Workers are returning to the former ConocoPhillips refinery in Trainer, to begin steps toward resuming fuel production in September, a move that new owner Delta Air Lines hopes can cut its jet-fuel bill by $300 million a year.

A Delta subsidiary, Monroe Energy L.L.C., closed on the $180 million purchase of the idled oil refinery on June 22. Three days later, the first workers arrived to begin a turnaround to modify some units and do routine inspections.

When its refinery is up and running again, Monroe Energy expects to have about 400 workers at the plant, about 220 of whom will be United Steelworkers members.

"Absolutely, people are happy," said Stephano, president of USW Local 10-234. "The school district, the town, the mayor of Trainer, the County Council. Everybody is happy. A lot of money gets generated out of these facilities."

The refinery will produce 165,000 to 185,000 barrels a day of crude oil, including 52,000 barrels per day of jet fuel. Delta will spend about $100 million to upgrade the plant to maximize jet-fuel production.

"We will be making gasoline, jet fuel, and diesel just like every other refinery," Warmann said. During the turnaround, the refinery workers will be joined by 600 to 700 members of other building trades unions to do repairs and overhaul equipment and compressors, he added.

Conoco was due for turnaround maintenance to do repairs and equipment overhauls when it idled the plant instead in September.

"We have to recertify everybody, and there are people coming in new, like from Sunoco that have to be trained on the specific units," Warmann said. "We're getting applications from all over, including from PBF in Delaware City and Paulsboro, and other places."

The Trainer refinery will supply Delta's Northeast operations. The jet fuel will be transported by pipeline and barge to airports, including John F. Kennedy International, LaGuardia, and Boston Logan, he said. Partnerships with BP and Phillips 66 will give Delta access to additional jet fuel around the country.

Greater Impact on U.S. Gasoline Market Being Caused by European Refinery Closures

The current state of the crude oil and refining industry in the Northern Atlantic Basin has led to excess European gasoline production playing a vital role, saving the U.S. East Coast from shortages, said GlobalData's expert analyst Jeffrey Kerr.

Economically-hard hit Europe has seen more than its fair share of refinery closures over the last two years. A combination of high crude oil prices and relatively low refined product prices, as well as dismal gasoline and middle distillate demand growth prospects, have resulted in a number of high-profile refinery closures and company bankruptcies.

The U.S. East Coast refining market has been impacted by the same factors, with large refineries in the Philadelphia area shut down, threatened to be shut down, or sold to new owners, keeping the supply of motor fuels tight amid the traditional summer driving season, when gasoline demand usually rises.

Jeffrey Kerr, GlobalData's senior analyst of downstream in New York, said: "While it's not new for Europe to send its excess gasoline to the U.S. in the summertime, the magnitude of those shipments this year is much higher. The shut refineries in the Philadelphia area and the Caribbean have really changed the dynamic of the East Coast marketplace, causing wide swings in cash market prices."

Since the East Coast gasoline cash market sets the price for the rest of the U.S. through the futures market, Kerr added, European refiners, now more so than ever before, are having a direct impact on U.S. gasoline markets, coast-to-coast.

BP to Pay Additional $13 Mln in Penalties for Texas City

Oil giant BP has agreed to pay an additional $13 million to settle charges of failing to fix safety violations at its Texas City oil refinery after a 2005 explosion killed 15 workers.

The settlement announced July 12 is the latest move toward resolving hundreds of violations at the plant alleged by the federal Occupational Safety and Health Administration. BP already had paid $50 million in 2010 to settle some of the OSHA violations. The government had been seeking a total of $80 million of penalties, the largest fine in its history. Resolving the fines could help BP in its effort to sell the Texas City refinery, now the nation's sixth-largest.

The settlement comes as BP attempts to restore its global reputation and resolve litigation over the massive 2010 oil spill in the Gulf of Mexico. "Their behavior has significantly improved in terms of safety since then, and I think this will send a strong message out to the industry as well," said Jordan Barab, deputy assistant secretary for OSHA. Iain Conn, BP's global head of refining and marketing, said the company is committed to safety and to "a strong relationship" with OSHA. The settlement resolves all but 30 of more than 700 violations discovered at the plant in 2009. Barab said he expects the rest to be litigated or settled in the future but stressed that there are no further imminent dangers at the refinery.

Of the remaining citations, 110 were withdrawn and most of the others were reclassified as less severe under the settlement. The fines were assessed after OSHA said the company failed to comply with the original terms of a 2005 agreement to take corrective measures following the deadly blast four years earlier.

OSHA also said BP had committed hundreds of new violations when it failed to follow industry practices in its pressure relief safety systems. Under the terms of the settlement, BP must file a report by the end of the year showing that it has corrected all safety violations. Overall, the company has paid more than $2 billion to settle lawsuits and fines stemming from the 2005 explosion.

It also has spent more than $1 billion on safety and infrastructure improvements at the Texas City refinery and another $500 million to make fixes under a 2010 settlement agreement with OSHA. BP is the second largest producer of oil and gas in the United States. Brent Coon, an attorney who represented workers and families who sued BP after the explosion, praised OSHA for putting additional pressure on BP to speed up safety improvements at the refinery. But he said the Justice Department's failure to prosecute management personnel individually "has allowed the company to act with less haste than it would”.

Environmentalists and State Clash over Washington Refineries' Greenhouse Gases

In 2009, Washington’s Gov. Chris Gregoire declared that the state would treat climate-changing gases as harmful pollutants that must be curbed.

But two years later when the Department of Ecology refused to use existing state rules to curb greenhouse gases from Puget Sound's five oil refineries, environmentalists were surprised, since refineries are Washington's second-largest non-vehicle source of emissions.

Environmentalists sued the state and won. This spring a federal judge told Ecology it must hunt for ways to reduce refinery emissions.

But Ecology, joined by the petroleum industry, has appealed the decision — and is rewriting the very rules the judge relied upon to reach her conclusion.

"They're doing everything they can to avoid having to do this," said Becky Kelley, with the Washington Environmental Council, one of the groups that filed suit.

"Until we sued them they weren't doing anything, and they've pretty much told us they're not intending to do anything. They don't want to do this job, and I don't get it. I think people should be angry. It's not right."

The state maintains the judge made a mistake, and Washington never intended to regulate greenhouse gases at refineries. Instead it wants the federal government to lead.

The federal Environmental Protection Agency is already working on national emissions rules for refineries, but those rules would only be triggered when facilities seek to upgrade. Emissions rules for refinery facilities that want to continue as-is remain several years away — provided there aren't extended delays.

The dispute over which emissions to reduce and how highlights the complex factors that help set or dash priorities when attempting to respond to climate change.

The state's top clean-air expert said Ecology shares environmentalists' overall emissions-reductions goals. But because the state's refineries get their power from relatively clean sources, he said, there are few easy improvements to be made. He also said the state had been working on the rule change long before environmentalists sued.

"The major concern for me is the huge administrative and analytical costs involved," said Stu Clark, head of Ecology's clean-air program. "If we're going to spend our energy doing something about climate change, let's focus on something that does make a difference — where we know we've got significant gains that can be leveraged.

"If the political winds said I could do anything I wanted to address climate change, refineries wouldn't be anywhere near the top priority."

The reason: The five Puget Sound refineries combined account for nearly 6 million metric tons of greenhouse gases a year, second among stationary sources only to TransAlta's coal-fired power plant in Centralia, WA which accounts for nearly 10 million metric tons.

But that pales in comparison to emissions from motorcycles, cars, trucks, buses, trains, planes and boats, which combined account for more than 45 million metric tons. That's nearly half of the state's total emissions, which are about 101 million metric tons.

"I get that the environmental community is very frustrated by the lack of action nationally and ... really wants something to happen," Clark said. "But to me, this is just a complete alteration of the structure of the federal Clean Air Act."

Activists from the Washington Environmental Council and the Sierra Club remain furious with the state over its approach, especially given the enthusiasm with which Gregoire went about, in 2009, negotiating with TransAlta's owners and helping find a way to get the power plant to stop burning coal by 2025.

More importantly, said Janette Brimmer, an attorney with Earthjustice, much of the federal EPA's approach to greenhouse gases and other pollutants has come in response to pressure from states that first threaten to tackle issues on their own. Ecology's position removes that leverage.

"How many times over how many decades and for how many pollutants have we heard the argument that 'the Feds are on it?' " said Brimmer, who won the environmentalists' lawsuit in federal court. "That's a lame excuse, and it makes no sense at all. These rules have been in play forever, and there have been countless delays. We are years from seeing results on the ground."

Brimmer and Kelly met privately in mid-July with EPA officials in Seattle and asked them to deny the state Department of Ecology's request to change its rules.

But the EPA, while not yet committing either way, is inclined to side with Ecology, arguing that following the judge's decision could lead to a kind of chaos.

"To just address it locally (the refinery issue) would be meaningless, and no matter what you did, you would set up all this structure that's not suited for this type of problem," said Rick Albright, head of EPA's air, waste and radiation program for the Northwest region.

The EPA requires states to have plans to deal with six of the most dangerous air contaminants — such as lead or sulfur dioxide. If a state or region doesn't keep those pollutants in line in accordance with strict federal limits, the federal government will force states to take drastic steps to clean the air.

While the EPA, too, has officially declared greenhouse gases to be dangerous, it hasn't included them on this list of pollutants covered under EPA's national ambient air quality standards.

But U.S. District Court Judge Marsha Pechman ruled in December that the way Washington's administrative code is written, greenhouse gases do fall on the state list of contaminants that have to be kept in line. That means the state is obligated to demand major sources, such as refineries, apply "reasonably available control technology" to improve emissions.

She gave Washington 26 months to comply. The state and regional clean-air authorities say they are taking steps toward that effort even as they appeal.

Nationwide, the country's 150 refineries are among the largest sources of greenhouse gases. The bulk of that carbon-dioxide pollution is from the combustion of petroleum, which is part of the fuel-making process. But refineries also require gobs of energy, much of it (outside Washington) from dirty fuel sources, such as coal-fired power plants.

Cleaning up refineries requires a complicated mix of using cleaner-burning fuels, making system wide internal efficiencies and switching to cleaner electricity sources.

Clark, at Ecology, said that since Washington's plants get power from relatively clean electrical sources, such as hydropower and natural gas — and absent new technologies to sequester carbon from combustion — the only clear way to improve emissions is through efficiencies.

And engineers with clean-air agencies "who know more about the internal workings of refineries feel that our refineries are already some of the more efficient in the country," Clark said.

Environmentalists disagree.

"Nobody knows how clean and efficient our refineries are because they (the state) haven't really gone through the process to look," Brimmer said. "They're just saying, 'Trust us, we kind of know,' but that could be true for everything. That's why we have to have clean-air laws."

While California is already moving to set emissions ceilings on refineries as part of a statewide cap-and-trade effort to curb greenhouse gases across all industries, Clark said the best approach is to let EPA take the lead nationally.

Hess Has Up to $2 Bln in Asset Sales 'Well Under Way'

Hess Corp. (HES) has up to $2 billion in potential asset sales "well under way" as the independent oil and gas producer tries to raise enough cash to keep up with its spending, the company said July 25.

Hess expects to close the deals by mid-2013, but did not say which assets it had on the sales block. The New York company has oil and gas assets throughout the world and a small refinery in Port Reading, N.J.

"They will be more mature, not as strategic," Chief Executive John Hess said of what the company is trying to sell. "We're going to be shedding assets that are smaller-interest, that have capital expenses associated with them that are not attractive."

Hess is also identifying more assets it can sell after 2013, the company said. Hess is rearranging its assets to focus on oil and gas fields it sees as the most profitable. In January, it closed its Hovensa LLC refinery joint venture with Petroleos de Venezuela SA, keeping the small Port Reading refinery as its only fuel processing plant.

Hess raised its 2012 capital expenditure estimate 25% to $8.5 billion, as it works to complete oil and gas wells in the Bakken and Eagle Ford shale formations in the U.S. The company was nearing completion of some wells just as infrastructure prices were increasing.

"We're at the peak of our capex," Mr. Hess said. "As we move forward, we expect significantly lower capital costs."

Still, the news of the increased spending may trouble investors who may have been happy with the company's increased production in the Bakken region of North Dakota. Hess is producing nearly 60,000 barrels of oil equivalent a day in the Bakken area, and is shipping about 29,000 barrels of oil a day out of the Bakken area via rail after building a rail terminal there in April, the company said.

The "current capex run-rate of more than $8 billion is not sitting well with investors," said Barclays analyst Paul Cheng in a note to clients.

Hess's second-quarter earnings fell 10%, to $549 million, as lower oil prices hurt its exploration and production segment's bottom line. Revenue fell 5.1% to $9.31 billion.

Hess said it would produce 395,000 to 405,000 barrels of oil equivalent a day in 2012, up 5% from its previous estimate. The company expects Brent oil to reach $90 a barrel by 2014.

Sunoco, Carlyle Capitalize on Shale Boom to Reach Deal on Largest U.S. East Coast Refinery

Sunoco Inc and private equity firm Carlyle Group LP reached a deal July 2 to save and expand the largest U.S. East Coast refinery, capitalizing on the nation's shale boom to reinvent the economics of refining in the region.

Sunoco will retain a minority stake in the 330,000 barrel per day Philadelphia, Pennsylvania refinery and Carlyle will be in charge of daily operations under the terms of the deal. Traders for Wall Street titan JPMorgan Chase & Co will handle crude supplies and fuel sales.

Carlyle and Sunoco plan to construct a high-speed unloading rail facility to feed the plant with cheap domestic crude, reducing the huge costs associated with importing oil that wrecked margins and forced the U.S. refiner to decide to look for buyers or shutdown the longest running refinery on the East Coast this summer. The private equity firm had been in exclusive talks since April, and a deal had been generally expected.

In addition to saving the region from a potential shortfall of fuel and heralding a stronger connection between East Coast refiners and the dramatic growth in Midwest shale oil production, the venture plans to exploit the low cost and abundant supply of natural gas from the nearby Marcellus Shale deposit to reduce the costs of powering the plant.

"We believe the changing nature of the energy paradigm in the U.S., coupled with a redefined operating model, could truly benefit this refinery," said Rodney Cohen, managing director of the Carlyle Group told reporters during a conference call.

"The refinery's exceptional location and infrastructure will enable the joint venture to create new business opportunities related to Marcellus Shale natural gas fields."

The joint venture, to be called the Philadelphia Energy Solutions, was expected to close in the third quarter, saving 850 existing jobs and creating 100 to 200 permanent new ones.

Terms of the deal were not disclosed, but some $25 million in state and local support spoke volumes to the political importance of saving jobs in a teetering economy and securing domestic fuel supply to prevent a potential spike in prices this summer.

Carlyle becomes the second white knight to rescue an imperiled refinery on the U.S. East Coast. Last month, Delta Air Lines Inc bought the 185,000-bpd Trainer refinery, located several miles away, from Phillips 66.

It is an abrupt reversal for a regional industry that a year ago appeared to be in terminal decline, beset by foreign competition, costly imported crude and weak demand. Now, only one of three plants in the Philadelphia area that had been threatened with closure is shuttered and is unlikely to reopen as a refinery.

The surge in U.S. oil and gas production from non-conventional sources such as shale has redefined energy markets and refining in the world's biggest economy, providing a cheap source of crude for domestic plants. The natural gas boom has also provided an inexpensive fuel for refineries to power their plants.

The refinery, which imported just over 300,000 barrels per day (bpd) of crude from countries like Norway and Nigeria in the first four months of this year, plans to run 50 percent domestic Midwest crudes within two years, operators said.

While some analysts warn that the rescue of the two East Coast refineries - plus plants in Europe and the Caribbean - could tilt the region back into the doldrums, others say the U.S. sector is now better able to withstand a downturn.

"The U.S. East Coast plants certainly have better prospects than their European competitors and the growth in U.S. domestic production of crude and natural gas is improving those prospects further," said John Auers, a refinery expert with Turner Mason in Houston.

With the deal, JPMorgan Chase's commodities division - which has expanded over the past four years with the purchase of RBS Sempra's trading desk - will take up supplying the refinery with crude and non-crude feedstocks and purchasing fuel produced by the plant for offtake, an increasingly common arrangement.

The deal effectively marks Sunoco's exit from the refining sector, ending the company's over century-long tradition in the region. Sunoco has already closed the 178,000-bpd plant in Marcus Hook, several miles away.

Meanwhile new buyers are snapping up assets with a view beyond the immediate margins. In Europe, trading companies have purchased plants from failed refiner Petroplus in order to gain valuable leverage in the market.

"We have seen non-traditional companies enter into the downstream space as traditional refiners exit because they have better access to low-cost capital," said Mark Routt, Senior advisor at KBC Advanced Technologies in Houston.

Philadelphia Energy Solutions plans to construct and upgrade units at the plant, moves that could help the refinery meet new lower sulfur fuel requirements for home heating oil in the region.

The joint venture plans to convert a middle distillate hydrotreater into a mild hydrocracker and construct a natural gas-based hydrogen plant to produce greener fuels. In addition, they plan to upgrade the plant's catalytic cracker to improve performance and reliability.

Phil Rinaldi, an industry veteran who helped turn the floundering Coffeyville, Kansas, refinery to a profit a decade ago, will be the chief executive officer of the new venture.

VENEZUELA

Foster Wheeler Awarded Contract for Venezuela’s El Palito Refinery Expansion

Foster Wheeler AG announced July 19 that a subsidiary of its Global Engineering and Construction Group has been awarded a contract by PDVSA Petroleo S.A. for the engineering, procurement services and construction management (EPCm) for the El Palito Refinery Expansion Project in Venezuela. Foster Wheeler will execute the project in consortium with Toyo Engineering Corporation from Japan and Y & V Ingeniería y Construccion from Venezuela.

Foster Wheeler and its consortium partners have previously completed the front-end engineering design for the project. The value of the EPCm award was not disclosed and will be included in Foster Wheeler's third-quarter 2012 bookings.

The major expansion of the refinery will include a number of new units, including a 140,000 barrels per stream day (BPSD) crude/vacuum distillation unit, a 24,500 BPSD naphtha hydrotreating/continuous catalytic reformer complex, a 58,000 BPSD vacuum gasoil hydrotreater, a 45,000 BPSD diesel hydrotreater, an 80 million standard cubic feet per day hydrogen production unit, a 250 tonnes per day sulfur recovery/tail gas treatment unit, a new flare system, amine regeneration and sour water stripper facilities, and relevant utilities, interconnecting and off-sites, including marine facilities and a new product storage tank farm.

The expansion is intended to double the refinery's capacity to 280,000 BPSD, processing heavy and extra-heavy crudes from the Orinoco Belt, and increasing production of clean fuels. The project is expected to be completed during 2016.

"Foster Wheeler and PDVSA have, over the years, built a strong working relationship, based on the excellence of our project execution and our world-class technical expertise," said Umberto della Sala, Chief Operating Officer, Foster Wheeler AG. "This relationship, together with our proven ability to execute complex projects and our heavy crude expertise, was key to our success in winning this project."

"Foster Wheeler is a strong and capable FEED and EPCm contractor with significant experience in Venezuela and in executing major refinery expansion projects," said PDVSA. "They will play a key role in the project as part of this winning consortium, which consortium is very well-qualified to deliver this important upgrade project successfully and safely."

The El Palito refinery is located close to Pto. Cabello, Carabobo State, Venezuela. Foster Wheeler has previously designed and built several units of the refinery.

ASIA

CHINA

Sinopec Plans $3 Bln Refinery to Meet Rising Fuel Demand

China Petroleum & Chemical (Sinopec) plans to spend US$3 billion (19.3 billion yuan) to build the nation's largest oil refinery in the eastern province of Jiangsu, to meet the mainland's rising fuel demand.

The world's second-largest crude oil refiner by capacity has formed a committee with the provincial government on the mega project, which will be located in the coastal city of Lianyungang and will integrate oil refining and petrochemical production, reported Sinopec News, a corporate newsletter published by parent China Petrochemical Corp. It did not provide further details.

But according to a Xinhua report last month, the project would have an annual refining capacity of 32 million tonnes and construction could start as early next year under an agreement signed between Sinopec and the provincial government.

The first phase of development involves 12 million tonnes of annual oil refining capacity and facilities capable of churning out one million tonnes of paraxylene,a chemical used to make polyester. The second phase includes 20 million tonnes of oil refining capacity and facilities to make one million tonnes of base chemical ethylene a year.

The agreement also includes the construction of a wharf large enough to accommodate oil tankers with storage capacity of 300,000 tonnes of fuel, Xinhua reported.

National Business Daily reported last month that the mega project still needs approval from the National Development and Reform Commission. It cited a Lianyungang official responsible for the project.

It also quoted Sinopec deputy chairman Wang Tianpuas saying that the company plans to form a joint venture with a large international petrochemical firm to co-invest in the project. A Sinopec spokesman could not be reached for comment.

Sinopec was operating 34 refineries at the end of last year, with a total annual processing capacity of 247 million tonnes, according to its annual filing to the Securities Exchange Commission in the United States, where its shares are traded.

If completed, the 32-million-tonne-a-year refinery will be much larger than Sinopec's largest operating refinery in Zhenhai, Zhejiang province, which has an annual capacity of 23 million tonnes.

INDIA

Vedanta Resources to Pick Up Minority Equity Stake in Proposed Rajasthan Refinery

The London-listed metals and mining major Vedanta Resources Plc has expressed interest to buy a minority equity stake in the recently revived 9 million tonnes per annum (MTPA) refinery project at the Barmer oil field in Rajasthan, an official statement said.

"With a positive gesture, he (Anil Agarwal, Chairman of Vedana Resources) expressed his interest in participation in this ambitious project," the Rajasthan government said in the statement.

Hindustan Petroleum Corp Ltd, the country's oil-refining and marketing major, has evinced interest to build the refinery project at the Barmer oil find of Cairn India Ltd. In 2011, Vedanta had acquired 58.5% equity stake in Cairn India for a total consideration of $8.7 billion.

The refinery is expected to entail an investment of about Rs 200 billion, media reports said.

Hindustan Petroleum has proposed to pick up 51% equity holding in the project, while energy explorer Oil and Natural Gas Corp Ltd (ONGC) may hold 26% stake in the project.

Notably, earlier in 2005, ONGC had committed to build the refinery project, but dropped it as it did not find building the project viable.

Besides, state-run Engineers India Ltd (EIL) has also shown interest to have 5% equity participation in the project.

The state government is actively in discussion with Hindustan Petroleum, ONGC and other agencies.

'We are hopeful for positive outcome of these efforts," the statement said.

The refinery would be authorized to off-take crude from Cairn's RJ-ON-90/1 block.

Besides, it may also use Barmer-Salaya Pipeline for the import of crude in case of crude depletion from Barmer block, reports said.

Reports also said that the state government of Rajasthan has already started the process of land acquisition of about 926 hectares for the project and is also likely to take equity stake in the project, apart from giving fiscal concessions like 50% exemption in excise duty to make it viable.

Cairn India, operator of the Barmer block with stake holding of 70%, currently produces 175,000 barrels per day (BPD) from the Rajasthan fields and has the potential to increase production to 300,000 BPD. Barmer block is estimated to have 6.5 billion barrels of oil equivalent in place.

India Offers Support for $7.57 Bln Matanzas, Cuba Refinery Project

India would like to facilitate construction of an oil refinery in Cuba, Commerce and Industry Minister Jyotiraditya M. Scindia said during a visit to Havana.

Cuvenpetrol, a Cuban-Venezuelan joint venture, is proposing to build a new, 150,000 barrel-per-day refinery in Matanzas, on west-central Cuba’s northern coast, estimated at $7.57 billion. The joint venture has also sought Chinese participation in the $5.44 billion expansion of a refinery in Cienfuegos.

Scindia told Cuban Foreign Trade and Investment Minister Rodrigo Malmierca that India is willing to provide know-how and equity for a refinery project in western Cuba, the Times of India reported. State-owned Engineers India Ltd. has currently six refinery-related projects underway, and Indian Oil Co. Ltd., which owns seven refineries in India, offers operating support.

Scindia also urged Cuban officials to facilitate an extension of an offshore lease by Indian state oil company ONGC Videsh Ltd. (OVL), which is set to expire September 10, according to the Times. Cuban officials said that a decision about OVL’s request is expected shortly, the Indian newspaper said. OVL leased two offshore blocks just west of Havana in 2006 and completed 2D and 3D surveying last year, after spending more than $43 million, according to the company; however, it hasn’t contracted the Scarabeo 9 platform, which is set to leave Cuba after completing two more drills. OVL was also a junior partner in a consortium led by Repsol, which failed to find oil in one recent exploratory drill.

Scindia came to Cuba via Venezuela, where he announced a $2.2 billion investment by OVL for exploration and production in the Orinoco heavy-oil belt.

During his visit to Havana, Scindia was accompanied by a 25-member business delegation.

The minister particularly highlighted energy and mining as two sectors where Indian companies can participate in Cuba, “through investment in exploration, production, refining and marketing,” according to a statement by the Indian Ministry of Commerce and Industry. He also offered support in construction of railway and airport projects in Cuba, and the sale of Indian-made urban buses, the statement said. The Cuban side, in turn, sought Indian expertise in nickel, cobalt and tungsten mining.

Cuba proposed seven projects to the delegation, including joint ventures in oil and gas, polymers and plastics, paper manufacturing, and tourism, according to Prensa Latina. At the meeting with Malmierca, Scindia also discussed renewable energy, irrigation, fire protection, sugar, automotives, and pharmaceuticals as potential areas of cooperation, according to the statement from India’s Commerce and Industry Ministry.

The Indian government is raising trade guarantees to Cuba from $12 million to $17 million, the minister announced during the visit. Although bilateral trade is at just $40 million, it rose 24 percent last year, said Deputy Foreign Trade Minister Orlando Hernández Guillén, according to Prensa Latina.

India’s HPCL on Course to Revive Barmer Refinery

State-owned oil marketer Hindustan Petroleum Corporation (HPCL) is on course to revive the Barmer refinery proposed by it ages ago — and first planned by the Oil and Natural Gas Corporation (ONGC).

Sources familiar with the development said HPCL plans to set up a 9 million metric tonne per annum (mmtpa) refinery, which will also house a petrochemical complex in the second phase.

“The land has already been acquired by the Rajasthan government and all approvals are in place. What is now needed is an agreement between HPCL and the state for the holding structure and sops,” one person said.

The company is nearing a deal in terms of tax holidays and other benefits. “If things work out well, HPCL will make an announcement during its annual general meeting in September,” the source said.

The Barmer refinery was proposed in 2004-05 when Cairn India discovered oil in the Barmer basin in 2004.

ONGC, which had a 30% stake in the oilfields, proposed a 7.5 mmtpa refinery which would consume the entire crude from the Mangala, Bhagyam and Aishwariya fields. However, ONGC later backed out because Rajasthan did not agree to the incentives it requested.

Cairn was not keen on the refinery as well as it wanted to value-add through its expertise in the upstream sector rather than invest in downstream projects.

However, later in 2009, Prime Minister Manmohan Singh asked the ministry of petroleum and ONGC to reconsider the project.

Since then, Rajasthan had been in talks with ONGC and downstream players to set up the refinery. HPCL finally agreed to set it up.

“Rajasthan is very keen on the refinery because all other major states have one,” said Sudhir Vasudeva, chairman, ONGC. He said ONGC has decided to have a minority stake while HPCL has shown interest in taking the majority.

“Our plan is to reach a production capacity of 42 mmtpa by 2016-17 and for that we are considering several greenfield options. Barmer is one of them,” said Bhaswar Mukherjee, director-finance, HPCL.

Mukherjee said land will be Rajasthan’s equity in the project.

While HPCL plans to hold 51% in the refinery, ONGC and Rajasthan will hold between 18% and 26%.

The Vedanta Group of Anil Agarwal, which owns Cairn India, is also interested in a minority stake in the refinery.

“There are companies interested in picking up some stakes in the project, but HPCL has decided not to part with its 51% to take advantage of the gross refining margins,” the source said.

He added this is the reason why the company has not included Mittal Energy Ltd, the power and energy arm of steel baron Lakshmi Mittal, which has jointly set up the 8 mmtpa Bathinda refinery.

India to Expand Numaligarh Refinery Capacity by 200 Percent for $3.6 Bln

India's Numaligarh Refinery Limited (NRL) will invest $3.6bn (€2.9bn) to increase its refining capacity to 9m tonne/year from the current level of 3m tonne/year, a company official said on July 25.

The proposal submitted to the Ministry of Petroleum was approved mid-July and a detailed project report will be commissioned shortly, the official said.

The completion date for the project will be decided after the detailed project report has been finalized and approved, the official added.

The expansion project will also include construction of a 150km pipeline to transport high-speed diesel (HSD) to Bangladesh, he said.

NRL, which operates a standalone grass root refinery at Numaligarh, in north Indian province of Assam, will also build a pipeline connecting the refinery to Dhamra Port, operated by a joint venture of Tata Group and L&T in eastern Indian province of Orissa, for import of crude through the port, the official added.

The addition of a naphtha splitter entailing a cost of $11m to the refinery will be complete by the end of 2012 that will facilitate supply of naphtha feedstock to Brahmaputra Cracker and Polymers Limited (BCPL) project currently under implementation at Lepetkata, also in the same province.

Under an agreement between NRL and BCPL, the NRL is committed to supply 160,000 tonne/year of naphtha feedstock to the cracker unit subject to minimum availability of 3m/year crude to the refinery, the official said.

BCPL is planning to complete a cracker and polymer complex by July 2013 that will comprise a 220,000 tonne/ year HDPE/LLDPE swing plant, a 60,000 tone/ year polypropylene unit, a 55,000 tonne/year raw pyrolysis gasoline plant, and 12,500 tonne/year fuel oil unit based on naphtha and gas as feedstock.

The naphtha will be sourced from NRL while the gas will come from from Oil India Ltd fields in Assam.

NRL is a joint venture of Bharat Petroleum Corporation Limited (BPCL), Government of Assam and Oil India Limited, with 61.65%, 12.35% and 26% shareholding respectively.

Essar Expects Margins to Improve after Switching from Gas to Coal at Vadinar Refinery

Private sector refiner Essar Oil says its margin will improve by at least $1 per barrel by switching the fuel at its Vadinar refinery in Gujarat from gas to coal.

Essar Oil's managing director and chief executive Lalit Gupta told ET that the company has abandoned plans to run the 20-million tonne refinery on gas-based power because of acute shortage of natural gas.

"As supply of cheaper domestically produced natural gas is uncertain, we are converting the generation unit to coal-fired plant," Gupta said.

The Vadinar refinery has a captive power plant that can produce 510 MW of electricity.

With optimization of the refinery and change in fuel, Essar is expecting to raise its gross refinery margin by $5 per barrel this year from $4.23 in the previous year, Gupta said. "Besides providing cheaper power, our coal-fired power plant will also supply steam, which will improve our gross refinery margin by approximately $1 per barrel. The refinery optimization is expected to give us an additional $4 per barrel," he said.

Essar completed the refinery optimization project last month by raising its capacity to 20 million tonne per annum.

Complex refineries, such as Vadinar, have traditionally reported gross refining margins of $7-8 per barrel, he said, adding that a coal-fired unit has additional advantages.

The company has already commissioned the first of the two 255 MW units and is in advanced stage of setting up the second, Gupta said. Earlier, the Vadinar refinery was run on 120 MW of electricity generated by refinery residual products, such as fuel oil and naphtha, and 380 MW generated by gas.

"Due to non availability of domestic gas, the imported liquefied natural gas makes power costly," Gupta said.

India is facing acute shortage of domestically produced gas after output from Reliance Industries-operated KG-D6 block dropped to about 32 million standard cubic meters per day from 62 mmscmd because of technical reasons. Domestic gas is sold at a regulated rate of $4.2 a unit. Imported gas is about four times costlier.

Gupta said most of the power generated by the unit would be for captive use of Essar Oil. "Some power will also be sold to Essar Steel and the balance will be sold into the merchant market," he said.

MALAYSIA

CB&I Announces Petronas Technology Contract in Malaysia

CB&I announced that it has been awarded a contract by PETRONAS for the license and engineering design work for five petrochemicals units. The project is part of the new refinery and petrochemicals integrated development (RAPID) project to be located in Johor, Malaysia.

'CB&I is excited to be working with PETRONAS on this important project by providing several key technologies from our petrochemicals portfolio,' said Daniel McCarthy, President of Lummus Technology. 'The RAPID project will allow PETRONAS to expand its products portfolio, capitalizing on the demand for higher value products in the region.'

Lummus Technology will be providing technology for a world scale steam cracker complex comprising ethylene, butadiene, benzene, isobutylene and MTBE units.

Lummus Technology, a CB&I company, capitalizes on more than 2,800 patents and patent applications to provide process technologies, catalysts and specialty equipment for petrochemical facilities, oil refineries and gas processing plants.

PHILIPPINES

Shell Refinery, LNG Projects in the Philippines to Cost $1 Bln

PILPINAS Shell Petroleum Corp. is looking to spend at least $1 billion for the Tabangao refinery upgrade program and for putting up a liquefied natural gas regasification facility over the next three to four years, country chairman Edgar Chua told reporters.

The Shell official said the refinery upgrade and LNG project could entail at least $1 billion in investments. “It’s a figure we’re looking at and the ongoing study will help determine the amount. We have a memorandum of understanding with the Philippine government, as we will try to make that work together,” he said.

Chua said the LNG and refinery upgrade will be one of the biggest projects to be undertaken by the company. “Over the next three to four years, the refinery upgrade will be the highest project with the different aspects of the project being combined. And for the next three to four years, this will be the highest investment of Shell,” Chua said.

He said the study on the refinery upgrade is underway, which will eventually enable the Tabangao refinery to produce products that comply with the more stringent specifications like lower sulfur. “We are upgrading the facility to improve it and be able to meet the future and more stringent fuel specifications,” he added.

Chua said the study on the potential upgrade of its Tabangao refinery will determine the needed changes in the facility that will allow them to meet the new Philippine National Standard for Euro IV grade diesel and gasoline set to take effect in 2016.

When asked if they will expand their refinery, Chua declined to give a definitive answer but added that the upgrade could be considered a step closer to the refinery’s expansion. Apart from the Tabangao refinery, Shell also has another refinery in Singapore that caters to the region’s fuel requirements.

Chua said the refinery upgrade will also include the possible increase in the production of white products such as liquefied petroleum gas, unleaded gasoline and diesel.

He, however, declined to quantify the possible increase saying that it will depend on the quality of crude. At present, he said, the Shell Tabangao refinery refines 11 to 12 different types of crude.

Chua said the decision to upgrade hinges on its Shell’s confidence to the present government leadership. “These were investments we looked at before but were held back. We are confident of the leadership now, as it provides good governance, level playing field and so on. The upgrade is not just hinged on demand, but more on having a conducive business environment,” Chua said.

During President Aquino’s recent state-visit to UK, Pilipinas Shell also signed a memorandum of understanding (MOU) with the government to explore establishing a local import and regasification terminal for LNG in the Philippines.

Pilipinas Shell said the MOU calls for cooperation and coordination efforts between the Philippine government and Shell of a technical feasibility study which shall determine the viability for the development, construction and operation by Shell of an import and regasification terminal adjacent to its refinery facility in Tabangao, Batangas.

“We believe this feasibility study for an LNG terminal is a timely activity as it firmly supports the Government’s thrust of achieving energy security and promoting cleaner energy. The feasibility study is expected to be completed by 2012 with a ‘first-gas’ target date in 2016,” Chua said.

The Philippine government, through the Department of Energy, is developing a Natural Gas Master Plan to diversify the country’s energy sources and address the increasing demand for power to support the economic growth of the country.

THAILAND

Bangchak Petroleum Opts to Enhance Thailand Refinery Safety Level Instead of Expansion

Bangchak Petroleum will enhance the safety standard of its refinery to be more environmentally friendly and in the long run will tone down the refinery business, according to its board chairman Krairit Nilkuha.

Krairit, who also serves as director-general of the Alternative Energy Development and Efficiency Department, said that the management discussed the future of the Bangkok refinery and agreed that within 10 years the company would tone down the refinery role, given running such a business in the city may not fit well environmentally.

Currently the refinery business is its main income source but this would change in the future when the focus would be on enhancing its safety level so it fits better with the surrounding location.

Earlier the company announced a long-term investment plan worth Bt87.5 billion from 2012 till 2019. In the first phase from this year to 2014, it will invest Bt26 billion, of which Bt15 billion will be put into building solar power plants and another Bt4 billion in an Efficiency, Energy and Environment Improvement (3E) Project. It will also spend Bt6 billion on bio-fuel project development and Bt1 billion on palm and cassava planting.

Bangchak aims to reduce Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) from the refinery to 50 per cent in 2015 before cutting that to 35 per cent in 2020, down from the forecast 70 per cent this year. The return from its solar power business should reach 20 per cent next year.

The company's crude distillation unit 3 in its refinery complex in densely populated Phra Khanong district caught fire in early July, the second such incident in two years. The company plans to rebuild the unit and a complete rebuild is expected within three months.

EUROPE / AFRICA / MIDDLE EAST

EQUATORIAL GUINEA

Equatorial Guinea Seeks Ties with Chinese Firms to Improve Power Infrastructure and Increase Crude and Natural Gas Output

Equatorial Guinea, the third-largest crude-oil producer in Sub-Saharan Africa, is seeking to deepen ties with Chinese energy companies as the country works to improve power infrastructure and increase output of crude and natural gas.

Equatorial Guinea has approached China Petrochemical Corp., (Sinopec Group) about building a 20,000-barrel-a day refining and petrochemical complex in the country, which later could be expanded to 60,000 barrels a day, Gabriel M. Obiang Lima, the country's minister of mines, industry and energy, told Dow Jones Newswires.

"We are planning to build a refinery, but will only use a small amount (of crude) coming from our own production," he said. "We are having discussions with Sinopec regarding that...we were expecting to sign something today, but the time has gone too fast."

Although Equatorial Guinea has approached other engineering companies based in the U.S., Spain, Italy and Germany about developing the refinery, state-owned Sinopec would be the only company that would take an ownership stake in the project if chosen, Mr. Obiang said, adding that a final decision could be made by year-end.

Cnooc Ltd. (CEO), China's largest offshore oil producer, plans to drill two deepwater wells off the coast of the country next year, Mr. Obiang said. Cnooc has drilled one well already, but discovered non-commercial amounts of crude, he said. Next year's wells will be drilled in partnership with South Korea's SK Innovation Co. (096770.SE), which will provide deepwater drilling technology, he said.

Cnooc signed an agreement with Equatorial Guinea in 2006 to explore a 2,287 square kilometer block off the coast of the country, with a water depth ranging from 30 to 1,500 meters. "We are inviting (Cnooc) to negotiate in another block, but they haven't concluded discussions with us," Mr. Obiang said.

Additionally, Equatorial Guinea plans to sign a total of six production-sharing contracts for onshore and offshore oil blocks this year with companies such as Noble Energy Inc. (NBL), Dana Petroleum PLC and Murphy Oil Corp. (MUR), Mr. Obiang said.

Meanwhile, the West African country has signed a series of preliminary agreements with Chinese energy companies on the sidelines of the fifth Forum on China-Africa Cooperation in Beijing. The agreements included a memorandum of understanding with Hong Kong-based Elegance Power to explore and develop onshore oil-and-gas blocks, electricity projects with China Machinery Engineering Corp. and a crude-supply deal with Sinochem Corp. in exchange for trade credit to pay for infrastructure projects.

Unlike the U.S. and other countries, China hasn't attached political or environmental strings to much of its aid.

NIGERIA

Nigeria Announces $4.5 Bln Deal with Vulcan Petroleum to Build Six Oil Refineries

Nigerian officials announced a $4.5 billion deal that will see the country partner with U.S. company Vulcan Petroleum Resources to build six oil refineries in Nigeria, Africa's biggest oil producer.

Vulcan said its goal is to build the first two facilities within one year and complete all six within the next 30 months. It said the various refineries will be located at different sites throughout the country.

Umaru Dembo, a former energy minister, said the announcement was a welcome development for Nigeria.

"It means quite a lot ... because, up to now, we seem to be dependent on refined oil from somewhere else ... the three or four refineries that we have now do not supply the needs of refined products that Nigeria needs at the moment," Dembo said.

Though Nigeria produces more crude oil than any other nation on the continent, it relies heavily on oil that is refined abroad in order to fulfill domestic energy demands. Nigeria exports more than two million barrels of crude oil a day.

Dembo added that the current refineries in the country produce more than 400,000 barrels of oil a day, and the reported 180,000 barrels a day that the six new refineries would produce is a surprisingly low number. But, he added, it was better than the alternative.

"It is better to get the refineries and have them working then have no refineries at all ... than [to have to] depend upon refineries outside Nigeria," he said.

According to Dembo, the new refineries, which are slated to all be finished in about two and a half years, could have additional benefits for the local economy.

"Definitely, it will mean more jobs for Nigerians if this comes to fruition," he said. "There'll be very many things that will be available for the people ... we hope there will actually be electricity."

In January, mass protests were staged throughout the country when the government said it was going to remove the oil subsidy, which was the only benefit many Nigerians said they enjoyed from the nation's oil wealth.

After a nationwide strike and continued protests, the government later announced a partial rollback of the price hikes.

President Goodluck Jonathan has said Nigeria can no longer afford the $8 billion fuel subsidy. He promised to use the money saved for needed infrastructure and social programs.

SOUTH AFRICA

Mossel Bay GTL Refinery Gets Go Ahead for New Gas Fields Project

The gas-to-liquids (GTL) refinery in Mossel Bay has been given a new lease on life with PetroSA giving the go-ahead for its R8-billion Project Ikhwezi to exploit new gas fields in the seabed off Mossel Bay.

The national petroleum producer on July 12 said it had been given approval by the National Energy Regulator of SA (Nersa) after applying in December to secure additional reserves for the GTL refinery.

"It is a major milestone in the project and allows the national oil company to produce natural gas from the F-O development fields when the project is commissioned," PetroSA said.

The new wells are based 40km south- east of PetroSA's offshore production platform near Mossel Bay.

PetroSA's board of directors took a final decision for the company to embark on the project in April last year and production of gas from the first well is planned for mid-2013.

PetroSA group chief executive officer Nosizwe Nokwe-Macamo said Project Ikhwezi was one of the most important initiatives in the company's history.

"Project Ikhwezi creates a critical opportunity for sustaining the operations of our GTL refinery.

"It ensures that we continue to play a vital role in the South African petro- chemicals market. Most importantly, PetroSA will continue to be a source of much-needed employment in the Southern Cape," she said.

PetroSA is the biggest employer in the Mossel Bay area and also supports a number of education initiatives in the Southern Cape as part of its corporate social responsibility plan.

Nokwe-Macamo said Project Ikhwezi had surpassed various critical milestones over the past year.

In November the Environmental Affairs department granted PetroSA environmental authorization to continue with the project.

In May, a drilling rig contract was awarded to international engineering and technology solutions company Ensco. The drilling operation of the five new Project Ikhwezi wells is scheduled to start in November and should be completed by the second quarter of 2015. PetroSA said it would take about six months to complete each of the five wells, with drilling activity accounting for 63% of the project's total capital expenditure.

At the same time, work will proceed on installing sub-sea pipelines and production infrastructure before linking the pipelines back to the Mossel Bay refinery via the GTL offshore platform.

The sub-sea pipelines will be installed between September and December this year, while the rest of the infrastructure will be installed next year.

PetroSA's Coega Refinery to Meet 200,000 bpd Shortfall by 2020

PetroSA's proposed crude oil refinery will meet a 200,000-barrels-per-day shortfall of refined petroleum products by 2020, PetroSA CEO Nosizwe Nokwe said July 12.

Ms Nokwe said PetroSA was progressing with preparations for the refinery, to be based at Coega port, near Port Elizabeth. The project would see the national oil company play a bigger role in the local petroleum industry. In terms of its growth strategy, PetroSA wants to supply about 25% of SA's fuel needs by 2020.

In its motivation for the project, PetroSA has said the refinery would boost SA's security of fuel supply and reduce the country's reliance on imports.

Ms Nokwe said SA last year imported about 120,000 barrels per day. “That is the size of a refinery”, she said.

But the project has attracted criticism. Former BP Southern African CEO Sipho Maseko has said that SA did not need the project, saying it should import refined petroleum products in case of a shortfall. In an article last year, consultant Jeremy Wakeford said the project would be an unaffordable “white elephant”. In the project's defense, Ms Nokwe pointed to last year's imports. She said these were likely to grow leading up to 2020. The project would meet the deficit for finished products.

“If there is excess (products from the refinery), that can be exported (into Southern Africa). If demand exceeds the 200000, we can always increase the size of the plant,” she said.

She said that the move to cleaner fuels would require an upgrading of existing refineries.

“A lot of the refineries are old. That will require a lot of investment. Chances are that (oil) companies will find it difficult to spend a lot of money on them.” A recent study showed a decrease in investments in local refineries.

Ms Nokwe said PetroSA was searching for potential equity partners in the project. “We want partners who will be able to bring in technology,” she said.

The potential partners should also facilitate PetroSA's access to crude oil. She would not say how much percentage PetroSA was prepared to give up on the project. But she said that the company wanted to retain “a percentage enough to give us sufficient decision-making” influence.

In May, PetroSA signed a “joint study agreement” with China Petrochemical Corporation. The agreement entails a commissioning of studies over two phases. The first phase, will, among others, look at the refinery's size and configuration.

The second phase would culminate in a final investment decision on the project. The refinery, also known as Project Mthombo, is to come on stream in 2020.

PetroSA's strategy will also see it enter the downstream market which entails the sale and distribution of petroleum products.

Ms Nokwe said the company would consider buying existing petroleum outlets “if opportunities arise” PetroSA would pursue new projects as part of a partnership, she said.

BELARUS

Venezuela Still Interested in Modernization of Belarus Refineries

Venezuela is still interested in participating in the privatization of Belarusian oil refineries, Venezuelan Ambassador to Belarus Americo Diaz Nunez said at a July 4 press conference in Minsk.

"At a press conference last year, they asked me whether Venezuela is interested in participating in the privatization of Belarusian oil refineries. And today I can say that the interest is still there," he said.

Oil deliveries from Venezuela to Belarusian oil refineries were terminated this year. However, Venezuela is still ready to supply oil to Belarus.

"It's not that the project failed. Belarus had an emergency situation that precipitated the necessity of such an import, and Venezuela agreed to supply oil at the amounts and under the conditions that Belarus needed," Nunez said.

Venezuela is not inclined to look at cooperation with Belarus in the oil sphere as an attempt by Minsk to compete with Russia in the industry, the diplomat said.

The year before last, faced with suspended oil supplies from Russia owing to a conflict with Russian oil companies, Belarus decided to arrange for light oil deliveries by sea from Venezuela. In April 2010, during a visit by Belarusian President Alexander Lukashenko to Caracas, a contract was signed for a test batch of 80,000 tonnes of Venezuelan oil to be shipped to Belarus in May of that year. The oil was delivered through the Port of Odessa and then sent by railroad to the Mozyr Oil Refinery.

Last year, Belarusian Oil Company entered into a swap contract with Venezuela's PDVSA and the State Oil Company of the Azerbaijani Republic (SOCAR) to pump Azeri light oil through the Odessa-Brody and Druzhba main pipeline system to Mozyr. In addition, direct deliveries of Venezuelan Santa Barbara oil were made through Estonia's Port of Muuga by railway.

Belarus has two oil refineries - OJSC Naftan in the Vitebskaya region and Mozyr in the Gomel region.

Naftan was commissioned in 1963 and later transformed into a joint-stock company, in the charter capital of which the Belarusian government owns 99% of shares. Last year, Naftan processed over 10 million tonnes of crude oil, or 25% more than it refined in 2010.

The Mozyr Oil Refinery's primary shareholders are the Belarusian government (42.76%) and NGK Slavneft (42.58%), which is currently equally owned by Gazprom Neft (RTS: SIBN) and TNK-BP (RTS: TNBP). Another 12.25% of Mozyr's shares belong to OJSC MNPZ+ (owned by the government), and 2.41% belong to private individuals. Mozyr's oil refining capacity, including secondary processes, is 11 million tonnes a year, and refining depth is 70%.

KUWAIT / UNITED ARAB EMIRATES

Fluor Says Kuwait and UAE Set to Award Refinery, LNG Contracts

Gulf News has quoted Fluor Corporation as saying that the UAE and Kuwait are set to award engineering contracts as early as August for two refinery projects and an import terminal for liquefied natural gas.

Mr Colin McKenzie the company’s VP for Saudi Arabia said that Fluor, based in Irving, Texas, is bidding on management contracts in Kuwait to build one refinery and upgrade a pair of older plants so they can produce cleaner burning gasoline and diesel. Each of the two projects is valued at about US$15 billion. By the end of August or early September, the client will pretty well know who they’re going to go with.

Oil producers in the Arabian Gulf region are building and expanding refineries and diversifying into petrochemicals to help meet local demand and wean their economies away from relying on crude. Gasoline and other refined products can fetch higher prices than crude, while petrochemicals are a raw material for plastics and other goods. Kuwait and the UAE are the fourth and fifth biggest oil producers, respectively in the Organization of Petroleum Exporting Countries.

Mr Jose Bustamante senior VP for the Middle East said that “Abu Dhabi plans a terminal for LNG to use as fuel for power plants and feedstock for chemical factories. Fluor is bidding to do engineering and design work and expects the project, known as Emirates LNG to pick a contractor within four weeks.”

OMAN

Oman Oil, IPIC to Sign Duqm Greenfield Refinery Project

The wholly government owned investment entity Oman Oil Company (OOC) will shortly sign an agreement with Abu Dhabi's International Petroleum Investment Company (IPIC) formalizing their partnership in the joint development of the Sultanate's third refinery at Duqm. The pact will pave the way for the establishment of a joint venture company to invest in, develop and implement the greenfield refinery project within the Special Economic Zone at Duqm. It will also enable the promoters to secure debt finance for the project, which is estimated to cost $6 billion.

"In this upcoming agreement, both sides will commit themselves to the joint implementation of the Duqm Refinery project. This would represent a significant ramp-up of their initial partnership arrangement to jointly evaluate the feasibility of the refinery venture, to a firm pledge to see the project through to fruition," a government official told the Observer. In conjunction with the signing of a formal agreement, the joint developers are also expected to reveal their choice of a Project Management Consultant to oversee the construction of the massive venture. Oman Oil Company has also appointed a Project Director to liaise with the Project Management Consultancy firm during the implementation phase of the project.

Significantly, the impending agreement will add to a flurry of developments designed to pave the way for the expeditious development of the 11.5 million tonnes per annum (230,000 barrels per day) capacity grass roots refinery. The project also anchors an ambitious petrochemicals cluster envisaged in later phases of Duqm's development as an industrial hub. Last month, Oman Oil Company and the Port of Duqm Company, which operates a giant multipurpose port adjoining the Duqm SEZ, announced plans for the formation of a joint venture named Duqm Petroleum Terminal Company (DPTC) to operate and manage a new Liquid Jetty at Duqm. While Oman Oil will hold a 90 per cent stake in the JV, the balance will be offered to Port of Duqm Company.

The jetty will handle the massive liquid volumes in crude feedstock and refined products that will flow through the port when the refinery is operational tentatively in 2017. Designed to accommodate ships of around 150,000 deadweight tonne (DWT) capacity, the Liquid Jetty will be connected to the refinery via a network of pipelines. Earlier this month, Oman Oil subsidiary Oman Gas Company (OGC), which operates the country's 2,500-kilometer gas transportation grid, firmed up plans for the construction of a pipeline to supply Duqm with its requirements of natural gas as energy and feedstock.

The 230-kilometer pipeline, which will channel gas from Saih Nihayda in central Oman to Duqm, will supply gas to a proposed power and water project and cement plant, as well as the refinery and petrochemical complex. At the same time, a number of international engineering consultants are preparing to bid for a contract to undertake the Front End Engineering Design (FEED) for the refinery project. Around eight companies are understood to have been prequalified to participate in the FEED tender.

The Special Economic Zone Authority of Duqm (SEZAD), for its part, has pledged to facilitate the rapid implementation of the refinery and associated petrochemical complex. An initial 900-hectare site has been earmarked for the venture in the area of the SEZ designated for heavy industries. The Duqm refinery is slated to come into operation in the fourth quarter of 2017.

UNITED ARAB EMIRATES

Oil Refinery in Fujairah Planned by Ipic

Khadem Abdullah Al Qubaisi, director-general of the International Petroleum Investment Company, or Ipic, disclosed that the company is planning to conduct technical and technological studies to set up the biggest oil refinery in Fujairah. The cost of the project may go up to Dh5 billion.

Addressing a press conference on the sidelines of the opening ceremony of the Abu Dhabi-Habshan oil pipeline project, Al Qubaisi said that working on the mega project is expected to begin in second half of next year.

He said the Abu Dhabi-Habshan oil pipeline project took four years of uninterrupted work for completion.

“The project cost about Dh4.2 billion. It is one of the great projects of Ipic. It is considered the first project carried out by the company inside the country, as the company has investment shares in as many as 15 countries,” Al Qubaisi said.

Al Qubaisi said the project may pave the way for economic and social developments in Fujairah as it will create nearly 300 vacancies for UAE nationals in its first phase.

According to Eng Saeed Al Meheribi, director of Ipic’s Projects Department, the new project includes eight reservoirs to store crude oil.

“Each reservoir can accommodate over eight million barrels oil,” he said.

He said the oil pipeline is more than 400km long beginning at the Habshan area, south of Abu Dhabi, passing through Sharjah and Ras Al Khaimah and ending at Fujairah.

The project, he said, will export 1.5 million barrels of crude oil per day through Fujairah, and it will be reaching 1.8 million barrels at times when demands on crude oil are more than usual.

“Ipic is currently intending to set up a new oil refinery in Pakistan, and another oil refinery will be built in Fujairah as well,” he said.

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