REFINERY UPDATE
September 2009
McIlvaine Company
TABLE OF CONTENTS
OPEC Has Bearish Outlook for Refining Margins
IEA Says Refinery Sales, Closures Needed To Combat Glut
CSB Team Investigating HF Releases at ExxonMobil Joliet Refinery
Petro Star on Track with Alaska Valdez Refinery Rebuild
BP Awards DTE Petcoke Terminal Services Contract with BP’s Whiting Refinery
U.S. Refinery Status: Unplanned and Planned Production Outages at U.S. Refineries
Ivanhoe Issues Update on HTL Tamarack Upgrading Project
Hidalgo Bests Guanajuato in Mexico’s Pemex Refinery Bid
Bidding for Pemex Refinery Set for 2011
Sinopec, KPC Choose Zhanjing for $9 Bln Oil Complex
Construction on New Guangdong Province, PetroChina Refinery to Start In November
Sinopec Wins Okay for 20 Mln Ton Oil Refinery Expansion
Petrovietnam to Build $10 Bln plus Petchem Complex
ConocoPhillips Shuts Irish Whitegate Refinery for Maintenance
Eni in Livorno Refinery Sale Talks with Klesch & Co
Petroplus Shuts Down Swiss Refinery after Pipeline Incident
Shell to Build HDS Plant at its Pernis Refinery
Dow Sells Interest in Dutch Refinery for $800 Mln
M.W. Kellogg to Upgrade StatoilHydro’s Karsto Gas Plant
Essar Energy Submits Formal Bids for Three Shell UK Refineries
KBR Wins Angola FCC, Hydroprocessing Tech Contract
Mozambique’s Oilmoz will Relocate Proposed $8 Bln Refinery to Protect Elephants
Petronas’ Engen Plans a Way Ahead for Refinery
Eni Eyes Uganda Refinery, Pipeline Projects
Uganda Issues international Tenders for Refinery Studies
Fluor Wins $700 Mln Contract To Expand Sakhalin-1 OPF
Alfa Laval Receives $15 Mln Compact Heat Exchangers Order for Russian Refinery
CNPC Begins Construction of 5 Bln cm Inner Mongolia Gas Plant
Abadan Oil Refinery Development Plan 80% Complete and will Come On Stream in 2010
The Organization of Petroleum Exporting Countries on August 11 expressed a "bearish outlook" for refining margins in the medium term.
"Due to ample product stocks, especially for distillates, the current sentiment of the product market is expected to soften further as the driving season comes to an end and with the startup of autumn refinery maintenance," OPEC said in its monthly oil market report.
Weak product margins could also have a negative impact on crude oil fundamentals in the coming weeks, OPEC added.
The oil producer group acknowledged that refining margins had strengthened in recent weeks, but cited refinery run cuts as the main reason for the rise in margins.
"At the peak of the driving season, refiners usually try to increase throughput levels ... but due to the continuation of slowing demand in tandem with the ongoing economic crisis, refiners unseasonably cut throughput levels across the board in July," OPEC said.
OPEC pegged refinery utilization at 85.9% in July, down 0.6% from June. Throughput in Europe also fell by 0.2% to reach 80.8% in June.
Meanwhile, Asian refinery utilization also remained under pressure after the completion of major maintenance, "as an overhang of light product supplies and low refining margins have dampened refinery activities."
The shift to autumn and high oil product supplies will continue to depress refining rates next month, OPEC said.
"Furthermore, the persisting economic crisis and its adverse effects on demand should have a negative impact on refinery operation in the months ahead."
In the U.S., the world's largest oil consumer, recent support for gasoline prices is expected to dwindle as the summer draws to a close.
OPEC pegged the gasoline crack spread - a proxy for refining margins - in the U.S. Gulf Coast at $13 a barrel against West Texas Intermediate crude, up from around $10 a barrel in late June.
But firmer U.S. gasoline prices were largely caused by supply restrictions, OPEC said.
"Higher demand for gasoline has combined with early refinery utilization cuts to provide support for gasoline prices, overshadowing the adverse effects of gasoline stockbuilds in July," while fewer gasoline imports from Europe also underpinned prices.
In Europe, support from refinery run cuts, as well as gasoline demand from the U.S. and West Africa, is expected to dissipate in the coming months.
"Sentiment in the European gasoline market is expected to ease next month," while weak fundamentals for middle distillate markets will also put a lid on prices, OPEC said.
Oil refiners may be forced to sell or close refineries to combat excess capacity, the International Energy Agency said August 13.
"Some refiners may face distressing times ahead and could be considering asset disposals to improve their business survival prospects [but] real industrial change will only come when excess capacity is closed," the Paris-based energy watchdog for the Organization for Economic Cooperation and Development said in its monthly oil market report.
Declining consumption has hit refiners hard and with new refineries coming online in Asia and the Middle East, the industry outlook remains bleak.
"Weak global demand is likely to require longer-term solutions to resolve the structural imbalances that have emerged in recent months, rather than 'quick-fix' changes of ownership," the IEA said.
In recent months, refiners have slashed capital expenditure in a bid to preserve balance sheets and maintain access to capital markets, but these measures may not be enough to save refineries which are struggling to eke out profits.
Several European refineries have already been put up for sale, including Petroplus Holdings' 117,000 barrel a day Teesside plant and Ineos PLC's 210,000 barrel a day Grangemouth in the UK, along with Eni SpA's 84,000 barrel a day Livorno in Italy.
Royal Dutch Shell PLC said in late July it aims to sell around 8% of its refining capacity, or around 330,000 barrels a day, between 2009 and 2010, continuing a trend of major oil companies disposing of non-core assets. Its 240,000 barrels a day Stanlow refinery in the UK and its Harburg and Heide refineries in Germany are thought to be for sale, according to the UK's Sunday Times newspaper.
"There's probably very little not for sale in the world's refining industries if you want to reach out and pay for it," said Petroplus Chairman Thomas O'Malley in the first week of August. Petroplus, Europe's largest independent refiner, is often cited as a potential buyer of refineries due to its aggressive growth strategy.
Refineries could also be shut, but high costs and environmental cleanup bills make closure an unpalatable option for many. Instead, a recovery in the debt and equity markets may kick off a new wave of industrial restructuring, as cheap prices for refineries tempt some companies to expand their refining portfolios, the IEA said.
"The recent increase in interest in the refining industry from investment banks, management consultancies and private equity groups suggests that some refiners appear vulnerable and potentially this may herald another round of industry consolidation," the IEA said.
"Ultimately, the industry survivors may be those with the deepest pockets, rather than those with the most competitive assets," the agency said. "Barring a rapid recovery in refining profitability, it seems likely that the sharks will continue to circle the industry and may look to pick off the weaker players."
The U.S. Chemical Safety Board (CSB) announced August 10 that it was deploying a four-member investigative team to the site of a release of propane and hydrogen fluoride at the ExxonMobil refinery in Joliet, Illinois.
On August 6, there was a sudden release of propane and hydrogen fluoride (HF) from the vicinity of a pump in the refinery's alkylation unit, which uses HF as a catalyst. The leak did not ignite, but one operator was transported to the hospital suffering from what were described as serious, HF-related chemical burns; he was initially reported in critical condition. A second operator was examined at the hospital and released. The unit's water deluge system, which is designed to contain airborne HF releases, was activated and the alkylation unit was shut down. Refinery personnel were instructed to shelter in place.
Chairman John Bresland stated: "We are concerned about the three apparent releases of hydrogen fluoride from refinery alkylation units in Pennsylvania, Texas, and now Illinois that have been reported since March 2009. Because of its high toxicity, any loss of primary containment for hydrogen fluoride is a serious matter." Recent reported releases include those at the CITGO refinery in Corpus Christi, Texas, on July 19, 2009, and at the Sunoco refinery in Philadelphia, Pennsylvania, on March 11, 2009. The CSB has an investigative team currently at the CITGO Corpus Christi refinery examining that incident.
The CSB investigative team will be headed by Investigation Supervisor Robert Hall, PE.
The CSB is an independent federal agency charged with investigating industrial chemical accidents. The agency's board members are appointed by the president and confirmed by the Senate. CSB investigations look into all aspects of chemical accidents, including physical causes such as equipment failure as well as inadequacies in regulations, industry standards, and safety management systems.
The Board does not issue citations or fines but does make safety recommendations to plants, industry organizations, labor groups, and regulatory agencies such as OSHA and EPA.
Petro Star Inc. is rebuilding its Valdez refinery, damaged by fire last November, and will manufacture ultra-low sulfur, or ULS, diesel at the plant, according to a spokeswoman for Arctic Slope Regional Corp., which owns Petro Star.
The refinery will be operating in October, and the ULS diesel will be available in the fall of 2010, said ASRC spokeswoman Mary Gasperlin.
Tesoro Alaska is now the only maker of ULS diesel in the state. Ultra-low sulfur diesel has a sulfur content of 15 parts-per-million and is now required for use in diesel trucks operating on highways by the U.S. Environmental Protection Agency.
Petro Star will also add approximately 20 new permanent refinery positions to operate and maintain the new facilities, a statement from the company said.
To make the fuel, Petro Star is installing a distillate hydrotreater and associated process units at the Valdez plant. The hydrotreater will allow the company to desulfurize diesel to meet the 15 ppm specifications established by the EPA.
More than 150 workers were involved, at peak, in reconstruction of the refinery this summer. A milestone in the reconstruction came during the week of Aug. 10 when a new crude oil processing column was set on its foundation.
The unit is 130 feet tall, 12 feet in diameter, and weighs over 200,000 pounds. The column is where crude oil is separated into various products, including jet and diesel fuels, and forms the heart of the distillation process.
"The rebuild of the Valdez refinery continues to be a success, thanks to the hard work of Petro Star's employees, insurers, suppliers, and contractors, including Arctic Slope Energy Services, another ASRC subsidiary," said Doug Chapados, president and chief executive officer of Petro Star.
DTE Coal Services, a subsidiary of DTE Energy, has been awarded a multi-year petcoke terminal services contract with BP Products North America's Whiting, IN, refinery.
The agreement calls for DTE Coal Services to unload, store and load all of BP's petcoke from trucks and rail cars into vessels and barges for delivery to BP's customers.
"The new bottom dump system that we'll be building will enable us to meet BP's unloading requirements, as well as expand our capacity, provide flexibility and improve reliability at our Chicago Fuels Terminal," said Matt Paul, DTE Coal Services president. "We're excited about this new opportunity and expanding our business with BP."
BP's refinery, in production for more than 100 years and the largest inland refinery in the country, is being modernized so it can process Canadian crude oil. The project is expected to be operational in 2012 and will expand petcoke production capacity from approximately 600,000 tons to about 2.2 million tons per year.
DTE Coal Services will install a bottom dump system, a series of conveyors and a radial stacker that that distribute the petcoke into storage piles. In addition, the project includes two new variable speed reclaim feeders that will enhance the terminal's blending capability.
The Chicago Fuel Terminal receives coal from all of the major coal basins via rail, truck and barge and can reach markets throughout the Great Lakes, river systems and rail/truck direct locations.
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.
Marathon Oil Corp. (MRO) said an alkylation unit was shut as a precautionary measure Thursday after a leak was discovered its Texas City, Texas, refinery.
Frontier Oil Corp. (FTO) said that a gasoline-making unit at its El-Dorado, Kansas, refinery was shut due to a fire.
Operator Refinery Capacity Description Restart
(in 000s
bbl/day)
UNPLANNED
CANADA
EAST COAST
Conoco Linden, NJ 238.0 Officials consider run cuts n/a
due to slack demand, a per-
son familiar with operations
said on July 17
CARIBBEAN
GULF COAST
Citgo Corpus 163.0 FCCU shut due to July 19 n/a
Christi, TX Alkylation Unit fire. No
restart estimate. A worker
was injured during the event.
Shut down hydrotreater Aug 15
Cut feeds to FCCU Aug 18
Exxon Baytown 572.5 Power surge upsets refinery
Aug 6, units being brought up.
Exxon Beaumont 344.0 Restarting hydrocracker unit
Aug 26 that was unexpectedly
shut Aug 25.
Marathon Texas City 76.0 Alky unit shut Aug. 27 after
Tx leak
Total Port Arthur 232.0 Condensate splitter shut
again Aug 22 after Aug 17
restart
Process unit 838 was
partially restarted Aug 22
after the loss of a
hydrogen compressor reduced
output Aug 17
Valero Houston, TX 145.0 Severe weather briefly cut
caustic flow to the
Belco Scrubber and feed to
the ultralow-sulfur
diesel unit Aug 21
MIDWEST
Frontier El Dorado 130.0 Reformer shut due to fire.
Kansas
ROCKY MOUNTAINS
WEST COAST
ExxonMobil Torrance, CA 149.5 Restarting an unidentified
refinery process unit Aug 26
that was shut down Aug 25.
Valero Benicia, CA 144.0 A coker stopped processing
crude due to repairs to the
scrubber Aug 27. Restart in
days.
PLANNED
CANADA
CARIBBEAN
Valero Aruba 235.0 The refinery that was shut
in June for 2-3 months for
economic reasons is being
closed indefinitely.
EAST COAST
Sunoco Philadelphia, 340.0 Reformer unit shut in Girard n/a
PA Point section in early Oct
for economic reasons. Shutdown
to last 1-6 months.
One-month work on FCCU unit
planned for 3Q.
Valero Delaware 210.0 Maintenance at 80,000-b/d
FCCU delayed until 2010 from
September 2009.
Western Yorktown 64.5 Planned work scheduled 1Q 2010.
Va.
GULF COAST
Chevron Pascagoula, 330.0 Pre-commercial heavy oil 2010
Miss. conversion project delayed
from 2008 to 2010 due to
economic factors.
Exxon Baytown, TX 567.0 FCCU No. 3 boiler shut n/a
for planned work July 10;
the work will have no impact
on the company's ability to
supply customers.
Valero Norco, LA 185.0 The coker will operate at
50% of capacity when
restarted due to poor
economics.
Flint Corpus 288.1 $250 mln project for new Spr
Hills Christi, TX diesel desulfurization, 2010
sulfur recovery unit to begin
in Fall 2008. Construction
to last 18 months.
Estimated restart of a Aug 21
CCR/NHT unit and a
hydrocracker unit at the
West Plant section
Marathon Garyville 245.0 Project to increase crude oil 4Q
LA refining capacity by 180,000- 2009
b/d 85% complete, as of end
April. New units expected
start up in 4Q 2009.
Motiva Port Arthur 285.0 Expansion project to increase 1Q
TX throughput capacity by 325,000 2012
b/d, to 610,000-b/d, slowed.
Completion now seen 1Q
2012, from 2010.
Valero Corpus 340.0 Coker unit shutdown for econo- n/a
Christi, TX mic reasons and planned work;
delayed to June 19 from June
12. The 20,000-b/d unit will
remain off line through July
but could restart at any time
if margins improve.
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 Norco, LA 250.0 Upgrade project to build 2012
a new diesel hydrotreater
unit moved from 2010 to
4Q 2012.
Valero Port Arthur 325.0 77,000-b/d FCCU at reduced n/a
TX rates since mid-Dec for
economic reasons.
Valero Norco, LA Turnaround at coker unit 1Q
delayed until 1Q 2010
from 4Q 2009.
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.
Plant-wide 24-day turnaround Sep
to begin in Sep, co last said
on July 28.
Western El Paso 122.0 Planned work scheduled for 1Q
2010.
MID-WEST
Frontier El Dorado 130.0 FCCU and hydrotreater will be Nov
KS shut in Oct for turnaround
maintenance that takes place
every four years.
A coker turnaround and expan- Mid-
sion project was delayed until Aug.
mid-July, and subsequently
delayed until August.
Marathon Detroit, MI 102.0 Co pushes back finish date Late 2012.
for heavy oil project.
Sunoco Toledo, OH 160.0 Planned work to last from
early Aug to mid-Sep.
Valero Memphis, TN 195.0 FCCU upgrade originally slated 2012
for completion in 2009 has been
shifted to 2012.
Alon Krotz Springs 80.0 Plantwide turnaround starts Jan. 21/22
La. Jan 1 to last 21 days.
ROCKY MOUNTAINS
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 unit is now scheduled
to begin in January 2010.
Frontier Cheyenne 52.0 The refinery is operating at n/a
WY reduced rates for economic
reasons.
WEST COAST
PetroStar Valdez, AK 48.0 Refinery shut due to Dec. Jun/Jul
28 fire; expected to re- 2010
start in June/July 2010.
Alon Paramount CA 55.0 Hydrocracker project post-
poned indefinitely, the Co.
said on Feb. 4
Chevron Richmond, 243.0 Judge halts construction on n/a
CA expansion project July 1.
Flint North Pole 210.0 One of three processing n/a
Hills AK units has been shut due
to low jet fuel demand,
co confirmed on Mar 19.
Shell Martinez 155.0 Crude Unit and Coker Unit Aug 15
CA to shut for planned main-
tenance on July 10; re-
start seen Aug 15.
Tesoro Wilmington, 97.0 39-days of turnaround main-
CA tenance is planned for
4Q 2009.
Valero Benicia, CA 144.0 Hydrocracker restarted Aug 8
over Aug 8-9 weekend;
shut for planned repairs
on Aug 3.
New crude unit is now scheduled
to start up Jan 2010.
Ivanhoe Energy Inc. August 10 announced that engineering work continued during the second quarter on a Phase I, 20,000-barrel-per-day Heavy-to-Light (HTL) upgrading facility for the Tamarack project in Canada. Front End Engineering & Design (FEED) is planned for completion in the fourth quarter of 2009, the company reported.
In the quarterly update, Ivanhoe President and CEO Robert Friedland said:
"Management is very pleased with our progress and with our current position at this stage of the emerging global economic recovery. We have consolidated and focused our energies on our core heavy-oil business and the development of our two world-class heavy-oil assets: Tamarack in Canada and Pungarayacu in Ecuador. Our HTL upgrading technology is ready for commercial implementation.
The initial engineering and design of a 20,000-barrel-per-day HTL facility, being carried out by AMEC of London, England, is scheduled to be completed by the end of this year. Recognition of the strategic value of HTL in unlocking the value of heavy oil is growing rapidly. We are evaluating various additional HTL opportunities around the world and we are actively engaged in partnership discussions with numerous leading oil groups. The proceeds from the recent sale of our U.S. oil and gas operations have provided us with added financial flexibility, giving us the time to select the appropriate partners that will help us achieve our objectives."
In July 2009, Ivanhoe Energy closed the sale of its U.S. oil and gas operations to Seneca South Midway LLC, a subsidiary of Seneca Resources Corporation. Seneca Resources is the exploration and production segment of National Fuel Gas Company. This sale is consistent with Ivanhoe Energy's goal of focusing its financial and human resources on its HTL heavy-oil projects.
Progress on the Tamarack project in Canada during the second quarter was focused on supporting the engineering related to the integrated Phase I, 20,000-barrel-per-day HTL facility being carried out by AMEC in London, in conjunction with the upstream engineering being carried out by AMEC-BDR in Calgary.
Ivanhoe Energy plans to have the Front End Engineering & Design completed on the Tamarack Phase I HTL facility in the fourth quarter of 2009.
The long battle between the states of Hidalgo and Guanajuato over the rights to have a new oil refinery came to an end on August 12. Petroleos Mexicanos (Pemex) director Jesus Reyes Heroles announced that the new complex will be built in Tula, state of Hidalgo, about 70 miles north of Mexico City.
Reyes Heroles said that the government of Hidalgo had garnered the legal documents to turn over to Pemex the 715 hectares of land it needs to build the new cutting-edge refinery. The land was communal property under the ejido system and owners had a certain degree of difficulty proving ownership.
"Hidalgo has complied with the juridical certainty of the plots of land," hence Pemex can go ahead and make the $10 billion dollar investment slated for the new complex, Reyes Heroles added. Building in Tula, he said, will save the state-owned oil company $600 million as building the refinery in Salamanca, Guanajuato, would have been much more expensive.
Company engineers will start working right away on basic infrastructure work to make it attractive to auction the oil complex construction contract bids.
He also said that there was good news for the aging Salamanca refinery as Pemex will do "reconfiguration" works worth $3.076 billion dollars starting immediately.
The announcement came after the governor of Hidalgo, Miguel Angel Osorio Chong, negotiated with the landowners to put together an attractive piece of land for Pemex. The state failed to meet an earlier deadline and that was when competition with Guanajuato became fierce and even political, as it was widely believed that Pemex would decide on Guanajuato because the state governor, Manuel Oliva, is a member of the National Action Party, the same as President Felipe Calderon. Osorio Chong is a member of the Institutional Revolutionary Party.
Gov. Osorio Chong stated his administration will conclude the land ownership paperwork by September 2, at the latest, before bidding, to assure that the large investment and cash flow that comes with it stays in Hidalgo.
"Hidalgo meets all the requisites for the refinery," the Governor assured.
The bidding to build the plants for the new refinery in Tula, Hidalgo, won't begin until 2011. Infrastructure construction will begin right away. "It will be 2014 or 2015 before we will be seeing gasoline," from the new refinery, Petroleos Mexicanos (Pemex) director Jesus Reyes Heroles said August 13.
On August 12, the Pemex director announced that the state-owned oil monopoly had chosen a 715-hectare polygon near Tula, which Hidalgo state governor Miguel Angel Osorio Chong had negotiated for with nearly 300 separate small landowners, paying them 1.050 billion pesos.
Osorio Chong said Banamex had awarded the state a 12-year maturity loan in order to pay landowners in cash.
As for the early development stages of the 10 billion-dollar project, Reyes Heroles said that the refining department is currently developing the conceptual engineering not just to have a larger capacity plant in Tula, but also to increase output at the Salamanca, state of Guanajuato, refinery.
According to Reyes Heroles, conceptual engineering works should be finished at the end of this year to pave the way for contractors to present projects and bid to construct basic infrastructure which "will take one more year."
He calculates that beginning in 2011 Pemex could possibly start the bidding on detailed engineering projects and the construction of the new plants.
Regarding investment the oil company will require to pay for this project.
China's Petroleum & Chemical Corp., Asia's biggest refiner, said August 10 its joint refining and chemical complex with Kuwait Petroleum Corp. (KPC) will be built in Zhanjing city in South China's Guangdong Province.
The US$9 billion project is expected to be completed by the end of 2013 after it gains approval from the National Development and Reform Commission, said the company in a statement.
It will become one of the country's biggest refining and chemical complexes with an annual capacity of 15 million tonnes.
The two parties first picked Nansha District of Guangdong's capital city Guangzhou as the complex's location but relocated the plant on environmental concerns.
Sinopec said the two parties would launch feasibility studies for the new location and evaluate environmental impact this week.
The feasibility study on PetroChina's 20-million-tons/year Jieyang Petrochemical refinery in Guangdong province has been completed and construction is expected to start in this November, says a report from the energy-consulting firm C1 Energy.
C1 Energy says the local Guangdong government has released the information, but there has been no confirmation from PetroChina.
PetroChina's Jieyang Petrochemical has a designed refining capacity of 20 million tons/year for the first phase and is planned to enter operation in 2013. Its second phase will expand capacity to 40 to 50 million tons/year.
Sinopec Maoming Petrochemical Co., Ltd. recently gained the approval from the National Development and Reform Commission, China's macro-economic regulator, to build a 20-million-ton oil refinery expansion project.
The Sinopec Maoming Petrochemical General Manager Li Anxi disclosed that for the new project, some equipment would be built or upgraded on the basis of its former 13.5-million-ton oil refining project.
For the moment, the company, under the wing of China Petroleum & Chemical Corporation, is busy making preliminary preparations for major parts like the decompression distillation part with a yearly proceeding capacity of 12 million tons.
Meanwhile, it is constructing the wax oil hydrogenation device that is capable of proceeding 1.8 million tons a year, as well as two 310-ton-per-hour coke-for-oil boilers and generation units. The construction is expected to be completed in 2009.
Moreover, Sinopec Maoming Petrochemical, based in the southern Chinese province of Guangdong, is to start the construction of the sulfur cycling equipment with an annual proceeding capacity of 100,000 tons a year.
Idemitsu Kosan Co. expects to make a final investment decision around June next year on a joint venture refinery it plans to build in Vietnam, and it is also mulling other foreign refining projects as it retools to cope with Japan's shrinking oil market.
"We have so far no other (overseas) projects, but we are not going to quit the refining and petrochemical business any time soon," said Kazuhisa Nakano, the new president of Japan's third-largest refiner by capacity.
"We have to think how, with our technology and experience, we can grow, and places where demand for these products is rising include Vietnam, China and the Middle East," he told Dow Jones Newswires.
Nakano succeeded Akihiko Tembo in late June, at a time of sharply falling oil products demand both at home and abroad.
Nakano says he sees his main job as president to make these two businesses more stable and not as vulnerable to economic swings as they are now.
Idemitsu posted net losses of Y3.2 billion in the April-June quarter, mainly due to lower sales volume and poor margins for refined oil and petrochemical. It has four refineries in Japan.
The 200,000 barrels a day Vietnam refinery, to be sited on the coast near Hanoi, is one launch pad for Idemitsu's future growth. However, it is the only foreign refinery project that a Japanese refiner is involved in, for now.
Idemitsu is part of a consortium set up last year which plans to build it. Other members are Kuwait Petroleum International, a unit of state-run Kuwait Petroleum Corp., government-owned Vietnam Oil and Gas Corp., or PetroVietnam, and Japanese petrochemical producer Mitsui Chemicals Inc. (4183.TO).
Idemitsu and KPI each hold a 35.1% stake, PetroVietnam has 25.1% and Mitsui Chemicals has the remaining 4.7%.
Assuming it goes ahead, it will be Vietnam's second - the first is the 140,000-barrels-a-day Dung Quat refinery, which started operations earlier this year.
Nakano said the new refinery is expected to start operations as early as 2013.
While seeking growth abroad, the company needs also to adapt to oversupply in the domestic market, something afflicting all Japanese oil refiners.
Japan has a total refining capacity of 4.8 million barrels a day, of which some 600,000 barrels a day is surplus to home needs, said Nakano.
This overcapacity will swell to 1 million barrels a day in the next few years if Japan's oil demand keeps falling at the same pace as seen in recent years, he said.
The decline is due to a mix of the recent economic slump and structural changes caused by the aging of the population, energy efficiency improvements and the erosion of Japan's industrial base.
Nakano said that while part of the demand fall is due to the global recession, Japanese demand "won't fully come back to levels it used to be."
That is because the energy demand mix has changed as consumers are shifting to hybrid and mini cars and as industrial users are using more natural gas and less oil at a timing of rising concerns about global warming.
Japanese refiners have been trying to export surpluses to Asia, mainly middle distillates, but demand has fallen due to economic conditions, and competition is growing from new large refineries in the Middle East, China and India.
Nevertheless, Idemitsu will be able to compete with the global rivals for several years, said Nakano.
"It's true that Japanese refineries are old and their capacities are small, but they are competitive as they are already amortized. They will be competitive for a while."
Idemitsu will keep exporting oil products from its 140,000 barrel-a-day Hokkaido refinery in northern Japan and its 160,000 barrel-a-day Aichi refinery in central Japan.
"They are well equipped (to crack heavy distillates). We will use 10% to 20% of their capacity for exports" once Asian demand recovers, said Nakano.
Idemitsu is in talks with Mitsui Chemicals about integrating its 220,000 barrel-a-day refinery near Tokyo with Mitsui's adjacent petrochemical factory.
Nakano said he is considering similar cooperation involving Idemitsu's 120,000 barrel-a-day Tokuyama refinery, which has significant petrochemical capacity, with nearby installations, to allow it "to compete with new rivals in the Middle East and China."
Japan's crude oil imports have nosedived, falling in double digits since February. In June, they were 19% lower on year, at 3.15 million barrels a day, the Ministry of Finance said.
Petrovietnam, the state-owned oil company, has decided to build what will be this country's largest petrochemical facility, the Nikkei reported August 3.
The total cost for the complex, which will consist of a refinery and a chemical plant, is estimated at over $10 billion. Construction is expected to start as early as 2011, and operations could begin in 2014.
Around this fall, Petrovietnam will select foreign business partners for a joint venture to run the refinery. As for the chemical plant, the firm has already decided to team up with the Siam Cement Group of Thailand and other players.
The site is located in the Long Son district of Ba Ria-Vung Tau Province, about 100km from Ho Chi Minh City.
The refinery, Vietnam's third, will have daily processing capacity of 200,000 barrels of crude oil, all of which will be imported. The complex will produce gasoline, diesel and liquefied petroleum gas. These products will at first be shipped domestically, and in the future exported to neighboring countries as well.
Petrovietnam is currently in the final stages of joint-venture talks with a number of foreign firms, discussing things such as what form the investment should take. "We will decide on partners at the end of the third quarter or the beginning of the fourth," said a company official.
At the moment, petrochemical products sold in Vietnam are almost all imported from Singapore, Thailand and Taiwan. If the two existing refineries and the new one were to operate at full capacity, the country may become self-sufficient in such products.
Vietnam has set the goal of becoming an industrialized nation by 2020, and to this end, has been promoting heavy chemical operations in earnest since 2008.
This first phase of the project will be implemented in the Wesseling refinery. It includes the modification of process units (desulfurization and hydrogen manufacturing) as well as the construction of new facilities. The units at Wesseling will also be used for the desulphurization of gas oil produced in Godorf. Technip's operating center in Düsseldorf, Germany, will execute the contract, which is scheduled to be completed in the fourth quarter of 2010.
ConocoPhillips has shut its 71,000-barrel-a-day Whitegate refinery on the east coast of Ireland for planned maintenance, a company official said September 1.
The refinery was shut Aug. 26 for "four to five weeks," said the official.
Traders said the units being shut involved the 71,000-barrel-a-day crude distillation unit, but the official declined to comment on that.
The Whitegate refinery, in Cork harbor, is the only refinery in Ireland.
Italian energy company Eni SpA (E) is holding preliminary talks to sell its Livorno refinery to private equity firm Klesch & Co. Ltd and doesn't expect a conclusion in less than a month, said a person familiar with the matter Sept 1.
"Talks will continue for at least a month before a decision" is expected to be taken, said the person. During this period Klesch will conduct due diligence.
Eni has put no job cuts at the 84,000-barrel-a-day refinery on the Tuscan coast at the top of its list of conditions, the person added. For this reason, Eni - Italy's biggest oil and natural gas company - is offering to buy Livorno's refined products for five years should the sale be agreed.
Oil companies are putting refining assets up for sale due to declining consumption as a result of the global downturn and as they struggle to squeeze profits out of their refining operations. Royal Dutch Shell PLC said in late July it aims to sell around 8% of its refining capacity between 2009 and 2010.
Tuscany's Governor Claudio Martini met the head of Eni's refining and marketing August 31, Angelo Caridi, to discuss the Livorno refinery sale, said the regional government in a note after the meeting in Florence.
According to Governor Martini, the Tuscan region asked Eni that a possible buyer include specific obligations on the workforce at the facility, investments and environmental protection. He said that Eni agreed to meet him again before a deal is concluded.
In July, Eni Chief Executive Paolo Scaroni reiterated that the company plans to reduce its refining capacity "in a market that is going down" as it holds a "pessimistic" view of the future of refining margins in the Mediterranean.
The Livorno refinery "is not losing money today," Scaroni added.
Nobody was immediately available to comment at the London office of Klesch, one of the largest private-equity firms in the mining and metals industry.
Petroplus Holdings AG on Aug 12 announced a reduction in crude processing at both the Cressier and Reichstett refineries due to an incident that occurred at the Societe du Pipeline Sud-European (SPSE) pipeline in France.
There has been a full and safe shut down of the Cressier refinery. The refinery will stay in safe shut down mode for approximately two weeks. Following further information on the repair of the SPSE pipeline this time period may be adjusted.
The Reichstett refinery is currently running at minimum rates. However, if crude supply continues to be limited due to the SPSE pipeline incident then a full shut down of the Reichstett refinery may also be required within the next few weeks.
The company stated that it is making reasonable endeavors to continue to supply oil products to its customers.
Royal Dutch Shell plc on said it will build a new hydrodesulfurization plant at its Pernis Refinery in the Netherlands. The plant, expected to come on stream in the second half of 2011, will increase cleaner-burning, low-sulfur fuels production at the 400,000 barrels per day refinery.
"The investment is part of Shell's strategy of selective downstream growth and focus on larger, integrated refining and chemical sites," said Tom Botts, Shell's Downstream Executive Vice President for Global Manufacturing.
Much of the production from the new plant will be marketed to German households as domestic heating oil, which must comply with strict new sulfur content requirements: The new plant's energy consumption and emissions will comply with the highest standards, anticipating more stringent European requirements. For instance, the new desulfuizer's furnace features a specially designed multi-burner system that will reduce nitrogen oxide (NOx) emissions.
At the peak of construction activity, about 1,300 extra people will work on the Shell Pernis site, in addition to the regular Shell workforce of 2,100.
Dow Chemical Co. on September 1 sold its interest in a Netherlands-based crude oil refinery for about $800 million, including inventory, in a move that furthers the chemical company's efforts to divest noncore assets.
The chemical company completed the sale of its interest in the Total Raffinaderij Nederland NV refinery to Paris-based Total SA.
KBR on August 24 announced its M.W. Kellogg Ltd. subsidiary has been awarded two contracts by StatoilHydro at the Karsto Gas Plant, near Stavanger, Norway. MWKL will provide Engineering, Procurement and Construction Assistance (EPCa) for the Double Inlet Crossover Project (DIXO) and NGL Metering Project.
The goal of the DIXO project is to provide increased regularity and blending possibilities for incoming gas supplies to the facility which will be achieved by providing two cross over lines.
The NGL Metering Upgrade project is to take place in parallel to the KEP 2010 EPCa project already being undertaken by MWKL, so the effective interface co-ordination and planning for all phases of the project is critical to the success of the project.
"MWKL has been involved with the Karsto Gas Terminal for more than 25 years and has executed over 20 projects including conceptual studies, pre-engineering, and world-scale engineering, procurement and construction assistance projects during this period," said Stewart Watson, Managing Director, MWKL. "We are delighted to be involved in these projects which will further enhance the operability of the Karsto facility."
MWKL, a majority owned subsidiary of KBR Inc. is a full service contractor serving the energy and petrochemicals industries. MWKL, headquartered in London, executes world-scale international projects from conceptual feasibility studies through fixed price turnkey mega-projects.
Essar Energy has officially entered the race to acquire three refineries from Royal Dutch Shell, pitting itself against U.S. firm Valero, Libya's National Oil Corporation and an investment vehicle controlled by the Saudi royal family.
An investment banker close to the transaction told ET that Essar had put in its bid to acquire a refinery complex in Stanlow in UK, and two others in Heide and Harburg, Germany. "The last date for placing the final bid was on August 17," he said requesting anonymity.
A London-based team, which the group has recently formed to scout for global acquisitions, is involved in the transaction.
Shell had put these refineries on the block to cut capacity and plans to mop up around $2.5 billion from the deal. The company had reported a 70 percent decline in net profit for the second quarter, and is looking to save costs by shedding idle capacity. The three refineries have a combined capacity to process 18 metric million tonnes per annum (mmtpa) of crude oil.
An Essar spokesman refused to comment on the deal but said "as a group, we keep looking at growth opportunities in the businesses in which Essar operates.” Shell spokesman Rainer Winzenried also said that the firm was indeed reviewing some of its refineries (two in Germany, one in Canada and one in UK).
"The review process is still going on and will take some time. I can't comment on any details yet, he said. Essar recently acquired a 50 percent stake in Kenya's oldest refinery, and is eyeing Shell's refining capacities to establish a distribution toehold in Europe.
"The prices of global energy assets have come down with falling oil demand and crude oil prices. This is a good time to buy assets," said Sanjay Grover, partner (tax & regulatory services) Ernst & Young.
"Owning European refineries will give Essar increased distribution capacity in Europe. Existing refineries have pipeline, road and sea links all of which would be hard to replicate from scratch. Funding will not be an issue for such an acquisition," said a senior official in the oil industry who did not want to be quoted.
In India, Essar operates 10.5 mmtpa refinery at Vadinar in the west coast and plans to scale it to 34 mmtpa refinery in the next two years to become India's third largest oil refiner after state-run Indian Oil Corporation (IOC) and Reliance Industries (RIL).
Shell's Stanlow complex, near Ellesmere Port, Cheshire, accounts for one-fifth of the UK's gasoline demand and is the oil giant's only refinery in UK. The refinery operates in 173-acre facility in northern England and has been operational for the 60 years, employs around 800 people. Shares of Essar Oil on BSE lost 6 percent or Rs 8 to close at Rs 130 in a weak Mumbai market. The stock has lost 3 percent in the past one week and 5 percent in the past one month.
KBR announced August 19 that it has been awarded a contract by Sonangol, E.P. to provide license and engineering services for grassroots FCC and Hydroprocessing technologies for the Sonaref Refinery to be located in Lobito, Angola.
KBR will provide licensing services for the state-of-the-art Orthoflow FCC technology and a Moderate Pressure Hydrocracking Unit (MPHC). This integrated solution will provide Sonangol the flexibility to control the gasoline to diesel ratio and to take advantage of seasonal demands. The company will also deliver Diesel Hydrotreating (DHT) and Kerosene Hydrotreating (KHT) technologies, for the production of premium distillate products. This contract award for four technology units follows the Front-End Engineering and Design (FEED) contract awarded in November 2008.
The four technology units are delivered in partnership with ExxonMobil Research and Engineering Company, (EMRE), Fairfax, Va., under joint marketing alliances for FCC and Hydroprocessing technologies between the two companies.
"KBR is pleased to continue our long-standing work related to the Lobito Refinery," said Tim Challand, President Technology for KBR. "This award builds on our strong, long-term relationship with Sonangol and our commitment to helping our customer achieve their objective of building a state-of-the-art refinery that will enable them to compete on a global scale."
The 200,000-bpd grassroots refinery is being built to reduce the country's dependence on imported products. The refinery will allow Sonangol to take advantage of heavy crudes produced domestically as well as enable them to export products internationally. When operations commence, the refinery will process crude into: premium gasoline, diesel, jet fuel, kerosene and liquefied petroleum gas (LPG).
Mozambican energy firm Oilmoz has moved the site for a planned $8 billion oil refinery to avoid putting a nearby elephant reserve at risk, the chairman said August 11.
The proposed site for the 350,000 barrel a day refinery has been shifted from the southernmost district of Matutuine, home of the Maputo Elephant Reserve, to Marracuene, about 125 kilometers to the north.
"The zone of Matutuine is a sensitive zone from the environmental point of view. There's an elephant reserve and it's also a zone of biodiversity," Chairman Leonardo Simao told AFP.
Simao, a former foreign minister of Mozambique, said the change of site won't slow construction on the refinery, which is scheduled to open in 2014.
Mozambique's only oil refinery closed 24 years ago, leaving the impoverished country dependent on fuel imports.
Oilmoz in March received $50 million from investors to begin environmental impact and feasibility studies for the project in partnership with Shell Global Solutions, a unit of Royal Dutch Shell PLC. Oilmoz plans to submit the project for final government approval early next year, Simao said.
Oilmoz says the facility will also include a 500 megawatt power plant, a petrochemical derivatives plant, a wastewater treatment unit, a fuel storage facility, a hospital and a housing project.
Mozambique has been working to rebuild its elephant population since a 16-year-civil war ended in 1992. Loki Osborn, a zoologist at the University of Cambridge, has called the Maputo Elephant Reserve "potentially one of Mozambique's most important natural assets."
The park is home to some 300 elephants.
Multinational oil and gas group Petronas, the majority owner of Engen, must make some tough decisions about the fate of the Engen Refinery in Durban.
It is not alone: all owners of refineries in SA are in a spot and pondering the future of their refineries. The government is putting pressure on them to invest further in their facilities in preparation for the introduction of cleaner fuels.
If SA is to move to the cleaner Euro 4 fuel standards, oil companies must invest about R40bn by 2014, according to the South African Petroleum Industry Association (Sapia).
Given the extent of the investment needed, refineries will have to turn to their owners with hands extended. It does not help that refining margins -- the profit from turning crude oil into fuels such as petrol and diesel -- have been low. "Shareholders will have to invest heavily," Engen refinery GM Willem Oosthuizen says in specific reference to the Durban Engen refinery.
Oosthuizen says Engen has presented options to the board regarding the refinery's future, including the addition of a "hydrocracker".
If built with upgrading units made of a tar-like material, the hydrocracker can increase petrol, diesel and jet fuel yield by between 5% and 15%, he says.
Oosthuizen says it will cost Engen between R10bn and R20bn to upgrade the refinery. With the upgrading, it would also make sense for Engen to increase capacity from 120,000 barrels a day to about 200,000 a day.
Given its current capacity, the refinery is considered small by global standards, while a 200,000-barrel-a-day refinery is midsize. Increasing the refinery's capacity will lead to lower costs of producing a single barrel. The bigger the refinery, the lower the costs per barrel Oosthuizen says, adding: "You cannot be number one if you are small."
A second option will be to consider the so-called post-treatment, which entails taking sulfur out of petrol. The main upgrading unit for the refinery uses the fluid catalytic cracking (FCC) process to produce petrol with high sulfur content.
Given its age and original configuration, the Engen refinery is considered complex.
The last and most undesirable option is for the refinery to be shut and turned into an import terminal. Engen could use the tanks to store imported petrol, diesel and jet fuel.
"That will be a bad decision in terms of the local economy. These kinds of refineries are important to the local economies. It is typical of old refineries," Oosthuizen says.
He says of all the scenarios, Engen is hoping for the "high- road" option, which will entail upgrading the facility.
Oosthuizen concedes that a number of factors will feature in the decision-making process, and these do not necessarily count in Engen's favor.
They include what he termed Engen's image problem. Its refinery has taken a lot of criticism from the nearby Wentworth community. Engen and the community have had a fair share of showdowns over the environmental effects of the refinery.
Shareholders cannot afford to have an entity that damages the brand. "All the things about the conflict have affected the brand. These have been a big problem for Engen and Petronas. The conflict is the single biggest thing to manage," Oosthuizen says.
In a bid to improve neighborly relations, Engen and the Wentworth community hold monthly meetings at which environmental concerns are discussed, among other issues.
There is also the matter of the 400,000-barrel -a-day refinery that national oil and gas group PetroSA plans to build in Coega, near Port Elizabeth. That refinery, which will be configured to produce fuel that conforms to Euro 5 standards, has the oil companies worried.
"It (the PetroSA refinery) is a threat," Oosthuizen says. For its part, PetroSA has said it is open to partnerships with other "complementary" refineries.
Commissioned in 1954, the Engen refinery is SA's oldest. Over the years, new units have been added to the facility to enhance production and efficiency.
Eni SpA has expressed interest building a refinery in Uganda and a 1,300-kilometer pipeline from there to the Kenyan port of Mombasa, a government official told Dow Jones Newswires August 14.
"Its almost a done deal but talks are still underway," said the senior official at Uganda's Petroleum Exploration and Production Department, adding a cooperation deal could be signed soon.
Under the deal, Eni would be expected to partner U.K.-based Tullow Oil PLC in carrying out a feasibility study for the construction of a 100,000 barrel a day refinery in the Albertine region. The refinery would produce fuel for both domestic and regional markets.
A 1,300 kilometer pipeline is also necessary to take fuel from the Albertine rift to the Kenyan port of Mombasa for export once the country reaches full production. Other projects being considered include a railway line and a number of roads to the remote oil region.
The official said when the deal is finalized Eni will also acquire stakes in oil blocks on the Ugandan side of the rift.
Eni couldn't immediately comment.
Eni executives including Chief Executive Paolo Scaroni met Ugandan President Yoweri Museveni in August. Sources close to state house say the president welcomed Eni's interest in the sector and promised to support the company's efforts to invest in the country. He also retaliated Uganda will refine fuel domestically before export.
The president's spokesman confirmed the meeting.
"They discussed a range of issues including investment opportunities in Uganda but for now, the president would want them to remain a secret," Tamale Mirundi said.
Government officials say Uganda's confirmed oil reserves now stand at 2 billion barrels, with vast areas of the oil region still to be explored.
Uganda has issued an international tender for feasibility studies on the construction of 150,000-barrel-a-day refinery as it moves closer to start oil production, the Ministry of Energy and Minerals said August 18.
Energy and Minerals Development Minister Hilary Onek has said Uganda doesn't want to export unrefined crude when it starts oil production in the next three-to-four years.
In a statement; the ministry said the feasibility studies would begin Oct. 20 and examine the anticipated oil production program on the Ugandan side of the Albertine Rift. The six-month study will also determine the viability of the refinery, its location as well as the regional oil-product market. The study is being funded by the Norwegian government
Interest in Uganda's oil sector continues to increase, propelled by drilling successes in three blocks operated by Tullow Oil PLC and Heritage Oil Ltd. In August, executives of Italy-based Eni SpA (E) held talks with the President Yoweri Museveni and expressed interest in investing in the Ugandan oil sector.
Fluor Corp. announced August 7 that its Russian joint venture Sakhalin Neftegas Technology LLC was awarded a contract by Exxon Neftegas Limited, on behalf of the Sakhalin-1 Consortium, for expanding its Chayvo Onshore Processing Facility (OPF) located on Sakhalin Island off the east coast of Russia.
Fluor and SakhalinNIPImorneft are joint venture partners in Sakhalin Neftegas Technology. Fluor booked the approximately $700 million contract in the first quarter of 2009.
"Helping our clients execute vast and complex projects in remote and demanding geographic regions of the world is one of Fluor's key strengths," said David Seaton, Senior Group President of Fluor Corporation. "We are proud that we were chosen for this strategically important project."
Alfa Laval has received an order for compact heat exchangers from one of the major refineries in Russia. The order value is about US$15 million with delivery scheduled for 2010. The Alfa Laval compact heat exchangers will be used for preheating the crude oil before it goes into one of the main distillation processes.
By using Alfa Laval’s compact heat exchangers it is possible to recover heat from several streams of the refinery process. As a result the Russian refinery will be able to reduce its energy consumption by 340 MW and CO2 emissions by 850 000 tonnes annually. The reduction of CO2 emissions corresponds to approximately the emissions from all family cars during one year in Stockholm, the Swedish capital.
“The order confirms that Alfa Laval’s compact heat exchangers has an outstanding offer that fits the refinery needs; technical, financial and environmental”, says Lars Renström, President and CEO of the Alfa Laval Group. “It is also evidence that Russian refineries’ continue to investment in energy efficiency.”
China National Petroleum Corp. (CNPC), parent of PetroChina, on August 12 announced that it's kicked off the construction of its fourth natural gas processing plant in the southern Sugeli natural gas field of Inner Mongolia.
The plant will be jointly operated by CNPC and Total S.A., the worldwide French oil company and boast an expected annual processing capacity of 5 billion cubic meters.
The project is expected to enter into production by the end of 2010. The annual processing capacity of the Sugeli natural gas field will reach 18 billion cubic meters.
The investment to be made by Total S.A. into the gas plant stands as one of the largest foreign investments in China's oil and gas resources.
Phase three of the Abadan Oil Refinery’s development plan is 80 percent complete, the refinery’s managing director said on August 30.
The Islamic Republic of Iran Broadcasting (IRIB) quoted Alireza Abhaji as saying that the project is estimated to come on stream by mid-March 2010.
“Once the unit is put into operation, the refinery’s gasoline output capacity will rise to 16 million barrels per day from the current figure of 10 million barrels, supplying 20 percent of the domestic gasoline demand,” he said.
The phase three of the Abadan Oil Refinery is also projected to daily produce 25,000 barrels of catalytic cracker, 434 tons of liquefied gas, and 251 tons of gas extracted from the cracking operation, according to IRIB.
The cracking unit will be established using the universal oil product (UOP) technology.
A catalytic cracker is a chemical reactor used for converting oils with high boiling points into fuels with lower boiling points.
It is estimated that the development plan would cost 280 million euros to complete.
Previously, Abhaji had stated that a Chinese company will take up 35 percent share in the refinery development project.
“The Iranian Oil Ministry laid much emphasis on the development project of the Abadan refinery in a bid to increase the refinery’s capacity for producing different kinds of oil products,” he added.
The Abadan refinery is located in the southwestern city of Abadan near the Persian Gulf coast. It was completed in 1912 and was one of world's largest oil refineries when it was destroyed in 1980 by Iraq in the Iraq-Iran war.
The refinery had a capacity of 635,000 b/d in 1980 and formed a refinery complex with important petrochemical plants. Its capacity has been increased steadily since the war ended in 1988. Its capacity is now listed as 450,000 b/d crude oil.
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