The world will continue to face surplus refining capacity despite a number of refinery closures in the Organization for Economic Co-operation and Development region, the International Energy Agency said in its monthly report December 10.

The energy watchdog expects global crude distillation capacity to increase by 200,000 barrels a day from its medium-term projections in June, a growth of 9.2 million barrels a day from 2009-2015, despite OECD refinery closures and a continued bleak outlook for the refining industry.

"Globally, growth in refinery distillation capacity remains dominated by China, which alone accounts for 38% of additions in the six-year period," the IEA said.

However, the medium-term outlook for the refining industry is expected to see a slight improvement, helped by a higher-demand profile and less natural gas liquids supplies by-passing the refining system, the IEA noted.

Meanwhile global refinery runs in fourth quarter of 2010 are forecasted to fall in line with seasonal trends, but the drop is expected to be deepened by the industrial action in France during October and an expected slowdown in global demand growth.

Crude runs in the last quarter of the year are estimated at 73.8 million barrels a day, 1.8 million barrels a day less than the third quarter, but are still 1.3 million barrels a day above production rates a year ago.

The IEA pegged its worldwide throughput estimate for the third quarter of 2010 at an average of 75.6 million barrels a day, a downward revision of 90,000 barrels a day on month, citing slightly weaker-than-expected runs in Brazil and Taiwan in September. Nevertheless 3Q10 global crude runs remained more than 2.0 million barrels a day higher than a year earlier, with gains evenly split between the OECD and the non-OECD.

Looking ahead OECD refinery runs are expected to recover in November and December as the autumn turnaround season draws to an end and inventories are replenished in preparation for winter, the IEA said.

In contrast OECD runs were sharply lower in October, as peak maintenance, poor margins and strikes in France combined to push the region's throughput rates to their lowest level since 1993.

At 34.6 million barrels a day, total OECD refinery runs were 2.3 million barrels a day below September, and 3.2 million barrels a day below August's peak. North American throughputs fell sharply, on heavy maintenance outages and poor margins, while Japanese autumn turnarounds also peaked in October, though runs were kept above those of a year ago, on the back of strong export demand for diesel.

In Europe, "a complete halt to France's refining industry severely curtailed regional runs," with the latest data suggesting that refiners outside of France didn't materially boost runs to fill the supply gap, but rather drew stocks instead, the IEA said.

AMERICAS

NORTH AMERICA / ASIA

Graham Corp Announces Oil Sands, Refinery Orders Totaling $4.8 Mln

Graham Corp., a designer and manufacturer of critical equipment for the oil refining, petrochemical and power industries, on December 1 announced that it has been awarded three orders totaling approximately $4.8 million for specialized condensers, liquid ring pump packages and ejector systems to be installed at facilities in North America and Asia.

The first order is for a custom-engineered surface condenser and liquid ring pump package which will be installed at an oil sands processing facility in the province of Alberta, Canada, and will serve as a vapor recovery unit for bitumen storage tanks. The second order is also for a surface condenser and liquid ring pump package destined for a U.S. refinery revamp intended to reduce the sulfur content in transportation fuel produced at the refinery. The third order is for ejector systems to be installed in India at a new ammonia/urea fertilizer producing facility, which when completed, will be one of the largest in the world.

Production and shipment for the three orders is expected to begin during Graham's second quarter of fiscal 2012, ending March 31, 2012. As a result, revenue will be recognized in the second through fourth quarters of fiscal 2012.

James R. Lines, Graham's President and Chief Executive Officer, commented, "We were encouraged to see several large orders break loose during the quarter, particularly our win for the oil sands project. I believe that the oil sands order is important because it is Graham's first in the extraction/production process. Investment in new oil sands production is expected to ultimately lead to increases in capacity for the upgrade process where Graham has historically had a strong presence. Moreover, the Indian fertilizer order is representative of Graham's strong market presence in this growing industry. Graham also continues to benefit from sulfur reduction initiatives in North America.

"The large projects in our pipeline, like the ones announced today, continue to progress slowly, while a number of smaller projects appear to be advancing more quickly toward the procurement phase. We remain optimistic about the overall outlook for the energy and petrochemical markets we serve, although our customers remain cautious given the continued global economic uncertainty," Lines concluded.

U.S.

BP, Husky Boards Okay $2.5 Bln Upgrade at Toledo

The governing boards of two large oil companies have given their final blessings to what will be a $2.5 billion upgrade for BP-Husky's Toledo refinery so the 91-year-old facility in the suburb of Oregon, Ohio, can process tens of thousands of barrels of heavy oil each day extracted from the rugged tundra of Alberta.

Three years after BP PLC and Husky Energy Inc. announced their partnership in the Sunrise Oil Sands Project, about 40 miles northeast of Fort McMurray, Alberta, and the subsequent upgrade of BP's local refinery, work on the project has commenced and the two companies have been given permission by their boards to move forward.

"Following our acquisition efforts, this sanction is a significant step in progressing BP Canada's upstream oil sands portfolio. It is a real demonstration of BP's enthusiasm and interest in Canadian oil sands," said Stephen Willis, BP's vice president of oil sands.

The local project is expected to generate hundreds of construction jobs but not add many jobs at the plant, the company has said.

The $4 billion project in Alberta and metro Toledo had been delayed, first by the worldwide global collapse in 2008, and then by falling energy prices.

Physical activity on the extraction site in Alberta is expected to begin next month, BP said.

Early this year, BP began its first renovations aimed at the oil sands project, spending $500 million to replace the reformer units at the Oregon facility to improve hydrogen and energy efficiency, process safety, and operating costs at Toledo, a BP spokesman said.

Ultimately, the local refinery will be able to run full-capacity production for the Sunrise project.

The Sunrise field is believed to contain as much as 3.7 billion barrels of usable oil and is one of many such projects on the vast Athabasca Deposit.

Geologists believe Athabasca may hold at least 160 billion barrels of oil trapped as bitumen, or oil sands.

Bitumen that will flow through more than 2,000 miles of pipeline to the BP-Husky refinery will be extracted from the Canadian oil sands using a process called steam-assisted gravity drainage to heat the oil trapped below, freeing it to drain into a lower horizontal pipe through which it is pumped to the surface.

Initially, plans call for about 60,000 barrels per day to be extracted from the oil sands by 2016, expanding to 200,000 barrels per day by 2020, according to Husky. First production of bitumen is expected in 2014.

Long-term drilling and facility development are expected to continue thereafter for four decades or more.

BP-Husky's Toledo refinery has about 600 employees and another 600 contractors working there, a spokesman said.

After the investment is completed, the company said, the refinery will have boosted capacity to 170,000 barrels per day of heavy oil, up from its capacity of 60,000. The plant now has a capacity of 155,000 barrels a day.

Energy officials in the Canadian province said raw bitumen production in Alberta grew 14 percent in 2009 to 1.5 million barrels a day, even as planning for several projects -- including the BP-Husky joint venture -- slowed when oil prices collapsed in 2008.

The Canadian Association of Petroleum Producers estimates that output from the oil sands deposits will double to 3 million barrels a day within 10 years.

U.S. Rep. Marcy Kaptur (D., Toledo) said the Sunrise production projections would put a sizeable dent in the approximately 9 million barrels of oil that the United States imports each day, half of which come from the long-troubled Middle East.

Sunoco to Sell Toledo Refinery to PBF Holding for $400 Mln

Sunoco, Inc. announced December 2 that it has reached a definitive agreement to sell its 170,000 barrel-per-day refinery in Toledo, Ohio to Toledo Refining Company LLC, a wholly owned subsidiary of PBF Holding Company LLC.

Sunoco will sell the refinery for approximately $400 million (consisting of $200 million in cash and a $200 million two-year note). In addition, the purchase agreement includes a participation payment of up to $125 million based on the future profitability of the refinery. The buyer will also purchase the crude oil and refined product inventory attributable to the refinery which will be valued at market prices at closing.

The transaction is subject to regulatory approval and customary closing conditions, and is expected to be completed early in the first quarter of 2011.

"Selling the Toledo refinery will enable us to direct resources and management focus toward growing the logistics and retail businesses where we have competitive advantages, as well as generate cash and strengthen our balance sheet. These businesses are generating significant value today and represent strong opportunities for future growth," said Lynn L. Elsenhans, Sunoco's Chairman and Chief Executive Officer. "We will continue to look for ways to optimize our two remaining refineries to deliver value and maintain our focus on process safety, reliability, margin capture and a competitive cost structure."

As a result of the sale of the Toledo refinery, the forthcoming Coke business separation, and the continuing efforts to become more competitive, the company is finalizing its plans to adjust its overhead to match the company's revised needs and long-term business strategy. The company anticipates completing this overhead reduction process during the first quarter of 2011.

Sunoco's existing retail marketing and logistics operations in Ohio and neighboring states will not be impacted by the sale. The company will continue to supply refined products to its branded distributors through a long term off-take agreement with PBF.

The company is expected to incur pretax charges, the majority of which are non-cash, of approximately $500-$550 million related to the sale primarily in the fourth quarter of 2010. The company also expects to realize pretax gains of approximately $450 -$500 million, assuming current market prices, related to the sale of the crude oil and refined product inventory attributable to the refinery in the first quarter of 2011. Cash proceeds from the sale of this inventory, net of related payables, is expected to be approximately $200 million on a pre-tax basis, assuming current market prices.

The Toledo refinery contributed after-tax earnings of approximately $29 million for the nine months ended September 30, 2010 and reported an after-tax loss of $23 million for the nine months ended September 30, 2009.

Sunoco also announced December 2 that the timeframe for the separation of SunCoke Energy, which the company originally anticipated would take place during the first half of 2011, may be extended pending the conclusion of the previously disclosed outstanding litigation with ArcelorMittal concerning coke pricing. SunCoke and ArcelorMittal have had discussions regarding a resolution to this matter and a trial is scheduled for May 2011.

Marathon Sells MN St Paul Refinery and Downstream Assets

Marathon Oil Corp. announced December 1 that its wholly owned subsidiary Marathon Petroleum Company LP (MPC) has closed the transaction with ACON Investments, LLC (ACON) and TPG Capital (TPG) for the sale of most of Marathon's Minnesota downstream assets. ACON and TPG formed Northern Tier Energy LLC (Northern Tier Energy) to operate the assets as a stand-alone company.

Included in the transaction is the 74,000 barrel per day St. Paul Park refinery and associated terminals, 166 SuperAmerica convenience stores (including six stores in Wisconsin), SuperMom's bakery and commissary, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories. The total sales value is approximately $935 million including Northern Tier preferred stock with a stated value of $80 million. Approximately $330 million of the total sales value is for the inventories associated with these operations.

The transaction also contains earnout and margin support components where Marathon could receive up to an additional $125 million over eight years or may be required to provide up to $60 million of margin support to the buyers, subject to certain conditions. Any margin support paid will increase the total earnout amount that may be received by Marathon.

EPA Hikes Stakes on Texas Air Permits

The EPA has threatened dozens of Texas refiners and chemical and plastic makers with penalties if they don't begin taking steps to bring their air pollution permits into compliance with federal law by late December.

The blunt threat was made in a recent letter by the Environmental Protection Agency's administrator in Texas, heightening tensions in a standoff that has already reached the courts.

Texas has sued to block the EPA from rejecting its so-called flexible permits. On December 7, Attorney General Greg Abbott filed a brief in the case, fleshing out his arguments in a July petition that the agency had no legal or technical justification for disapproving the 16-year-old program.

The EPA's rejection of the Texas permitting regime in June is "arbitrary, capricious, an abuse of discretion, and not in accordance with law," Abbott wrote in the brief for the 5th U.S. Circuit Court of Appeals.

The EPA has defended the decision, saying the Texas rules fall short of the federal Clean Air Act's requirements. The Texas Commission on Environmental Quality issues the permits on behalf of the EPA, but the federal agency decides whether they are in compliance with the law.

The flexible permits cover 130 industrial facilities across the state, but most of them have made no attempt to fix their permits, the EPA said.

At the beginning of December, the agency sent letters to 74 companies, giving them until December 22 to explain how they intend to obtain federally approved permits. If they miss the deadline, then the EPA will penalize them, the agency's Dallas-based regional administrator, Al Armendariz, wrote in the letter.

The permits at issue; require refineries, chemical plants and other facilities to meet an overall emissions cap but allows them to choose how to do so. Federal rules, however, require plants to limit emissions of certain pollutants from each source within a facility.

In effect, the EPA argues, Texas' flexible permits are unenforceable and allow plants to emit more than similar facilities in other states. But state officials say the program cuts red tape and pollution without violating federal law.

In his brief, Abbott wrote that the EPA acted far too slowly in rejecting the state's permitting program. Texas created it in 1994, but the EPA didn't rule on it until after industry groups sued to force the agency to act.

Abbott added that the EPA's rejection shows a "fundamental misunderstanding" of the permitting program, which is designed to meet federal requirements. He said regulators relied on their "own mistaken interpretation" of Texas law rather than the state's interpretation.

Industry groups also filed a brief, making similar claims to those by Abbott. The Texas Oil & Gas Association said the EPA's failure to act on the permitting program for 16 years "constitutes an abuse of discretion and exceeds the scope of EPA's authority."

"Predictability in air programs is critical to the Texas economy," the group said. "This lawsuit is necessary to eliminate the ambiguity introduced by EPA's latest actions."

Ilan Levin, an attorney for the Environmental Integrity Project, which is challenging some flexible permits, said he is confident that the courts will put the Texas program "in the trash heap where it belongs."

KKR to Acquire Stake in El Paso's Altamont Gathering, Processing Assets

El Paso Midstream Group, Inc., a subsidiary of El Paso Corp., and Kohlberg Kravis Roberts & Co. (together with its affiliates, "KKR") on December 7 announced that El Paso and KKR have executed agreements to create a new midstream joint venture. El Paso Midstream will operate the new venture, and they will each own a 50 percent interest. The joint venture is consistent with El Paso's commitment to develop midstream opportunities in a balance sheet-friendly manner. The transaction is expected to close by December 31, 2010.

Under the terms of the agreement, KKR will acquire a 50-percent interest in El Paso's Altamont gathering and processing assets for $125 million. The Altamont gathering and processing assets include approximately 800 miles of pipelines, 3,800 barrels per day of fractionation capacity and 40 million cubic feet per day of natural gas processing capacity. These assets serve El Paso Exploration & Production Company, as well as third-party producers. The Altamont field is one of El Paso's core oil programs, and El Paso expects to increase its drilling activity from a current two-rig program to three rigs in 2011 and six rigs by 2013. The partnership expects that there will be opportunities to expand the Altamont midstream assets given El Paso's and others' drilling plans.

In addition, KKR and El Paso will each invest up to approximately $500 million in future midstream projects including, but not limited to, the Marcellus Ethane Pipeline System (MEPS) in the Marcellus shale and the Camino Real Pipeline in the Eagle Ford shale. El Paso previously announced that it is partnering with Spectra Energy to develop the MEPS project, and expects to have a partner for the Camino Real Pipeline project.

"We are very pleased to partner with KKR as we develop our midstream business," said Mark Leland, president, El Paso Midstream Group. "KKR is a very successful and experienced investor in energy-related infrastructure, and we believe that the combination of our two companies creates a strong competitor in the midstream space."

"The emergence of unconventional resources is driving a need for significant investment in midstream infrastructure in the U.S., and El Paso's talented team is developing projects that are very well-positioned to meet these needs. El Paso is a world class pipeline operator and developer, and we are thrilled to be partnering with them to build a leading midstream business," Marc Lipschultz, the global head of KKR's Energy and Infrastructure business, said.

Texas Loses Battle for Temporary Halt of Federal GHG Regs

A federal appeals court on December 10 denied Texas' request to halt nationwide greenhouse-gas regulations, clearing the way for the program to begin next month.

Texas is the only state to have refused to issue new permits for stationary sources of carbon-dioxide emissions, such as power plants. State officials had said they wouldn't set up a program that would be struck down by the courts.

The decision doesn't mean Texas and the other plaintiffs, which include several national business groups, won't eventually prevail in their lawsuit. But it denies their request to temporarily block the permitting program, along with national greenhouse-gas standards for light-duty vehicles that were finalized in April.

As of January 2, state permit writers and businesses must consider the "best available control technology" for reducing greenhouse gas emissions when they build a plant or modify an existing one. If states don't set up a program to award such permits, the EPA must do so.

In its decision, the U.S. Court of Appeals for the District of Columbia ruled that Texas and other plaintiffs had failed to prove that economic harm would result from the regulations. The other plaintiffs include the National Association of Manufacturers and the Coalition for Responsible Regulation.

Environmental groups hailed the decision as a major victory.

"It's a good sign for EPA and for us and a very bad sign for Texas," said David Doniger, an attorney and policy director for the National Resources Defense Council's Climate Center. "Texas is the only state that is grandstanding about abstract concepts of federal intrusion and not taking care of its industries."

Gov. Rick Perry's office said it was "deeply disappointed" in the decision but believed it would eventually win the case.

"Texas will do everything in its power to defeat the threat these misguided policies impose upon our state's energy industry and the thousands of jobs it sustains, not to mention the cost they will inflict on Texas families," the governor's office said in a statement.

Industry attorneys said they weren't surprised by the court's decision. Legal challenges of the EPA's regulation of greenhouse gases could still succeed, they said.

"It is always a bit of a long shot to get a stay granted in any case," said Scott Segal, an attorney and lobbyist at Bracewell & Giuliani, which represents utilities and other businesses that would be affected by regulation.

"Indeed, we expect vigorous challenges to continue regarding EPA's unprecedented foray into greenhouse-gas regulation," Segal said.

Foster Wheeler Acquires Sulfur Recovery Tech from FLSmidth

Foster Wheeler AG announced December 15 that its Global Engineering and Construction Group has acquired the CEntry Sulfur Recovery proprietary technology from FLSmidth & Company. The acquisition includes patents, know-how and skilled personnel.

The Sulfur Recovery technology is used to treat gas streams containing Hydrogen Sulfide (H2S) for the purpose of reducing the sulfur content of fuel products and to recover a saleable sulfur by-product. The technology includes a sulfur recovery section based on the Claus process, an amine-based tail-gas treating section, an incinerator with waste heat recovery, and proprietary burners. With the growing need for low-sulfur transportation fuels, Foster Wheeler believes the demand for process units to reduce the sulfur content of refinery gas streams is sizeable.

"This addition to our technology portfolio is part of our strategic growth initiative and greatly enhances our ability to provide refiners with the process technology they need to meet increasingly stringent environmental and fuel product specifications," said Umberto della Sala, chief executive officer of Foster Wheeler AG. "This technology addition is complementary to our long and successful track record of engineering and building a wide range of downstream projects, and can be leveraged into adjacent market sectors, such as gas processing, in which we are also active. The technology also will complement our other process technologies, including SYDEC Delayed Coking, Solvent Deasphalting, Visbreaking and Hydrogen Production."

The CEntry Sulfur Recovery technology is currently used by a number of U.S. and international refiners.

The terms of the transaction were not disclosed.

24 Organizations Seek More Time to Comment on E15 Regs

A diverse group of 24 organizations on December 16 asked the Environmental Protection Agency to allow an additional 60 days for public comment on proposed regulations designed to prevent mifueling with gasoline containing 15 percent ethanol (E15).

NPRA, the National Petrochemical & Refiners Association, is among the signers of a letter to EPA Administrator Lisa Jackson requesting the extension beyond the current deadline of January 3.

The letter says the extension is needed "to allow stakeholders the opportunity to offer complete and thoughtful comments" on the proposed misfueling regulations. Three of the eight weeks EPA designated to receive comments fall around holidays, when many people are out of their offices, the letter points out.

Organizations signing the letter are: Alliance of Automobile Manufacturers; American Boat Builders & Repairers Association; American Petroleum Institute; American Sportfishing Association; Association of Marina Industries; Boat Owners of the United States (BoatU.S.); Center for Coastal Conservation; Coastal Conservation Association; Engine Manufacturers Association; Environmental Working Group; International Liquid Terminals Association; International Snowmobile Manufacturers Association; Marine Retailers Association of America; Motorcycle Industry Council; National Association of State Boating Law Administrators; National Association of Truck Stop Operators (NATSO); National Marine Manufacturers Association; National Meat Association; National Petrochemical & Refiners Association; Outdoor Power Equipment Institute; Personal Watercraft Industry Association; Small Business and Entrepreneurship Council; Specialty Equipment Market Association; and Specialty Vehicle Institute of America.

"The members of NPRA want to be absolutely certain that the gasoline we manufacture for the American people is safe, effective and reliable," said NPRA President Charles T. Drevna. "This is why we've repeatedly asked EPA to proceed carefully on all its decisions regarding increasing the amount of ethanol allowed in our nation's fuel supply."

"Misfueling is a serious problem that could cause costly damage to the engines in vehicles and equipment powered by gasoline," Drevna said. "Groups concerned about this require more time to evaluate the problem so they can give EPA their best ideas on how to prevent misfueling."

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 the use of E15 for older cars and light-duty trucks, or for any model year for motorcycles, heavy-duty trucks, buses, boats, snowmobiles and outdoor power equipment.

NPRA supports the use of gasoline containing 10 percent ethanol (E10), which already makes up 85 percent of the gasoline sold in America, but advocates more testing to determine if E15 is safe.

EPA's proposed regulations designed to prevent misfueling include fuel pump labeling requirements to make consumers aware when a pump dispenses E15 and to educate them on the limited number of vehicles EPA says can use E15. In addition, EPA has proposed a quarterly survey of gasoline retailers designed to help ensure that gasoline pumps are properly labeled.

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

EPA Set to Propose Refinery GHG Standards in Late 2011

The U.S. Environmental Protection Agency on December 23 announced its plans for establishing greenhouse gas (GHG) pollution standards under the Clean Air Act in 2011.

According to the EPA, the agency looked at various sectors and is advancing GHG standards for fossil fuel power plants and petroleum refineries. The agency reasons these two industrial sources emit "nearly 40 percent of the GHG pollution in the United States." The schedule issued in the December 23 agreements reportedly provides a "clear path forward" for these sectors.

"We are following through on our commitment to proceed in a measured and careful way to reduce GHG pollution that threatens the health and welfare of Americans, and contributes to climate change," EPA Administrator Lisa Jackson said in a statement. "These standards will help American companies attract private investment to the clean energy upgrades that make our companies more competitive and create good jobs here at home."

Several states, local governments and environmental organizations have sued the environmental regulator, asserting that it has failed to update the pollution standards for fossil fuel power plants and petroleum refineries. Under the proposed settlement agreement with the petitioners, EPA will propose standards for power plants in July 2011 and for refineries in December 2011. Moreover, EPA agreed to issue final standards in May 2012 and November 2012, respectively. The petitioners include the following:

"State Petitioners": the states of New York, California, Connecticut, Delaware, Maine, New Mexico, Oregon, Rhode Island, Vermont, and Washington; the Commonwealth of Massachusetts; the District of Columbia; and the City of New York. "Environmental Petitioners": Natural Resources Defense Council, Sierra Club, and Environmental Defense Fund.

EPA added that it will host "listening sessions" with the business community, states, and other stakeholders early next year as well as seek additional feedback during the normal notice and comment period. Under the Clean Air Act, EPA sets industry-specific standards for how much air pollution a new facility may emit. Last month, EPA issued GHG permitting guidelines that the agency contends will provide a "clear and sensible path" for power plants and refineries to use to address GHG pollution.

Beginning in January, industries that emit large volumes of GHGs and are planning to build new facilities or make major modifications to existing ones must obtain air permits and implement energy efficiency measures. Where available, the EPA is requiring these industries to deploy "cost-effective technology" to cut GHG emissions where available.

The leader of the National Petrochemical & Refiners Association (NPRA) sees "tremendous costs but no benefits for the American people" from the GHG proposals. Also, he questions the availability of technologies that can reduce GHG emissions in a cost-effective manner.

"Regulations can't create technology that doesn't exist or change the laws or physics or economics, so the only way to comply with EPA's proposals would be to inflict massive increases in energy costs and massive increases in unemployment on families across our nation," said NPRA President Charles T. Drevna. He said that his organization will urge Congress to vote to stop EPA from implementing the GHG regulations.

Howard Feldman, Director of Regulatory and Scientific Affairs with the American Petroleum Institute (API), contends the EPA should finalize New Source Performance Standards (NSPS) that remain under development before adding GHG standards. He pointed out that API and other stakeholders have been working with the EPA to revise the previous versions of the NSPS—a requirement of the Clean Air Act (CAA).

"Our recommended changes for flares and process heaters would protect the environment while allowing refineries to operate in a safe and efficient manner," said Feldman. "Any New Source Performance Standard must be cost-effective and achievable so refineries can continue to make the changes necessary to meet the nation's energy needs."

In addition, API and others with a stake in the oil and gas industry question EPA is using longstanding clean air legislation to enact curbs on GHGs. "The Clean Air Act was never intended to be used to regulate stationary source greenhouse gas emissions," he said. "Elected members of Congress should chart U.S. climate change policy. API hopes that EPA will reconsider using NSPS to set greenhouse gas emissions standards and is concerned that such standards will hurt businesses' ability to create jobs and spur economic growth."

EPA will accept public comment on the settlement agreements for power plants and refineries for 30 days following publication of notice in the Federal Register. The agency has posted additional information about the settlements at http://www.epa.gov/airquality/ghgsettlement.html.

Some Major U.S. Refiners Won’t Sell E15 Blend

Several major U.S. refiners said December 21 that they won't sell gasoline containing 15% ethanol despite the fact that government recently allowed fuel makers to start distributing the blend as part of its aim to reduce oil consumption.

Valero Energy Corp. (VLO), Marathon Oil Corp. (MRO) and Tesoro Corp. (TSO) said they would refuse to sell E15, a mix of 85% gasoline and 15% ethanol, at their retail gas stations, because it could allegedly harm older automobiles or void their warranties. These companies' stance might crimp the ethanol lobby's success in convincing the U.S. Environmental Protection Agency's (EPA) Oct. 13 approval of the fuel blend for vehicles made since 2007. The EPA is currently weighing whether to expand its E15 approval to older cars and light trucks despite opposition from automakers and some environmentalists.

"While some government agencies may believe differently, Tesoro isn't convinced that E15 is ready for prime time," Tesoro spokesman Mike Marcy said.

The three companies own or license their names to a combined 12,700 gas stations in the U.S., about 7.8% of the total as of 2008, the latest figure available. Other refiners, including Exxon Mobil Corp. (XOM) and BP PLC (BP) referred E15-related questions to industry group American Petroleum Institute, which said it wasn't aware of where member companies stood on the issue.

None of Valero's 1,000 wholly owned retail gas stations will sell the fuel blend, while the 4,800 stations that license the Valero brand name could sell E15 only if they market the fuel under a name other than Valero's, said company spokesman Bill Day. Valero is the largest independent U.S. refiner. Selling E15 is "not practically possible" because of the danger of drivers putting E15 into non-approved vehicles, Day said.

Although ethanol advocates cite research saying E15 won't damage vehicles, automakers hold that E15 could harm car and light truck engines and void their warranties. The Alliance of Automobile Manufacturers, representing Ford Motor Co. (F), General Motors Co. (GM), Toyota Motor Corp. (TYO) and other auto companies, filed a petition with a U.S. appellate court in Washington on Monday challenging the EPA's approval for the sale of gasoline containing 15% ethanol.

"There's no warranty protection from engine and equipment manufacturers for E15," Day said. "We're not going to sell a product we can't guarantee."

To help meet the EPA's goal of having 12.6 billion gallons of ethanol blended into the U.S. fuel supply in 2011, Valero will instead install more E85 pumps to serve "flexible fuel" vehicles specifically designed to use fuel containing 85% ethanol, Day said.

Marathon Oil Corp. said it won't sell E15 at the 6,000 gas stations it either owns or licenses its name to until the company feels sure that the fuel won't harm engines, said company spokeswoman Angelia Graves.

"Before a new product like this is brought onto the market, the research needs to be complete," Graves said.

The Renewable Fuel Association, an industry group representing ethanol makers, said that despite the EPA's approval of E15 its final arrival at gas stations nationwide is still "a bit of waiting game."

"There is that concern for sure," RFA spokesman Matt Hartwig said in an e-mail. "I don't know of any (refiners) that have said no, but I don't know many that have said yes, either."

Tesoro Awaits PUC Ruling on Its Underperforming Hawaii Refinery

Tesoro Corp. said it hopes to dramatically improve the profitability of its underperforming Hawaii refinery next year through a combination of measures, including a plan to charge Hawaiian Electric Co. more for fuel oil.

In addition to revising the HECO contract, Tesoro also is looking to tap cheaper sources of crude oil "feedstocks" in the Pacific Basin and increase production of higher-value refined products in an effort to boost its net refining margins in Hawaii by an estimated 220 to 225 percent, CEO Greg Goff said in a recent presentation to investors. San Antonio-based Tesoro operates Hawaii's largest refinery and a network of gasoline stations in the state.

The expected gains in Hawaii far outpace what Tesoro hopes to accomplish in other markets. Tesoro is targeting refining margin increases of 5 to 25 percent at its six other U.S. refineries.

The size of the projected increase in Hawaii is partly due to the fact that net refining margins at the local plant have been unusually low in recent years. Refining margins, which are a measure of a refinery's ability to earn a profit from each barrel of crude it processes, totaled $11 million in 2009 and $5 million through the first nine months of this year at the Hawaii plant.

Goff said about half of the anticipated improvement in the refining margins in Hawaii will come from an expected revision in Tesoro's contract to supply low-sulfur fuel oil to HECO and independent power producer Kalaeloa Partners LP, which sells electricity to HECO.

Under the current contract, Tesoro is locked into selling fuel oil to HECO at a loss, causing a financial hardship for the company, a Tesoro spokesman said. Both HECO and the state consumer advocate have agreed to the proposed "price structure revision," the details of which were not made public for competitive reasons. The Public Utilities Commission is expected to make a final ruling on the proposal this month.

"The substantial losses suffered by Tesoro Hawaii since 2009 as a result of the existing fuel oil contract is the major justification for Tesoro to obtain a retroactive adjustment on the low-sulfur fuel oil pricing," said Tesoro spokesman Mike Marcy.

He said Tesoro competitor Chevron, which operates the only other major refinery in the state, obtained a similar agreement with HECO in February.

A HECO spokesman said it is the long-term interest of the utility to have two viable suppliers to choose from as it shifts to greater use of alternative fuel sources.

"Hawaiian Electric's priority remains to significantly reduce Hawaii's use of imported oil by increasing renewable energy as well as energy efficiency and conservation," said HECO spokesman Peter Rosegg. "As we work toward this goal, it is still important to have more than one financially sound fuel supplier in the market to ensure price competition so we can get the best possible price for our customers."

Rosegg also said Tesoro is committed to transporting biofuels to HECO power plants, which adds renewables to its energy mix.

Tesoro's Hawaii refinery also is at a disadvantage compared with the company's mainland operations because of the high cost of importing crude oil from Asian countries, Goff said in his presentation. However, the Hawaii plant has the flexibility to process a wide variety of crude products, which would allow Tesoro to tap new, cheaper sources of crude that are in less demand in the world market. One new source Tesoro is researching is crude from eastern Russia.

Goff said Tesoro also is planning to improve yields at its Hawaii plant by producing more products with higher value, such as jet fuel.

The low profitability had prompted Tesoro at one point recently to consider ceasing refining operations at its Hawaii facility and using the site as a terminal from which to distribute fuel. That option was one of several considered earlier this year as part of a review of the company's assets in Hawaii.

ARUBA

Valero Plans Aruba LNG Project, Refinery Restart

Officials with the Valero Aruba Refinery and the Government of Aruba announced December 13 that they had signed a memorandum of understanding addressing the delivery of liquefied natural gas to Aruba, which will help reduce utility costs and lower emissions on the island.

At the time of the signing, Valero executives also announced that the Valero Aruba Refinery has completed a plant-wide program to get refinery units ready to restart, and that the restart process would begin within several days.

Both announcements represent a boost to Aruba's economy. Generating power through liquefied natural gas rather than more expensive fuel oil has significant potential to reduce costs both for the refinery and the island.

Prime Minister Mike Eman and Minister of Finance & Energy Mike de Meza, who are both actively working on this project, also see an important synergy between Aruba and Valero in this endeavor.

Valero has spent more than $90 million so far getting the refinery ready to operate. The restart comes nearly 18 months after it was shut down in July 2009 for economic reasons and uncertainty in the tax regime going forward. The restart was supported in part by the settlement agreement reached with the Government of Aruba and approved by the Parliament of Aruba last May. Throughout the shutdown, employees remained on the payrolls, and in June 2010, Valero announced that the tax settlement along with an improved economy had made it possible to consider restarting the refinery. A plant-wide "turnaround," or thorough maintenance period, was begun shortly afterward. Now that the turnaround work has been completed, Valero has determined that market conditions support the refinery's operation.

The refinery employs more than 650 people full-time, and refinery investments and financial impact represent more than 12 percent of Aruba's gross domestic product.

The startup process was to begin on selected refinery units and would continue through December, with the expectation that all refinery units would be operating fully by the end of January.

BRAZIL

Emerson Wins Comperj Automation Contract from Petrobras

Petrobras has selected Emerson Process Management to provide process automation technologies and services for the Petrochemical Complex of Rio de Janeiro (Comperj) in Brazil.

The scope of the automation contract reflects Petrobras' confidence in Emerson's industry expertise and its significant investments in Latin America. As Main Automation Contractor for Comperj, Emerson will deliver engineering services and technologies for process automation and systems integration of the refining unit, selected utilities, and offsite operations that are part of the Brazilian energy giant's project.

Built on an area of 45 million square meters — the equivalent of about 6,000 soccer fields — the Comperj complex will be able to process 165,000 barrels of heavy crude per day when its first refining unit begins operations in 2013, and the same amount in a second unit expected five years later. This investment in Brazil's refining capacity will help support the country's expanding oil production. The project is also expected to generate more than 200,000 direct and indirect jobs during construction.

The Comperj project is one of the first in Brazil to use a Main Automation Contractor, which improves coordination of projects involving multiple suppliers and contractors. Emerson will draw on its global experience in this role to provide a broad scope of automation products and services. In addition to systems for process control, safety, fire and gas detection, machinery monitoring, and management of process and maintenance information, Emerson will also supply measurement instruments, control valves, pressure regulators, and other related products and services.

Engineering work has already begun, with hardware delivery to begin in 2011. Automation tasks will be led by a dedicated Emerson team in Rio de Janeiro and in Sorocaba, Sao Paulo, where Emerson's Brazilian headquarters is located. In late 2009, Emerson announced a US$35 million, 45,000-square-meter expansion of its Sorocaba manufacturing and operations facility.

"Emerson is honored to have been selected by Petrobras for this highly sophisticated, complex, and important project," said Steve Sonnenberg, president, Emerson Process Management. "Our investments in our facilities and people in Brazil reflect our commitment to meet the needs of customers like Petrobras that are building a more prosperous Latin America."

Venezuela’s PdVSA Must Invest Additional $2.4 Bln to Keep Abreu e Lima Refinery Project

Venezuela's national oil company, Petroleos de Venezuela SA, has two key obstacles to surmount if it wants to remain a partner in a joint-refinery project with Brazil's Petroleo Brasileiro, or Petrobras, according to Petrobras downstream director Paulo Roberto Costa.

PdVSA, as the company is known, must ante up about $2.4 billion (4 billion Brazilian reais) in cash, representing the company's 40% stake in the BRL10 billion Petrobras has already invested in the troubled project, Costa said. In addition, PdVSA also needs to reach a deal with the Brazilian National Development Bank, or BNDES, on BRL3.6 billion in loan guarantees.

"When that's going to be completed, we don't have any idea," Costa said.

The $13 billion Abreu e Lima refinery is under construction in Brazil's northern Pernambuco state. It will have installed processing capacity of 230,000 barrels per day, with PdVSA and Petrobras each providing half of the crude oil to be processed.

The refinery features two individual production trains, one for heavy oil from Petrobras' Marlim field and one for heavy oil from PdVSA's Carabobo field, Costa said. For now, Petrobras is holding off on buying the expensive sulfur-treatment equipment needed to process the Carabobo field, the executive added.

"The equipment costs about $350 million, and we won't need it if Venezuela isn't a part of the project," Costa said.

Should PdVSA bail out of the joint venture, Petrobras is prepared to go it alone, Costa added.

"In case PdVSA decides not to participate in the venture, we'll build the two lines to process crude oil from Marlim," Costa said.

The refinery joint venture has been fraught with difficulties from the start. Last year, PdVSA and Petrobras finally reached a shareholders' agreement after years of rancorous talks. Petrobras will have 60% of the $12 billion project, with PdVSA holding 40%.

The refinery has also been saddled with cost overruns, allegations of overcharges and difficult negotiations between Petrobras and PdVSA on crude oil supplies.

Petrobras plans to invest $224 million over the next five years to double crude oil output to 3.9 million barrels a day by 2014. Also included in the budget is construction of five new refineries that will process the crude into higher-value products, netting the company more cash on the export market.

Petrobras plans to boost refining capacity to 3.6 million barrels a day by 2015, up from current capacity of 1.9 million barrels a day, to meet expectations for growing demand in Brazil and capitalize on the export market.

Foster Wheeler Wins FEED Contract for Petrobras Grassroots Refineries

Foster Wheeler AG announced December 13 that its Global Engineering and Construction Group has been awarded a basic engineering design and front-end engineering design (FEED) contract for two grassroots refineries in Brazil for Petroleo Brasileiro S.A., (Petrobras).

The Premium I Refinery will be a dual train, 600,000 barrels per stream day (BPSD) facility in Maranhao State, and the Premium II Refinery will be a single-train 300,000 BPSD facility in Ceara State. Foster Wheeler will be the prime subcontractor to Honeywell's UOP, the managing process technology licensor.

The value of the contract was not disclosed. The award will be included in Foster Wheeler's fourth-quarter 2010 bookings.

The contract calls for the provision of basic design and FEED for the main process units and auxiliary units. Each of the three refinery trains will consist of a crude vacuum distillation unit, a four-drum delayed coker based on Foster Wheeler's SYDEC technology, a hydrocracker, a distillate hydrotreater, a naphtha hydrotreater based on UOP technology, a hydrogen unit based on Foster Wheeler's hydrogen production technology, a sour water stripper and amine regeneration and a sulfur recovery unit. Both refineries will be designed to produce diesel.

"We are excited to work with UOP as the prime subcontractor for these strategically important projects in Brazil," said Umberto della Sala, chief executive officer of Foster Wheeler AG. "This very large award reflects our position in and commitment to Brazil and our world-class refinery expertise. The award also demonstrates our ability to provide a high level of local content through our own subcontractors or affiliates, a requirement that is becoming increasingly common in the fastest-growing regions of the world. Establishing a strong presence in Brazil on a major project for Petrobras is a significant milestone for Foster Wheeler."

PUERTO RICO

Buckeye Buys Petroleum Products Terminal in Puerto Rico

Buckeye Partners, L.P. confirmed December 10 that it has completed the acquisition of a refined petroleum products terminal on the southeast coast of Puerto Rico from an affiliate of Royal Dutch Shell plc. Shell has made a multi-year commitment to remain a key customer at the terminal.

The terminal, located in Yabucoa, Puerto Rico, includes 44 storage tanks with approximately 4.6 million barrels of gasoline, jet fuel, diesel, fuel oil, and crude storage capacity. This acquisition brings Buckeye's total system-wide storage capacity to over 30 million barrels.

"As Buckeye's first acquisition outside the continental United States, this transaction represents an important step in Buckeye's growth objectives. It provides geographic diversity with strong local demand and potential regional growth opportunities," said Forrest E. Wylie, Chairman and CEO of Buckeye's general partner. "While this acquisition is expected to immediately increase distributable cash flow, we will look to continue to optimize the terminal under our best practices model."

Buckeye is a publicly traded partnership that owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 5,400 miles of pipeline. Buckeye also owns 69 refined petroleum products terminals, operates and maintains approximately 2,400 miles of pipeline under agreements with major oil and chemical companies, owns a major natural gas storage facility in northern California, and markets refined petroleum products in certain of the geographic areas served by its pipeline and terminal operations.

ASIA

INDIA

Bharat Petroleum Plans to Expand Southern India Kochi Refinery

Bharat Petroleum Corp. is planning to expand its refinery at Kochi in southern India to help meet its target of 50 million tons of annual refining capacity, a company spokesman said December 5.

"Preliminary work for refinery expansion at Kochi will be initiated soon. The expansion and investment haven't yet been decided," the spokesman told Dow Jones Newswires.

Bharat Petroleum and other state-run Indian refiners Hindustan Petroleum Corp. and Indian Oil Corp. are adding refining capacity either by expanding existing units or through new projects. India already has surplus refining capacity, with private refiners such as Reliance Industries Ltd. exporting most of their fuel products, but the country continues to build refineries as it seeks to become a refining hub for the continent.

Including its new 6-million-ton refinery at Bina in central India, Bharat Petroleum has a refining capacity of 30.5 million tons a year and plans to reach 50 million tons in the next five years. The Kochi refinery in Kerala state currently has a capacity of 9.5 million tons a year.

The Bina refinery in Madhya Pradesh state has already been commissioned and is likely to begin commercial operations within the next four months. The refinery has been set up by Bharat Oman Refineries Ltd., a joint venture of Bharat Petroleum and Oman Oil Co.

The spokesman said that existing crude supply infrastructure at the Kochi refinery allows for expansion to 15 million tons in the next two-three years.

"The single-point mooring at Kochi will allow enough crude for a 15-million-ton refinery. Whether we need another mooring facility for expansion beyond 15 million tons will be decided after the [feasibility] studies are complete," he said.

Bharat Petroleum has previously said it would look at expanding the Bina refinery further, to as much as 15 million tons.

However, the expansion of the Kochi refinery is likely to kick off before the expansion of the Bina refinery, the spokesman said December 3.

Refinery expansions in India are also being driven by local demand for oil and gas products, which is expected to increase at an annual rate of 3.5% over the next two decades.

In October, Oil Minister Murli Deora said that though the country imports nearly 80% of its crude oil requirements, the export of finished petroleum products has become its highest foreign-exchange earner.

According to oil ministry projections, India's refining capacity will rise to 255 million tons a year by 2012 from 196.38 million tons on October 1.

Kuwait's Kharafi Group to Invest $150 Mln in Indian Refinery

Kuwait-based diversified group Kharafi Group will invest US$150 million in a 100,000-barrel per day refinery being built by India's Cals Refineries Ltd in West Bengal.

"Al Qebla Al Watya (an investment vehicle of Kharafi) signed agreements" on November 25 for investing "US$150 million through GDR route," Cals Refineries said in a statement to stock exchanges.

The investment is subject to all Indian government and regulatory approvals, it said but did not say how much equity stake was been offered to the Kuwati group.

"The Kharafi family with a heritage of over 100 years hails from Kuwait and controls one of the Middle East's largest conglomerates in the field of finance, construction, manufacturing (including oil and gas equipment), food industry, telecommunication and hospitality among many others," it said.

The group now operates in more than 30 countries around the world and has more than 100,000 employees.

Cals Refineries is building a US$1.1 billion refinery at Haldia in West Bengal by 2012.

Cals, a Spice Energy Holding company, is importing a 90,000-barrel-per-day refinery from Bayernoil, Germany. The old refinery is being dismantled at Ingolstadt on the river Danube, Germany, and shipped to Haldia for reconstruction.

The refinery will become Bengal's second largest oil refinery after the Indian Oil Corporation's existing one in Haldia.

Global energy major BP Plc may supply crude oil to the refinery which needs 2.5 million tons of heavy (high sulphur) crude and a similar supply of light (low sulfur) crude.

Cals plans to export petrol and diesel produced in the Euro-4 complaint refinery. The refinery would also produce jet fuel, LPG and pet coke for the domestic market.

TAIWAN

CPC Corp Awards Jacobs Sulfur Recovery Unit Contract for Taiwan Refinery

Jacobs Engineering Group Inc. announced December 7 that it has received a contract from CPC Corp., Taiwan (CPC) to design and license Jacobs' proprietary EUROCLAUS technology for a desulfurization unit as part of the Ta-Lin refinery expansion project in Kaoshiung, Taiwan.

Officials did not disclose the contract or investment values, but noted that Jacobs will execute the project from its office in Leiden, The Netherlands.

This project is the first to combine Jacobs' EUROCLAUS technology with DynaWave technology, which is engineered and licensed by U.S.-based MECS, Inc., the world's largest supplier of sulfuric acid technology. The combination of these two unique technologies makes it possible to achieve very low sulfur emissions at low investment cost compared to existing technologies. The new desulfurization unit will be integral to CPC's refinery operations.

Jacobs introduced EUROCLAUS technology to the global marketplace in 1985 and now has over 200 units in operation. Addition of the DynaWave technology to the EUROCLAUS process nearly eliminates sulfur from the production process. This results in cleaner fuels with minimal gaseous emissions and lower energy consumption.

CPC, a state-owned petroleum, natural gas, and gasoline company in Taiwan and the core of the Taiwanese petrochemicals industry, will design and build the Ta-Lin refinery expansion. The new facility, scheduled to be operational in 2013, will produce clean fuels products for the local Taiwanese market.

VIETNAM

Japan’s JGC Corp led Consortium to Negotiate $8 Bln Vietnam Thanh Hoa Refinery Contract

A five-company consortium led by Japan's JGC Corp. has won the exclusive right to negotiate a contract to build Vietnam's largest refinery in the country's northern province of Thanh Hoa, informally securing the contract, a Japanese media report said.

The JGC-led group and another consortium led by Italian plant engineering company Saipem S.p.A. competed for the lucrative bid, the Japanese economic daily of Nikkei reported, adding that the bid solicitor favored the JGC-led consortium due to JGC's experience in undertaking projects in Vietnam.

The consortium, which also includes Japan's Chiyoda Corp., the French firm of Technip, and Republic of Korea's groups SK and GS, is expected to sign a formal contract at the end of February after the bid solicitor makes the final assessment of the technological expertise of the companies involved.

The project will be invested by a four-company group consisting of Vietnam Oil and Gas Corp. (PetroVietnam), Idemitsu Kosan Co. and Mitsui Chemicals Inc. of Japan, and Kuwait Petroleum International Ltd. at an estimated cost of US$8 billion, of which the bid solicitor will finance 30-40 percent from their own money, while the remainder will be funded by loans from both government-affiliated and private banks, including the Japan Bank for International Cooperation (JBIC).

Once completed by the end of 2014, the refinery will have the capacity to process 200,000 barrels of crude oil a day imported from the Middle East, turning out such petrochemical products as gasoline, diesel oil, kerosene, jet fuel and polypropylene.

EUROPE / AFRICA / MIDDLE EAST

BELGIUM

Foster Wheeler Wins Kuwait Contract for Antwerp Blending Plant

Foster Wheeler AG announced December 21 that a subsidiary of its Global Engineering and Construction Group has been awarded a contract by Kuwait Petroleum International Lubricants for the provision of detailed engineering services for a brownfield lube oil blending plant to be built at Kuwait Petroleum's facility at Antwerp, Belgium.

The lube oil blending plant will be designed to substantially enhance the ability of the Antwerp facility to operate at European scale by increasing the production capacity from 125 million to 250 million liters per year. The detailed engineering activities will be completed by mid 2011.

Kuwait Petroleum International Lubricants is increasing the plant's capacity to keep pace with the growth of its Q8Oils and Roloil branded business and to give it the option of toll blending for other companies.

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

"Their excellent reputation and world-wide experience led us to award this contract to Foster Wheeler," said Giuliano Franzi, Managing Director, Kuwait Petroleum International Lubricants. "We are confident that the implementation of our project will be a success."

FINLAND

Neste to Merge Oil Products, Renewable Fuels Units

Neste Oil has decided to reorganize its operations now that its renewable fuels business is entering a new phase following two major investment projects.

The Oil Products and Renewable Fuels business areas will be merged to create one business area Oil Products and Renewables. Matti Lehmus, currently Executive Vice President, Oil Products, has been appointed Executive Vice President, Oil Products and Renewables. The change will take effect as of December, 20. Neste Oil's financial reporting will remain unchanged, however. Oil Products and Renewable Fuels will continue to form separate reporting segments.

"The reorganization will bring us greater operational efficiency and clear synergy benefits, which is very much in line with our strategy. By integrating the businesses, we want to ensure cost efficiency and transparency, and ensure that we make the best use of our know-how and resources," said Matti Lievonen, Neste Oil's President and CEO. "In addition, the change will enable us to serve our customers more effectively by giving them one clear point of contact at Neste Oil."

Neste Oil has recently commissioned the world's largest renewable diesel plant in Singapore and is moving towards completion of a similar-sized plant in Rotterdam, due to come on stream at the end of the first half of 2011. Completion of these major investments means that renewable fuels-related activities will shift into a normal business model.

Parallel to the reorganization, Neste Oil's Deputy CEO and Executive Vice President, Renewable Fuels, Jarmo Honkamaa, will leave the company.

FRANCE

Technip to Boost Hydrocracker Capacity at Normandy Refinery

Total has awarded Technip an engineering, procurement services and construction management contract to increase the capacity of the hydrocracker at the Normandy refinery located in Gonfreville, France. This project, which is part of a larger investment plan for the refinery, is valued at more than EUR100 million (of which Technip’s share is 20%).

Technip’s scope includes:

debottlenecking of the hydrocracking plant,
debottlenecking of the hydrogen unit needed in order to operate the hydrocracker.
This extension will increase hydro-conversion capacity to 10,000 tons per day from the current 8,000 tons thereby enabling the production of more diesel fuel and kerosene.

Technip’s operating center in Paris, France will execute the contract with support from the Group’s Zoetermeer office (Netherlands).

TURKEY

Fluor Wins PMC Contract for New Turkish Refinery

Fluor Corp. announced December 14 that SOCAR & TURCAS Rafineri A.S., the joint venture of the State Oil Company of the Azerbaijan Republic (SOCAR) and TURCAS Petrol A.S., awarded the firm a project management consultant (PMC) contract for a new refinery to be built in Aliaga, Turkey.

The new planned refinery will be integrated at the Petkim petrochemicals site on the Aegean coast. As PMC for the SOCAR & TURCAS Aegean Refinery (STAR) project, Fluor will assist STRAS in selecting and managing the engineering, procurement and construction (EPC) contractor(s) and provide overall project and construction management. Fluor has begun the work and will book the undisclosed contract value in the fourth quarter of 2010.

"This new refinery project award in the downstream oil and gas market in Turkey is a precedent-setting milestone," said Peter Oosterveer, president of Fluor's Energy & Chemicals Group. "As Turkey's economy continues to grow, and building upon our strong resume in Europe, we believe this key project positions us well for the future both in Turkey and in nearby Asia."

"Fluor's global footprint, coupled with our talented resources from our Haarlem, Madrid and Houston offices, positioned us well for this important new refinery project," said David Zelinski, senior vice president of downstream in Fluor's Energy & Chemicals Group. "As a leading integrated refining and petrochemicals company, the SOCAR & TURCAS team is an extremely important player in the region and we are excited to provide them value throughout the project duration."

"We are progressing with the project with the utmost speed," said Erdal Aksoy, SOCAR & TURCAS vice chairman. "The FEED is about to be completed and we are definitely convinced that Fluor brings added value to the project, especially now that we are entering the most crucial phases of EPC selection and then construction. The STAR refinery should significantly contribute to the growth of the Turkish economy while meeting the diesel deficit in the nation."

Project work is underway with the start of site preparation and EPC work estimated to be in mid-2011 and construction start-up some time in the first quarter of 2012. For this phase of the project, Fluor estimates that about 100 professionals will be engaged at peak

STRAS is a 100 percent subsidiary of SOCAR & TURCAS Enerji A.S. (STEAS) which also owns 51 percent of Turkey's only petrochemicals producer PETKIM (ISE:PETKM). STEAS aims to be the leading oil and gas company in Turkey through integration and synergies arising from the merged strengths of SOCAR's upstream and midstream operations with TURCAS' downstream operations.

ALGERIA

Technip Wins $908 Mln Algiers Refinery Revamp Contract

Technip has been awarded by Sonatrach, the Algerian national oil company, a contract for the refurbishment and revamping of the Algiers refinery.

This lump sum turnkey contract, worth approximately US$908 million/67.9 billion Algerian Dinars (at an exchange rate of USD/DZD = 74.8), will last 38 months and cover the execution of the complete scope of works, including the design, supply of equipment and bulk material, construction and start-up.

The revamp of the existing installations will enable refining capacity to be increased from 2.7 to 3.6 million tons per year. The new units will allow the refinery to produce gasoline at specifications similar to those in force in Europe.

This project will be carried out by Technip's operating center in Paris, France. It confirms the Group's leadership in the refining market and is part of Sonatrach's vast program to renovate and refurbish the country's oil refining installations.

SYRIA

Syria, Venezuela Agree to Move Ahead With $5 Bln Refinery

Syria and Venezuela signed a memorandum of understanding December 3 towards implementing a refinery joint venture in the Arab state at an estimated cost of $5 billion, the official Syrian Arab News Agency, or Sana, reported December 4, citing Syrian's minister of petroleum and mineral resources, Soufian Allaw.

The refinery will have capacity to process 140,000 barrels a day of crude and both parties have set up a schedule to complete design studies and then move on to implementing the project, Allaw said, according to the news agency.

Syria and Venezuela want to go ahead with the project as fast as possible and will cover all cost related to the studies if Iran and Malaysia don't give their approval, the news agency cites Allaw as saying.

Syria, Iran, Venezuela and Malaysia's Bukhari Group signed a partnership agreement in 2008 to construct and finance the refinery project that will be located in the Froklos region, east of the city of Homs, Sana reports.

Venezuela's energy and oil minister Rafael Ramirez said, according to Sana, that the studies are expected to be completed in mid-2011.

RUSSIA

Rosneft Board Approves Far Eastern Refinery, Petchem Plant

Russian state-run oil major OAO Rosneft has approved the construction of a 200,000 barrel a day refinery and petrochemical unit at Nakhodka on the Pacific Coast at the end of November.

"The board approved the plan for setting up the Eastern Petrochemical Company in the vicinity of Nakhodka, Primorsky Krai, with a [refining] capacity of 10 million tons per year," Rosneft said in a statement following a board meeting without disclosing any financial details.

The refinery will be built to handle crude from the East Siberia-Pacific Coast, or ESPO, pipeline. Last year, Rosneft started loading the new ESPO crude from its huge East Siberian Vankor field onto tankers at the port of Kozmino near Nakhodka.

Alfa Laval to Supply Heat Exchangers in 2011 for Russian Refinery

Alfa Laval has received an order for compact heat exchangers from a refinery in Russia. The order value is about SEK 70 million and delivery is scheduled for 2011.

Alfa Laval's compact heat exchangers will be used in the distillation process of the refinery, where the crude oil is pre-heated for further refining into high-value products such as gasoline. By using Alfa Laval's compact heat exchangers it is possible to recover heat from other parts of the process and use it to preheat the oil, thereby achieving a highly energy-efficient solution.

"The last years we have seen increased investment in energy efficiency by the process industry," said Lars Renstroem, President and CEO of the Alfa Laval Group. "Russia is one of our most important refinery markets and this order is another example of their investments in heat-recovery duties for energy optimizations."

Alfa Laval's compact heat exchangers can recover up to 95 percent of the heat, that otherwise would be wasted, representing 35 percent increased efficiency compared with competing shell-and-tube technology.

AZERBAIJAN

Fluor Wins PMC Contract for New SOCAR Refinery in Azerbaijan

Fluor Solution Company has announced that it has been chosen the management consultant on the project of construction of a new oil refinery for the State Oil Company of Azerbaijan (SOCAR).

The Company reports that on December 30 SOCAR and TURCAS Rafineri A.S. (STRAS), the joint venture of the State Oil Company of the Azerbaijan Republic (SOCAR) and TURCAS Petrol A.S., awarded the firm a project management consultant (PMC) contract for a new refinery to be built in Aliaga, Turkey. The new planned refinery will be integrated at the Petkim petrochemicals site on the Aegean coast. Fluor will assist STRAS in selecting and managing the engineering, procurement and construction (EPC) contractor(s) and provide overall project and construction management.

Fluor has begun the work and will book the undisclosed contract value in the fourth quarter of 2010.

"This contract award is a precedent-setting milestone for the company. As Turkey’s economy continues to grow, and building upon our strong resume in Europe, we believe this key project positions us well for the future both in Turkey and in nearby Asia," said Peter Oosterveer, president of Fluor’s Energy & Chemicals Group.

"We are progressing with the project with the utmost speed," "The feasibility study is about to be completed and we are definitely convinced that Fluor brings added value to the project, especially now that we are entering the most crucial phases of EPC selection and then construction. The refinery should significantly contribute to the growth of the Turkish economy while meeting the diesel deficit in the nation," said Erdal Aksoy, SOCAR & TURCAS vice chairman.

Project works are to be completed by mid-2011, and refinery construction to start up in the first quarter of 2012.

For this phase of the project, Fluor estimates that about 100 professionals will be engaged at peak.

SAUDI ARABIA

Saudi Aramco Selects GE for $500 Mln Processing Facilities Expansion

GE has been selected by Saudi Aramco, the state-owned national oil company, for agreements totaling nearly $500 million to supply a broad range of equipment and services for an expansion of the Shaybah gas-oil processing facilities. The project is expected to enable Saudi Aramco to enhance its oil recovery efforts and spur further economic growth in Saudi Arabia.

The agreements demonstrate the strength of GE Energy’s integrated high-technology equipment and services portfolio and reflect GE’s commitment to continued investment and localization in the region. With one of the world’s fastest growing economies, Saudi Arabia continues to present significant opportunities for technology innovation and infrastructure development.

Shaybah, which is Saudi Aramco’s most remote oil field, is located in the southeastern section of the Kingdom. It already is highly productive, following a 50 percent capacity upgrade in June 2009 from half-a-million barrels per day (bpd) to 750,000 bpd of Arabian Extra Light crude. The new expansion is expected to enable Saudi Aramco to further increase crude production to 1 million bpd and increase the gas-oil ratio (GOR) of the field from 1,800 to 7,200 standard cubic feet per stock tank barrel (scf/stb).

“This latest project with Saudi Aramco reflects GE’s commitment to localization and sustainable growth in the Kingdom. As Saudi Arabia forges ahead with its ambitious national development plans, we look forward to continue to support Saudi Aramco and other customers in the region with GE’s high-tech multi-business approach,” said Joseph Anis, GE Energy’s President for the Middle East.

“Our desire to deliver a complete suite of high-technology and service solutions, while meeting Saudi Aramco’s compressed project timeline, were essential factors in being selected to deliver the extensive scope of this important project,” noted Anis.

To generate the additional 729 megawatts of power, GE is supplying 11 gas turbine-generators, 44 compressors, motors and services. This will bring the total supply of GE gas turbines to Saudi Aramco to more than 110 and the number of GE centrifugal compressors to nearly 100.

A key feature of the expansion, the valuable natural gas liquid (NGL) components from gas produced at Shaybah will be recovered through the construction of the new Sabkha NGL recovery plant which will process 2.4 billion standard cubic feet per day (scfd) of low-sulfur sweet gas and extract 264,000 bpd of NGL. The gas is used in petrochemical applications.

The GE Frame 7EA gas turbines for Shaybah's expansion project have been used in previous Saudi Aramco applications. Similar GE units have been operating since 1998 in Shaybah, one of the most challenging environments in Saudi Arabia. The 7EA gas turbines to be delivered to Shaybah will be equipped with GE's advanced Dry Low NOx combustion systems to reduce emissions. All 44 GE centrifugal compressors will be driven by GE electric motors. GE will ship the equipment during the first half of 2012. In addition, services and training will be provided through the GE Energy Manufacturing Technology Center in Dammam, Saudi Arabia. The 10,000 square meter facility represents a $100 million investment in the largest GE center of excellence worldwide.

With a presence that spans almost 80 years in Saudi Arabia, GE has expanded its energy presence in the Kingdom through public-private partnerships and a strong footprint of facilities in service repair support and customer training centers in power, water and oil and gas. With more than 800 GE employees, Saudi Arabia has the largest GE workforce in the Middle East.

UNITED ARAB EMIRATES

Mitsubishi Considers Oil Refinery and Storage Business in UAE

Senior officials from Japan's Mitsubishi Corporation have expressed plans to set up a petrochemical and oil refining and storage business in Fujairah, north of the United Arab Emirates.

At a meeting with Director General of Fujairah Chamber of Commerce and Industry (FCCI) Khaled Mohammed Al Jasem, Mitsubishi's Middle East's head of Strategy and International Cooperation, Hiroshi Nishimoto, said that Fujairah, with its strategic location, is being considered by Mitsubishi plans as a potential site for petrochemical and oil storage installations.

Present at the meeting were head of research and marketing at Abu Dhabi National Oil Company (ADNOC) and others.

Al Jasem said the emirates location on the Gulf of Oman and the Indian Ocean is also suitable for bunkering.

He cited plans to build a pipeline to export oil from Abu Dhabi's Habshan oilfield via Fujairah.

McIlvaine Company,

Northfield, IL 60093-2743

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

E-mail: editor@mcilvainecompany.com