The refining industry has spent millions trying to curb California's climate law. Now after the Prop 23 loss it will have to spend much more trying to adapt to it.

U.S. refiners operating on the West Coast say California's climate law will force them to spend millions of dollars to update or replace equipment to meet the state's greenhouse gas emission targets, among the strictest in the country.

Valero Corp., Tesoro Corp. and others spent more than $9 million since April boosting Proposition 23, which would have suspended California's greenhouse gas emissions targets until unemployment in the state--which has been around 12% since August 2009--dropped to 5.5% for at least a year. With the proposition garnering a vote of 61% against it, California continues to call for greenhouse gas emissions to fall to 1990 levels by 2020.

California is a major market for refiners. Valero, the largest independent U.S. refiner, reported third-quarter throughput of 272,000 barrels a day at its two refineries in California, or 11% of its total for the period. Tesoro processed more than half of its third-quarter throughput of 474,000 barrels a day at its two California refineries.

Valero spent more than $5 million backing the measure. Bill Klesse, chief executive of the San Antonio-based company, told investors before the recent midterms that the company would "work around" the emissions targets if the proposition failed. But the CEO has also said the cost of meeting the clean air rules would force Valero to lay off some of the 1,600 people it employs at the two refineries and 83 retail outlets it owns in the state.

Market and industry analysts said the proposition's failure probably wouldn't cause refiners to engage in massive layoffs or exit the market--yet. But the defeat could further dampen profits in an already tough business environment and make the state a ripe target for foreign producers.

Dominick Chirichella, a trading analyst with Energy Management Institute, a consultancy, said meeting the emission standards would potentially raise the cost of refining on the West Coast enough to make the region more open to refined product imports from Asia.

"Imported oil would increase, and jobs would in essence be outsourced to refinery centers outside the U.S.," Chirichella said in an email.

Other industry watchers said West Coast refiners are already used to California's relative high cost of business and will find a way to work with emissions targets. But they ponder whether other states--or federal regulators--could take inspiration from California's enthusiasm for greenhouse gas limits. Donors spent more than $30 million to quash the refiners' proposal, according to data from the California Secretary of State--far more than refiners spent. "When the Obama administration sees the strong vote against it, they may use that to push more stringent rules next summer," said Carl Larry, analyst with market research group Oil Outlooks and Opinion.

Sandar Cohan, refining industry analyst for research firm Energy Security Analysis, added that although the refiners lost the ballot fight, they could still see some relief from the incoming state government. Incoming governor Jerry Brown and state regulators could still tweak the state's emission targets to help refiners if they decide the current schedule is unworkable, he said.

The climate laws "affects both alternative fuels and crude oil," Cohan said. "The next state administration could still scale it back or slow it down if it's not sustainable."

California Releases Cap-and-Trade Rules for Major Polluters

About 600 of California's major polluters -- from oil refineries to power plants and factories -- will face mandatory limits on the amount of greenhouse gases they emit, starting January 1, 2012, under rules released October 29 by state air regulators.

The facilities will be able to trade pollution credits under a new "cap and trade" market, and will be allowed to use projects that offset global warming, such as tree planting, to cover up to 8 percent of their emissions limits.

The new rules are part of AB 32, the landmark law signed by Governor Schwarzenegger in 2006 that was at the center of a bruising ballot fight in the November 2 election. The law requires that California's greenhouse gas emissions be cut to 1990 levels by 2020, a drop of about 15 percent from current levels.

Proposition 23, a ballot measure that would have suspended AB 32 until state unemployment fell below 5.5 percent for a year funded by Valero and other oil companies, failed in the recent November 2 elections.

"Everything is designed to reward efficiency and clean energy," said Stanley Young, a spokesman for the California Air Resources Board, which wrote the rules. "This sends a signal that clean energy pays off, and that's where we want to be."

The air board -- an eleven-member body appointed by the governor -- is scheduled to vote on the rules December16. If it approves them, as expected, California will become the first state in the nation with mandatory limits on emissions from a wide variety of industries that most climate scientists say are contributing to global warming through the burning of fossil fuels like natural gas, coal and oil.

Similar rules already are in place for 10 New England and East Coast states, but they only affect emissions from power plants.

Schwarzenegger has made global warming reduction efforts a centerpiece of his term in office.

Opponents of the law say it would cost the state jobs and have little effect on worldwide emissions of greenhouse gases. Supporters say it would create jobs by boosting the state's renewable energy and green technology industries, and would set an example for other states and Congress.

To meet the goals of AB 32, the air board and the Legislature have put in place a variety of programs and regulations.

The cap-and-trade program released October 29 would account for as much as 20 percent of the greenhouse gas reductions. The other 80 percent would come from new energy efficiency standards on appliances and new building construction; a low-carbon fuel standard on gasoline; an existing state law requiring utilities to produce 33 percent of their electricity from renewable sources by 2020; new fuel economy standards on cars that fully take effect in 2016; and other measures.

"This is a really important step," said Kristin Eberhard, an attorney with the Natural Resources Defense Council, an environmental group. "California has always been out in front on environmental and energy issues. This is one more time where we are leading the way."

Industry officials said they are still reading through the 1,000 pages of draft regulations but are pleased the cap-and-trade program will allow some offsets through programs like planting trees, and that 90 percent of the pollution allowances will be given away by the state, rather than all auctioned, as some environmentalists had wanted.

"This is perhaps the most far-reaching regulatory policy ever attempted in our state history," said Shelly Sullivan, a spokeswoman for a coalition of more than 200 businesses known as the AB 32 Implementation Group.

"We believe it is going to impose new costs on virtually every product and service used by Californians. One of our main concerns is that we are able to keep costs low for consumers and provide regulatory certainty for business."

In a recent conference call with analysts, Kimberly Bowers, executive vice president and general counsel of Valero Oil, said that the AB 32 rules could cost Valero $120 million a year.

"I guess we'll get the opportunity down the road to say, 'We told you so,' " said William Klesse, CEO of Valero." It will all be passed through to the consumer."

The air resources board has said that the new rules could increase the price of gas by roughly 20 cents a gallon by 2020, although that cost will be offset by new federal gas mileage rules in 2016 requiring new car fleets to get 35 mpg instead of the current 25 mpg.

American Petroleum Institute Files Court Challenge to EPA E15 Waiver

The American Petroleum Institute (API) on November 9 filed a lawsuit with the Court of Appeals for the D.C. Circuit challenging the Environmental Protection Agency's E15 waiver decision.

The partial wavier improperly authorizes an increase in ethanol content of gasoline from 10 percent to 15 percent only for use in 2007 and newer model year cars and light duty trucks. The EPA decision lacks statutory authority and comes prior to the completion of thorough testing to ensure the safety, performance and environmental impacts of the new fuel for consumers. API's Director of Downstream Operations, Bob Greco, made the following statement after the lawsuit was filed:

"The EPA's partial waiver is premature, lacks statutory authority and puts consumers at risk. Ongoing testing by our industry, auto makers and the Department of Energy to determine whether E15 is safe has not been completed. Results so far have revealed potential safety and performance problems that could affect consumers and the investments they've made in their automobiles.

"The U.S. oil and natural gas industry is the biggest consumer of ethanol and other biofuels and remains committed to the use of renewable fuels in our energy mix. We support a realistic and workable Renewable Fuel Standard and the responsible introduction of increased biofuels in a manner that protects consumers. However, rushing to allow more ethanol before we know it is safe could be disastrous for consumers and could jeopardize the future of renewable fuels."

API represents more than 400 oil and natural gas companies, leaders of a technology-driven industry that supplies most of America's energy, supports more than 9.2 million U.S. jobs and 7.5 percent of the U.S. economy, and, since 2000, has invested nearly $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives, while reducing the industry's environmental footprint.

EPA Confirms Criminal Probe of Tesoro Anacortes Blast

Tesoro Corp., one of the country's largest oil-refining companies, is being investigated by agents from the Environmental Protection Agency's criminal division for its role in an explosion at its Anacortes refinery plant that killed seven people last spring.

In a quarterly earnings report filed in the first week of November, Tesoro disclosed that it had been working with investigators from the EPA who were looking into the explosion.

On November 8, company spokesman Mike Marcy said the investigation "was being coordinated by EPA's criminal investigative division."

In response, the EPA released a statement confirming that criminal-division agents had responded to the refinery fire.

Tesoro's earlier filings with the Securities and Exchange Commission (SEC) had never made clear whether the company was facing civil or criminal investigations. The agency referred all other questions to the company.

The explosion and fire April 2 was the nation's worst refinery accident since 2005, when an explosion at BP's plant in Texas City, Texas, killed 15 people and injured 180.

Last month, investigators with Washington's Department of Labor and Industries said the Tesoro explosion was caused when a 40-year-old steel heat exchanger ruptured and spewed vapor and liquid that immediately exploded. Tests showed welds in the exchanger had developed cracks over the years, which blew apart just as equipment was coming back online after maintenance.

L&I fined Tesoro $2.38 million, citing the company for 44 workplace violations, including willful disregard of safety regulations and failing to maintain 40-year-old equipment. Tesoro has since appealed the fine.

The federal Chemical Safety Board also is investigating the accident, but its review isn't expected until early next year.

"We have provided these regulatory bodies with all requested information and are cooperatively keeping them in the loop going forward," Marcy said.

David Beninger, a lawyer who represents families of the victims, said EPA investigators and the U.S. Attorney's Office met earlier this year with family members to clarify what the agency was -- and was not -- looking into.

"They made it clear that if they proceeded with an investigation it would not be for the deaths, but would be for violations of the Clean Air Act or other environmental statutes, rather than anything associated with the loss of life," he said.

But EPA investigators and the Justice Department have broad latitude to review how companies handle dangerous materials -- and to issue penalties if a company has been deemed to have handled materials inadequately.

The Clean Air Act, for example, requires companies that deal with toxic or flammable chemicals to have up-to-date emergency plans to deal with accidental releases. And after the Texas City refinery disaster, BP paid $50 million in criminal fines -- part of the largest-ever criminal environmental penalty -- for violations of the Clean Air Act in the operation and maintenance of an exhaust stack where hydrocarbon liquid and vapors escaped and ignited, causing the explosion.

Tesoro's accident "may be a wake-up call to the EPA to give this operation a closer look," said Mary Fan, an assistant law professor at the University of Washington. "And once they start looking, they're not going to close their eyes to other potential violations."

EPA Delays Release of New Ozone Standards

The U.S. Environmental Protection Agency has postponed the release of new ozone-pollution standards, potentially delaying the creation of new pollution-control requirements for electric utilities and other types of industrial facilities.

Originally scheduled to release the new ozone standards by the end of October, the EPA now says it will finish the rule by the end of the year.

The EPA first proposed to tighten ozone standards in January, suggesting a level between 60 to 70 parts per billion, down from 75.

The proposal has come under attack by several industry sectors, including the oil and gas industry, which says the vast majority of U.S. counties would fail to meet the new ozone standards.

Inability to meet the standards--a status known as "non-attainment"--forces state governments to develop measures to reduce the pollution.

"We hope that this extension signals that the EPA is being more deliberative in finalizing this rule because they realize that the proposed new ozone standard would put nearly 100% of the United States in non-attainment and subject every state to erroneous and costly requirements," said Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute.

Technip Wins Flare Gas Recovery Contract at Valero Port Arthur Refinery

Technip has been awarded an engineering, procurement and construction support lump sum contract by Valero Refining Company for two flare gas recovery units at its Port Arthur, Texas refinery.

Each unit involves modification to the existing flare system, gas compression and gas treating to remove hydrogen sulfide. The recovered and treated gas will be returned to the refinery fuel gas system.

Technip's operating center in Houston, Texas will execute this contract, which is scheduled to be completed in the third quarter of 2011. The scope of work includes basic engineering, project management, detailed engineering, procurement, construction support, pre-commissioning and start-up assistance.

This project follows the successful execution of the Front End Engineering Design (FEED) by Technip.

Texas Officials Refuse to Implement New Federal GHG Policy

Texas officials said November 10 that they would refuse to implement a program that regulates the largest industrial sources of greenhouse gas emissions, despite new federal rules that give wide leeway to states to implement the program.

The latest schism between the Environmental Protection Agency and Texas means the federal agency is almost certain to issue the permits for Texas businesses when the rules take effect January 2. The EPA has previously stripped Texas' authority to issue permits under a separate air program, saying the state didn't comply with the Clean Air Act.

The greenhouse gas rule requires permit writers and businesses to consider the "best available control technology" for reducing greenhouse gas emissions when they build a plant or modify an existing one.

The EPA didn't endorse specific technology to achieve the reductions, saying energy-efficiency measures would probably be the most cost-effective way to comply.

"We are disappointed that Texas hasn't engaged in this process," said Gina McCarthy, EPA assistant administrator for air and radiation.

"We're hoping we can identify a process that they concur meets the needs of their industry," she said.

Texas state regulators continue to assert that EPA lacks the legal authority to regulate greenhouse gases under the Clean Air Act.

Texas Gov. Rick Perry and Attorney General Greg Abbott have filed several lawsuits against the federal agency, saying that EPA unlawfully modified the Clean Air Act to justify regulation of carbon dioxide and other gases.

In an interview, Bryan W. Shaw, the state's top environmental regulator, said the rule would fail to reduce greenhouse gas emissions and instead simply raise costs for energy companies and manufacturers.

"What was illegal and a bad idea yesterday is illegal and a bad idea today," said Shaw, the chairman of the Texas Commission on Environmental Quality.

"We won't see any environmental benefits from this. We'll just see the additional bureaucracy associated with permitting in this state and across the U.S."

Other states have joined Texas in a lawsuit over climate rules but have nevertheless taken steps to begin the permitting process.

Shaw said Texas held out because "if we agreed to go along and submit ourselves to the EPA's approach, we basically undermine our opportunity ... to get it tossed out."

The state's decision could delay the construction of some projects, because it would take "some time" before the EPA could add greenhouse gas controls to the existing permit programs, Shaw asserted.

"I don't doubt that there are industries looking at the cost of the delays," he said. But "if we don't take a stand and insert some common sense, there is no end in sight to how far EPA will go."

EPA officials say new projects aren't in jeopardy in Texas or elsewhere. Adding greenhouse gases to the pollutants examined by regulators won't significantly add to the burden of writing permits, McCarthy said.

"We will not allow Texas to fall behind in terms of their ability for their businesses to get permits in a timely way," McCarthy said.

Republicans and several business groups said that the EPA's guidance was issued too late for a rule that takes effect in less than two months. Most said the regulation would hurt business, particularly oil companies, coal-fired power plants and energy-intensive manufacturers.

"The EPA is railroading job-killing regulations onto states, localities and America's businesses, during a time of uncertain economic recovery, without giving those affected adequate time to review, provide comments, or even implement the new regulations," said Howard Feldman, director of regulatory and scientific affairs for the American Petroleum Institute.

The EPA is moving forward with its climate-change rule after legislation failed to pass in Congress.

Republicans and even some coal-state Democrats may try to advance legislation next year that strips EPA's authority to regulate greenhouse gases.

William Becker, executive director of the National Association of Clean Air Agencies, said state regulators are ready to begin issuing permits in January. Business criticism of the rule was "such hyperbole and such exaggeration," he said.

Praxair Starts Up Hydrogen Facility at Whiting

Praxair, Inc. has begun supplying BP's refinery complex in Whiting, Indiana, with hydrogen from its new, state-of-the-art hydrogen facility. The two steam methane reformers have a total capacity of 200 million standard cubic feet per day. BP uses hydrogen to produce ultra-low-sulfur gasoline and diesel fuels.

The facility was fully designed, engineered, procured and built by Praxair's hydrogen engineering group. "This facility demonstrates Praxair's world-class hydrogen plant-design and construction capabilities, using advanced construction techniques and the latest energy-efficient technologies," said Dan Yankowski, president of Praxair's Global Hydrogen business unit.

Worldwide, Praxair operates 40 hydrogen production facilities and seven hydrogen pipeline systems that deliver nearly one billion standard cubic feet per day of hydrogen. Praxair's 310-mile-long hydrogen pipeline on the U.S. Gulf Coast is one of the world's largest, serving more than 50 refineries and petrochemical plants. In 2009 Praxair had sales of $9 billion.

American Petroleum Institute Welcomes EPA Delay on E15 Decision for Some Vehicles

The American Petroleum Institute welcomed news November19, reported in the media, that the Environmental Protection Agency would delay a decision on whether gasoline with up to 15 percent ethanol is safe for vehicles built during the 2001 to 2006 model years. API Downstream Director Bob Greco commented:

"Although we have not had official word from EPA, if true, we welcome the delay. As we have suggested previously, EPA should extend its review six months or more to allow scientific testing to be completed on the effects of E15 on the engines of these older vehicles. Approving use of E15 without adequate and complete testing puts American consumers at risk. Early indications from results of testing have revealed potential safety and performance problems that could affect consumers and the investments they've made in their automobiles.

U.S. Refiners Should Focus on Exporting Diesel According to Sunoco CEO

The U.S. refining industry will have to focus on exporting diesel to growing markets instead of establishing refineries overseas, Sunoco Inc. Chief Executive Lynn Elsenhans said November 17.

As over capacity, slow demand and increased use of alternative fuels continue to eat into petroleum refiners' profit margins, domestic fuel makers should forget about moving operations overseas and instead focus on shipping diesel to growing markets in the Middle East, Latin America and China, Elsenhans said.

"In markets with high-demand growth, licenses to operate are hard to get a hold of, and the local refiners do not need expertise from U.S. companies," Elsenhans said.

The U.S. is set to become home to half of the excess global refining capacity, Elsenhans said. U.S. refiners will face the choice of serving niche domestic markets or boost diesel sales to foreign markets as gasoline demand wanes in their own market.

Elsenhans forecast diesel crack spreads to increase to $8-10 a barrel in the coming year, while the gasoline crack spread would fall to $6-8 a barrel.

Meanwhile, U.S. refiners are trying to grapple with higher ethanol blending mandates. The U.S. Environmental Protection Agency recently approved an increase in the amount of ethanol to be blended into the gasoline pool to 15% from 10%.

"No one wants to provide fuel that could harm customers' vehicles," Elsenhans said.

The future of alternative energy cars was more likely to rest with hybrid vehicles, which could use both gasoline and electricity as fuel. Elsenhans said she expected the hybrid car market to grow by 37% by 2025.

In all, U.S. refiners will have to reinvent themselves to prosper in the coming years.

"The fundamentals are suggesting it's going to get tougher unless you're in a niche, a low-cost producer or there's a supply-and-demand rebalance that sends margins back up," Elsenhans said.

E15 Misfueling Proposal Needs Work According to Engine Manufacturers Assoc.

Testifying at an U.S. Environmental Protection Agency (EPA) public hearing held in Chicago, the Engine Manufacturers Association (EMA) stated that EPA's proposed rule to prevent misfueling with mid-level ethanol blend gasoline (E-15) fails to achieve its goal.

Roger Gault, EMA's Technical Director, testified that EPA's proposed labeling program will not prevent the inadvertent or intentional use of E-15 blends in small engines and that the agency needs to take additional steps to prevent misfueling. During his testimony, Gault stated that the proposed regulation "fails to provide adequate misfueling safeguards in three critical areas: availability of fuel; preemption of state regulations and practices that would promote misfueling; and effective deterrents to both intentional and unintentional misfueling."

EMA member companies manufacture gasoline engines used in a variety of equipment such as lawnmowers, utility equipment, and generators. Those engines are designed to operate on gasoline fuel with less than 10% ethanol content. Using gasoline with more than 10% ethanol can create performance and operational problems and reduce engine life.

EPA recently approved a fuel waiver allowing late model passenger cars to use gasoline blended with up to 15% ethanol, and the November 16 hearing was held to obtain public comments on a proposed rule intended to prevent the use of E-15 fuel in vehicles, non-road equipment, and engines not included in the waiver. EMA fully supports EPA's decision that E-15 blends are not acceptable for use in those engines, but remains concerned that E-15 will be used in such engines in spite of EPA's proposed misfueling controls.

"The partial waiver is a real problem since it creates a fuel that can only be used in select late model passenger cars and not in older light-duty vehicles, all heavy-duty vehicles, marine engines, off-road recreational vehicles, or small utility engines," continued Gault. "There are no adequate safeguards to prevent owners of engines that cannot properly operate on E-15 from filling-up with E-15 blends and thus potentially damaging their engines. Equally important, there is no guarantee that gasoline with less than 10% ethanol will even be available. That will create serious problems for consumers across the nation."

In drawing attention to this issue at the November 16 hearing, EMA called upon EPA to develop an alternative and effective misfueling regulation that guarantees that owners of small engines will have access to the fuel needed to safely run their engines and equipment and that ensures that E-15 fuel will only be used for vehicles that EPA approves to operate on E-15. "EPA needs to go back to the drawing board and develop a misfueling regulation that will actually work to prevent misfueling with E-15. Otherwise, owners and operators of small engines across the country are at serious risk of experiencing significant problems when they fill up with fuel from the local gas station," said Gault.

E15 Misfueling Regs Will Create Large Consumer Risk According to NPRA

Gregory M. Scott, executive vice president and general counsel of NPRA, the National Petrochemical & Refiners Association, testified at an Environmental Protection Agency public hearing November 16 that proposed EPA regulations designed to prevent misfueling with gasoline containing 15 percent ethanol (E15) will fail to protect consumers.

"E15 will find its way into older vehicles, small engines, and boats with dire consequences for personal safety, irreversible engine damage, consumer confusion, operational problems, loss of manufacturers' reputations, and warranty arguments," Scott said in prepared testimony. "The risks are large and daunting."

EPA approved the use of E15 on Oct. 13 for cars and light-duty trucks produced for the 2007 model year and later, but did not approve use of E15 for older cars and light-duty trucks. In addition, EPA did not approve the use of E15 for any model year for motorcycles, heavy-duty trucks, buses, boats, snowmobiles, and engines for gasoline-powered equipment such as lawnmowers and chain saws.

EPA's Oct. 13 decision increased the amount of ethanol allowed in gasoline for newer cars and light-duty trucks by 50 percent from the previous limit of 10 percent (E10).

The environmental agency's proposed regulation includes E15 fuel pump labeling requirements designed to make consumers aware when a pump dispenses E15 and to educate consumers on the very limited number of vehicles that EPA has determined can use E15. EPA also proposed a quarterly survey of gasoline retailers designed to help ensure that gasoline pumps are properly labeled.

EPA's hearing in Chicago was held to hear public comments on the pump label regulation.

Scott said that "it is inevitable that if E15 is made available at retail, many consumers will misfuel — putting the wrong gasoline into the wrong engine. This misfueling may occur intentionally, due to price differential or a quality perception, or unintentionally, due to consumer confusion or inattention. Such misfueling cannot be avoided merely with a dispenser label."

"NPRA asks EPA to convene a roundtable discussion of appropriate stakeholders – separate and apart from this public hearing — to discuss misfueling concerns and possible strategies to prevent misfueling," Scott added. "Such a stakeholder roundtable should be conducted prior to the close of the public comment period on the proposed rule to provide stakeholders with the opportunity to include information derived from this roundtable in their comments. If EPA declines to convene such a stakeholder roundtable, NPRA suggests that stakeholders themselves arrange such a meeting."

Total Port Arthur, Texas, Refinery Has Unit Shut, Emissions

Total SA reported the shutdown of a unit at its Port Arthur, Texas, refinery November 26 after a compressor tripped, according to a filing with the National Response Center.

The compressor trip was caused by low air flow in the system and emissions were reported, the filing showed.

The refinery can process 240,000 barrels of crude a day, according to data compiled by Bloomberg.

U.S. refineries must notify the response center if they release hazardous substances in excess of reportable quantities, according to the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund.

Conoco Reports Shutdown of Cat Cracker at Wood River Refinery

ConocoPhillips halted a catalytic cracker at its Wood River refinery in Illinois on Nov. 24, according to a filing.

The No. 2 cracker tripped and emitted more than 500 pounds (227 kilograms) of sulfur dioxide, according to a filing made with the Illinois Emergency Management Agency.

The Wood River refinery is part of a joint venture with Alberta oil-sands producer Cenovus Energy Inc. The venture was established to increase the amount of heavy Canadian crude processed in ConocoPhillips’s Wood River and Borger, Texas, refineries.

The plant processes light, low-sulfur and heavy, high sulfur, crude oil. It has a capacity of 306,000 barrels a day, according to the company website.

Holly Reports Sulfur Dioxide Release at Tulsa, Oklahoma Plant

Holly Corp. has released sulfur dioxide into the atmosphere at its Tulsa, Oklahoma refinery, according to a filing made to the U.S. Coast Guard’s National Response Center.

The incident occurred November 26 after a heater released the gas, according to a notice on the NRC website. Holly said in an October filing with state regulators that it would shut units at the facility for five to 10 days of scheduled maintenance starting November 21.

U.S. refineries must notify the National Response Center if they release hazardous substances in excess of reportable quantities, according to the Comprehensive Environmental Response, Compensation and Liability Act, known as Superfund.

Bloomberg News could not immediately verify that the information in the filing was accurate.

CUBA

China’s CNPC to Lead $6 Bln Cuba Cienfuegos Refinery Expansion Project

A unit of China National Petroleum Corp (CNPC) is set to begin in 2011 a $6-billion expansion project at Cuba's Cienfuegos refinery in one of the biggest investments ever on the communist-led island, a source close to the project said November 22.

The blockbuster deal will be financed mostly by China's Eximbank and backed by financial guarantees in the form of oil from Venezuela, Cuba's close socialist ally and leading trade partner, the source said.

State-owned CNPC's Haunqiu Contracting and Engineering Corp is expected to start the project in the first quarter with completion planned for the end of 2013.

The Italian unit of French oilfield service company Technip will do design and engineering for the project and assist in construction.

The expansion will increase the capacity of the Soviet era refinery 155 miles southeast of Havana to 150,000 barrels per day from 65,000.

But it will also include construction of a liquefied natural gas terminal with capacity to process 2 million tons of gas annually, and a 150 megawatt electricity generation plant.

"It is one of the biggest investments in the history of Cuba. It's a minimum of $4.5 billion just for the refinery and another $1.3 billion for the LNG terminal," an executive involved with the project told Reuters.

The expanded refinery could play an important role in processing Cuban oil if the island finds significant quantities of petroleum in its waters in the Gulf of Mexico.

Several companies are planning to sink exploratory wells off Cuba's northern coast starting next year.

The project greatly expands China's role in Cuba's energy sector, which, at least publicly, has been small. China is Cuba's No. 2 trade partner.

Beijing is assisting in production of oil along Cuba's northern coast and has leased an onshore block for exploration near Havana.

The offshore drilling rig to be used in exploring Cuban waters next year has been under construction in China, but whether the Chinese government has had a role in that project is not known.

Although final details are still being negotiated by the governments of China and Venezuela, the source said about 85 per cent of the cost will be financed by China's Eximbank and secured by China Export & Credit Insurance Corp.

"But the investment is totally guaranteed by the Venezuelan government, through off-takes of PDVSA crude oil," said the source.

The Cienfuegos refinery, operated by state-owned CubaPetroleo and state-owned Petroleos de Venezuela (PDVSA), has been the centerpiece of the strategic alliance between Cuba and Venezuela.

The refinery was built during the Soviet era, but never operated until it was activated in 2007 after Venezuela helped refurbish its antiquated facilities to process part of the 115,000 barrels a day that Venezuela sends to Cuba at preferential terms.

The most recent official figures showed Cienfuegos was producing about 55,000 barrels per day of oil products.

Refinery expansion will become important for Cuba if significant offshore oilfields are found in its waters, and the Cienfuegos project is being done with that in mind.

"The expansion of the refinery is tied to the exploration in the Gulf of Mexico," the source said.

The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil and 10 trillion cubic feet of gas offshore, but Cuba says it could have at least 20 billion barrels of oil.

A consortium led by Spanish oil firm Repsol YPF is planning to drill an exploration well next year, as is Malaysia's Petronas in conjunction with new partner, Russian firm Gazprom.

Other oil companies such as Brazil's Petrobras, ONGC Videsh, a unit of India's Oil and Natural Gas Corp, PDVSA, PetroVietnam and Russia's Zarubezhneft have exploration leases in Cuban waters, with plans to develop them.

Oil expert Jorge Pinon at Florida International University in Miami said Cuba has been installing oil storage tanks in Matanzas along the northern coast and reconstructing a pipeline that runs from there to Cienfuegos.

"The pieces of the puzzle are falling into place," he said.

BRAZIL

Brazil’s Petrobras Selects UOP Process Tech for Two New Refineries

UOP LLC announced November 10 that Petroleo Brasileiro S.A. (Petrobras) has selected UOP to provide all of the process technologies for two new maximum diesel refineries to be built in Brazil.

UOP hydrocracking and hydrotreating technologies will be used to produce high-quality diesel fuel from Brazilian national crude oils at two new refineries. Petrobras plans to construct a two-train 600,000 barrel per day (bpd) facility in Maranhao, Brazil, to be known as Premium I, and a single-train 300,000 bpd facility in Ceara, Brazil, to be known as Premium II.

Basic engineering for the refineries is currently under way. Commissioning of the first train at the Premium I facility is planned in 2014 and the Premium II facility in 2017.

"The high yields from our market-leading hydrocracking technology combined with our proven methodology for refinery optimization will enable Petrobras to produce the maximum yields of high-quality diesel product while maximizing the economic value of the project," said Rajeev Gautam, president & CEO of Honeywell's UOP. "The work processes we employ allow us to streamline new refinery projects, optimize yields and energy and maximize the return on investment for our customers."

According to OPEC, global demand for diesel fuels is expected to grow from 24.5 million bpd to 34.2 million bpd by 2030 driven by an increasing share of diesel cars in developing regions around the world. Diesel production is projected to account for 60 percent of the rise in oil demand expected over the next 20 years.

Honeywell's UOP is a recognized leader in diesel production process technology, products and equipment.

Both facilities will utilize the UOP Unicracking hydrocracking process and the UOP Unionfining hydrotreating process to upgrade feedstocks to ultra-low-sulfur-diesel. Selective Yield Delayed Coking (SYDEC) technology provided by Foster Wheeler USA will also be employed to maximize diesel production by converting the residue portion of the crude oil to an intermediate product used in diesel production. UOP will also serve as the Front-End Engineering Design (FEED) contractor to provide a firm basis for procurement and construction at the site. Design of the crude and vacuum systems in the refineries will be provided by Process Consulting Services, Inc. through an alliance partnership with UOP.

Petrobras Exec Says Brazil Needs More Refineries

Brazil needs to build more oil refineries if it is to avoid becoming an "enormous" importer of fuel and other oil products, due to quickly rising demand, state-run oil company Petroleo Brasileiro SA (Petrobras), said November 17.

Demand for fuel is growing faster than gross domestic product growth in Brazil, leading to high imports of derivatives, which reached 720,000 barrels a day in March, Paulo Roberto Costa, supplies director at Petrobras, told reporters in Rio de Janeiro.

Imports of diesel soared so far this year to levels 108,000 barrels a day higher than in 2009, mainly due to growth in the agricultural sector, he said.

"Our plan is to make Brazil self-sufficient in oil and oil derivatives by 2013-2014, but whether we can do this all depends on GDP growth rates," Costa said. "We're going to have a very demanding market."

While GDP is forecast to grow around 7.3% this year, demand for oil derivatives is likely to grow about 10%, Costa said. The government expects a 5.9% annual growth rate for the next four years and annual oil derivatives demand growth is likely to exceed this by one percentage point, he said.

In the first 10 months of the year, local gasoline sales grew 18% from a year ago, while jet fuel sales rose 15% and diesel sales 10%, he said.

Petrobras is investing $78.7 billion in the 2010-2014 period of its refining business, including construction of five new refineries. This represents 37% of the company's strategic plan investments for the period, he said. Two of the new refineries, the Abreu e Lima and Comperj plants, are due to come into production in 2013, Costa said.

Nevertheless, the country will likely need more investments in the refinery area, Costa said.

Over the longer term, by 2020, Petrobras plans to be producing 4 million barrels a year of oil, of which 800,000 barrels a day should be exported, while 3.2 million barrels a day will be processed into derivatives, mainly for the domestic market, which is the country's priority, Costa said.

In that year domestic demand for derivatives is expected to be 2.79 million barrels per day, he said.

In 2009, Petrobras produced 1.97 million barrels per day, of which 1.79 million were processed into derivatives, which was less than domestic market demand of 1.93 million barrels a day, he said.

Petrobras is currently working at above 90% capacity at its existing refineries, and no further maintenance stops are planned this year at these locations, Costa said.

Despite the pressing need for more refinery capacity, Petrobras currently has no plans to build any new refineries other than the five already under construction, he said. The cost of building new refineries has nearly tripled over the last 10 years, citing international studies, although profit margins on processing have improved, he said.

In addition, the company currently has no plans to either buy or sell any refineries, even including its stake in the Pasadena refinery in the U.S., Costa said.

ASIA

CHINA

Possible $9 Bln Kuwait-China Refinery JV Deal Pending

Kuwait Oil Minister Sheik Ahmad Abdullah Al Sabah arrived in Beijing November 8, with his talks with Chinese government and company officials expected to focus on a planned joint venture refinery and petrochemicals complex, sources involved with the visit said.

The project, which will cost around $9 billion, has been under negotiation now for more than five years, but it isn't yet clear whether the present trip will result in a final go-ahead.

The 300,000-barrel-a-day refinery project now requires only formal Chinese government approval for construction to start, as a last procedural barrier, an environmental impact study, had now been approved, one source said.

Sheik Ahmad and officials from Kuwait Petroleum Corp. or KPC, and Kuwait Petroleum International, or KPI, will meet with Chinese Vice Premier Li Keqiang. The trip, which follows previous visits to China in April and May 2009, aims at reiterating Kuwait's "strong support" for a planned joint refinery and petrochemical project in southern China, which awaits final Chinese government approval, Kuwait's official Kuna news agency reported Monday.

If approved the complex is expected to come onstream as early as 2013 and will be the largest Sino-foreign joint venture in China energy sector, Kuna added.

The Kuwaiti minister is also scheduled to fly to Guangdong Province, where the plant will be located, to discuss the project with local provincial leaders, according to Kuna.

Apart from the Kuwait project, Chinese companies are negotiating at least four other joint venture refinery projects, at a time the country's refining sector is straining at the seams to produce enough refined oil to meet domestic demand.

The Kuwait refinery, for which the Gulf state will supply all the crude, is a 50-50 joint venture between China Petroleum & Chemical Corp. (SNP), known as Sinopec, and Kuwait Petroleum Corp. Sinopec is China's, and Asia's biggest refiner in terms of capacity.

The project also involves building facilities capable of producing 1 million tons a year of ethylene.

In May, economic planning watchdog the National Development and Reform Commission gave its provisional green light to the complex, to be built in Zhanjiang city in southern China's Guangdong province. Final approval was dependent on it getting environmental approval, and then the Chinese government's formal go-ahead.

The project was delayed in 2009 when the original site for the refinery, at the more heavily populated Nansha district in Guangdong, was rejected on environmental grounds.

The plan suffered another setback in December, when Royal Dutch Shell PLC (RDSA.LN) said it had ended talks to take a stake in the project, opening the way for other international oil companies to join.

It isn't clear if Kuwait still intends to bring in foreign partners.

Kuwait Petroleum International, which oversees KPC's international downstream marketing operations and represents Kuwait in talks with potential partners, has said it would finalize any international partnership only after the Chinese government grants final approval for the project.

China's two main refiners, Sinopec and China National Petroleum Corp., which together have more than 4.5 million barrels a day of processing capacity in China, plan to boost crude oil processing to record highs in November to help deal with diesel shortages in several parts of the country.

In line with efforts to bolster the sector, seven weeks ago China National Petroleum Corp., or CNPC, and Russia's OAO Rosneft (ROSN.RS) agreed to invest around $5 billion in a 260,000-barrel-a-day joint venture oil refinery in the Chinese city of Tianjin, with this supplied with crude from Russia and elsewhere.

Three other projects with foreign companies are on the drawing board. One involves CNPC and Petroleos de Venezuela SA, or PDVSA project in Southern China, while another is for a refinery to be built near Shanghai by Qatar Petroleum International and CNPC unit PetroChina (PTR).

Also, in September, South Korea's SK Energy Co. (096770.SE) said it was talking to Cnooc Ltd. (0883.HK) about a plan to build a refinery in north eastern China.

INDIA

HPCL Plans $6.7 Bln Refinery on India's West Coast

India's state-owned Hindustan Petroleum Corp. Ltd (HPCL) plans to invest US$6.7 billion (Rs 30,000 crore) to set up an 18 million tonne-per year refinery on the West Coast, its chairman and managing director Subir Roychowdhary said November 12.

The new refinery, to be set up in the state of Maharashtra, was conceptualized to make up for space constraints at HPCL's existing Mumbai Refinery.

"We have been told that 1,800 acres of land is available with MIDC (Maharashtra Industrial Development Corp). We have asked for 1,000 acres more land," he told reporters in New Delhi.

State-owned Engineers India has been engaged to carry out a feasibility report study on the proposed refinery. The options under consideration are a single 18 million tonnes per annum unit or two units of 9 million tonnes per annum capacity each.

The detailed feasibility report (DFR) will be ready by December, Roychowdhary said.

The land earmarked for the refinery is located between Ratnagiri and Raigad and the unit, called Maharashtra Refinery, would be completed within 48 months from the date of receipt of all approvals.

"We are doing configuration studies," he said.

HPCL face tremendous space constraints at its existing 6.5 million tonnes-per year Mumbai refinery. A refinery of this size is usually spread over 2,000 acres of land, but HPCL's refinery is situated in a plot measuring just 350 acres.

The existing Mumbai Refinery may eventually be shut down once the new refinery is built.

HPCL, which also has a 7.5 million tonnes a year unit at Vizag, in Andhra Pradesh, is building a 9 million tonnes per annum plant at Bhatinda, in Punjab, under a joint venture with steel czar Lakshmi Mittal.

Roychowdhary said the Bhatinda project is on schedule for mechanical completion in March, 2011.

"The refinery will be fully commissioned in August-September, 2011," he said.

The Bhatinda refinery will cater to fuel demand in Punjab, Haryana, Delhi, UP and parts of Bihar. HPCL has almost finished laying a product pipeline to transport fuel from Bhatinda to Delhi, from where it can be moved by train to anywhere in UP and parts of Bihar.

Alfa Laval Wins India Refinery Order

Alfa Laval has received an order for Alfa Laval Packinox heat exchangers to be used in a refinery in India. The order value is about SEK 50 million and delivery is scheduled for 2011.

The Alfa Laval Packinox heat exchangers will be used in a catalytic process to remove sulfur from refined diesel. Alfa Laval's unique Packinox heat exchangers are widely used in the refinery and petrochemical industry as they have an unmatched energy efficiency well suited for these demanding applications.

"Four out of the five large orders Alfa Laval has received recently have been in India," says Lars Renstroem, President and CEO of the Alfa Laval Group. "The rapidly increasing standard of living increases the demand for diesel."

SINGAPORE

ExxonMobil Plans New Hydrotreater at Singapore Refinery

ExxonMobil Corp announced plans to construct a diesel hydrotreater at its Singapore refinery, increasing the facility’s production capacity of ultra-low sulfur diesel fuel.

Chris Erickson, vice president for planning & project execution, ExxonMobil Refining & Supply said the decision to build the diesel hydrotreater reflects “the increasing demand for diesel fuel in the region and ExxonMobil’s confidence in Singapore's business climate.”

ExxonMobil said it has completed feasibility studies and early design work on the new unit. Once the unit is completed, the refinery’s total low sulfur diesel capacity will rise to more than 25 million liters per day.

According to Kwa Chong Seng, chairman and managing director, ExxonMobil Asia Pacific Pte Ltd, the new hydrotreater is “just the latest in a series of major investments ExxonMobil has made in Singapore to meet the increasing demand in the Asia Pacific region.”

Analyst IHS Global Insight agreed with that view, saying that a number of international oil companies are seeking to increase their refining capacity in Singapore.

Recently, Neste Oil Corp. said it has launched operations at its new 800,000 tonne/year renewable diesel plant in Singapore, a €550 million facility described as the world’s largest.

The IOCs wish to take advantage of the city-state’s strategic location near rapidly industrializing economies in China and Southeast Asia, its relatively skilled workforce and accommodating regulatory regime.

“While the hydrotreater could increase ExxonMobil's ability to provide ultra-low sulfur diesel oil produced in Singapore to Australia and to Hong Kong, tightening fuel standards in China and India suggest the unit could also serve these markets over the longer term,” IHS Global Insight said.

While eyeing demand growth potential in Asia-Pacific, ExxonMobil has already begun to meet documented demand growth for ultra-low sulfur diesel in the U.S., with the construction of new facilities in Texas and Louisiana.

Earlier this month, the American Petroleum Institute reported that U.S. ultra-low sulfur diesel consumption increased in October from a year earlier, rising 8.4% to average 3.19 million b/d.

API also said that consumption of ultra-low sulfur diesel fuel during the first 10 months of 2010 climbed 2.9% to 2.97 million b/d.

Prior to the API report, ExxonMobil announced it completed commissioning of new units to produce ultra low sulfur diesel at its Baytown, Texas and Baton Rouge, LA refineries.

The new facilities will enable ExxonMobil to increase the supply of ultra low sulfur diesel by over 3 million gallons a day, and allow for reduced emissions from diesel consumption when used in modern engines.

Plans for the new U.S. facilities were originally announced in December 2008, when ExxonMobil said it had more than $1 billion to invest in three refineries to increase supply of ultra low sulfur diesel.

It said the projects, located in the U.S. and Belgium, required construction of new hydrotreater units at each facility, as well as modification to the existing facilities. The Belgian facility, located in Antwerp, is due online later this year.

EUROPE / AFRICA / MIDDLE EAST

UNITED KINGDOM

UK Spin-off Permasense Unveils Live Corrosion Monitoring Tech

Monitoring systems specialist Permasense has announced the commercial availability of a new system for monitoring the integrity of oil and gas infrastructure. The system, developed in partnership with Imperial College London and BP, is designed to herald a new age of frequent, repeatable wall thickness monitoring that will give corrosion engineers, inspectors, planners and plant managers previously unavailable insights into the condition and capability of critical oil & gas assets. The Permasense system has been proven in operation at BP's European refineries and in the U.S. as part of BP's Refining & Logistics Technology program, and is being used at BP refineries world-wide.

Corrosion monitoring itself presents significant technological and practical challenges. Inspections typically take place at infrequent intervals, are expensive to perform and offer little chance of the consistency needed to accurately identify wall thickness trends at an early stage. The Permasense system, based on a network of permanently positioned, ultrasonic wall thickness measurement sensors, enables better decision-making by providing more consistent and robust corrosion data on-demand at no incremental cost.

This system, developed by one of the world's leading teams in the field of non-destructive evaluation at Imperial College London, is based on a patented, waveguide-mounted sensor design. The sensors can be permanently attached to pipes operating in extreme conditions—temperatures from -40°C to 550°C —and difficult-to-access locations. The sensors are linked via a wireless network to provide data directly to the user for standalone viewing or integration into other plant monitoring systems. The sensors have ATEX and FM approval in Europe, the U.S. and Australia.

Charles Cameron, Head of Research & Technology for BP's Refining & Marketing segment, commented: "By deploying this technology globally, BP has seen a step change in the capability of our integrity monitoring activities. We are proud of the role we have played in the development of a technology that we believe will be of enormous benefit to the oil and gas industry as a whole."

Peter Cawley of the Department of Mechanical Engineering at Imperial College, and a co-founder of Permasense, added: "Everyone at Imperial is pleased to see the results of a successful university/industry development program being taken to market. It's always rewarding to apply our expertise to address a real-world business issue."

Peter Collins, CEO Permasense, added: "The experience gained in proving the system with BP has shown our technology can make a real difference in an industry facing new challenges every day. We are relishing the prospect of taking our solution to the wider oil and gas market and demonstrating how it will enable managers, corrosion engineers, inspectors and planners to make better informed decisions to the benefit of both their business and the environment."

Permasense is a rapidly growing developer and manufacturer of permanently installed sensor-based monitoring systems. The company was spun out of research at Imperial College London by the technology transfer company Imperial Innovations. Based on a patented, waveguide-mounted ultrasonic sensor that can be permanently fitted to pipework operating under extreme conditions, the system has been proven in application at BP refineries in Germany and the US as part of BP's Refining & Logistics Technology program.

NIGERIA

Nigeria’s Warri Refinery Shut After Pipeline Attack

Nigeria’s main militant group, the Movement for the Emancipation of the Niger Delta, said its fighters blew up a pipeline that supplies crude to the country’s Warri Refinery.

The attack on the link to the 125,000-barrel-a-day refinery took place on November 21, a spokesman for the group known as MEND, said in an e-mailed statement November 23. The “attack and similar attacks on pipelines which will take place within the next few days” are to show “the futility of wasting the nation’s resources in combating militancy without addressing the underlying causes of agitation in the Niger Delta.”

A pipeline belonging to the Nigerian National Petroleum Corp. was sabotaged, Levi Ajuonuma, a spokesman for the state- owned energy company, said without giving details on the operations of the refinery. Nigeria is the fifth-largest source of U.S. oil imports.

The southern Niger delta, which is home to nation’s oil and gas industry, has been hit by a surge of violence in recent months after a period of relative calm that followed a government amnesty in 2009 and the disarming of thousands of militant fighters. In response to the attacks, the Nigerian army ordered an offensive against rebels in November.

The pipeline that supplies crude to the plant in Warri is also the source of oil for the refinery in the northern city of Kaduna. The 110,000-barrel-a-day Kaduna refinery is operating after a minor glitch, Ajuonuma said.

Nigeria’s four state-run oil refineries are producing at about 30 percent of capacity, the Department of Petroleum Resources that oversees the country’s oil and gas industry said on November 15. Africa’s biggest crude producer relies on fuel imports for more than 70 percent of its domestic needs, according to the Petroleum Ministry.

MEND says it is fighting for local control of oil revenue by the ethnic minorities of the delta, alleging domination by Nigeria’s majority ethnic groups.

Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA run joint ventures with NNPC that pump most of the West African nation’s oil.

SUDAN

Southern Sudan Considers Three Refineries Pending Successful Secession Vote

The Government of Southern Sudan (GoSS) plans to build three new oil refineries should citizens of the semi-autonomous region choose to secede in the upcoming referendum scheduled for January 9, 2011.

The disclosure came at a press conference by the GoSS Energy Ministry Undersecretary David Loro on November 9.

In May, the Akon Refinery Co., a joint venture between Khartoum-based Eyat Oilfield Co. and Southern Sudan's state-owned Nile Petroleum Co., announced a tender for bids to build a 50,000 barrel per day refinery. The cost of the project is estimated at $1.8 billion, according to the company's website.

The huge Warrap refinery project, which is expected to take about three years to complete from the date of kick off at the construction sites. To transport the crude oil to Akon refinery site in Warrap state the Company will also construct a pipeline of some hundreds of kilometers long from the Unity state oilfield.

Currently the crude oil from Unity and Upper Nile states is being transported through the thousands of kilometers long Chinese-constructed pipeline to the international market via Port Sudan in the far North-eastern part of the country.

KAZAKSTAN

Geo Point Technologie Acquires 'Micro' Refinery in Kazakhstan

Geo Point Technologies, Inc. has announced its official entry into the oil refining business in an underserved region of the world with the completed acquisition on October 28, 2010, of GSM Oil Holdings Ltd., a limited liability company organized in Cyprus ("GSM") through a share exchange agreement. GSM recently acquired Sinur Oil LLP, a limited liability partnership organized in Kazakhstan which owns and operates an oil refinery in Karatau, Kazakhstan.

"This acquisition signifies a major shift in our focus, as Geo Point Technologies is now operating a state-of-the-art, green oil refinery in southern Kazakhstan," commented Jeffrey Jensen, Geo Point's President and Chief Executive Officer. "This region has tremendous oil reserves, but lacks refining capacity, and we anticipate strong domestic demand for our refined fuel products. Now that the acquisition is complete, we will look at expanding our facility in the near future."

Using a patented oil refining technology, Sinur Oil has built a near zero emissions "micro" oil refinery, expected to process approximately 2,000 tons of crude oil per month. The refinery uses electromagnetic induction in place of traditional open flame combustion, which minimizes operating pressures and provides a safer work environment for plant operators. The refinery is located on a 4.3 hectare site that contains the refining equipment, storage tanks, administrative buildings, boilers, pumps, a warehouse, and a rail spur. The three main refined products are diesel fuel, gasoline, and mazut, a heating oil.

Pursuant to the terms of the acquisition agreement, GSM is now a wholly owned subsidiary of Geo Point and the GSM shareholders have assumed the controlling interest in Geo Point Technologies, Inc. Upon closing, Geo Point issued 26,808,000 restricted shares of its common stock to the beneficiary shareholders of GSM Oil Holdings and received all of the outstanding shares of GSM. The structure is intended to optimize tax savings for Geo Point's shareholders, taking advantage of various credits and tax exclusions in the European Union, the United States and other countries.

IRAQ

Iraq Will Pay for One Refinery in $20 Bln Program if No Investors Can Be Found

Iraq is prepared to come up with the cost of building one of four refineries planned in a $20 billion program if investors can’t be found, Deputy Oil Minister Ahmed al-Shamma said.

The government may disburse annual payments from the state budget to pay for the construction of a refinery in the central city of Karbala, Shamma said November 26 in Basra, Iraq.

“The Karbala refinery is a priority,” as it is in central Iraq where consumption is very high, he said.

Iraq, holder of the world’s fifth-largest oil reserves, has plans to build four refineries to almost double its capacity to process fuel and cut dependence on gasoline and other product imports.

The four refineries, designed to add capacity of around 750,000 barrels a day, will be based in Karbala, in the northern Kirkuk region, the eastern Maysan area, and Nassiriyah in the southeast.

Iraq has refineries in Baghdad’s Dora district, in the southern region of Basra and in the northern city of Baiji. The three have a combined capacity of 700,000 barrels a day and can produce about 500,000 barrels a day because of wartime damage. The country also has about 30 smaller refineries that together have a total production capacity of 300,000 barrels a day.

Iraq, which generates most of its revenue from oil exports, needs to import about a quarter of all the refined products it consumes, according to data from the U.S. Energy Information Administration.

SYRIA

Saipem Wins $129 Mln Contract for Syria Processing Facility

Following a lengthy and detailed tender selection process carried out in close cooperation with the General Petroleum Corp. of Syria (GPC), Gulfsands Petroleum plc confirmed November 15 that Saipem S.p.A. has been selected as the successful bidder for the construction of the Central Processing Facility (CPF) to be installed at the Khurbet East oil field on Block 26, Syria.

The CPF has been designed with an initial capacity to handle the processing of 50,000 barrels of fluid per day (bofd) of which it is expected initial oil production will be 33,000 barrels of oil per day (bopd). The contract for construction of the CPF is expected to be signed later this month and provides for delivery of the completed project within 20 months of signing, with completion now anticipated for September 2012.

The contract tender price of US$129 million (Euro 94 million) represents a modest increase in Gulfsands' original estimate for construction of the CPF reflecting changes to the engineering design to facilitate ready expansion of the plant's capacity and movement in the Euro/US$ exchange rates since original estimates were prepared. The estimated cost to Gulfsands after cost recovery is approximately US$22 million (Euro 16 million).

Gulfsands Petroleum plc is an oil and gas production, exploration and development company with activities in Syria, Iraq, Tunisia, Italy and the U.S.A.

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