Foster Wheeler AG announced October 7 that its Global Engineering and Construction Group has been awarded a contract by the CO2 Capture Project (CCP) to undertake a study to evaluate a range of refinery, in-situ extraction of bitumen, and natural gas power generation CO2 capture scenarios.

The Foster Wheeler contract value for this project was not disclosed and was included in the company's third-quarter 2010 bookings.

The CCP is a partnership of seven of the world's major energy companies including BP, Chevron, Eni, Petrobras, Shell, Suncor, ConocoPhillips, and associate member EPRI. Since its formation in 2000, the CCP has been at the forefront of advancing the technologies that will underpin the widespread adoption of CCS. The CCP is now in the third phase of its work (CCP3); a critical stage in preparing the ground for widespread deployment of CCS. The study awarded to Foster Wheeler will contribute to this phase of the CCP's program.

Foster Wheeler will study the application of CO2 post-combustion capture to a range of refinery, in-situ extraction of bitumen and natural gas power generation CO2 capture scenarios, including both retrofit and green-field solutions. The study is expected to be completed at the end of the fourth quarter of 2010 with the production of a 'CO2 Capture Handbook' to be used by the CCP participants for their use in pre-screening work on carbon capture projects.

"This award reflects the depth and range of our carbon capture and storage expertise and our extensive energy refining and chemicals experience. It also demonstrates the client's confidence in our ability to leverage this expertise and apply creativity and outside-the-box thinking to deliver high value-added consultancy and help our client meet its objectives," said Umberto della Sala, president and chief operating officer, Foster Wheeler AG.

The CO2 Capture Project (CCP) is an award-winning partnership of seven major energy companies, working to advance the technologies that will underpin the deployment of industrial-scale CO2capture and storage.

Since its formation in 2000, the CCP has undertaken more than 150 projects to increase understanding of the science, economics and engineering applications of CCS. The group has been working closely with government organizations -- including the U.S. Department of Energy, the European Commission and more than 60 academic bodies and global research institutes. CCP received the Carbon Sequestration Leadership Forum (CSLF) Recognition Award in 2009 for its contribution to the advancement of CCS.

AMERICAS

U.S.

BP's Texas Refinery Fires, Leak Draw $15 Million Fine

Although BP has pledged royalties from future oil and gas production in the Gulf of Mexico as collateral for the $20 billion Deepwater Horizon Oil Spill Trust to pay claims from the April 20 incident, the company was hit with another big fine.

BP Products North America Inc. agreed to pay a $15 million penalty for violations of the federal Clean Air Act at its Texas City petroleum refinery in Texas. The penalty resolves federal civil claims stemming from two fires, a leak, and reporting violations at refinery.

The penalty is the largest ever assessed for civil violations of the Clean Air Act's chemical accident prevention regulations and also the largest civil penalty recovered for Clean Air Act violations at a single facility, the U.S. Environmental Protection Agency and the U.S. Justice Department said October 1.

The settlement, which is subject to court approval, addresses violations stemming from two fires that occurred at the refinery on March 30, 2004 and July 28, 2005, and a leak that occurred on August 10, 2005.

During the three incidents, each of which required the surrounding Texas City community to shelter-in-place, thousands of pounds of flammable and toxic air pollutants were released.

BP's Texas City refinery is the third largest in the United States, with a production capacity of more than 460,000 barrels of oil per day.

EPA identified the Clean Air Act violations that have been resolved during a series of inspections of the Texas City refinery begun after a catastrophic explosion and fire on March 23, 2005 that killed 15 people and injured more than 170 others.

"BP's actions at the Texas City refinery have had terrible consequences for the people who work there and for those in nearby communities," said Cynthia Giles, assistant administrator for EPA's Office of Enforcement and Compliance Assurance.

The U.S. Chemical Safety Board determined that the 2005 explosion happened when a 170-foot tower at the refinery was being filled with liquid hydrocarbons. Because of missed communication among exhausted workers, no one saw that the tower was filled too full.

A fountain of chemicals burst from the tower, and the vapors were ignited when a fleeing contractor tried to start his balky pickup.

The Chemical Safety Board concluded that the explosion was "caused by organizational and safety deficiencies at all levels of BP."

On October 30, 2009, the Labor Department's Occupational Safety and Health Administration imposed an $87 million fine on the company for failing to correct safety hazards revealed in the 2005 explosion. In its report, OSHA cited over 700 safety violations. The fine was the largest in OSHA's history, and BP announced that it would challenge the penalty.

On August 12, 2010, BP announced that it would pay $50.6 million of the October 30 fine, while continuing to contest the remaining $30.7 million. The fine had been reduced by $6.1 million between when it was imposed and when BP paid the first part.

OSHA is still working to collect another $30 million from the company for other penalties that BP is contesting.

EPA also identified violations of other Clean Air Act requirements at the refinery relating to the control of benzene, ozone-depleting substances, and asbestos. Exposure to benzene can harm human health and exposure to asbestos, a known human carcinogen, can cause two types of cancer.

These other violations were resolved in a February 2009 settlement that required BP to spend more than $161 million on pollution controls, enhanced maintenance and monitoring, and improved internal management practices at the refinery. The company also paid a $12 million civil penalty and performed a $6 million supplemental project to reduce air pollution in Texas City and vicinity.

With the October 1 settlement, the federal government will have recovered $137 million in criminal, civil, and administrative fines related to process safety violations at the Texas City refinery.

In addition, BP Products has performed $1.4 billion in corrective actions and the company will spend an estimated additional $500 million, to improve safety at the refinery as required by settlements entered into with the Occupational Safety and Health Administration (OSHA) and the criminal Clean Air Act plea agreement following the fatal March 23, 2005 explosion.

"Today's settlement, in conjunction with other actions already taken by EPA and other federal agencies at Texas City, demonstrates the agency's continuing commitment to actively and vigorously working to hold BP accountable and to make them comply with our nation's environmental protection laws wherever the company operates," said Giles.

"The Clean Air Act is intended to prevent not only accidents like the fatal March 2005 accident, it also penalizes accidents like these three that result from poor practices and cause air pollution," said Ignacia Moreno, assistant attorney general for the Justice Department's Environment and Natural Resources Division.

"This settlement emphasizes the serious nature of the fires and releases of hazardous air pollutants that occurred at BP's Texas City Refinery and puts industry on notice that the Department of Justice and the EPA will aggressively pursue those who fail to comply with the laws that protect our environment."

Washington State to Release Tesoro Refinery Blast Probe Report in October

Washington state officials planned to release the results of their investigation of last April's Tesoro refinery explosion on October 4.

The Washington Department of Labor and Industries conducted a six-month investigation of the Anacortes blast that killed seven people. They focused on determining if there were any violations of state workplace safety and health regulations.

Tesoro announced earlier that it would begin bringing its Anacortes facility back online starting on October 6. The company says its refinery units will be brought back into operation on a staggered basis, with a goal of having the whole facility working by October 15.

Magna International Proposes 200,000 to 250,000 bpd Oil Refinery in Simmesport, LA

Officials with the Canadian company that built the post-Katrina village Magnaville in Simmesport, LA are looking into building a crude oil refinery near the small Avoyelles Parish town that sits on the Atchafalaya River.

According to an August 11 letter from Louisiana Gov. Bobby Jindal to Magna International Developments Inc., the 200,000 to 250,000 barrel-per-day refinery would employ more than 600 workers in addition to the construction jobs it will take to build the "clean fuels" plant.

"Louisiana supports this important economic and environmental project," Jindal wrote to Magna Vice Chairman Dennis Mills. "Please let me know what I can do to assist Magna International in this important matter."

Kyle Plotkin, press secretary for Jindal, referred questions to Louisiana Department of Economic Development Secretary Stephen Moret.

Moret declined to answer questions such as how much effort the Jindal administration is spending on the proposed Simmesport project in Central Louisiana, and how much money is left in the state fund used to entice companies to Louisiana.

State Rep. Robert Johnson and Sen. Eric Lafleur, both Democrats whose districts include Simmesport, visited with Moret about getting a port constructed in Simmesport, which has been completed, Johnson said.

They also talked at the time about building a refinery somewhere in Avoyelles Parish, Johnson said.

"We would support any kind of project that brings jobs to the parish," Johnson said, adding that he was bound by confidentiality agreements to not discuss specifics.

In mid-September, Jindal announced that North Carolina steelmaker Nucor Corp. would build an iron plant in St. James Parish. For that, the state gave incentives, including $160 million in performance-based grants, local tax exemptions and hundreds of millions of dollars in low-interest, tax-free loans, according to The Advocate.

Moret, in an e-mail to The Town Talk, said "premature media" stories about possible projects could damage their viability.

"In order to protect Louisiana's competitive position relative to other states, we don't discuss our interactions with confidential business development prospects," Moret said.

If it happens, the oil refinery would be the first one built in the United States since the 1972 completion of Marathon's Garyville plant.

Marathon this year completed a $3.9 billion expansion to its Garyville plant on the Mississippi River near New Orleans.

The Marathon expansion was done at a plant that already had permits. Larry Wall, with the Louisiana Mid-Continent Oil & Gas Association, said Simmesport's location offers advantages, such as it being on the Atchafalaya River, where barges could bring in crude oil and depart with the finished product.

"It also would be out of the hurricane path pretty much and not be shut down like they were in 2005," Wall said.

When Hurricanes Katrina and Rita blew through in August and September 2005, respectively, many of the Gulf Coast refineries were knocked out, and gasoline and other commodity prices shot up.

Wall said refineries are expensive to build, and that's after applying for and getting permits and conducting engineering studies.

If the process of permitting, engineering and pre-construction were started today, "you're looking at a minimum five years, if you're lucky, of getting it online," he said.

An example of the economic and project scale of refineries is the recent completion of the Garyville expansion. Now, the whole plant covers 5.5 square miles, the expansion cost $3.9 billion, and Garyville went from being the 18th largest refinery in the country to the fourth-largest.

The Simmesport plant "would incorporate the latest technology, and fuels produced by the new facility will meet the 'California Air Resource Board (CARB)' quality," Jindal said in his letter to Mills. "This would be very beneficial to the ozone non-attainment zone in Louisiana and elsewhere across America by reducing nitrogen oxides and carbon monoxide tailpipe emissions."

Small Refiner PBF Energy Relies on Big Partners to Turn Profits

PBF Energy Co. is cutting through the usual tangle of supplier and marketing agreements to save two struggling East Coast refineries, relying on just one company to provide their oil and another to sell their fuel.

In a highly unusual strategy, PBF will buy oil solely from Statoil ASA, and market transportation fuels exclusively with Morgan Stanley. Typically refiners, even small ones, do their own trading, sometimes working with hundreds of suppliers to find deals on crude and scouring the world to sell their refined products at the highest price.

By outsourcing trading to bigger, more experienced firms, PBF hopes to squeeze some extra profits out of two refineries, one of which had already been shut down for being uncompetitive by Valero Energy Corp., its former owner. Two-year-old PBF is a joint venture between European refiner Petroplus Holdings AG and private-equity firms Blackstone Group LP (BX) and First Reserve Corp. Petroplus said at the end of September it is exiting the partnership to focus on its European operations.

PBF bought refineries earlier this year from Valero in Delaware City, Del., and nearby Paulsboro, N.J, for a combined $580 million, after both facilities had sat on the blocks for months with little interest from other buyers. Both process lower-quality crude, which earns refineries lower profits and have suffered disproportionately as the weak economy has hurt fuel demand. With other East Coast refineries able to run higher-quality oil, a radical strategy was needed to reopen the Delaware plant and boost profits at the Paulsboro facility.

"It is an interesting strategy and I think given what we know about [PBF's] assets--they have been struggling--you probably need something to make sure they are cash flow positive," said RBC Capital Markets managing director Jacques Rousseau.

Having an exclusive agreement with Statoil, which is expanding its North American trading operations, could give PBF access to cheaper crude that Valero wasn't using, Rousseau said. He added that PBF's exclusive supply and sale agreements could help the company compete with the major East Coast refiner Sunoco Inc.,.

The idea of becoming a "pure" refiner contrasts with the push by Valero, Sunoco and Tesoro Corp. --the three largest U.S. independent refiners by capacity--to expand their retail and distribution operations. Each is trying to create a brand identity with drivers and increasing investment in their stations' convenience stores.

"This is really a different business model than many other companies," said PBF President Michael Gayda.

Still, the refining industry is a volatile business that can see profits skyrocket or transform into losses over short periods depending on the cost of the oil refined relative to the fuels produced. U.S refiners are beginning to recover after prices for refined products collapsed in the second half of 2008. But refiners on the East Coast face additional pressure from cheap fuel imported from the Gulf Coast and overseas.

Washington State Levies $2.4 Mln Fine for Anacortes Blast

After a six-month investigation, Washington State's Department of Labor & Industries (L&I) has concluded that the deadly explosion at the Tesoro petroleum refinery in Anacortes could have been prevented.

At a press conference October 4, L&I announced it has cited Tesoro for 39 "willful" violations and five "serious" violations of state workplace safety and health regulations, fining the company $2.38 million. While no amount of money can reflect the value of a person's life, this is the largest fine in the agency's history.

A willful violation is a category of violation where an employer knowingly violates a rule and is plainly indifferent to correcting it, while a serious violation is one involving an instance where there is a substantial probability of serious injury or death.

A heat exchanger at the refinery ruptured April 2, 2010, releasing hydrocarbon vapor which almost immediately ignited. Seven workers, five men and two women, died as a result. It is the worst industrial disaster in the 37 years that L&I has been enforcing the state's workplace safety law, the Washington Industrial Safety and Health Act.

"The loss of seven lives is a tragedy not just for their loved ones but for our entire state. What makes the loss of these lives all the more painful is that these deaths could have been prevented," Governor Chris Gregoire said. "I believe the action L&I is announcing today and the record fine they have assessed against Tesoro sends a clear message that these tragedies are not acceptable."

L&I inspectors found that Tesoro disregarded a host of workplace safety regulations, continued to operate failing equipment for years, postponed maintenance, inadequately tested for potentially catastrophic damage and failed to adequately protect their workers from significant risk of injury and death.

"This explosion and the deaths of these men and women would never have occurred had Tesoro tested their equipment in a manner consistent with standard industry practices, their own policies and state regulations," said L&I Director Judy Schurke.

At the October 4 press conference, L&I inspectors explained that the explosion occurred in the plant's Naphtha Hydrotreater Unit, an area that includes two banks of heat exchangers. Naphtha a flammable, oily substance produced as part of the refining process flows through the heat exchangers, cylinders approximately 30 feet long, on its way for further processing. One of these heat exchangers split violently on April 2.

The blast came as workers were returning a bank of heat exchangers into service after it had been shut down for maintenance. As part of the investigation, the heat exchangers were sent to a laboratory in Ohio and dismantled for metallurgical testing. Tests revealed cracks had developed in many of the welds in the heat exchanger that exploded and in at least one other similar heat exchanger. These cracks likely developed over the years.

These heat exchangers were nearly 40 years old. In addition, they were subjected to extreme heat and pressure, wide temperature and pressure swings, extensive chemical exposure and a near doubling of production over the years. These are all stresses that can damage this equipment, including causing cracking. Despite this, Tesoro failed to test the heat exchanger that exploded in a way that would have revealed such cracks.

"If Tesoro had tested their equipment appropriately and had followed their other safety requirements, we believe that they would have found the cracks that caused this explosion and, either by replacing the equipment or repairing it, prevented this from happening," said Michael Silverstein, assistant director, Division of Occupational Safety and Health.

The equipment also leaked hot, volatile and flammable vapor and liquid from flanges and other connections for years, especially when starting up following a shutdown. Tesoro's repair efforts, including clamps, were ineffective and when they could not correct the problem, workers had to disperse the flammable vapors with long tubes called "steam lances" in an effort to prevent ignition. Employees did this work in hard hats, gloves, goggles and basic flame-resistant coveralls, which was inadequate protection for the hazards they faced.

Tesoro's lengthy list of willful violations include failing to inspect equipment consistent with recognized engineering practices and industry standards, failing to test for cracks and other defects in equipment prone to damage from thermal fatigue, chemical exposure, and failing to implement its own corrosion awareness and management program.

Other willful violations were cited because Tesoro also failed to repair equipment, as with the leaks on the heat exchangers; did not have start-up procedures for the heat exchangers that clearly described the hazards workers would face; and failed to ensure workers involved in starting up the heat exchangers were properly trained.

Among the serious violations, Tesoro was cited for failing to ensure fire brigade members were properly trained and failing to ensure emergency communications were coordinated by a single incident commander.

The most important thing is for Tesoro to correct the hazards identified in the investigation.

"Our expectation is that in the coming weeks, we will work with Tesoro to improve their safety and health program so that work at their plant can begin again safely," Schurke said.

Technip Wins Hydrogen Plant Contracts at Valero Texas and Tennessee Refineries

Technip has been awarded two lump sum contracts by Valero Refining Company and Diamond Shamrock Refining Company (both part of the Valero group) for two hydrogen plants at their refineries in Memphis, Tenn., and McKee, Texas.

The two 30-million standard cubic feet per day hydrogen plants will produce high purity hydrogen and export steam. The plants will use a high efficiency top-fired steam methane reforming process and utilize the latest nitrogen oxide reduction technology thereby ensuring minimum emissions.

The contracts cover: basic engineering, project management, detail engineering, fabrication, supply and installation, pre-commissioning and start-up assistance. Technip's operating center in Claremont, California will execute these contracts. Technip is partnered with Performance Contractors Inc. for the installation of both hydrogen plants. The project is scheduled to be completed in the first half of 2012.

Marathon to Divest MN Refinery in $900 Mln Deal

Marathon Oil Corp. announced October 6 that its wholly owned subsidiary Marathon Petroleum Company LP (MPC) has entered into definitive agreements with ACON Investments, LLC and TPG Capital, L.P. for the sale of most of Marathon's Minnesota downstream assets. ACON and TPG formed Northern Tier Energy LLC to operate the assets as a stand-alone company.

Marathon, ACON and TPG first announced that a Letter of Intent had been signed on May 19, 2010. Marathon anticipates closing to occur by year-end, contingent upon the buyers meeting the conditions of their financing arrangements and other customary closing conditions. Included in the transaction will be the 74,000 barrel per day St. Paul Park refinery and associated terminals, 166 SuperAmerica convenience stores (including six stores in Wisconsin), SuperMom's LLC, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories. The total sales value is approximately $900 million including Northern Tier preferred stock with a stated value of $80 million. Approximately $300 million of the total sales value is for the inventories associated with these operations. The agreement also contains earnout and margin support components where Marathon could receive up to an additional $125 million over eight years or may be required to provide up to $60 million of margin support to the buyers, subject to certain conditions. Any margin support paid may be recovered by an increase in the total earnout amount.

This proposed sale is part of Marathon's ongoing efforts to ensure the Company's asset portfolio is strategically aligned with its business plans, while maintaining its position as one of the leading refining, marketing and transportation operations in the nation. MPC expects to continue to be one of the largest suppliers of finished products in the Midwest and Southeast through its remaining refining, distribution and marketing system.

Houston based Marathon, has principal operations in the United States, Angola, Canada, Equatorial Guinea, Indonesia, Libya, Norway, Poland and the United Kingdom. It is the fourth largest United States-based integrated oil company and the nation's fifth largest refiner.

ACON Investments is a Washington, D.C. based private equity firm with offices in Los Angeles, Houston, Madrid, Sao Paulo, and Mexico City. Founded in 1996, ACON manages private equity funds and special purpose investment partnerships with investments in the United States, Europe and Latin America. ACON has been a longtime energy investor, with experience in upstream and mid-stream oil and gas as well as investments in power infrastructure and energy services, including Mariner Energy, Chroma Oil and Gas, Milagro Oil and Gas, Signal International, Tropigas Inc, and SAE Towers.

TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992, with more than $47 billion of assets under management and offices in San Francisco, Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, Shanghai, Singapore and Tokyo. TPG Capital has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. TPG has significant experience in the energy sector with investments including Alinta Energy, Belden & Blake, Copano Energy, Denbury Resources, Energy Future Holdings (formerly TXU), Texas Genco, and Valerus Compression Services. TPG has also been an active investor in the retail sector.

EPA Grants SPCC Plan Extension to Refiners, Chem Facilities

The U.S. EPA is extending the compliance date by one year for certain facilities subject to recent amendments to the Spill Prevention Control and Countermeasure (SPCC) rule. The agency is also announcing that some facilities will not be eligible for the one year extension and will have to comply by the current date of November 10, 2010.

Last year, EPA amended the SPCC rule to strengthen certain provisions. Regulated facilities are required to amend and implement these changes as part of their overall SPCC plans. The purpose of the SPCC rule, which was finalized in 1973, is to establish requirements for facilities to prevent a discharge of oil into navigable waters or adjoining shorelines. EPA has no SPCC jurisdiction over drilling, production or workover facilities seaward of the coastline.

Types of facilities not eligible for the extension must comply by November 10, 2010:

Drilling, production or workover facilities that are offshore or that have an offshore component, or onshore facilities required to have and submit facility response plans (FRPs), due to the threats these facilities could pose of significant oil spills to navigable waters or adjoining shorelines.

Types of facilities eligible for the one year extension:

Onshore oil production, farms, electric utility plants, petroleum refining and related industries, chemical manufacturing, food manufacturing, manufacturing facilities using and storing animal fats and vegetable oils, metal and other manufacturing, real estate rental and leasing, retail trade, contract construction, wholesale trade, other commercial, transportation, arts entertainment & recreation, other services (except public administration), petroleum bulk stations and terminals, education, hospitals & other health care, accommodation and food services, fuel oil dealers, gasoline stations, information finance and insurance, mining, warehousing and storage, religious organizations, military installations, and government facilities.

In summary, the rule would:

Extend the date by which the owners or operators of certain facilities must prepare or amend and implement an SPCC plan by one year to November 10, 2011
Delay the compliance date by which facilities must address milk and milk product containers that are constructed according to the current applicable 3-A sanitary standards, and subject to the current applicable grade "A" pasteurized milk ordinance (PMO) or a state dairy regulatory requirement equivalent to the current applicable PMO until one year after EPA finalizes a rule for these facilities.
Maintain the current November 10, 2010 compliance date for drilling, production and workover facilities that are offshore or that have an offshore component, and for onshore facilities required to have and submit FRPs
Reconcile the compliance dates for new production facilities
These amendments do not remove the regulatory requirement for owners or operators of facilities in operation before August 16, 2002, to maintain and continue implementing an SPCC plan in accordance with the SPCC regulations then in effect.

Cal/OSHA Applauds Refiners' Corrosion Monitoring Program

Cal/OSHA's nationally recognized Process Safety Management (PSM) Unit has completed investigations at all of California's refineries in the aftermath of the deadly explosion in April at the Tesoro Refinery in Washington State. This extraordinary measure was taken to ensure safeguards are in place to prevent California from experiencing a similar disaster. Cal/OSHA's PSM Unit released its inspection findings on October 11 and concluded that the hydrogen corrosion that led to the Tesoro accident was due to circumstances that do not exist in this state.

The California Emphasis Program report found that California's refiners are using the most advanced technology available for controlling the type of corrosion that can be caused by crude oil refining. The report highlights the existence of best practices in California's refinery industry. The California Department of Industrial Relations' (DIR) Division of Occupational Safety and Health, which runs the Cal/OSHA Program, provided each refinery with a copy of the findings.

"Cal/OSHA's unprecedented approach to refinery safety is due to the PSM Unit developing a good working relationship and partnership with the refineries in California," said DIR Director John C. Duncan. "As the only agency in the nation having a dedicated Process Safety Management Unit, Cal/OSHA takes a cooperative, hands-on approach to process safety management. In addition to conducting accident investigations, our PSM Unit also conducts planned inspections, which means instead of waiting for accidents to happen, we go out there and make sure the proper measures are in place to minimize the potential for them to occur."

California's refineries cooperated fully with the PSM Unit's investigations by allowing inspectors unlimited access into the refineries and promptly providing the Unit with documents on request. Investigators also met with safety managers at the refineries to discuss safety concerns caused by corrosion damage. The PSM Unit examined each refiner's procedures and practices for identifying and mitigating the kind of corrosion damage that is known to be produced in naphtha hydrotreater process units, the same type of unit where the Tesoro blast occurred. This unit uses hydrogen to bring out impurities in naphtha, which is a flammable liquid byproduct of crude oil.

"Crude production is an inherently dangerous industry, but California's refineries are some of the safest in the nation due to the PSM Unit's multi-dimensional approach to refinery safety," said Cal/OSHA Chief Len Welsh. "Thanks in large part to the oversight of our PSM Unit, California's refiners use the most effective measures available to monitor corrosion, measures that were not used at the Tesoro plant in Washington State."

"The routine oversight of the PSM Unit has promoted the ability and readiness of Cal/OSHA and industry representatives to pick up the phone to ask questions of each other. This has resulted in a teamwork approach that is highly valued," said Terry Schulte, Voluntary Protection Program (VPP) Coordinator for Valero Refining Company, Benicia. "The Valero Benicia Refinery's involvement in the VPP further enhances that working relationship."

Cal/OSHA's Process Safety Management Unit is the only PSM unit in the nation dedicated to oversight of refineries and other operations handling large volumes of chemicals and was created in the aftermath of a 1999 settlement with the Tosco Corporation, which operated a refinery in California where an explosion killed four workers. In the 11 years since the PSM Unit was created, there have been three worker fatalities at refineries in California. The PSM Unit also regulates food handling facilities, alcohol and beverage manufacturers and chemical plants, among other industries.

Cal/OSHA is the employee health and safety division of the Department of Industrial Relations.

ExxonMobil Commissions ULSD Units at Baytown, Baton Rouge

ExxonMobil announced October 21 it has completed commissioning of new units to produce ultra low sulfur diesel at its Baytown, Texas and Baton Rouge, LA, refineries. This will enable ExxonMobil to increase the supply of ultra low sulfur diesel by over 3 million gallons a day from the refineries, and allow for reduced emissions from diesel consumption when used in modern engines.

"These projects are part of a series of global investments aimed at reducing the sulfur content of diesel fuel," said Sherman Glass, president, ExxonMobil Refining & Supply. "Together, they will help ensure future supplies of ultra low sulfur diesel products and enable the use of advanced technology diesel engines, resulting in improved air quality."

In December 2008, ExxonMobil announced plans to invest over $1 billion in three refineries to increase supply of ultra low sulfur diesel. The projects, located in the United States and Belgium, required construction of new hydrotreater units at each facility, as well as modification to the existing facilities. In the United States, the two projects provided more than 3,000 construction jobs and hundreds of millions of dollars of economic impact in the Baytown and Baton Rouge communities.

Completion of commissioning activities in Antwerp is expected later this year.

North Dakota $415,000 Refinery Study Supports More Diesel

The federal Department of Energy provided $415,000 for a year-long study of the economics of a new oil refinery in North Dakota. It concluded that a case could be made for a facility that makes diesel and the fuel product naphtha, but its rate of return likely would not justify the investment.

Markets for petroleum products could support new refining capacity in the state, but a project likely would require some incentives, according to the study.

"It would provide a rate of return that would be around 9 percent," said Dennis Hill, the spokesman for the study's steering committee. "It's probably still not enough to satisfy the traditional refining investment."

The study focused on a model that would produce 34,000 barrels a day of diesel and naphtha, a product that can be used to dilute heavy crude from the Canadian oil sands.

Production of more unleaded gasoline here is hard to justify because North Dakota's small population provides little demand for it. However, the state must import diesel to meet its needs and has experienced shortages recently.

"It's pretty obvious it's growing," said Hill, the head of the North Dakota Association of Rural Electrical Cooperatives, which oversaw the study project.

Sen. Byron Dorgan, D-N.D., who directed federal money to the project, said in a statement that new refining capacity "showed promise" and could help alleviate diesel shortages.

"The oil boom in North Dakota is expected to last for decades, so we must be forward-thinking when it comes to increasing the region's refining capacity," he said.

A refinery like the one envisioned in the study would provide 210 jobs with total annual salaries of $16.6 million and would provide other side benefits, according to the report.

Options for boosting the economic case for a refinery could include expanding the state's existing refinery rather than building new, public debt financing or state incentives.

"It could range from whether or not the state of North Dakota would want to provide some incentives" to local incentives or credit financing, Hill said. "There is still some apprehension that capital markets are a little skittish."

National demand for gasoline has been declining as fuel efficiency standards have been increasing, making most new refineries not economically feasible.

"Understanding that the gasoline market in the country is on the decline is hard to refute," Hill said.

Hill said the steering committee saw a presentation of the report earlier this month and was pleased with the results, though they did not make a case for additional unleaded production.

"I think the group came to understand the challenges in the market," he said. "The group appreciated the identification of a niche market."

The study group will next present its findings to the Department of Energy.

Refiners Face Changing Gasoline, Middle Distillate Outlook

According to EIA, U.S. refiners face a changing outlook for gasoline and middle distillate fuels (diesel, heating oil, jet fuel and kerosene) demand, with the need for petroleum-based gasoline declining and middle distillate consumption growing.

Both gasoline and middle distillate fuel consumption fell during the recent economic downturn, but gasoline fell less. The bulk of U.S. middle distillate consumption comes from heavy duty trucking and air travel, which are both affected strongly by economic activity. Gasoline consumption, on the other hand, is more sensitive to changes in personal income, which fared better than economic activity during the downturn, and prices. Once the economy began to recover, middle distillate fuels exhibited stronger growth than gasoline. Over the January through July 2010 period, distillate fuel consumption was 2 percent above its level over the comparable year-ago period while gasoline consumption remained flat.

Longer-term factors also suggest a growing need to produce more middle distillate fuels relative to gasoline. The consumption of petroleum-based gasoline is likely to decline for at least the next 5 years due to increasing light-duty vehicle efficiency standards and the growing use of renewable motor fuels and blending components as mandated by the Energy Independence and Security Act of 2007. From 2010 through 2015, EIA's 2010 Annual Energy Outlook shows U.S. gasoline consumption (which includes volumes of ethanol blended into the fuel) to be relatively flat, which implies a reduced need for petroleum-based gasoline once the increasing volumes of ethanol that suppliers will blend into gasoline are taken into account.

In contrast, EIA's Annual Energy Outlook 2010 projects that U.S. middle distillate consumption will continue to grow in the longer term, averaging 1.6 percent per year growth from 2010 to 2015. The forecast has heavy-duty vehicles experiencing less improvement in vehicle efficiency than anticipated in the light duty fleet, and little non-petroleum fuel penetrating distillate fuel markets.

In addition, U.S. refiners have recently had a robust export market for middle distillate fuels. In 2008, the United States switched from being a net importer to a net exporter of middle distillates, as surging world demand produced strong price incentives for U.S. refiners to export. Most U.S. exports went to markets in Europe and Latin America. U.S. refinery middle distillate yields during summer 2008 jumped 3.4 percentage points over summer 2007 from changes to refinery operations alone, allowing refiners to produce more distillate for export while avoiding surplus production of gasoline. Even though distillate margins have receded from 2008 levels, export opportunities remain attractive, and distillate export volumes have stayed high.

In the United States, the incentive for refiners to supply less gasoline and more distillate fuel may persist for years to come, while U.S. total petroleum demand remains relatively flat. This raises the question of how far U.S. refiners can increase their middle distillate/gasoline production ratios without making significant investments.

A review of actual refinery production, consultation with refiners and process experts, and some refinery modeling, indicates that U.S. refineries in aggregate likely have the ability to increase significantly annual average distillate yields on crude and unfinished oil inputs. Yields could rise 3 to 5 percentage points over typical historical yields of about 35 percent with little or no investments for distillation unit improvements. When planned hydrocracking increases are taken into consideration, the increase in distillate yields could rise to the 4-to-8 percentage point range. (Planned hydrocracking units are targeted for increased distillate fuel production.)

To put these yield changes in perspective, a single percentage point increase in middle distillate yield produces about 150,000 barrels per day more middle distillate volume (based on typical recent levels of 15 million barrels per day of crude oil and unfinished oil inputs). Thus, an increase of 5 percentage points produces an additional 750,000 barrels per day of middle distillate fuel, which is about 15 percent of U.S. middle distillate consumption.

Even if the economy recovers more rapidly than currently forecast and petroleum product demand picks up faster than expected, distillate would still be expected to grow more rapidly than gasoline. Surplus refinery capacity in the United States and Europe appears sufficient to absorb higher consumption growth rates than currently forecast by EIA. Given the outlook for rising distillate consumption, potential yield increases will enable U.S. refiners to meet changing U.S. demand patterns and increased distillate export requirements for at least the next 5 years, if not longer, without significant investments beyond those currently planned. In particular, it appears that U.S. refiners' export volumes will be limited by market conditions between now and 2015, rather than by their capacity to produce more distillate.

Valero to Shut Benicia Refinery for Maintenance

Valero said October 26 that it will shut its Benicia refinery for five weeks early next year for plant wide maintenance, raising the specter of higher gasoline prices if other plants suffer surprise hiccups at the same time.

The planned 36-day shutdown of the Benicia oil refinery marks the first time since October 2004 that the facility has been completely idled for maintenance efforts, said Bill Day, a spokesman for Texas-based Valero Energy Corp.

The refinery is due to shut in January for the maintenance, known in industry parlance as a turnaround, Valero officials said.

"It's better to do plant turnarounds in the fourth quarter or the first quarter," Day said. "Fuel demand is usually lower. You have less of an impact."

Refiners prefer to avoid major plant overhauls during the six months from April through September, he said.

"It's typically better to avoid doing this in the second and third quarters, which are closer to summer driving season," Day said.

Gasoline prices should not rise because of the Benicia refinery shutdown -- so long as other oil plants that might supply the West Coast operate as expected.

"A planned turnaround shouldn't have that much of an impact, as long as you don't have unplanned outages," said Jim Byrne, an analyst with the Calgary, Alberta office of investment firm BMO Capital Markets. "But you might see some increased prices if there are upsets beyond what's been planned."

Since a recent low in late September of $2.81 in the average price for reformulated gasoline, gas prices have risen 5.7 percent.

Yet plenty more pain could loom for motorists: Since late September, crude oil prices have risen 13.6 percent -- which means gasoline prices might rise even further. Drivers in the Golden State could be squeezed especially hard.

"California historically has been an import market," said Roger Read, an analyst with the Houston office of investment firm Natixis Bleichroeder. "There is not enough refining capacity on the West Coast to supply all of California."

That means there's little capacity to spare if unexpected refinery shutdowns surface.

"If you have an unplanned outage, suddenly you are competing with the world for gasoline products," Read said. "Given the logistical challenges of getting products to the West Coast, that makes things more expensive."

All told, Valero, the nation's largest refiner, said it plans maintenance projects at five refineries during the first three months of 2011. Besides the 170,000-barrel-a-day Benicia refinery, the other plants affected during the first-quarter repairs are:

-- A 90,000-barrel-a-day refinery in Oklahoma that will close completely for 40 days starting in March.

-- A catalytic cracker at a 250,000-barrel-a-day Louisiana refinery for 55 days starting in March.

-- A crude unit and a coker unit at a 310,000-barrel-a-day refinery in Texas that will begin in January and last for 55 days.

-- A hydrocracker unit at a different refinery in Texas that will begin in March and extend 24 days.

Valero determined that widespread work was needed to maintain the Benicia refinery.

"It made more sense to take the whole plant down, do all the work at once, and have the time to bring the plant back up and do it safely," Day said.

CUBA

Cuba’s Port of Cienfuegos Refinery Expanding

Amid a deep recession for Cuba, the Port of Cienfuegos is scheduled for a major expansion.

Driven by Venezuelan funding, Venezuela and Cuba are expanding a refinery and building a petrochemical hub around the southern port city.

The port will add three berths and a terminal for super cargo vessels within four years, a local TV station Perlavisión reported. Cienfuegos currently has five berths. Supplying the refinery with Venezuelan crude, supertankers have docked at Cienfuegos since 2008.

“The Port of Cienfuegos will be an industrial port, this will be its main role,” Luis Medina, general director of the national ports authority, said during a recent press conference. He said petrochemical products are changing the nature of the port.

Cienfuegos is not the only port expansion in Cuba. Construction of a container terminal at the Port of Mariel, just west of Havana, began early this year, with funding from Brazil and Dubai. Mariel will also be the base for offshore oil operations.

ASIA

CHINA

China's Xinjiang Province Planning Capacity Upgrades to Refine its Petroleum Base

China's western Xinjiang Uygur Autonomous Region is planning a capacity upgrade to 10 million tonnes for each of its four petroleum refining bases in a bid to craft itself into a global edging regional petroleum base in the coming few years.

The four refining bases are, respectively, located in the region's Dushanzi, Karamay, Urumqi, and Kuche County.

Up to now, the Dushanzi oil refining base boasts China's largest integrated project for petroleum refining, chemical engineering and oil product marketing. It was put into operation in September 2009 and is accessed to oil imported from Kazakhstan via pipelines.

In addition to the above landmark program, PetroChina's Dushanzi refinery, after taking in the refinery's original capacity, is capable of refining 16 million tonnes of petroleum each year.

The second 10-million-tonne base is likely in Karamay, where PetroChina Karamay Petrochemical Co. is located and aims to increase its refining capacity from the current five million tonnes.

PetroChina Karamay Petrochemical Co. is the biggest heavy oil producer in China, with heavy oil making up to 80 percent of its processed petroleum.

Also, a greenfield installation to hydrogenate 500,000 tonnes of lubricating oil a year will expand Karamay's production capacity of lubricating oil to approximately one million tonnes.

The third Urumqi base, PetroChina Urumqi Petrochemical Co., will increase its refining capacity to 9.5 million tonnes by 2011—approaching the pledged 10-million-tonne target.

As for the base's specialties, it began producing xylene this past July. The new production supports Urumqi's goal of broadening its capabilities in refining as well as fertilizer and aromatics production.

The fourth base, in Kuche Country, hopes to reach its 10-million-tonne target in the next several years. Both PetroChina Co., Ltd. and China Petroleum and Chemical Corp will increase their refining capacities there.

Currently, the Kuche base can refine 2.2 million tonnes of petroleum. Once the Sinopec Tahe Petrochemical Corp begins operations, Kuche's overall petroleum refining capacity will rise to 5.7 million tonnes.

Alongside the repeated new steps, Xinjiang is expected to arise as the largest petroleum and natural gas refining base in China. So far, PetroChina's refining capacity there has already exceeded 22 million tons per year.

The latest publicized data show that oil and chemical industry in Xinjiang grew by more than 10 percent year-on-year during Jan-Aug.

Officials with Xinjiang's Economic and Trade Commission have laid down a blueprint for setting up 10 industrial clusters—including petrochemical, machinery manufacturing, plastics, chemical fiber products, rubber products, and fine chemicals—to develop the downstream industries for petrochemical sectors.

Also, the 10 industrial clusters' relevant locations will situate at Zhishan, Kuche,

Karamay, Midong, Kuidu, Luntai, and Wusu petrochemical and industrial parks.

INDIA

Alfa Laval to Supply Heat Exchangers for Indian Refinery

Alfa Laval has received an order for Alfa Laval Packinox heat exchangers to be used in an Indian refinery. The order value is about SEK 110 million and delivery will be finalized during 2011.

The Alfa Laval Packinox heat exchangers will be used in a catalytic chemical process for mixed xylene which, among other things, can be used for production of PET bottles.

"India became our fourth largest market during the third quarter and I expect it to become number three in the near future", says Lars Renstroem, President and CEO of the Alfa Laval Group. "Once again our energy-efficient Packinox heat exchangers prove their unmatched performance for the refinery and petrochemical industries."

KOREA

Korea’s SK Energy to Spin Off Refining, Chemical Businesses

SK Energy Co., South Korea's largest oil refiner by capacity, said October 1 that its board has approved a restructuring plan, under which it will spin off its refining and chemical businesses into two separate companies.

The two new companies will be established January 1 if the spin-off plan is approved at a shareholders' meeting slated for November 26, SK Energy said in a statement.

The remaining entity, SK Energy, will focus on resources development and creating new businesses, it said.

As a result of the restructuring aimed at improving business decisions at its units, SK Energy will have three wholly-owned units, including SK Lubricants Co., which was set up in October last year.

SK Energy's refining and chemical businesses accounted for about 67% and 26%, respectively, of the company's revenue of about KRW36 trillion ($30 billion) last year.

MALAYSIA

Pertamina Asks Saudi Aramco to Build $7 Bln Refinery

Saudi Aramco has been invited to join Indonesian state-owned oil and gas company PT Pertamina and PT Chandra Asri to build a US$7 billion oil refinery integrated with a petrochemical plant in the country.

A Pertamina director Edy Setyanto said the company and PT Chandra Asri, the country's largest petrochemical producer, plan to build the integrated project in Banten.

The refinery will have a processing capacity of 300,000 barrels of crude oil per day, with products including naphtha needed to feed the petrochemical plant, Edy said.

Pertamina has long planned the project in cooperation with National Iranian Oil Refining and Distribution (NIORD) and Malaysia's Petrofield.

Originally the project was to be built in Bojonegara in Banten, but apparently Pertamina began to doubt that the cooperation could be implemented.

"If cooperation with Iran failed we could look for other partners most likely Aramco," Edy said.

VIETNAM

Experts Call for Raising Vietnam’s Dung Quat Capacity

The total cost to construct and put into operation Viet Nam's first oil refinery has been estimated at around VND43 trillion (US$2.2 billion), nearly VND8 trillion lower than first estimated. But some experts are concerned over its effectiveness.

At a meeting in October, PetroVietnam Group, the project's main investor, attributed the lower costs to the fact that running costs during a trial period had been cut and they had been tax exempt during that time.

A final report on the project with more specific statistics will be finished in December.

Vice chairman of the National Assembly, Nguyen Duc Kien, said this was the first of many national key projects to be reviewed in order to draw lessons and improve effectiveness in the future.

Minister of Industry and Trade Vu Huy Hoang said the refinery operated safely and stably at its full capacity at 6.5 million tonnes of crude oil per annum, satisfying nearly one third of the country's total demand.

According to a report by PetroVietnam, the refinery imported roughly 6.4 million tonnes of crude oil and produced 5.5 million tonnes of a variety of products since operations started last year.

Dung Quat sold 5.3 million tonnes of products making VND25 trillion ($1.28 billion), VND3 trillion ($153.8 million) of which went to the State budget.

PetroVietnam also reported to the National Assembly the project's internal rate of return (IRR) of nearly 7.7 percent.

The refinery generated 1,400 jobs and made a great contribution to the social and economic development of Quang Ngai Province.

However, experts pointed out some of the project's shortcomings. They claimed that it took nearly 13 years to complete after it had first been suggested, with construction suspended for over nine years.

Luong Van Ket, deputy director of the Ministry of Planning and Investment's Industrial and Economic Department said that the IRR should be higher than the 7.7 percent rate set by PetroVietnam.

He also expressed his concern over VND1.5 trillion that had not been disbursed due to problems on legal documents and procedures.

Experts also said that the refinery's capacity should be raised to 10 million tonnes of crude oil per year rather than the current rate of 6.5 million tonnes because the average capacity of other refineries around the world is 10-12 million tonnes.

EUROPE / AFRICA / MIDDLE EAST

FINLAND / SWEDEN

Shell to Divest Downstream Units in Finland, Sweden to Keele Oy

Shell announced October 27 that it has agreed to sell the majority of its refining and marketing businesses in Finland and Sweden to Keele Oy.

Keele Oy is the major shareholder of St1 Holding Oy, whose businesses include fuel retail networks in Finland, Sweden, Norway and Poland.

The terms of the transaction, which are subject to regulatory approvals, include Shell's retail business, including some 340 service station in Sweden and some 225 in Finland as well as its commercial road transport (CRT) in both markets. All service stations together with the CRT business will remain Shell-branded in both markets under a licensing agreement. Also included is Shell's 87,000-barrels-per-day Gothenburg Refinery, Shell's bulk fuels business in both markets and the Shell marine business in Sweden. The businesses will be sold as going concerns and Shell will receive a total cash payment of $640 million.

This announcement follows a review by Shell of its downstream businesses in the two countries. Commenting on the deal Mark Williams, Royal Dutch Shell's Downstream Director, said: "This transaction is consistent with Shell's Downstream strategy to reduce net refining capacity by 15 percent, to reduce our marketing footprint, and focus the portfolio on profitability and growth potential."

Not included under the scope of this deal are Shell's aviation and liquefied petroleum gas (LPG) businesses in Finland and Sweden, whose future will be the subject of separate announcements. The upstream business exploring for natural gas in southern Sweden remains out of scope of this transaction.

The transaction includes the signing of a Retail Brand License Agreement for the continued use of the Shell brand in the Retail and commercial road transport (CRT) markets in both countries.

FRANCE

Petroplus to Convert its French Reichstett Refinery into Terminal

Switzerland-based refiner Petroplus Holdings AG October 21 said it intends to convert its Reichstett refinery in eastern France into a terminal.

The announcement comes as Petroplus, Europe's largest independent refiner, failed to find a buyer for the site and mirrors a similar decision by the company to convert its Teesside refinery in U.K. into a storage facility in November 2009.

The move is unlikely to surprise the oil market as refiners in Europe have seen their regional and global market share eroded by a massive growth in refining capacity in the Middle East and Asia.

"It's very difficult to make an adequate return in a competitive market ... we have over capacity [in Europe] and as Reichstett is a relatively small refinery it makes it a good candidate for closure," said Roy Jordan, downstream consultant for EMC, an energy consultancy in London.

In August, Petroplus' outgoing chief financial officer Karyn Ovelmen said the Reichstett refinery's book value was $175 million.

The plant's current shutdown, due to widespread strikes in France, makes investment in Reichstett less attractive, said David Wech, head of research at JBC Energy, a consultancy in Vienna. But Wech cautioned the proposed Reichstett conversion isn't enough to stop further consolidation of Europe's refining industry. "Given that we see a total of 2.2 million barrels a day of shutdown requirement in Europe by next year, this is little more than a drop in the ocean."

Nationwide protests in France against a government-planned pension reform as well the restructuring of Marseille port have disrupted operations at all 11 of the country's active refineries.

Northwest Europe Brent fluid catalytic cracker variable cost margin -- an indicator of the amount of money a complex refiner can earn from processing a barrel of crude -- have fallen in the past two years, Jordan said.

The margin is now at just over $3 a barrel after getting a short-term boost from disruption to refining operations in France, but was as low as $1.40 a barrel at the start of October, Jordan said. The annual average margin was $5.35 a barrel in 2008, he added.

News also emerged that labor representatives of workers at a ConocoPhillips' (COP) Wilhelmshaven refinery in northern Germany will launch a search for new investors for the facility, after the U.S. oil major revealed plans to convert the site into an oil terminal and fuel depot.

The number of refineries still up for sale in Northwestern Europe highlights the difficulties facing the industry in the region, with seven plants currently on the list.

Wech warned that despite the Petroplus' decision to cease refining activity at the Reichstett plant, the process could be complicated in light of Total SA's struggle to halt refining activities at its Dunkirk refinery due to opposition from trade unions.

A French court in July ordered the French major to restart its 137,000-barrel-a-day plant in Dunkirk, after September 2009 saw Total halting refining at the site and present workers with a plan to permanently shut down refining operations there.

GERMANY

Rosneft to Buy Stake in German Refinery from PdVSA

Russia's state-controlled oil major OAO Rosneft said October 15 it agreed with Venezuelan state oil company Petroleos de Venezuela SA, or PdVSA, to buy from it a 50% stake in German refinery Ruhr Oel GmbH.

Rosneft will pay $1.6 billion for the stake, excluding PdVSA's "share of crude inventory and receivables to be valued at closing," the company said. The deal will make Rosneft a partner with BP PLC (BP), as Ruhr Oel is a 50-50 joint venture between PdVSA and the U.K. oil company.

"This transaction is consistent with our strategy to expand our presence with high quality assets in key international markets," Rosneft's President Eduard Khudainatov said, adding that after the deal "18% of Rosneft's refining capacity will be located in the heart of industrialized Europe."

The deal was signed in a presence of Russian President Dmitry Medvedev and Venezuelan President Hugo Chavez, who is currently visiting Moscow.

In late August, the Wall Street Journal cited unnamed sources as saying Rosneft is in "advanced negotiations" to buy a 50% stake in Ruhr Oel from Petroleos de Venezuela for between $1 billion and $2 billion.

German Union Seeks Investors for ConocoPhillips Wilhelmshaven Refinery

Labor representatives of workers at a ConocoPhillips' (COP) oil refinery in northern Germany will launch a search for new investors for the facility, after the U.S. oil major revealed plans to convert the site into an oil handling terminal and fuel depot, a union official said October 19.

"We have a big interest in preserving the Wilhelmshaven refinery given the large number of jobs that are at stake," said Ralf Becker, regional manager at labor union IG BCE for northern Germany. "To this end we're now launching an initiative to find new investors for the refinery."

On top of the around 400 jobs on the site itself, shutting down the plant could cost up to 1,500 people their jobs at external companies that do business with the refinery, Becker said.

He said that the union is in the process of preparing a meeting with Joerg Bode, the economics minister of Lower Saxony—the German state in which the refinery is located. The meeting, for which no date has been set, may also be attended by representatives of the relevant employers' federation and workers' representatives, Becker said.

The Wilhelmshaven plant has faced a series of setbacks in the last year. It remains idle following a May 1 fire and prior to that was shut for maintenance amid poor economic conditions for six months between October and April.

Conoco bought the plant from commodities firm Louis Dreyfus in early 2006, since when it has undergone several periods of reduced production due to poor economic conditions. Plans to upgrade the refinery had repeatedly been postponed in recent years and were scrapped entirely earlier this year.

ConocoPhillips had also been considering selling the plant, in line with plans by other refinery operators in Europe as weak demand and excess global capacity squeezed refining margins.

IG BCE's Becker said ConocoPhillips had mandated Deutsche Bank AG (DB) to examine a possible sale of the Wilhelmshaven plant. Finding investors, however, has proved difficult due to the oversupply in refining capacities and the need to invest in the plant, Becker said.

He also said that ConocoPhillips October 18 informed workers at the Wilhelmshaven refinery of its plans to shutdown the facility for good and turn the site into a oil handling terminal and fuel depot, confirming reports in several German newspapers.

NORWAY

Statoil Extends Mongstad Refinery Contract with Aker Solutions

Statoil has exercised a one-year option to extend its contract with Aker Solutions at the Mongstad refinery in Norway. The estimated contract value for 2011 totals approximately NOK 100 million and the work will occupy about 120 employees from Aker Solutions in Bergen, Norway.

The oil refinery at Mongstad is a modern highly-upgraded plant with an annual capacity of 10 million tonnes of crude. It is the largest facility of its kind in Norway.

The scope of work for Aker Solutions mainly comprises minor modifications to increase robustness and generally improve the facility. The option period commences January 1, 2011.

In 2005 Statoil awarded Aker Solutions a modifications framework agreement for the Mongstad refinery. Remaining options in the running minor modifications contract includes a one year option followed by a two year option.

Most crude oil refined at the Mongstad plant comes from the Norwegian continental shelf. The principal outputs are petrol, diesel oil, jet fuel and other light petroleum products. Most of the refinery's output is exported, particularly to continental Europe.

The contract parties are Aker Solutions' subsidiary Aker Offshore Partner AS and Statoil ASA.

UGANDA

Global Oil Majors Interested in 200,000 bpd Uganda Refinery

Oil majors from India, China and Europe have expressed their interest in building Uganda's first refinery, expected to have a capacity of 200,000 barrels a day, Uganda's minister of state for energy said October 26.

The new refinery will be a boost for this East African nation, which currently meets its oil product requirements through imports from the Mombasa oil refinery in Kenya.

"It will be Uganda's first refinery. It will be built with a public-private partnership," the minister said.

D'Ujanga said the refinery will help Uganda cut its petroleum imports and also help feed neighboring countries such as Kenya, Rwanda and Congo.

Uganda's primary processing industries that include coffee, cocoa and cotton rely on diesel-fired thermal power plants for a bulk of their electricity generation, as water levels at its hydroelectric plants have fallen.

Fuel supply from Kenya's Mombasa refinery has been disrupted because of insufficient production levels and congestion at the Mombasa port, which is the region's main import-export hub.

Uganda is now looking at setting up a refinery. The government is likely to invite bids for the refinery early next year and subsequently award the contract later in the year, D'Ujanga said.

The presidential spokesman of Uganda said in September that the country held talks with Kenya and India's Essar Group, which operates the Mombasa refinery, to form a joint venture to build a refinery in Uganda to use the country's oil reserves.

Oil exploration companies have discovered around 2 billion barrels of oil in Uganda's Lake Albert basin and Uganda plans to become an oil producer in the next few years.

While Chinese oil companies like CNOOC already have a foothold in east Africa's energy sector, Total and Italy's Eni Spa (E) have previously expressed interest in investing in Uganda's oil market. India's Essar Group has also made public its intentions to invest in the African continent.

UNITED ARAB EMIRATES

Bapco Plans $5 Bln in Projects at Bahrain Refinery

More than $5 billion has been earmarked for new projects at Bapco's refinery, a top government official announced October 25.

The plan is to focus on the production of high-value products and minimizing low-value products, said Oil and Gas Affairs Minister Abdulhussain Mirza.

"This also includes processing an increased amount of crude oil imported from Saudi Arabia to 350,000 barrels per day (bpd) as opposed to the current 230,000 bpd," he said.

Mirza, who is also National Oil and Gas Authority (Noga) chairman, was speaking at the opening of a conference entitled Improving Oil at the Movenpick Hotel, Muharraq.

He said a Bahrain Refinery Modernization Projects was ongoing and had resulted in several new facilities and infrastructure development.

"After several expansions and construction of a number of processing units, the refinery today has the capacity to process nearly 267,000 bpd of crude oil, a part of which is produced from Bahrain Field and the rest is piped in from Saudi Arabia," said Mirza.

"This capacity will increase to 350,000 bpd after a new pipeline is commissioned next year.

"We will also have increased production from the Bahrain Field with Tatweer Petroleum now engaged in employing better and more modern methods to drill."

He said the Bahrain Field production was expected to increase from 32,000 bpd to 100,000 bpd in a few years.

It had been earlier announced that a private-sector refinery could also be up and running in Bahrain within five years and steps had already been taken to make this possible.

Mirza said the future plans of Arab oil producing countries aim at significantly increasing capacities of petroleum refineries and processing plants by investing millions of dollars.

"This is an instrument to increase return from the Arab petroleum income," he said.

The event is organized by the Organisation of Arab Petroleum Exporting Countries (OAPEC) and Noga, with the cooperation of Bapco.

Present were OAPEC secretary-general Abbas Ali Naqi and its technical affairs director Samir Elkareish.

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