnaround maintenance.

                                                       20,000-b/d FCCU in East                   n/a

                                                       Plant shut; West Plant

                                                       50,000-b/d FCCU at reduced

                                                       rates since mid-Dec. for

                                                       economic reasons.

Valero      McKee, TX       170.0     Smaller of two crude units                 May/

                                                       at 60,000-b/d to shut in                     June

                                                       May for 14 days; 55,000-b/d

                                                       to shut in May for 21 days.                                   Valero      Norco, LA         250.0    Upgrade project to build                     2012

                                                      a new diesel hydrotreater

                                                      unit moved from 2010 to

                                                      4th-quarter 2012, the Co.

                                                      said on Jan. 27.

Valero      Port Arthur        325.0   77,000-b/d FCCU at reduced              n/a

                TX                                  rates since mid-Dec. for

                                                       economic reasons.

Valero      Sunray, TX        170.0   55,000-b/d FCCU at reduced             n/a

                                                       rates since mid-Dec. for

                                                       economic reasons.

Valero      Three Rivers      95.0     24,000-b/d FCCU at reduced            n/a                               

                  TX                                rates since mid-Dec. for

                                                       economic reasons.

MID-CONTINENT

BP             Whiting,            410.0   Planned maintenance continues        End

                  IN                                 on Mar. 16 at the smaller of              Mar

                                                      3 crude units. The work began

                                                      in early March and is expected         Early

                                                      to conclude by the end of the            Apr

                                                      month or by early April.

Conoco      Billings,           61.0     On Mar. 5 the Co. delayed for            Jan.

                   MT                             one year an expansion project           2010

                                                     which will increase capacity

                                                     to 71,000 bbls. Construction of

                                                     a new crude is now scheduled

                                                     to begin in January 2010.

Frontier    El Dorado       130.0    Hydrotreater in restart and                   Mar.

                 KS                               expected to produce product by          28-29

                                                     Mar. 28-29, the Co. said.

                                                     A coker turnaround and expan-           Mid-

                                                     sion project was delayed until             Aug.

                                                     Mid-July, and subsequently

                                                     delayed until August.

Frontier    Cheyenne       52.0      12,000-b/d FCCU at planned               Mar

                 WY                              rates on Mar. 27 following two             27

                                                     weeks of planned maintenance.

                                                    The refinery is operating at re-

                                                    duced rates for economic reasons.

Marathon    Robinson     204.0    Crude unit, two coker units                   n/a

                   LA                             shut Mar. 9 for planned main-             

                                                     tenance; no restart timing available.

Marathon    Detroit         100.0      Project to upgrade refinery                  n/a

                    MI                             to process Canadian crude

                                                     delayed from 2009 to 2012,

                                                     the co. said on Feb. 3.

Sunoco      Toledo, OH   160.0    FCCU turnaround lasting 6 weeks         4Q08

                                                     planned for 4q 2008 or 1Q 2009

Sunoco      Tulsa, OK.     85.0     Turnaround maintenance will                  n/a

                                                     take place in Feb., the Co.

                                                     said on Feb. 5.

                                                     Refinery could close by end

                                                     of 2009 if buyer not found.

Valero        Memphis,      195.0    FCCU upgrade originally slated             2012

                   TN                             for completion in 2009 has been

                                                     shifted to 2012, the Co. said

                                                     on Jan. 27.

 

ROCKY MOUNTAINS

Suncor     Commerce       90.0     32,000-b/d crude unit,                             n/a

                 City, CO                       10,500-b/d reformer will

                                                      shut in March for planned

                                                      maintenance, the Co. said

                                                      on Jan. 26.

 

WEST COAST

Alon        Paramount        55.0     Hydrocracker project post-

               CA                                 poned indefinitely, the Co.

                                                     said on Feb. 4

Tesoro    Wilmington       105.0    Reformer and Coker units                    week

                CA                                in restart Mar. 28-29 and                      of

                                                     back at normal rates some                   Mar. 30

                                                     time during the next week,      

                                                     Co. said. The units were shut

                                                     Mar. 13 for scheduled work.

Valero      Benicia            144.0    Hydrocracker in restart April                April 2

                CA                                2 after two-week turnaround.

 

Petrobras Announces Put Option Price for Pasadena Refinery

Petrobras on April 16 announced that an arbitral decision under the arbitration rules of the International Centre for Dispute Resolution has defined the amount Petrobras America Inc. (PAI), a wholly owned Petrobras subsidiary, must pay to Transcor Astra Group (Astra) as a result of the put option exercised by Astra for its 50% interest in Pasadena Refining System Inc (PRSI) and in the PRSI Trading Company.

 

The put option exercise price was set at US$466 million to be paid in three installments, the first due on April 27 2009, of US$296 million, and the two subsequent ones, of US$85 million, due in September 2009 and in September 2010.

 

As the result of said the exercise of the put option, Petrobras, through PAI and its affiliates, will hold 100% of PRSI, which owns Pasadena refinery, in Texas, and PRSI Trading, a company incorporated to purchase feedstock, including crude oil, and trade the oil products.

 

Petrobras through its attorneys and consultants is analyzing the arbitral decision.

Holly Corp Plans $215 Mln Upgrade of Tulsa Refinery

Holly Corp.'s $65 million deal to acquire Sunoco's West Tulsa refinery is part of the buyer's $215 million plan that upgrades the 96-year-old facility to meet stricter environmental standards and could save many jobs, officials said.

 

Dallas-based Holly plans to close on the deal June 1, according to reports. Closing is subject to approval of a wide-ranging incentive program by the state Legislature.

 

The buyers then plan to spend an additional $150 million to install a distillate treating system and sulfur recovery unit over the next two years.

 

The 400 people now employed at the Sunoco plant are likely to stay on during the transition and upgrades, officials said. Sunoco had planned its own $375 million upgrade but put it off last year due to commodity market conditions, according to reports.

 

The Tulsa Metro Chamber and the Oklahoma Department of Commerce have worked with Holly officials during the past several weeks on state incentives for the acquisition. Economic development incentives include the Oklahoma Quality Jobs Act and the Investment Tax Credit, according to the chamber.

 

Chamber officials are asking state legislators to combine the incentive packages in a one-time deal to leverage some of the financing to facilitate the sale.

 

Philadelphia-based Sunoco Inc. has been looking for a buyer since 2007 and said it would have shifted the plant into a terminal storage operation if it had not found one. A terminal likely would have employed fewer people than an active refinery.

 

"This agreement protects about 400 jobs at the refinery," Sunoco spokesman Thomas Golembski said. "We're grateful to the employees at the refinery for their dedication and hard work over the years to make it successful for such a long time."

 

Holly executives also praised the Tulsa operation's efficiencies. CEO Matt Clifton said the refinery is well known for its transportation diesel fuel, speciality lube oils, and process oils and waxes.

 

The refinery can process about 90,000 barrels of crude oil a day, according to Energy Department data. An energy analyst, Michael LaMotte of J.P. Morgan, estimated the facility's possible selling price at $500 million in December.

 

Falling gasoline prices and upgrade factors, however, likely made the refinery impossible to sell at that price.

 

The plant opened around 1913 and has been part of Sunoco since 1968, according to reports. It has a direct pipeline connection to the Cushing crude oil hub, the Burlington Northern Santa Fe railroad yard and the Magellan Midstream Partners pipeline system.

 

"We are extremely excited about acquiring this complex refinery," Clifton said. "In addition to a very attractive price, the Tulsa acquisition provides Holly with added asset, geographic and product diversity."

 

Holly plans to construct a new diesel desulfurizer and related equipment by the end of 2011, according to the company release. Work on that project should begin next year.

 

The deal is subject to federal regulatory approval. Holly also would pay an undisclosed sum for the value of refined products on site that would be valued at current market prices at the time of closing, Golembski said.

 

"We worked very hard to reach an agreement that kept the refinery open and protected the jobs," he said. "This ensures the long-term viability of the site."

 

Meanwhile, Sunoco Logistics Partners LP said in a press release it does not expect any impact to its business from the sale.

 

After the closing of the deal, Sunoco Partners Marketing & Terminals LP, an affiliate of the logistics company, will have a long-term agreement with Holly to supply crude oil to the Tulsa refinery, the statement said.

Modules Leave Port Arthur for Motiva Expansion

The first four of an estimated 350 modules that eventually will form the insides of the Motiva Enterprises refinery expansion began moving out of the Port of Port Arthur on April 22.

 

The port is an essential part of Motiva's $7.5 billion expansion project that will take it to 600,000 barrels per day of refined product, almost double its present size.

 

"The project's economic impact on the local area economy and the port is estimated to be in excess of $50 million over the life of the project," said Mark Underhill, the port board's chairman in an emailed statement.

 

For Danny Stafford, business agent for a longshoremen's union working at the port, it means full employment for his group.

 

"We've been working this project since October," Stafford said. "Since December, it's been three or four vessels per week."

 

Stafford leads the Local No. 1924 of the International Longshoreman's Association. His group is the clerks and checkers union. They check incoming cargo for quality to ensure it is undamaged, and also for the correct quantity.

 

There are at least 40 people in Local No. 1924. Another 70 or 80 in Local No. 25, known as the deep sea group, unload cargo from the vessels.

 

"Right now is a good time for us," said Stafford, 48, who has worked for the union for 25 years. "It's keeping all of our people working."

 

Motiva general manager Forrest Lauher said that as modules are delivered, the refinery's construction workforce will begin to resume its previous pace.

 

The refinery's owners, Shell Oil and Saudi Refining Co., completed a cost review earlier this year of the expansion and decided to extend the pace about a year. The refinery expansion should be complete by the first quarter of 2012.

 

That slowed down the need for workers and resulted in some layoffs by their subcontractor employers.

 

Lauher said there are still more than 2,000 construction workers still employed on the project.

 

The modules delivered at the port are pipe racks assembled at the Cianbro Eastern Manufacturing plant in Brewer, Maine.

 

It's Cianbro's first major project after converting a former paper mill into the manufacturing plant.

 

Some of what Cianbro is building came from Fabricon International, near Smith Road and Interstate 10 in Beaumont.

 

"We've sent truckloads up there, and sent some up by barge," said Lonnie Arrington, Fabricon president.

 

He said the company has been building pressure vessels for the Motiva project since August 2007.

 

"It's a long lead time," he said, referring to how long it takes to plan the construction and build it to coincide with the customer's needs.

 

Fabricon is finishing up another column for the project.

 

"And then we're done," Arrington said.

Shell to Settle Deer Park Refinery Pollution Suit

Shell Oil Co. has agreed to pay millions of dollars to resolve a lawsuit by two environmental groups over pollution at its Deer Park refinery.

 

Under the proposed settlement, the Houston-based U.S. arm of oil giant Royal Dutch Shell will spend the money for equipment to reduce harmful emissions known as "upset events," which occur during equipment malfunctions, unscheduled maintenance and other unforeseen events.

 

The exact cost of those improvements was not immediately available.

 

The company also agreed to pay $5.8 million for past federal Clean Air Act violations, which attorneys for the Sierra Club and Environment Texas said is the largest penalty from a citizen suit over air pollution in the state's history.

 

The lawsuit, filed in January 2008 in Houston federal court, alleged that Shell's Deer Park refinery recorded more than 1,000 upset events in a five-year period, emitting millions of pounds of pollutants more than allowed by the facility's permits.

Linde to Supply Hydrogen for Deer Park Complex

Linde North America and Shell Oil Company have executed a long-term contract for Linde to supply hydrogen for Shell's Deer Park, Texas, complex. The hydrogen will be used primarily for the production of clean-burning transportation fuels at Deer Park Refining Company, a 50/50 joint venture of Shell and PMI Norteamerica S.A. de C.V., a wholly-owned subsidiary of Petroleos Mexicanos (Pemex).

 

Linde North America is a member of The Linde Group, a world-leading gases and engineering company.

 

Linde will invest in excess of $50 million to supply hydrogen through a pipeline network connected to its facilities in the Houston Ship Channel. The supply will commence in mid-2010.

 

Kent Masters, member of The Linde Group executive board said, "Linde has been associated with Shell on multiple international initiatives in the areas of industrial gases and plant supply and the provision of engineering services during the last five years. We are very excited to expand this relationship by the establishment of this additional long-term hydrogen tonnage supply arrangement in the strategic Houston Ship Channel area."

 

Linde is a premier supplier of hydrogen utilities to the North American refining industry and is also a major supplier of syngas products, including hydrogen, for industries in the Houston Ship Channel. Execution of the Deer Park supply contract builds on a successful hydrogen supply relationship established earlier with Shell Chemicals in connection with hydrogen and steam supply for their specialty refinery in Mobile, Alabama, that commenced in 2007.

 

Linde, a leading supplier of hydrogen is among the most reliable suppliers of this strategic industrial gas. The company boasts world class in-house technical and engineering capabilities in the areas of hydrogen and syngas that enables the delivery of high-value solutions to those customers, who desire and can benefit from such capabilities.

 

In the 2008 financial year it achieved sales of EUR 12.7 billion (USD 15.9 billion).

   MEXICO

Pemex Initiates $12.2 Bln Plan to Add New Refining Capacity

Mexico’s state-owned Pemex has launched a $12.2 bln plan to add new refining capacity to deal with the country's growing dependence on imported fuels. The company will now build a new refinery near an existing plant at Tula, north of Mexico City, as well as overhaul its Salamanca refinery, outside Guadalajara.

 

The plan will boost the country's crude-processing capacity by 250,000 b/d, as well as slash fuel oil production at the two existing refineries. The two refineries produce over 125,000 b/d of fuel oil, but as the country moves away from oil-fired power generation to natural gas, Pemex has a mounting surplus of unwanted fuel oil.

 

The finance ministry forecasts crude exports will fall by 18% in 2010, to 1.125m b/d, from a predicted 1.37m b/d in 2009. Production and exports are suffering from the decline of the country's largest oilfield, Cantarell, which has seen output fall to 0.77m b/d this year from a peak of over 2m b/d just five years ago. Exports are also being reduced by increased domestic refinery runs.

 

Pemex has awarded a $0.65 bln drilling contract to Weatherford to drill 500 wells in the country's large Chicontepec region, which is estimated to hold 139bn barrels of oil in place and 50 trillion cf of gas. The U.S. oilfield services company won two previous Chicontepec drilling contracts in 2008, for up to 600 wells.

 

 In March, Pemex awarded a $0.69 bln drilling contract to Schlumberger, also for the Chicontepec area, where challenging geology makes oil production very difficult and expensive. Pemex hopes to produce 12bn barrels of oil and 31 trillion cf of gas from the region's 29 fields.

   BRAZIL

Petrobras, PdVSA Continue $4 Bln Refinery Deal Talks

Brazilian state-run energy giant Petrobras (PBR) and Petroleos de Venezuela SA continue to discuss a $4 billion refinery deal, Petrobras' downstream director said April 27.

 

Quoted by the local Estado news agency, Paulo Roberto Costa said that negotiating teams from the two companies will meet again in April. He declined to provide further details about the talks.

 

Costa also denied government charges that the company was overcharged for site work at the refinery. Cost overruns at the refinery have reached 100 million Brazilian reals ($45.6 million), Brazil's government accounting office said.

 

The accounting office compared site work at the refinery to site work done for road construction, Costa said, leading to confusion about the costs of the project. "The complexity is completely different," he said.

 

While the alleged cost overruns at the refinery are unlikely to delay construction of the refinery, this week's Petrobras and PdVSA meeting shows that the two companies continue to wrangle over participation in the project.

 

Petrobras and PdVSA agreed in March to extend the deadline to agree to terms on the Abreu e Lima refinery until May 25. Petrobras has threatened to build the refinery on its own if a deal with PdVSA can't be reached.

 

The two companies have engaged in contentious talks in recent months after PdVSA wanted better-than-market prices for the oil it would provide for processing at the refinery. While a shareholders agreement has been signed, purchase and sales agreements for the Venezuelan and Brazilian crude that will supply the refinery haven't yet been completed.

 

The refinery is expected to process 200,000 barrels of oil a day. Each company was expected to provide half of the crude oil needed for daily processing.

 

In addition, PdVSA wants to sell oil products from the refinery in Brazil. Oil products and derivatives from the refinery were to be earmarked for export.

 

In September 2008, Petrobras and PdVSA reached a shareholders agreement on the refinery. Petrobras will hold a 60% stake in the Abreu e Lima refinery, with PdVSA holding the remaining 40%.

 

The refinery is a key cog in Petrobras' plans to rapidly expand its oil derivatives output. Petrobras plans to boost refining capacity to 3.6 million barrels a day by 2015, up from current capacity of 1.9 million barrels a day.

Brazil’s Petrobras Denies Having Refinery Talks with Mitsui

Brazilian state-run oil company Petrobras (Petroleo Brasileiro SA) isn't in talks with Japanese trading company Mitsui & Co. to finance a refinery project, Petrobras Chief Executive Jose Sergio Gabrielli said April 30.

 

Gabrielli called press reports about talks between Mitsui and Petrobras "groundless."

O Globo reported in the April 30 editions that Mitsui had offered $11 billion in return for a 20% stake in a premium fuels refinery Petrobras plans to build in the northeast Brazil state of Ceara.

 

In addition, the Japanese trading company wants to receive fuel from the refinery in payment for the financing, the report said.

 

Despite Gabrielli's emphatic denial, Petrobras was less dismissive in a filing with stock regulators made after markets closed April 30. "The company informs that it is evaluating diverse alternatives to finance the construction of new refineries, but has up until now not celebrated any contract or memorandum of understanding in reference to the financing of the premium refinery in Ceara," Petrobras said in the filing.

 

The Ceara refinery will process 300,000 barrels of crude oil a day. Petrobras plans to build four new refineries as part of its effort to boost capacity to 3.6 million barrels a day. The company currently processes about 1.9 million barrels daily.

ASIA

     INDIA

India’s ONGC Mittal Energy to Build Refinery in Nigeria

Indian energy company ONGC Mittal Energy Ltd (OMEL) has gotten the nod of the Nigerian National Petroleum Corporation (NNPC) for OMEL's plan to set up a refinery in Nigeria.

 

"The steering committee and the working committee of NNPC has approved the refinery as OMEL's preferred downstream commitment," Mr Sudhir Maheshwari, Managing Director, Mittal Investments, told Business Line. OMEL had committed to building a 180,000-barrel-a-day refinery, a 2,000-MW power plant and a railway line connecting eastern and western Nigeria.

 

OMEL is the joint venture between Mittal Investments Sarl, the private investment company of the Mittal family, and ONGC Videsh Ltd (OVL), the overseas investment arm of ONGC. "OMEL is in constant discussion with NNPC regarding its downstream commitment. It has carried out a pre-feasibility study for a grass roots refinery by engaging a reputed international consultant," he said. NNPC has conducted due diligence and visited two refineries organized by OMEL, Mr Maheshwari said. "OMEL is keen to carry out the downstream obligation in earnest. Unilaterally, OMEL cannot move forward for implementation of the project without the support of NNPC through its Steering Committee."

   INDONESIA

Indonesia may Provide More Incentives for New Oil Refineries

Indonesia may provide additional incentives to investors to build new oil refineries as Southeast Asia's biggest economy tries to cut costly imports of fuel products, a senior energy ministry official said on May 1.

 

'The new incentives may include government guarantee on the new refinery project and zero import tariff,' Evita Legowo, director general oil and gas, told reporters.

 

Legowo said Indonesia badly needs new refineries to meet growing domestic demand and cut imports.

Indonesian Govt Considers Establishing Fuel Refinery Agency

The Indonesian government is considering establishing an agency which will manage the finding of locations for fuel refineries, Director General for Oil and Gas, Evita H. Legowo said May 1 in Jakarta.

 

"As we know, finding locations is the most difficult thing [in building refineries]. Now, we are working on forming an agency which will specifically take care of finding locations for oil and gas downstream facilities," Evita said. 

 

Difficulties in finding locations have hampered investment in refineries, she said

 

"With the agency, we will be prepared with blueprint locations to offer investors," Evita said.

 

Evita said the agency establishment was still just an idea. The Ministry of Energy and Mineral Resources would make a proposal to the Ministry of Finance soon, she added. 

 

Indonesia is working hard to attract investors to build refineries as the country continues to suffer a fuel deficit.

 

In 2008, the fuels deficit reached 360,000 barrels a day or about 33 percent of the total domestic demand.

Two Refineries Proposed for Indonesia's Batam Island

Indonesia's Setdco Group and its partner PT Intan Megah have sought permission to build a 300,000 b/d refinery at Tanjung Sauh on Batam Island near Singapore—one of two new facilities apparently set for construction on the island.

 

"The crude oil will be from the Middle East," said Evita Legowo, director general for oil and gas at the Ministry of Energy and Mineral Resources. She said the government is still in the process of issuing a permit for the development of the planned refinery, and could release no further details.

 

Meanwhile, other reports have emerged that Gulf Petroleum Ltd., Qatar's largest oil company, also plans to build a refinery in Batam.

 

Gulf Petroleum is preparing documents needed to seek the investment license from the Indonesian government, according to Ismeth Abdullah, chairman of the Batam Free Trade Zone Council.

 

Gulf Petroleum Pres. Abdul Aziz Abdulaimi and PT Batam Sentralindo Pres. Bang Hawana recently signed a memorandum of understanding on the project.

 

PT Batam Sentralindo, the operator of the Batam Free Trade Zone, has agreed to provide a 250-hectare plot of land for the refinery project, which plans to sell its products in Indonesia and other Southeast Asian nations.

 

Meanwhile, reports said that a $1.5 billion refinery joint venture between Indonesia's state-owned PT Pertamina and Japan's Mitsui & Co. may stall because the Indonesian government wants an increased stake in the project.

 

Agreement had been reached to build a residue fluid catalytic cracking unit with a capacity of 60,000 b/d of gasoline in Pertamina's existing refinery at Cilacap in Central Java, with Mitsui holding an 80% stake and Pertamina 20%.

 

But the Indonesian government has advised Pertamina to review the project and seek a higher stake, a request that could sink the project altogether according to one source, who said financing for the refinery already has been approved by the Japan Bank for International Cooperation.

   PAKISTAN

Pakistan's Bosicor to Invest $500 Mln in Refinery, Oil Storage, Petchem

Bosicor Pakistan Limited is to invest US$500 million in the oil industry over the next two years as part of its expansion plans to be the leading market player in Pakistan.

 

Chairman Amir Abassciy said investment projects of refinery units, oil storage and petrochemical plants were to be completed within the next couple of years.

 

Company executives said the group would invest in its oil-refining unit along with the principal units, that would be completed by June 2010. The 43 percent under-construction project would increase the generation capacity up to 115,000 barrels per day.

 

It aims to produce 5.5 million metric tonnes of various petroleum products from the new plant that not only help Pakistan's demand but will also export internationally, standard products to the world.

 

The group will build up the crude oil storage tank with the capacity of 144,000 metric tonnes by the next year.

 

Bosicor will invest million of dollars on the construction of an aromatic complex that will generate 17,100 barrels per day.

Pakistan Refineries Need $1.5 Bln for Upgrade

 Pakistan’s oil refineries will require around $1.5 billion for upgrading to achieve de-sulferization and isomerization in order to meet Euro-II specifications, Adviser on Petroleum and Natural Resources Dr Asim Hussain says.

 

“Half of this money would be mobilized by the government through different measures, while the remaining would be generated by refineries from their own resources,” he told the publication,The News.

 

The adviser said one proposal was that the government would line up $750 million by paying to refineries an additional amount of Rs1.2 for every liter of refined diesel and petrol it would get from them in the next five years.

 

Explaining, he said this amount could be passed on to consumers and could be called a tax or levy for a specific purpose, or the government might take out this sum from the petroleum development levy (PDL) that it already charges.

 

The remaining half, $750 million, would be made available by refineries from their own resources, Dr Asim said. “We are asking them to arrange this sum of money.”

 

The adviser said that by December 2010, refineries would be bound to give the government a plan of the isomerization program. In the next three years, he said, they will achieve the desired objective by completing the projects. He disclosed that refined diesel and petrol in Pakistan was not up to international standards.

 

Dr Asim, who accompanied President Asif Ali Zardari to Libya, said that they would explore and conduct a study in order to absorb maximum technical skilled manpower from Pakistan in the energy sector.

 

He said that he wants Pakistan’s public and private sectors to contribute to the international oil exploration industry in a big way. Already they have got stakes in Iran, Iraq and Yemen, he said, adding that 36 international companies had recently applied in Iraq and among those short-listed was Pakistan Petroleum Ltd.

 

Answering a question, the adviser said a high-level committee, headed by him, that was recently formed to decide the question of increasing deemed duty or processing fee for oil refineries, would take another couple of weeks to make a decision.

 

The refineries want an increase of 2.5 per cent in the existing 7.5 per cent deemed duty, to overcome operational losses they claim are incurred because of low oil prices.

 

Economic Coordination Committee (ECC) formed this committee on April 13. In a summary, the petroleum ministry had proposed a 2.5pc increase in deemed duty to 10pc, which the ECC rejected after a heated debate.

 

Dr Asim argued that since National Oil Refinery Limited, Pakistan Refinery Limited, Attock Oil Refinery Limited and Bosicor Refinery Limited believed that they were on the verge of closure because of losses they were suffering in the aftermath of fallen oil prices, deemed duty should be increased by 2.5pc so that they could sustain themselves.

   MALAYSIA / INDONESIA / SYRIA

NIOC to Participate In Malaysia, Indonesia, Syria Refinery Projects

The National Iranian Oil Refining and Distribution Company is taking part in joint projects to construct refineries in Malaysia, Indonesia, and Syria.

 

NIORDC has made a 30 percent investment in the 4.8-billion-dollar project to construct the Kadah Refinery in northern Malaysia, which will have a capacity of 250,000 barrels per day. The other 70 percent of the investment is being made by the Malaysian company SKSD, IRIB reported.

 

In a 6-billion-dollar project to construct a refinery in Java, which will have a capacity of 300,000 barrels per day with the feedstock supplied by Iran, Indonesia's Pertamina is covering 40 percent of the cost, NIORDC another 40 percent, and Malaysia's Petrofield 20 percent.

 

And in a 2.6-billion-dollar project to build a refinery near the city of Homs, Syria, which will be fed with extra heavy crude supplied by Iran, Syria, and Venezuela and will have a capacity of 140,000 barrels per day, NIORDC is covering 26 percent of the cost, Venezuela's PDVSA 33 percent, Malaysia's Petrofield 26 percent, and Syria's HRC 15 percent.

 

All the projects are scheduled to come on stream by 2013.

   VIETNAM

Work on $6 Bln Oil Refinery in Vietnam Starts

Kuwait’s Oil Minister Sheikh Ahmed al-Abdullah al-Sabah said construction work on a US$6 billion (US$1 = RM3.59) oil refinery in Vietnam has started and the country is committed to the project, state-run KUNA news agency reported.

 

Vietnam Oil & Gas Group signed an agreement in April last year to build the 200,000 barrel-a-day Nghi Son Refinery and Petrochemical LLC with Kuwait Petroleum Corp, Idemitsu Kosan Co and Mitsui Chemicals Inc.

 

Kuwait Petroleum will allocate half of its budget to refining and petrochemical projects overseas, KUNA also reported.

EUROPE / AFRICA / MIDDLE EAST

   FINLAND

Neste Oil Postpones Isomerization Project at Finland’s Porvoo Refinery

Neste Oil has decided to postpone construction of a new gasoline isomerization unit at Finland’s Porvoo refinery. The decision has been taken in response to the weaker demand for petroleum products, and will enable resources to be concentrated on the company's strategic growth projects, which are focused on building NExBTL renewable diesel capacity in Singapore and Rotterdam and a base oil plant in Bahrain.

 

The decision to build a new isomerization unit was taken in summer 2008 and its investment cost was estimated to be approximately EUR 80 million. The engineering work for the unit is largely complete, and the intention is to move ahead with construction when the market situation improves.

 

Neste Oil Corp. is a refining and marketing company concentrating on low-emission, high-quality traffic fuels. The company's target is to be the world's leading supplier of renewable diesel. Neste Oil's refineries are located in Porvoo and Naantali and have a combined crude oil refining capacity of approx. 260,000 barrels a day. The company had net sales of EUR 15 billion in 2008 and employs around 5,200 people.

   ITALY

Eni Restarts Coking Unit after Fire at Gela Refinery

Eni SpA, Italy's biggest oil and natural gas company by volumes, restarted production at a coking unit in the Sicilian Gela refinery after a fire, an official said April 6.

 

There were no injuries and very slight damage to some lines in the April 4 fire, the official said. Eni staff put out the fire, caused by a leakage from a diesel pump.

 

The Gela refinery has an annual capacity of about 1.5 million metric tons, he said.

 

The refinery, on the southern Sicilian coast, had recently completed a planned maintenance that lasted about 20 days, the official said.

    KENYA

Essar Oil to Acquire Fifty Percent Stake in Kenyan Oil Refinery

India's second largest private oil company Essar Oil, a 10.5 million tonnes refinery in India, finally entering the overseas arena, with the refiner close to acquire a 50% stake in a Kenyan oil refinery in Mombasa, media reports said.

 

Essar will pay between $400 and $450 million to acquire the above stake in the sole refinery in Kenya that has a capacity to process 0.7 million tonnes of oil per day, sources reportedly said.

 

Analysts feel that this deal fits well into Essar's objective of achieving refining capacity of 1 million barrels per day.

 

If company sources are to be believed, the deal could be concluded within a week after finalizing an agreement about vesting the management control of the Mombasa unit, with the Ruias demanding at least four representatives in the board.

NIGERIA

Nigeria’s Oando PLC Completes Feasibility Study of 240,000 bpd Greenfield Refinery

Oando PLC, Nigeria's leading integrated energy group, has taken a bold step in its commitment to end Nigeria's petroleum products supply shortages, with the completion of a comprehensive 4-month bankable feasibility study for an ultra-modern 240,000 barrels per day (bpd) Greenfield refinery in Lekki Free Trade Zone, Lagos.

 

This is the first phase in the development of a 360,000 barrels bpd capacity refinery.

 

The 'bankable' feasibility study, which affirms a positive outcome for the project, was conducted by Wood Mackenzie and Foster Wheeler, renowned global energy solutions firms. Covering both the marketing and technical aspects of the proposed refinery, this set of complex studies reviewed long term demand and supply projections, included capital cost estimates, an economic evaluation and a positive outcome for the implementation plan of the project.

 

Mr. Ayo Ajose-Adeogun, Chief Executive Officer, Oando Refinery & Terminals said: "Oando's effective execution, and our strict operational controls have resulted in several successful projects in the past, and we are taking deliberate steps to ensure the refinery project is likewise implemented flawlessly. This is evident in the detail of this feasibility study and the choice of world-class vendors."

 

In preparation for developing the refinery, and to improve the efficiency of the project, Oando has completed a separate feasibility study and is on the verge of commissioning a Front End Engineering Design (FEED) for a world-class finished products reception terminal in the same location. The terminal, scheduled for completion in the third quarter of 2009, will be best-in-class and the largest product terminal in Sub-Saharan Africa, serving as the first phase of the refinery development.

 

The project's next steps are the sourcing of finance, environmental impact assessments and the securing of all necessary regulatory approvals. Oando will now commence engagements with Federal and State government agencies.

 

Nigeria's shortfall of at least 16 million litres per day of petrol justifies the economics of a refinery project. In the last seven years the nation's four existing refineries mostly operated at an average of 37% capacity utilisation. The nation requires about 47 million litres of refined petroleum products daily to sustain economic activities. The current daily output of Nigeria's existing refineries is far from meeting the demands of a growing economy.

 

"That's why Oando has taken the initiative to bridge the supply gap by providing the economy with sufficient refined petroleum products with the aim of reducing the nation's dependence on imports", Mr. Ajose-Adeogun added.

 

Commenting on the project, Mr. Wale Tinubu, Oando's Group Chief Executive said; "This study is the first step in revolutionizing Nigeria's refining landscape. We now have the blueprint to guide us in developing sub-Saharan Africa's most sophisticated and advanced refinery. This refinery will complete our integrated energy solutions status, allowing us to extract optimal value at every point along the energy chain, irrespective of the vagaries of the oil and gas market."

 

"With a refinery physically close to high quality crude, a huge local market and technology sophisticated enough to produce premium refined products, ours will be one of the most competitive operations in the world. Though a project of this magnitude is unprecedented in this region, we are confident that we will be able to attract financiers due to competitiveness of the refinery, the quality of this study and our brand reputation", Mr. Tinubu concluded.

  RUSSIA

South Korea’s GS Engineering & Construction Cancels $900 Mln Russia Refinery Order

GS Engineering & Construction Co., South Korea's second-largest builder, said that its US$900 million order for a refinery project in east central Russia has been canceled due to the contractor's circumstances.

 

GS Engineering won the order in June last year from Russian oil company Tatnetf OAO in a consortium with Italian engineering group Maire Technimont SpA.

 

The South Korean builder, however, did not elaborate on the details of the reason why its order has been canceled.

 

The refinery was scheduled to be built in Nizhnekamsk, 170 kilometers east of Kazan, the capital of the Republic of Tatarstan, by 2011.

   MIDDLE EAST / SOUTH AMERICA

Graham Corp Awarded $2.5 Mln in Surface Condenser Orders

Graham Corporation announced April 7 that it has been awarded $2.5 million in orders for surface condensers to be installed in conjunction with the renovation of an oil refinery in the Middle East and the renovation of an oil refinery in South America. Both orders were booked during Graham’s recently completed fiscal 2009 fourth quarter, which ended March 31, 2009. The order for the Middle East refinery is expected to ship during Graham’s fiscal 2010 third quarter, which ends December 31, 2009. Shipment to the South American facility is scheduled for Graham’s fiscal 2010 fourth quarter, which ends March 31, 2010.

 

James R. Lines, Graham’s President and Chief Executive Officer, commented, “The fourth quarter was a much stronger quarter for bookings than the trailing third quarter. We believe that the pipeline for projects remains active, with the refinery sector demonstrating greater robustness in the quarter than we had seen in the previous six months. We also received a few fertilizer project orders. However, we are still seeing a good deal of caution on the part of refiners and chemical processers to initiate new projects as they continue to evaluate the potential for further reduction in costs and the availability of capital.”

 

Graham had $20.8 million in orders during the fourth quarter, compared with $8.1 million in orders during the trailing fiscal 2009 third quarter and $35.1 million in orders during the fourth quarter of fiscal 2008.

 

Mr. Lines added, “Although short-term visibility for us continues to be uncertain, we remain confident that long-term growth in the world’s energy needs will translate into additional demand for Graham’s products.”

    IRAN

Senators Push for Iran Business Sanctions

Nearly two dozen senators introduced legislation April 28 threatening punishment of foreign companies that provide gasoline and other refined petroleum products to Iran.

 

The Iran Sanctions Enhancement Act would sharply escalate a U.S. economic war aimed at persuading Iran to suspend uranium enrichment and answer unresolved questions about its nuclear program.

 

Past legislation and White House executive orders have banned U.S. investment in Iran's petroleum sector and barred U.S. banks from even indirect contacts with Iranian financial institutions. The new sanctions would go much further, though it is not clear how easily the measures could be enforced. They would freeze the U.S. assets of foreign companies providing refined petroleum to Iran and forbid them from doing business in the United States.

 

The legislation seeks to exploit the fact that while Iran is the world's third-leading exporter of crude oil, it imports about 40 percent of its gasoline. This is because it lacks refinery capacity and government gas subsidies ensure that demand exceeds supply.

 

The new bill "requires the president to impose sanctions on any individual or company that provides Iran with refined petroleum resources or engages in activity that could contribute to Iran’s ability to import such resources," the summary of the legislation said. Specifically, the bill would target those who sell, ship, insure or finance deliveries of gasoline and other refined petroleum products.

 

Both Democrats and Republicans are among the bill's 23 sponsors. They include liberal lawmakers such as Sen. Ron Wyden, Oregon Democrat, as well as the conservative vice chairman of the Senate Select Committee on Intelligence, Christopher S. Bond Missouri Republican.

 

 

For the White House, the legislation could provide leverage as it seeks direct negotiations with Tehran. Secretary of State Hillary Rodham Clinton threatened "crippling sanctions" if negotiations fail to resolve the nuclear dispute.

 

The White House had no immediate comment on the legislation, however.

 

Thus far, Iran's response to U.S. overtures has been mixed.

 

The new legislation against Iran is in keeping with a letter sent earlier this month from House Democratic leaders to the White House expressing support for negotiations but also saying that talks cannot go on for an indefinite period.

 

The summary of the bill says it "supports diplomatic efforts with Iran and seeks to complement those efforts by empowering the president to impose additional sanctions on the government of Iran and certain companies doing business with Iran."

    IRAQ

Foster Wheeler Wins $128 Mln Iraq Refinery Contract

Iraq has signed a $128 million contract with Foster Wheeler to draw final engineering designs for a 300,000 barrel per day (bpd) oil refinery in its south, the deputy oil minister said on April 1.

 

Ahmad al-Shammaa said the design contract did not necessarily give the U.S. engineering company an advantage when it came to bidding for the contract to build the refinery in Nassiriya, 300 km (185 miles) south of Baghdad.

 

Iraq is moving ahead with plans to build or revamp a number of refineries as part of an effort to revive its crumbling oil infrastructure after decades of war, sanctions and neglect.

 

"The design will provide a clear overview to whatever company bids to construct the refinery," he said.

 

He added that Iraq also signed a 68.4 million euro ($90 million) deal with Italy's Nuovo Pignone, a General Electric subsidiary, to install a gas processing unit in West Qurna, a super giant oil field in the south.

 

Iraq has said it plans to boost refining capacity by 840,000 bpd as part of a $50 billion plan to overhaul the energy industry and boost production.

 

It has only this year reached a stage where it is refining enough gasoline for its own domestic transport purposes, despite sitting on the world's third largest reserves.

 

"We signed the contract with Nuovo Pignoni to invest in by-produced gas in station six of west Qurna oil field as part of a plan to this giant field," Shamma told Reuters.

 

In January, Italy's Technip won a contract to design a refinery in Kerbala, in the south, and Stone & Webster, a subsidiary of Shaw Group, last year won contracts to design two refineries in Iraq, in the southern province of Maysan and the northern oil fields of Kirkuk.

 

Iraq sits atop some 116 billion barrels of oil, the world's third largest reserves after Saudi Arabia and Iran, but it needs billions of dollars of investment to overhaul its oil sector.

      JORDAN

Jordan, Swiss Banks Reach Initial $1.5 Bln Refinery Deal

The Jordan Petroleum Refinery Co (JPRC) has signed a preliminary memorandum of understanding with a consortium of 12 Swiss banks that allow them to acquire a 51-percent stake in the sole Jordanian downstream facility, a JPRC spokesman said April 6.

 

The agreement provides for "a strategic partnership" that involves the spending of about 1.5 billion dollars by the Swiss banks for financing the JPRC's fourth expansion, the spokesman told German Press Agency dpa, speaking on condition of anonymity.

 

The official refused to identify the banks involved in the deal, but said that they had to present their financial offer to the JPRC board of directors within three months.

 

The JPRC signed an agreement with Citigroup in 2005 under which the group acted as a financial advisor for the company's latest expansion plan.

 

Three previous attempts failed to lure a strategic partner to finance the expansion, which has the objective of meeting the rising demand for oil derivatives and improving their quality to meet international standards, informed sources said.

   KUWAIT

Kuwait’s $15 Bln Zour Oil Refinery not Cancelled, Official Says

Kuwait has not cancelled plans to build a fourth oil refinery in the Gulf Arab state, even though it has cancelled a tender to build the plant, an official at the state's refining firm said in March.

 

The decision to scrap a tender to build the $15 billion refinery does not mean the project will be dropped, Abdulla al-Ajmi, clean fields project manager at Kuwait National Petroleum Co (KNPC), told an energy conference in the United Arab Emirates.

 

'The new refinery project is going to be re-evaluated by the Supreme Petroleum Council (SPC). It will take them some time to come back with their directive and they haven't indicated a timeframe,' he told reporters later.

 

Ajmi said one of the main issues was cost. If Kuwait can bring down the cost of the refinery it will enjoy better margins for the project and that will have an impact on the outcome of the SPC review.

 

'Eventually the project will have to prove itself in terms of feasibility. Market conditions now are different and there will have to be a revisit,' he said.

 

An industry source said Kuwait had already spent $1 billion on equipment and studies for the refinery project, adding that specialist equipment had been procured and delivered to Kuwait.

 

Ajmi said power demand, one of the main reasons Kuwait wanted the refinery, was still there. 'The objective of the fourth refinery was to provide feedstock for the generation of power,' he said.

 

KNPC said it had informed the companies that were awarded contracts to build its fourth refinery that the tender was cancelled.

 

In May, KNPC awarded deals worth $8.4 billion to four South Korean firms and one Japanese firm for the 615,000 barrels per day al-Zour refinery.

 

The project has faced political problems. Several lawmakers in parliament have alleged violations, such as handing out a package to U.S. firm Fluor Corp without a tender.

 

Some deputies threatened to question former oil minister Mohammad al-Olaim if he went ahead with signing contracts.

 

Kuwait has plans to boost refining capacity to 1.415 million bpd from around 930,000 with the new al-Zour plant and upgrades to two other refineries. The new plant would replace the country's aging 200,000 bpd Shuaiba plant.

 

In December, Kuwait scrapped a $17 billion joint venture with U.S. group Dow Chemical just a month after signing the deal, saying it was no longer viable in light of the global crisis after parliament opposed the agreement.

 QATAR

Qatar Delays Al-Shaheen Refinery to Take Advantage of Lower Construction Costs

Qatar has delayed several projects, including the planned Al-Shaheen refinery, for about one year to take advantage of lower prices, the OPEC member state's oil minister said, as the global financial meltdown brings down construction costs.

 

Abdullah bin Hamad al-Attiyah also issued what appeared to be a jab at non-OPEC oil giant Russia, saying in comments published in a recent Al-Hayat newspaper that oil producers outside the Organization of Petroleum Exporting Countries had offered the group little more than verbal support.

 

In reality, "we could not find any support for maintaining a balance in the market" from non-OPEC members, Al-Attiyah said without naming any of the countries.

 

OPEC had pressed Russia and several other major non-OPEC producers to cut production to help balance a market reeling from slumping demand.

 

At the group's March meeting, Russian Deputy Premier Igor Sechin announced that his country is reducing crude sales. But the move was interpreted by many analysts as more of an attempt to spin the country's already declining oil production into a gesture of support for the 12-member group.

 

The reductions from countries outside the group were for technical reasons "and not (based) on cooperation," Al-Attiyah said.

 

On the domestic projects, Al-Attiyah said that when these projects were first conceived, costs were high. Qatar, however, now "expects costs to drop by 30 percent or more," he said, citing the Al-Shaheen refinery as one example. The plant has a planned capacity of about 250,000 barrels per day and was initially projected to start up next year, according to Arab media.

 

Several OPEC members have either canceled or delayed projects amid the global economic meltdown.

 

While Qatar's vast natural gas wealth has helped cushion the blow from the global meltdown, other members of the six-nation Gulf Cooperation Council have faced greater challenges as crude prices plummeted from mid-July highs of $147 per barrel to around $50.

 

Kuwait, for example, backed out of a $17.2 billion dollar deal with U.S. giant Dow Chemicals and said the fate of the country's planned fourth refinery, a $14 billion project, would be decided after a new Parliament was elected.

 

OPEC officials and many energy experts have also warned that without a rebound in crude oil prices much-needed investments in the sector could be drained away, setting the stage for another spike in oil prices.

 

Al-Attiyah, who early in April said that oil prices at around $40 to $50 per barrel were "OK" for this year, told the paper that present prices were "comfortable for the world economy, and for producers and consumers." Oil at between $70 and $80 per barrel was "unrealistic" at present, he said.

 

OPEC kingpin Saudi Arabia has repeatedly said that $75 per barrel is a fair price for both consumers and producers, offering a level that would continue to encourage investments.

 

Still, the group last month opted against enacting further output reductions, choosing instead to focus on greater compliance with earlier rounds of cuts aimed at bringing its members' production to 4.2 million barrels per day below September 2008 levels.

 

The decision was seen by many in the market as a nod to Western officials who had voiced concerns that a deep cut would cause a spike in crude prices at a time when world leaders are struggling to chart an exit route from the current global financial crisis.

 

Leaders of the Group of 20 wealthy and developing nations are currently meeting in London to discuss options, and Al-Attiyah said the officials faced a "difficult task."

 

The oil minister said Qatar was continuing with major projects as planned, including six liquefied natural gas lines that would boost capacity from 31 million cubic meters to 77 million cubic meters.

 

He also said there were other major projects, including a polyethylene and aluminum plant and what he said would be the world's largest condensate plant, with a 145,000 barrel per day production capacity

 

"All those mega projects will be executed this year and in the next year and will be ready to produce and export in less than two years," he said.

Indonesia may Provide More Incentives for New Oil Refineries

Indonesia may provide additional incentives to investors to build new oil refineries as Southeast Asia's biggest economy tries to cut costly imports of fuel products, a senior energy ministry official said on May 1.

 

'The new incentives may include government guarantee on the new refinery project and zero import tariff,' Evita Legowo, director general oil and gas, told reporters.

 

Legowo said Indonesia badly needs new refineries to meet growing domestic demand and cut imports.

 

The decision was seen by many in the market as a nod to Western officials who had voiced concerns that a deep cut would cause a spike in crude prices at a time when world leaders are struggling to chart an exit route from the current global financial crisis.

 

Leaders of the Group of 20 wealthy and developing nations are currently meeting in London to discuss options, and Al-Attiyah said the officials faced a "difficult task."

 

The oil minister said Qatar was continuing with major projects as planned, including six liquefied natural gas lines that would boost capacity from 31 million cubic meters to 77 million cubic meters.

 

He also said there were other major projects, including a polyethylene and aluminum plant and what he said would be the world's largest condensate plant, with a 145,000 barrel per day production capacity

 

"All those mega projects will be executed this year and in the next year and will be ready to produce and export in less than two years," he said.

 

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