Alon USA Energy, Inc. announced June 2 that it has completed the acquisition of the Bakersfield, California refinery from Big West of California, LLC, a subsidiary of Flying J Inc.

Jeff Morris, Alon's CEO, commented, "The Bakersfield refinery, which is being acquired at a very attractive price, avoids hundreds of millions of dollars in anticipated costs to construct a hydrocracker for our California refineries, and will enable us to operate it as an integrated unit with our Paramount refinery, allowing us to significantly increase throughput at our California refineries and increase West Coast refining margins by processing vacuum gas oil from our Paramount refinery at Bakersfield. Additionally, we were able to accomplish the acquisition of substantially all of the assets of Big West without incurring additional debt to Alon or its subsidiaries."

"We are very pleased to have the opportunity to join ranks with a strong group of employees, which we believe will facilitate the integration of the Bakersfield refinery into our refinery portfolio under our current corporate infrastructure. Our acquisition of Bakersfield will allow us to potentially save up to 100 jobs in the Bakersfield area once the refinery has recommenced full operations."

The Company anticipates using certain equipment from Bakersfield at its other refineries while processing vacuum gas oil from its refinery in Paramount, California at the Bakersfield Refinery. The purchase price of the Bakersfield transaction, including substantially all of the assets of Big West, consists of $40 million in cash. The Company also acquired the Bakersfield refinery's existing inventory as of the closing date of the transaction.

The Bakersfield refinery, located in California's Central Valley has the capacity to refine up to 70,000 barrels per day of crude oil. The refinery is supplied by crude oil produced in the San Joaquin Valley with its products marketed in California, and is a major provider of motor fuels in central California.

Texas, Sierra Club Take Aim at EPA Push to Change Texas Air Pollution Regulation System

Texas Gov. Rick Perry vowed to fight the EPA over its push to change Texas' system for regulating air pollution June 2, while environmentalists argued the federal agency hasn't done enough to reduce harmful emissions.

The Sierra Club filed a formal notice of its intent to sue the U.S. Environmental Protection Agency over its failure to meet deadlines for action on reducing soot, smog and the effects of Texas pollution on neighboring states.

The legal move comes a week after the regulatory agency's takeover of one of the state's biggest permits, Flint Hills Resources' East Corpus Christi refinery.

"The step last week will not be adequate to clean the air," said Bruce Nilles, deputy conservation director for the Sierra Club.

Perry, meanwhile, said again that the EPA is doing too much by seizing control of one permit and threatening to take over more.

Perry said the EPA's "power grab" would be devastating to the Texas economy. He said the current system has allowed the state to improve air quality and create jobs.

"The EPA seems to believe that federal controls and bureaucracy are more important than clean-air results," said Perry, who asked President Barack Obama to rein in the agency.

Chad Burke, president and CEO of the Economic Alliance Houston Port Region, said the area's petrochemical industry employs 30,000 people, with an additional 300,000 jobs that are related.

"If we allow the EPA to chase the 30,000 jobs away, the 300,000 jobs will follow," said Burke, who joined Perry at the news conference.

The campaign of Bill White, Perry's Democratic opponent, disputed claims that the EPA is picking on Texas, noting the agency's push started during the administration of Republican President George W. Bush.

The federal action also was in response to a lawsuit by an industry group asking that the EPA approve more than 30 changes to the state's air permitting program over 14 years.

In a statement, White said: "Other governors have been able to keep the authority to enforce the Clean Air Act."

The states handle several environmental laws on behalf of the EPA, but the agency can take the power away if it doesn't approve of a state's efforts.

"The EPA is asking Texas to do what every other state in the U.S. is doing," said Matthew Tejada, executive director of the advocacy group Air Alliance Houston.

The Sierra Club's Texas chapter, meanwhile, wants the EPA to do more, claiming in legal papers that the agency has missed key deadlines for improving air quality in the state.

Individuals and groups can file citizen-enforcement suits if the EPA fails to enforce the Clean Air Act, but must notify the agency 60 days in advance to allow time for an out-of-court resolution. It's the same approach industry groups took to get the EPA to act on changes in Texas' air permitting program.

The Sierra Club is seeking action on the state's plans to regulate soot, smog and the pollution that drifts between states. Federal regulators missed deadlines in 2005, last October and in April, the notice says.

"We're just asking EPA to follow the law," said Jennifer Powis, a Houston-based representative of the Sierra Club.

EPA Sets Tougher SO2 Standard

The U.S. Environmental Protection Agency (EPA) on June 3 issued a final new health standard for sulfur dioxide (SO2).

The one-hour health standard reportedly will protect millions of Americans from short-term exposure to SO2, which is primarily emitted from power plants and other industrial facilities. Exposure to SO2 can aggravate asthma and cause other respiratory difficulties. People with asthma, children, and the elderly are especially vulnerable to the effects of SO2.

"We're taking on an old problem in a new way, one designed to give all American communities the clean air protections they deserve. Moving to a one-hour standard and monitoring in the areas with the highest SO2 levels is the most efficient and effective way to protect against sulfur dioxide pollution in the air we breathe," said EPA Administrator Lisa P. Jackson. "This is one of many pollutants we've been able to significantly reduce through the Clean Air Act, keeping people healthy, protecting our environment and growing our economy. This new standard -- the first in almost 40 years -- will ensure continued success in meeting these challenges."

EPA is setting the one-hour SO2 health standard at 75 parts per billion (ppb), a level designed to protect against short-term exposures ranging from five minutes to 24 hours. EPA is revoking the current 24-hour and annual SO2 health standards, claiming that the science indicates that short-term exposures are of greatest concern and the existing standards would not provide additional health benefits.

EPA is also changing the monitoring requirements for SO2. The new requirements assure that monitors will be placed where SO2 emissions impact populated areas. Any new monitors required by this rule must begin operating no later than Jan. 1, 2013. EPA is expecting to use modeling as well as monitoring to determine compliance with the new standard.

The final rule also changes the Air Quality Index to reflect the revised SO2 standard. This change will improve states' ability to alert the public when short-term SO2 levels may affect their health.

EPA estimates that the health benefits associated with this rule range between $13 billion and $33 billion annually. These benefits include preventing 2,300 to 5,900 premature deaths and 54,000 asthma attacks a year. The estimated cost in 2020 to fully implement this standard is approximately $1.5 billion.

The first National Ambient Air Quality Standards for SO2 were set in 1971, establishing both a primary standard to protect health and a secondary standard to protect the public welfare. Annual average SO2 concentrations have decreased by 71 percent since 1980.

The final rule addresses only the SO2 primary standards, which are designed to protect public health. EPA will address the secondary standard -- designed to protect the public welfare, including the environment -- as part of a separate review to be completed in 2012.

EPA expects to identify or designate areas not meeting the new standard by June 2012.

More information: http://www.epa.gov/air/sulfurdioxide

Valero Divests Delaware City Assets for $220 Mln

Valero Energy Corp. announced June 1 that it has completed the sale of the assets of its terminal operation and discontinued operations in Delaware City to the Delaware City Refining Company LLC and Delaware Pipeline Company LLC, wholly owned subsidiaries of PBF Energy Company LLC. Valero received total proceeds of $220 million.

Valero had announced the sale of the assets in April. It is also exploring strategic options for its refineries in Paulsboro, N.J., and Aruba.

PBF Energy Expects to Restart Delaware Refinery Next Year

PBF Energy Company LLC on June 1 announced that its subsidiaries, Delaware City Refining Company LLC and Delaware Pipeline Company LLC, have completed their purchase of the Delaware City refinery in Delaware City, Delaware, from Valero Energy Corp.

The acquired assets include a currently idle 190,000 barrel per day refinery, associated terminal and pipeline, and 218 megawatt power plant complex. The purchase price totaled $220 million, subject to certain adjustments. In addition, PBF will be commencing major maintenance work at the refinery and plans to restart the refinery in the first half of 2011. The terminal assets will continue to operate through this period.

Thomas D. O’Malley, PBF’s Chairman, said, "PBF looks forward to being a responsible business partner with the State of Delaware, Governor Markell and his administration, the United Steel Workers, the Building Trades and to providing the community with highly valued industrial jobs. Through the efforts of Governor Markell and his administration, and the USW and the Building Trades, we believe the refinery can be a sustainable part of the Delaware and U.S. economies for years to come."

O’Malley added, "The Delaware City refinery and related assets provide an excellent platform upon which PBF plans to grow while focusing on safe, reliable and environmentally responsible operations."

PBF’s principal investors are Petroplus Holdings AG, the largest independent refiner and wholesaler of petroleum products in Europe, and private equity firms The Blackstone Group and First Reserve Corp.

NPRA Seeks Cooperation on Refinery, Petchem Plant Safety Issues

Operators of petroleum refineries and petrochemical plants want to work closely with federal agencies, labor unions and others to make further progress in preventing injuries and fatalities at their facilities, the president of NPRA, the National Petrochemical & Refiners Association, told a Senate subcommittee June 10.

"Nothing is more precious than the good health and the lives of our employees and contractors," NPRA President Charles T. Drevna said in prepared testimony to the Senate Subcommittee on Employment and Workplace Safety. "There has been significant progress over the years, as facilities continually enhance their safety programs. The result is fewer and fewer people being injured at refineries and petrochemical plants."

"We firmly believe that there is no tolerable level of injury," Drevna added. "There is no tolerable level of workplace-related incidents. Our goal is to reduce these to zero, and we will do everything possible to reach that goal."

"We believe that the best way to improve safety in our industry is to work in cooperation – rather than confrontation -- with all stakeholders: OSHA, the Chemical Safety Board, labor unions, contractors and Congress," Drevna said. "We all seek the same goal -- safe workplaces, where every worker goes home safe and sound every day."

"Issuing dueling press releases, denouncing each other for the TV cameras and in expensive ads, and using inflammatory rhetoric to score political points won't accomplish our common goals and, if anything, will only serve to make the task even harder," Drevna said. "Instead of applying our energy to escalate the rhetoric of charge and countercharge involving safety, we must join forces to improve the reality of safety."

Drevna said NPRA is planning a workshop focusing on refinery safety with significant input from OSHA (the Occupational Health and Safety Administration) and labor unions this fall. He invited committee members and their staffs to attend.

The NPRA president cited a list of specific safety improvements refineries have made over the past five years, including moving structures at refineries to safer locations, making more buildings blast-resistant, keeping as many workers as possible away from areas during hazardous operations, and improving operating procedures and worker training.

"Our members go above and beyond what is required by OSHA and other government regulations, and are always reviewing new techniques to improve both personnel and process safety," Drevna said. "They have invested and will continue to invest heavily to make refining and petrochemical manufacturing processes safer."

Personnel safety is involved with protecting the safety, health and welfare of the people who work in refineries and petrochemical plants.

Process safety, which is equally important, involves making sure that a facility operates properly. That means maintaining the equipment in a way that will avoid chemical releases and other incidents that could harm people, the facility itself, or the surrounding area.

Drevna said that besides being the right thing to do, promoting safety makes good business sense, because it is far more expensive to deal with the aftermath of workplace incidents than to prevent them.

NPRA agrees with OSHA that OSHA inspectors need to focus on facilities and companies with the most serious workplace safety problems, and not try to find every minor violation at every facility, Drevna said. He said OSHA should use its enforcement arm against operators of refineries and petrochemical plants that commit serious violations and aren't taking necessary steps to comply with safety regulations.

"If there are bad actors, government should be acting against them," Drevna said. "But in all fairness, it is not accurate to paint everyone in the domestic petroleum refining and petrochemical business -- or any business for that matter -- with a broad brush, condemning all because of the actions of a very few."

NPRA members include more than 450 companies, including virtually all U.S. refiners and petrochemical manufacturers.

Senate Resolution Would Overturn EPA's 'Endangerment' Finding

A group of 24 trade associations representing a broad range of employers that provide jobs to millions of Americans is urging U.S. senators to bar the Environmental Protection Agency from going around Congress to regulate greenhouse gas emissions under the Clean Air Act.

The group has sent a letter to all senators urging them to support Senate Joint Resolution 26, a bipartisan measure introduced by Sen. Lisa Murkowski (R-Alaska).

The resolution would overturn EPA's 2009 "endangerment" finding, which concluded that greenhouse gas emissions endanger public health and welfare. The finding paved the way for EPA to regulate car and light-duty truck emissions of greenhouse gases, which in turn has triggered subsequent EPA regulation of greenhouse gas emissions from other commercial and industrial sources.

"Massive and rapidly imposed restrictions on greenhouse gas emissions would harm the American economy and hit every American in his or her wallet," said Charles T. Drevna, president of the National Petrochemical & Refiners Association, one of the groups signing the letter.

"If EPA's aggressive campaign to regulate greenhouse gases under the Clean Air Act is successful, it will add billions of dollars to the cost of doing business in the United States, raise the cost of energy and other products for American families, wipe out the jobs of millions of American workers, and simply shift greenhouse gas emissions from the United States to other nations without any increase in environmental protection," Drevna added.

"Restrictions on greenhouse gas emissions were never authorized or contemplated by members of Congress when they enacted the Clean Air Act," Drevna said. "Sen. Murkowski's resolution simply recognizes this truth and calls a halt to EPA's greenhouse gas campaign before it harms the American economy, destroys American jobs, and costs families and farmers billions of dollars."

The letter's signatories also urged senators to reject any effort to codify the EPA's recently released "tailoring" rule into law. That rule would subject only stationary sources of greenhouse gas emissions of 100,000 tons or more annually to state government permitting requirements under the Clean Air Act. The Clean Air Act, however, sets a permitting threshold of 250 tons annually for emissions from major sources.

Groups signing the letter are: American Coke and Coal Chemicals Institute; American Iron and Steel Institute; American Health Care Association; American Petroleum Institute; Associated General Contractors of America; The Center for North American Energy Security; Corn Refiners Association; Industrial Energy Consumers of America; Industrial Minerals Association - North America; International Warehouse Logistics Association; Metals Service Center Institute; National Association of Convenience Stores; National Association of Manufacturers; National Cattlemen's Beef Association; National Center for Assisted Living; National Mining Association; National Petrochemical & Refiners Association; Natural Gas Supply Association; Portland Cement Association; Society of Independent Gasoline Marketers of America; Small Business & Entrepreneurship Council; The Fertilizer Institute; U.S. Chamber of Commerce; and U.S. Oil and Gas Association.

EPA, WY Frontier Refinery Resolve Enforcement Action

In a Consent Agreement filed on May 27, 2010 the U.S. Environmental Protection Agency and Frontier Refining Inc., a petroleum facility in Cheyenne, Wyoming, resolved an enforcement action initiated in September 2009.

Frontier will pay a $900,000 penalty and has agreed to disconnect inlet piping which allowed hazardous waste releases to Surface Impoundment 2. The company has agreed to remove and manage all waste in Pond 2 and clean the existing liner this fall. Additionally, Frontier will submit a closure plan with respect to the future use of Pond 2. Frontier estimates the cost of compliance at about $1 million.

Frontier is alleged to have violated the law by storing hazardous wastes in a wastewater pond that was neither constructed nor operated properly to prevent overflowing and leaks. Other violations relate to closing the pond and providing financial assurance for its proper closure. These violations of the Resource Conservation and Recovery Act were discovered during an EPA-led inspection in March 2009.

The Wyoming Department of Environmental Quality had also previously addressed violations and resolutions regarding other impoundments and contamination near the area of EPA's case. This was accomplished in enforcement cases completed by WDEQ from 2004-2009.

EPA is investigating ponds such as this, referred to as surface impoundments, as part of a nationwide initiative.

EPA Pulls ECF Rule

The U.S. Environmental Protection Agency (EPA) has withdrawn the Emission Comparable Fuels (ECF) Rule, a rule that was finalized in December 2008. The agency stated the rule sought to remove regulatory costs by reclassifying fuels that would otherwise be regulated as hazardous waste, but generate emissions similar to fuel oil when burned.

EPA has now withdrawn the rule due to difficulty of ensuring that emissions from burning ECF are comparable to emissions from burning fuel oil.

The ECF rule was criticized for potentially allowing hazardous waste to evade the hazardous waste regulatory system, and for being difficult to administer. Industry members have also criticized it because of the detailed conditions for reclassification, which they believe will limit the rule's use.

More information on the rule: http://www.epa.gov/epawaste/hazard/tsd/td/combust/compfuels/exclusion.htm

Sunoco Expects Profitable Q2 for Refining

Sunoco, Inc. announced June 16 that it anticipates its refining segment to report a profit for the quarter ending June 30, 2010. It would be the segment's first profitable quarter since Q1 2009.

"We are beginning to see the results of our business improvement initiatives positively impact our performance," said Lynn L. Elsenhans, Sunoco's chairman and chief executive officer. "The actions we've taken, coupled with a slight improvement in market conditions, have brightened our immediate outlook for Sunoco's refining and supply business. Nevertheless, business conditions remain difficult, requiring our continued focus on operating excellence and achieving a sustainable, lower cost structure."

OSHA Testifies that Refinery, Petchem Violations Still too Common

Jordan Barab, deputy assistant secretary for the U.S. Department of Labor's Occupational Safety and Health Administration, on June 10 testified before the U.S. Senate Committee on Health, Education, Labor and Pensions Subcommittee on Employment and Workplace Safety. His statement, as prepared, appears below.

"Chair Murray, Ranking Member Isakson, and members of the subcommittee, thank you for inviting me to join you this morning for this necessary conversation about worker safety in our nation's energy production industries. This issue has most recently been brought to the public's attention in the most tragic way possible, with deaths of 11 workers and injuries to 17 others as the result of the April 20th explosion on the Deepwater Horizon offshore oil drilling platform. The Deepwater Horizon disaster occurred even as OSHA continues to deal with the ramifications of the 2005 fire and explosion at BP's Texas City refinery that killed 15 workers and injured more than 170 others, and to help our Washington State Plan partners investigate the April explosion at a Tesoro refinery that left seven more workers dead.

"What have we learned from these tragic events? Certainly we have learned that in our nation's energy producing industry, the status quo is not working. In the past four months alone, at least 58 workers have died in explosions, fires and collapses at refineries, coal mines, an oil drilling rig and a natural-gas-fired power plant construction site. Not all of these tragedies are within OSHA's jurisdiction; the Deepwater Horizon was an offshore drilling facility, technically a "vessel" not subject to OSHA requirements, while mine safety is within the purview of OSHA's sister agency, the Mine Safety and Health Administration. Nevertheless, the toll of worker deaths and injuries on the job is sounding an alarm about a major problem throughout the energy industries -- a problem that OSHA must help address.

"Secretary Hilda Solis' vision for the Department of Labor is 'good jobs for everyone.' Good jobs are safe jobs, and we must do more to ensure that all of our nation's workers, including those in the energy industries, can go home safely when their work is done.

"In the wake of the Texas City explosion, OSHA initiated a national emphasis program with the goal of inspecting the process safety management programs of almost all of the nation's oil refineries. We adopted this saturation program partly because conventional methods of assessing workplace safety, such as injury and illness rates, are not adequate indicators of the risk of fires, explosions or other catastrophic accidents. Nor do they account for the fact that, at many refineries, much of the most dangerous work is contracted out, and injuries to the contract workers do not show up in the refinery operators' injury rates.

"I am sorry to report that the results of this NEP are deeply troubling. Not only are we finding a significant lack of compliance during our inspections, but time and again, our inspectors are finding the same violations in multiple refineries, including those with common ownership, and sometimes even in different units in the same refinery. This is a clear indication that essential safety lessons are not being communicated within the industry and often not even within a single corporation or facility. The old adage that those who do not learn from the past are doomed to repeat it is as true in the refinery industry as it is elsewhere. So we are particularly disturbed to find even refineries that have already suffered serious incidents or received major OSHA citations making the same mistakes again.

"For example, because BP Texas City had failed to abate many of the problems that it agreed to address after 15 workers were killed in the 2005 explosion, and also failed to address a number of related hazards, late last year OSHA proposed additional penalties of $87 million at that refinery. Only a few months after that, OSHA found similar violations at the BP-Husky refinery in Toledo, Ohio, for which we proposed an additional $3 million in penalties for egregious willful violations. That refinery had also been inspected a few years earlier, and numerous violations identified. Although BP fixed the specific violations at the Toledo facility that OSHA had identified in the first inspection, we found the exact same problems in other units in the plant.

"This failure to learn from earlier mishaps has exacted an alarming toll in human lives and suffering. In the last five years alone, OSHA has counted over 20 serious incidents, many resulting in deaths and injuries in refineries across the country. The Tesoro Anacortes explosion in Washington State that killed seven workers last April was one of these.

"What do all of these incidents have in common? None resulted from unique technical causes. Each one repeated a lesson that should already have been learned by the industry. For example, last year, OSHA completed an investigation of a naphtha piping failure and release at the Delek Refinery in Tyler, Texas, in which the resulting explosion and fire seriously injured three workers and killed two other workers. One of these two workers was killed in the explosion, while the other struggled for 13 days in the hospital before dying from severe burns. But the saddest part of this story is that the naphtha pipe that exploded had already ruptured once before within the past few years.

"This cycle of workers being hurt or killed because their employers failed to implement well-known safety measures points out major deficiencies in chemical process safety management in the nation's refineries and, quite possibly, to systemic safety and health problems in the entire petrochemical industry.

"Refineries, chemical plants and other facilities that routinely handle large quantities of highly hazardous chemicals are not like conventional workplaces; the consequences of a single system failure anywhere in the system can be catastrophic. Safety professionals have long been aware that reliance on a safety approach that only addresses problems after they manifest themselves as obvious hazards is wholly inadequate to ensure safety in such workplaces.

"For that reason, OSHA, in the wake of a disastrous chemical release in Bhopal, India, and several other significant chemical accidents, issued its Process Safety Management of Highly Hazardous Chemicals standard nearly 20 years ago. That standard, embodying a comprehensive, systematic management approach to process safety, was one of OSHA's earliest attempts to create the kind of plan/prevent/protect regimen that the department is now working to implement in a much broader way. As an early effort, the standard has many strengths, but it is far from perfect. As I will describe below, we are seeing similar violations in too many of the refineries we inspect.

"The standard, among other things, requires employers to compile process safety information and make hazard information and training available to employees and contractors; to develop and communicate written process hazard analyses that identify potential system failures; and to address and remediate risks identified by PHAs as well as risks identified in other ways, such as routine inspections or investigation of significant incidents. Employers must take extra steps to maintain the mechanical integrity of critical process components such as pressure vessels and relief systems. It is a key process safety management requirement that employers must timely address and resolve all identified safety issues, and must communicate the resulting safety information and recommendations to all affected personnel, which includes management, employees and contractors.

"Consistently throughout the course of the Refinery NEP, we have found that more than 70 percent of the violations we are finding involve failures to comply with the same four essential requirements:

"Process Safety Information: Frequent process safety information violations include failure to document compliance with Recognized and Generally Accepted Good Engineering Practices, (or RAGAGEP, which consists primarily of industry technical guidance on safe engineering, operating or maintenance activities); failure to keep process safety information up to date; and failure to document the design of emergency pressure relief systems.

"Process Hazards Analysis: We are finding many failures to conduct complete process hazards analyses. Often, there are significant shortcomings in attention to human factors and facility siting, and in many cases employers have failed to address process hazard analysis findings and recommendations in a timely manner, or, even to address them at all.

"Operating Procedures: Operating procedures citations are for failure to establish and follow procedures for key operating phases, such as start-ups and emergency shutdowns, and for using inaccurate or out-of-date procedures.

"Mechanical Integrity: This is a particular concern given the aging of refineries in the United States. Violations found by OSHA typically include failure to perform inspections and tests, and failure to correct deficiencies in a timely manner. In the Delek Refinery case mentioned above, for example, OSHA discovered multiple substandard pipes being operated, and the naphtha pipe whose explosion killed two workers and hospitalized three others had already ruptured once within the past few years.

"I have been deeply frustrated by these results. Over a year ago, we sent a letter to every petroleum refinery manager in the country, informing them of these frequently cited hazards. Yet, a year later, our inspectors are still finding the same problems in too many facilities. Clearly, much more work must be done to ensure effective chemical process safety. OSHA has identified three important concepts to guide that work.

"Concept Number One: Effective process safety management systems and workplace safety culture are critical for success in preventing catastrophic events.

"In addition to effective process safety management systems, organizational culture is also a critical component to preventing workplace injuries, illnesses and deaths. To paraphrase Professor Andrew Hopkins of the Australian National University and author of "Failure to Learn: The BP Texas City Refinery Disaster," workplace culture is not just an educational program that gets everyone to be more risk aware and think "safety first." It means establishing a set of practices that define the organization and influence the individuals who make up the organization. It's not how people think, it's what companies do.

"And it may seem obvious, but it bears emphasizing: Organizational safety culture must start at the top. It is vitally important for corporate leadership to create an environment within the workplace where workers feel they can report safety and health concerns without repercussions. Since OSHA inspectors cannot visit more than a fraction of the nation's workplaces, we rely on the eyes and ears of workers to help identify workplace hazards. To this end, OSHA must protect whistleblowers from retaliation or discrimination. The need for effective whistleblower protection is especially important in process safety management, because PSM systems rely upon effective communication of hazard information to and from workers involved in these hazardous operations. We applaud the subcommittee's work on the Protecting America's Workers Act to strengthen and expand protections for worker voice in the workplace.

"Concept Number Two: The oil and gas industry must learn from its mistakes.

"As discussed earlier, inspections under OSHA's Refinery NEP have found that over 70 percent of violations are of the same four PSM standard provisions. Almost all of the catastrophic incidents that have killed so many workers were caused by failures that industry executives and facility managers knew how to prevent. They were repeats of earlier mishaps, from which lessons should have been learned.

"Industry must do a better job of institutionalizing systems for learning from mistakes, so it does not continue to repeat the same mistakes at the expense of workers' lives. Reform in the management systems of companies that own, operate, or provide services to petrochemical operations is needed, and is needed now.

"Concept Number Three: Conventional injury and illness rates are not adequate indicators of the risk of fires, explosions, or other catastrophic accidents, and companies need to develop better leading indicators to assess risks in their workplaces

"To ensure strong PSM systems, we need to do a better job of identifying useful leading indicators of potential catastrophic hazards. The warning that "past performance is no guarantee of future success" applies with particular force to the low-frequency, high-impact events that process safety programs are intended to guard against.

"One of the most important challenges in trying to measure performance is determining how and what we measure. Companies have good tools for measuring and managing personal, or "hard hat" safety, and the refining and chemical sectors have generally done well in this area. Standard, OSHA-mandated injury and illness recording on the OSHA 300 log measures conventional hazards such as, for example, those from falls, broken bones and amputations, and yields rates for mishaps resulting in days away from work, restricted work or job transfer (the "DART rate"). Unfortunately, as we have also discovered, having good numbers on the OSHA 300 injury logs does not correlate with having an effective chemical process safety program. The classic example of this is BP-Texas City, which had very good injury and illness numbers for its own employees prior to the 2005 explosion. That tragedy, of course, revealed serious problems with process safety and workplace culture at the facility. Focusing on low DART rates alone will not protect workers or employers from disaster.

"Please do not misunderstand me; we need to keep reporting and tracking the illness and injury numbers -- DART rates are useful -- but we must not let those numbers lull us into a false sense of security. Looking only at these numbers does not warn us about pending doom from cutting corners on process safety. And to the extent we continue to factor DART rates into our targeting mechanism, we need to make sure that they are accurate. That is why we are paying special attention to incentive and discipline programs that discourage workers from reporting injuries and illnesses.

"So where do we go from here? How do we ensure that safety conditions in the nation's refineries improve? OSHA will continue its efforts to intervene on behalf of workers in the nation's refinery and petrochemicals industries. These efforts will include both a strong and credible enforcement presence, and a concerted effort to enlist the cooperation of industry, labor, and other stakeholders. This cooperation is crucial to maximizing our impact because OSHA cannot inspect every refinery every year.

"You can also expect to see OSHA collaborating more with the National Institute for Occupational Safety and Health, Environmental Protection Agency and other agencies to address the worker health and safety problems in the refinery and petrochemical industry -- and in other industries as well. Together, we can develop a more effective system for targeting problem hazards and problem worksites, and addressing the problems that we have identified. I also met recently with the National Petrochemical and Refiners Association, the American Petroleum Institute, and the United Steelworkers to reemphasize OSHA's concerns. And, in connection with hazards to which workers outside our jurisdiction are exposed, OSHA is actively collaborating with other agencies to assist in promoting worker safety.

"Finally, we need to pass the Protecting America's Workers Act, which would significantly increase OSHA's ability to protect workers, and specifically workers in refineries and chemical plants. The act would make meaningful and substantial changes to the Occupational Safety and Health Act that would increase OSHA's civil and criminal penalties for safety and health violations, making us much more able to issue significant and meaningful penalties to large oil companies before a disaster occurs.

"And because safe process safety depends heavily on lessons learned from close calls and near misses, workers need to feel that they are protected when reporting these events and exercising other health and safety rights. The enhanced whistleblower protections that are included in PAWA would go far toward ensuring that workers are protected for speaking out. Another way PAWA could strengthen workers' rights would be to clarify that the whistleblower provisions of the Occupational Safety and Health Act, contained in section 11(c), prohibit retaliation for protected activity in connection with occupational safety and health hazards, similar to those aboard the Deepwater Horizon, that are regulated by other federal agencies.

"Giving OSHA the ability to require abatement of hazardous conditions before contests are decided would also significantly enhance the safety of refineries. Ultimately, stronger OSHA enforcement and a modern Occupational Safety and Health Act will save lives.

"Chair Murray, thank you again for the opportunity to testify today. I applaud your efforts to shed light on the safety and health crisis in America's oil and gas industry. OSHA is committed to addressing this problem so that more workers do not needlessly die. As stated earlier, we also support Congress passing the Protecting America's Workers Act to give OSHA the tools needed to improve and expand its PSM enforcement and more effectively deter safety and health violations.”

Valero to Double Capacity of Crude Gathering Systems for its Texas McKee Refinery

Valero Energy Corp. on June 17 announced Phase I expansion plans that will double the capacity of its existing North Texas and Oklahoma Panhandle area crude oil gathering system in order to accommodate increased crude production. The pipeline system expansion project, which is scheduled to be completed by the fourth quarter of this year, will increase the amount of crude oil available to be processed at the 170,000 barrel per day Valero McKee Refinery in the Texas Panhandle.

The project will involve looping existing pipeline from Valero's storage facility in Perryton, Texas, additional pump stations and storage facilities. Valero expects the project to be completed quickly since most of the infrastructure and right-of-way is already in place.

"This is a quick and cost-effective expansion that will allow us to serve area producers who have steadily been increasing their crude production," said Joe Gorder, Valero's Executive Vice President for Marketing and Supply. "It will also give us the capability to accommodate even more production in the future."

Chevron Works to Repair Pipeline Serving Utah Refinery

Although the pipeline that supplies Chevron's refinery in Salt Lake City with about 15,000 barrels of crude per day remains shut down because of a leak, the oil company still has plenty on hand to process into gasoline, diesel and jet fuel, a Chevron spokesman, said June 14.

"We've started looking for other sources of crude [in case the pipeline closure drags on]," the spokesman, Dan Johnson said,. "But, for the short term, we have plenty of oil in storage at our refinery."

And while it may be weeks or even months before the spill that polluted Red Butte Creek, Liberty Park and parts of the Jordan River is cleaned up, the pipeline that caused the problem could be up and running in a few days.

Chevron workers started repairing the 10-inch steel pipeline by removing the damaged section in preparation for welding a new segment into place -- repairs that are expected to take a couple of days at most.

The work is being monitored by a representative of the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), which must sign off on the pipeline before it can be filled back up with crude.

"There is no set time for when a pipeline will go back into service," said Patricia Klinger, a deputy associate administrator at PHMSA. "Our first priority is to make sure that the integrity of the line is safe. But as soon as we are satisfied, they [Chevron] can begin operating it again."

Sometimes that certification may take only a few days, she said. Other times, it may take a week or more for PHMSA regulators to be comfortable with the repairs.

CANADA

Shell to Convert Montreal East Refinery to Terminal

After more than 11 months seeking a suitable buyer for the Montreal East Refinery, Shell Canada Products (Shell) on June 4 announced that this process has been unsuccessful and that it will now proceed with converting the refinery to a terminal.

The decision comes after considerable effort to market the refinery, including a cooperative effort with a Special Committee, led by Michael Fortier and supported by the Government of Quebec, to identify and approach potential purchasers. Although this effort resulted in two expressions of interest, there was a significant valuation gap and Shell will no longer pursue discussions with the interested parties.

"While we will not get into details about the expressions of interest or parties involved, we have informed the parties, the government and our employees that we will not be continuing discussions for the reason that we are too far apart on some of the terms put forward to realistically reach an agreement on the sale of the refinery," said Lorraine Mitchelmore, Shell Canada President and Country Chair. "Therefore, we will continue with our plans to convert the refinery in to a terminal."

"Today's announcement reflects our strategy to divest non-core assets, while making selective investments to enhance Shell's competitive position," said Mark Williams, Downstream Director. "Although we will be closing the refinery, conversion to a terminal will ensure we continue to supply the Montreal market with Shell's innovative products. I also want to thank the employees of the Montreal East Refinery for their dedication during this time of uncertainty"

The decision comes after a six-month time period between July 2009 and January 2010, during which Shell reviewed a number of options for its Montreal East Refinery. This review was comprehensive and involved significant efforts to market the facility to a number of parties. Despite these significant efforts no parties expressed an interest in purchasing the refinery during this time and so Shell announced its intention to convert the refinery in January.

This was part of a commitment Shell made with the Government of Quebec in February to consider credible offers if tabled by June 1, 2010.

MEXICO

Pemex to Move Forward on New $452.4 Mln Refinery

The chief official of Mexico's state-run oil company Petroleos Mexicanos, or Pemex, said June 16 the company will move forward with plans for a new refinery in the central state of Hidalgo and will spend $452.4 million (5.7 billion pesos) this year on basic engineering and other costs associated with the first phase of construction.

Pemex CEO Juan Jose Suarez met with the governor of Hidalgo, Miguel Angel Osorio Chong, to outline progress in planning for the new refinery to be built near an existing one in Tula, Hidalgo, the company said in a statement.

It will be called the Tula Bicentenary refinery because 2010 marks 200 years since Mexico's independence fight from Spain.

The public works project is one of the most important in the administration of President Felipe Calderon and has been budgeted to 2015. Its total cost is estimated at MXN129 billion, Pemex said.

Hidalgo officials are finalizing the acquisition of the land for the project, Pemex said, working with federal agencies to preserve pre-Hispanic archaeological sites.

Pemex has been importing about 350,000 barrels a day on average of gasoline so far this year, most of it from the U.S. It has been selling about 794,000 barrels of gasoline per day on average for domestic consumption so far this year.

Some analysts have suggested Pemex could save money by using underutilized U.S. refineries rather than building a new facility of its own. Pemex has a joint venture with Royal Dutch Shell PLC at a refinery in Deer Park, Texas, and six of its own refineries in Mexico.

ARUBA

Valero Set to Begin Turnaround at Aruba Refinery

Valero Energy Corp. announced June 3 that it will soon begin a 90-day turnaround at its 235,000-b/d refinery in Aruba. The company also stated that it aims to restart the refinery, which has been shut down since July 2009 due to unfavorable economic conditions, once the turnaround is complete.

Valero expects to begin the turnaround in "a week or so," according to a company spokesman.

CURACAO

Venezuela’s PDVSA Struggles to Restart 320,000 bpd Curacao Refinery

A restart process at a Curacao refinery is encountering problems, and the nearly 100-year-old plant has yet to process any significant amount of oil after being shut down three months ago, an official said May 28.

"We're not refining much at all," said an official at the Isla refinery, which is owned by the Curacao government and operated by Venezuela's state-owned Petroleos de Venezuela, or PDVSA. "Next week we may have a better idea of how things are going."

The refinery has a capacity to refine 320,000 barrels a day, and was averaging about 230,000 barrels a day when a power outage brought the plant to complete halt March 1.

Since then, officials have struggled to get access to most of the key requirements in refining, including steam, water, compressed air and electricity.

To solve the problems with the air compressors, which were damaged in the initial power outage, the refinery rented moveable compressors from the U.S. They were delivered and installed nearly a month ago.

But even the rented equipment hasn't been problem-free.

"We've had to conduct major revisions to one of the units," said the official, who asked not to be identified.

The refinery processes Venezuelan crude and makes up about 10% of PDVSA's 3 million-barrel-a-day capacity refinery network. The refinery's port has deep waters that can handle the large ships used for long-distance delivery of oil products to China, an increasingly important customer of Venezuelan fuel.

Venezuela says it currently ships about 460,000 barrels of oil to China each day, and hopes to bump that up to 1 million barrels a day over the coming years.

ASIA

CHINA

Air Products to Build Hydrogen Plant at China’s Sichuan Refinery

Air Products on June 8 announced that its joint venture company based in Sichuan, China has signed a long-term agreement to build a hydrogen production facility for PetroChina Company Limited, one of the largest oil and gas companies in the world. It is the first time that a state-owned refinery in China has outsourced its hydrogen requirements. The steam methane reformer (SMR) will produce hydrogen and syngas to support PetroChina's Sichuan refinery and petrochemical facilities. The facility will produce over 90 million standard cubic feet per day of hydrogen and is targeted to be on stream in early 2012.

"We are honored to be part of this first-ever contract to provide outsourced hydrogen to PetroChina. We have a similar JV that has already contracted with PetroChina to supply oxygen and nitrogen, so we are pleased that they have shown further confidence in Air Products providing a reliable, low-cost supply of hydrogen and other industrial gases for their new Sichuan refinery and ethylene complex. This project will help make cleaner transportation fuel available to meet China's growing demand," said Phil Sproger, vice president-Business Development for Asia at Air Products.

The hydrogen production plant will feature technology advancements to maximize facility energy efficiency and emission reductions. The enhanced SMR design targets minimal loss of heat to the environment, which in turn reduces the quantity of natural gas required to make hydrogen. These efforts and other productivity improvements support Air Products' overall sustainability goals of reducing energy consumption and emissions.

PetroChina plays a leading role in the oil and gas industry in China as its largest oil and gas producer and distributor. PetroChina was established as a joint stock company with limited liabilities by China National Petroleum Corporation in 1999.

This is the second contract announced with PetroChina in the past year. In September of 2009, the same Air Products joint venture company signed an agreement to build an air separation unit (ASU). The ASU will supply oxygen and nitrogen to PetroChina's main refinery and ethylene complex in Sichuan, as well as produce liquid products for Air Products' merchant gases customers in the Chengdu area. The ASU is targeted to be on-stream in late 2011.

The Sichuan hydrogen facility will be built through the global alliance between Air Products and Technip. This alliance, which has built over 30 hydrogen production facilities, continues to provide the worldwide refining industry with competitive technology and world-class safety. Technip provides the design and construction expertise for steam reformers while Air Products provides the gas separation technology. Air Products, through its extensive operating network, and Technip, from its large reference base, also bring effective operational and engineering knowledge to "design-in" high reliability and efficiecy.

PetroChina Plans Gasoline and Diesel Hydrotreaters Upgrade at Lanzhou Refinery

PetroChina Co., the nation’s largest oil and gas producer, plans to build gasoline and diesel hydrotreaters at its Lanzhou refinery in northwestern China to produce cleaner fuels.

The company is conducting “preliminary work” on the projects, China National Petroleum Corp., said in its online newsletter July 4. The gasoline unit will have an annual capacity of 1.8 million metric tons, or about 42,000 barrels a day, and the diesel unit 3 million tons, the company’s parent said.

China’s state oil companies are upgrading their refineries to produce fuels that meet emissions targets in the world’s biggest polluter. The Lanzhou hydrotreaters will produce fuel that can meet China III standards, which is similar to Euro III specifications adopted by the European Union, CNPC said.

The Lanzhou refinery in Gansu province can process 10.5 million tons of crude oil a year.

CNPC expects to complete the expansion of its Qingyang refinery in Gansu this year, the Beijing-based company said in a separate statement, without giving further details.

INDIA

Technip Wins Three Lump Sum Turnkey Contracts for India Refinery Units

Technip has been awarded three lump sum turnkey contracts for Mangalore Refinery & Petrochemicals Ltd. (MRPL), worth a total value of approximately EUR25 million, for the Phase III Expansion Project of its refinery located in Mangalore, west coast of India. This project will allow this refinery's crude refining capacity to increase to 15 million tons/year.

The contracts cover the design, engineering, supply and installation of fired heaters in four major units of the MRPL refinery: the Crude Distillation, Vacuum Distillation, Delayed Coking and Petrochemical Fluid Catalytic Cracking units.

The contracts, which are scheduled to be completed in the first semester of 2011, will be executed by Technip's operating center in New Delhi, India.

Technip Hands over Dung Quat Refinery to Petrovietnam

A ceremony was held in the central Vietnamese province of Quang Ngai on May 30 for the Technip contractors consortium to officially hand over the Dung Quat Oil Refinery to its management board.

A key national project, the Dung Quat refinery is the first of its kind in Vietnam and was built in the Dung Quat Economic Zone at the cost of US$3 billion. It is designed to have a capacity of 6.5 million tonnes of oil products a year, meeting over 30 percent of the country's needs.

After 44 months of construction, on February 22, 2009, the plant rolled out its first product. Three months later, it began producing all kinds of products as designed and it ran at full capacity.

By the end of May, the plant received a total of 4 million tones of crude oil from the offshore Bach Ho oilfield for its test run. It has so far turned out over 3.2 million tonnes and sold to the market 3 million tonnes of LPG, propylene, unleaded petrol, kerosene, petrol for aircraft Jet A1, DO and FO.

The Binh Son Petrochemical Company will be in charge of operations, production as well as business activities of the Dung Quat oil refinery.

Speaking at the function, Phung Dinh Thuc, Director General of the Vietnam Oil and Gas Group (PetroVietnam) - the refinery's investor, said with estimated revenues of over US$3.4 billion (65 trillion VND) a year, the refinery is expected to contribute greatly to promoting Quang Ngai provinces economic restructure and industrial and service development.

P.K Singh, Project Director of the Technip consortium, stressed the endeavors the consortium has made during the construction phase of the project.

He said his consortium was pleased to see that all participating builders have made their utmost to ensure the safety for the plant and hoped PetroVietnam, the Binh Son company, and local authorities will help the plant maintain its certified safety.

On the occasion, Singh handed over the key symbol of the Dung Quat plant -- a crown of Vietnam's industry -- to PetroVietnam and the Binh Son Petrochemical Company.

EUROPE / AFRICA / MIDDLE EAST

EUROPE

Europe's Refining Glut Could Be a Given for Years

A glut in global refining capacity is keeping a lid on refiners' profits, particularly in Europe, where firms are resisting much-needed plant closures.

Refining margins -- the amount of money a refiner can earn from processing a barrel of crude -- in northwest Europe stood at an average $3.55 a barrel so far this quarter, according to BP data. Margins have edged up from 2009, when they averaged $3.26 a barrel, but are down sharply from their 2008 peak of $6.72 a barrel, a period considered a golden age of refining by industry analysts.

Vienna-based consultancy JBC Energy forecasts that refineries handling 3.4 million barrels a day, or 19% of Europe's total refining capacity, are under threat of closure by 2020 because they are unprofitable. But companies are reluctant to shut plants, given environmental cleanup costs and the opposition from both, governments and labor unions, industry executives and analysts say.

About one-third of the European refining plants that are vulnerable to shutdown should close in the next two years, says David Wech, head of research at JBC Energy. "Unions are relatively strong in Europe, so it looks to be more difficult to take the decision and bring it through," he adds.

If that doesn't happen, it could weigh down refiners globally by prolonging the squeeze on profitability "The center of gravity [for refining and demand] is moving to the Far East. We [in Europe] are going to be secondary players in this market," says Inigo Diaz de Espada, vice president of supply, trading, bunkering and aviation at Spanish refiner Cepsa, which is expanding a refinery in Spain. "Only the good refineries will survive."

Global refiners have struggled to maintain profitability in the last two years, hit by a sharp contraction in global oil demand and massive expansions in refining capacity in Asia and the Middle East.

The capacity glut has already forced some companies to close or convert plants to stem their losses. Last year, Europe's largest independent refiner, Petroplus Holdings AG, idled its Teesside refinery in the U.K., while French oil major Total SA halted refining operations at its Dunkirk plant in response to the slump in Europe's demand for oil. More than 25% of refineries in the Atlantic Basin, or Europe and North America, lost money in 2009, according to Wood Mackenzie estimates.

"The biggest problem for [refiners in] Europe right now is that demand has collapsed; it's imploded," says Stephen George, senior refining analyst at U.K.-based consultancy KBC Energy Economics.

But Mr. George expects ailing European refineries, rather than shut down entirely, to limp along with narrow, and in some cases, negative margins in the coming years.

One reason is that governments are reluctant to see large numbers of industrial jobs disappear.

For example, Total's decision to close the Dunkirk plant, which employed 620 staffers and full-time contractors, was criticized by the French government and met with a wave of strikes across Total's French refineries in February. The uproar prompted Total to repurpose the Dunkirk facility, possibly into a storage facility, and keep all jobs there.

"The pain to shut down in Europe is quite large," said Willem Kuijl, a special advisor to BP PLC, said at a recent industry conference in Rotterdam.

FINLAND

Neste Oil Inaugurates Lab at Porvoo Refinery

Neste Oil inaugurated a new Central Laboratory at its Porvoo, Finland refinery June 2. The laboratory will play a key part in the company's R&D and in analyzing the refinery's products and quality assurance work. The project was carried out between 2008 and 2010 and cost approximately EUR 18.5 million.

"Around 1,000 of our more than 5,000 personnel work in areas related to research and technology development, and our annual R&D budget today is around EUR 37 million," said Lars Peter Lindfors, Neste Oil's Senior Vice President, Technology and Strategy. "Cutting-edge R&D calls for the latest technology, both in terms of equipment and facilities. The new laboratory, combined with our strong research expertise, will give us an excellent foundation for continuing our successful research into the future."

Neste Oil's main laboratory carries out around 250,000 analyses on some 100,000 samples annually. Half of these samples are linked to process monitoring, something over a quarter to quality assurance on end-products, 7.5% to feedstocks, and around 15% to research projects. Around 300 analytical methods are currently in use. Some 80 people - primarily chemists, laboratory technicians, and laboratory analysts - will work in the new building.

The new laboratory is located close to key parts of the refinery, the Research and Technology organization, and Neste Oil's engineering company, Neste Jacobs. The close cooperation that takes place between people in these various organizations gives Neste Oil a valuable competitive edge. Neste Oil has developed a number of cutting-edge technologies in use around the world. One of the latest of these is NExBTL technology, used to produce the world's leading renewable diesel fuel.

Neste Oil also recently invested in a new laboratory at its other refinery at Naantali, which was opened in December 2008.

SERBIA

Gazprom Neft Launches Construction of Hydrocracking Complex at Serbia’s Pancevo Refinery

A commencement ceremony has been held at the Pancevo Refinery (Serbia) to celebrate the construction launch of a hydrocracking and hydrotreatment complex, Gazprom Neft reported in a news release. The construction was commenced within the frames of Naftna Industrije Srbije’s (NIS) refining capacities modernization. The ceremony was attended by the Prime Minister of the Republic of Serbia Mirko Cvetkovic, Minister of Energy Petar Shkundric, Russian Ambassador to the Republic of Serbia Alexander Konuzin, Chairman of Gazprom Neft Management Board Alexander Dyukov, NIS CEO Kirill Kravchenko, and other officials.

The construction of the light hydrocracking and hydrotreatment complex at the Pancevo Refinery will enable the plant increase its throughput up to the maximum annual capacity of 4.8 million tons. Thus, the complex will not only cover local Serbian market requirements but provide conditions for export gasoline supplies to the Balkan states. Following the complex commencement, NIS will produce engine gasoline and euro-diesel with a maximum sulfur content of 10 ppm, which conforms fully to the ecological requirements of EC and Serbia. When the complex achieves its designed capacity, the engine gasoline throughput will arrive at 638 thousand tons per year. Further, the volume of euro-diesel annual production will increase significantly from the actual 230 thousand tons to 1.54 million tons.

Gazprom Neft’s aggregate investments into the Pancevo Refinery upgrading projects amount to 500 million euro till 2012. They particularly cover the construction of a refinery-based hydrogen unit, modernization and construction of infrastructural and industrial refinery facilities, and various ecological projects. Construction of the hydrocracking complex alone will require 396 million euro of the total volume of financing. In accordance with the modernization program, commencement of the complex is scheduled for the third quarter of 2012.

Chairman of Gazprom Neft Management Board Alexander Dyukov stated: “Gazprom Neft is committed to NIS development and expansion of its operations. Construction of the hydrocracking complex at the Pancevo Refinery is one of the steps in this direction. Increasing industrial safety and developing refining technologies while improving product quality up to the European standards including ecological performance progress will enable NIS to rise to the fore at the Balkan regional oil product market”.

CAMEROON

Foster Wheeler Wins Cameroon Refinery Project

Foster Wheeler AG announced June 1 that its Global Engineering and Construction Group, has been awarded an engineering, procurement, and construction management (EPCm) services contract by Societe Nationale de Raffinage (SONARA) for Phase 1 of the Limbe Refinery upgrade and modernization project in Cameroon.

The terms of the award were not disclosed and the contract will be included in Foster Wheeler's second-quarter bookings for 2010.

Foster Wheeler has already completed the front-end engineering design for the entire project. Phase 1 includes the revamp of the existing crude distillation unit, addition of a new vacuum distillation unit, new catalytic reformer unit, and power generation and associated offsites and utilities facilities.

"This project is of significant strategic importance for Cameroon, allowing the Limbe Refinery to process local crude and condensate while increasing processing capacity and improving overall refinery utilization," said Umberto della Sala, president and chief operating officer, Foster Wheeler AG. "It will also enable SONARA to market more value-added products such as kerosene and diesel once the overall project is completed. SONARA is a very important client with whom we have established a strong relationship as part of our strategy to develop more business in Africa."

"We have selected Foster Wheeler because of their ability to provide qualified and professional services, as already demonstrated to us in the past, and their recognized strengths in the design and execution of large, technically complex projects in challenging environments," said Charles Metouck, general director of SONARA.

NIGERIA

KBR to Perform Design, Engineering for Nigeria’s $3 Bln, 160,000 bpd Araromi Refinery Project

KBR announced June 1 that it has been awarded a contract by Houston-based FPR Inc. to provide Design and Early Engineering Services for the development of the Araromi Refinery Project in the OK Free Trade Zone (OKFTZ) in Nigeria.

KBR will execute the Design and Early Engineering Services for a low complexity 160,000 barrels per day Greenfield refinery and marine facility estimated in excess of US$3 billion. The refinery will produce motor gasoline, automotive gas oil, kerosene and jet fuel. This work will be executed primarily in the Republic of South Africa and the United States.

This award marks the first contract awarded under a Memorandum of Agreement (MOA) under which the two firms anticipate executing various phases of the project which include EPC-GM and Operation and Maintenance. The Araromi Refinery Project will be developed in phases, with an ultimate capacity of 320,000 barrels per day with a full petrochemical complex.

Pursuant to FPR's mission, the refinery will enhance the social and economic development of the host country.

"We are proud to partner with FPR, Inc. and assist in the development of the Araromi Refinery Project, a refinery that is anticipated to have a positive impact on the Nigerian market," said John Quinn, President, KBR Downstream. "This award demonstrates KBR's commitment to Africa and allows us to enhance an already robust portfolio of refinery design, engineering and construction in the region."

KBR is a global engineering, construction and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power and industrial markets.

KAZAKSTAN

Kazmunaygaz Hopes To Sell 50% Stake in Pavlodar Refinery to TNK-BP

The Kazakhstan state holding Kazmunaygaz hopes to sell a 50 percent stake in the Pavlodar refinery for $600 million, and views TNK-BP as the most likely buyer, Reuters reports, citing a source in the industry.

Earlier, representatives from LUKOIL and Rosneft, which are also active in Kazakhstan, said they were not interested in the asset.

A source in Kazmunaygaz said "A TNK-BP purchase of the Pavlodar refinery is a question that has been resolved. The contract will be signed this autumn".

The TNK-BP press office declined to comment, but a source in the company said that the deal was still being negotiated and it was not that clear it was a foregone conclusion. "The company sees a number of problems that would arise after buying a 50 percent stake in the facility and these are foremost linked to state regulation of the oil products market in Kazakhstan", he said.

He added that the company viewed acquiring the stake in the refinery in tandem with purchasing the large Gelios filling station network.

IRAQ

Foster Wheeler Wins 300,000 bpd Iraq Refinery FEED Contract

Foster Wheeler AG announced June 2 that it’s Global Engineering and Construction Group has been awarded a feasibility study and front-end engineering design (FEED) contract by the Iraqi Ministry of Oil for a new grassroots refinery at Nassiriya in southern Iraq. The proposed refinery will have a capacity of 300,000 barrels per day.

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

In executing this contract, Foster Wheeler will develop the configuration of the new refinery to meet the client's processing objectives, evaluate proprietary technologies, prepare a report covering the feasibility of the project and the design basis of the refinery facilities, engage the selected licensors and prepare the front-end engineering design package for the total project.

"This award reflects our position as a leading refining contractor. We believe that the very balanced and objective approach we apply to refinery investment planning and technology evaluation, our long and successful track record in refining project execution, and the in-depth technical expertise and experience of our refining consultants have again delivered a winning combination," said Umberto della Sala, president and chief operating officer, Foster Wheeler AG.

Iraq Seeks $20 Bln for Four New Oil Refineries

Oil Minister Hussein al-Shahristani said on June 19 that Iraq is seeking around $20 billion to build four new refineries as it seeks to become a net exporter of petroleum products.

"The investment in the new refineries will be around 20 billion dollars. Each one will cost around $5 billion," he told reporters at a conference attended by global energy and construction giants interested in bidding for the contracts.

Iraq aims to boost its refining capacity by 740,000 barrels per day (bpd) on top of the current 550,000 bpd through construction of the four refineries in the central province of Karbala, in the northern oil hub of Kirkuk and in Nasiriyah and Maysan in the south of the country.

"The investment will not be constrained -- we are looking for real partners and in any ratio," Shahristani said.

"Any investor can invest in full or in partnership with Iraq," he added.

"The investor will receive a discount of five percent on the price of crude compared to international prices, as there will be tax breaks, land provided and transport as well.

"We welcome any investor to join us under the design that is developed," he added, referring to feasibility and design contracts that Iraq has already begun awarding.

The Iraqi parliament adopted legislation in 2007 allowing for full foreign ownership of refineries, breaking the stranglehold of the state over the oil sector under now executed dictator, Saddam Hussein's regime.

The Karbala refinery is intended to have a capacity of 140,000 bpd, the Nasiriyah refinery 300,000 bpd, and the Maysan and Kirkuk plants 150,000 bpd each.

"There is a priority for construction of a refinery in Karbala as it is in the centre of Iraq and the inputs can be transferred to it from the south and north, followed by Maysan, Kirkuk and then Nasiriyah," said Iraq's deputy minister for refining, Ahmed al-Shamma.

"It is expected that some of the production from the Maysan, Kirkuk and Nasiriyah refineries will be surplus to domestic needs, but that will be reduced with the increase in demand over time," Shamma said.

"These refineries will meet future needs for the next two decades."

SAUDI ARABIA

SATORP Completes more than $13.5 Bln Project Financing for Jubail Refinery

Saudi Aramco Total Refining and Petrochemical Company (SATORP), a company that is 62.5 percent owned by Saudi Aramco and 37.5 percent owned by TOTAL, signed on June 24, the finance documents for $8.5 billion of senior project finance facilities that have been secured for the Jubail refinery.

The availability of the financing marks another important step in the progress of this 400,000 barrel per day world-class, full conversion refinery in Jubail, Saudi Arabia, which is scheduled to be operational in 2013.

Finances totaling $8.5 billion were secured from multiple sources including $4.01 billion from the Public Investment Fund and Export Credit Agencies (covered and direct), and $4.49 billion from commercial financial institutions.

The senior loan facilities have a tenor of 16 years with an all in pricing of 1.85 percent (above LIBOR) for the US Dollar commercial and Export Credit Agencies (ECA) covered loan facilities.

The financing has been very well received by a diverse group of local, regional and international banks, with commitments received for over $13.5 billion.

McIlvaine Company,

Northfield, IL 60093-2743

Tel: 847-784-0012; Fax: 847-784-0061;

E-mail: editor@mcilvainecompany.com