Phillips 66 (PSX) may decide to keep in its portfolio a refinery in Louisiana it had been trying to sell since December 2011, the company's chief executive, Greg Garland, said June 5.

Such a decision would be an exception in the atmosphere of refineries trying to sell assets. Phillips 66 and other refiners are rearranging their geographic footprint during a boom in U.S. oil-and-natural-gas production that has caused inland refineries to thrive while those on the coast have had profit margins decline.

Phillips 66 has considered a sale of its 247,000-barrel-a-day Alliance refinery in Belle Chasse since December, but is rethinking the prospect while pricing is falling for Light Louisiana Sweet, or LLS, Garland said. LLS is the benchmark crude oil for the Gulf Coast market.

"Our view of that refinery has increased," Garland said during an investor conference. "We think LLS will become an advantaged crude." Phillips will reach a decision on whether to sell the refinery by late summer, Garland added.

LLS sold for about $95 a barrel June 5, down nearly 17% since December. The premium of about $12 LLS commands over inland-crude-oil benchmark West Texas Intermediate should fall as more WTI crude comes to the Gulf Coast via pipelines and rail cars.

Other coastal refineries are on the selling block. Sunoco Inc. is still trying to sell its 335,000-barrel-a-day refinery in Philadelphia after shuttering its refinery in Marcus Hook in December. Both plants depended on crude oil priced off of Brent, the price of which was as much as $20 more than inland alternatives.

BP PLC is also trying to sell its 265,000-barrel-a-day Carson refinery in California.

Phillips 66 would keep investments in its refining assets to a minimum, instead focusing on expanding its chemical-and-logistics business, Garland said. The Houston company will spend $2 billion on capital projects in its midstream-logistics segment, including natural-gas-liquids processing and exports infrastructure, Garland said.

Phillips 66 may also consider spinning off its logistics business into a master-limited partnership, or MLP. Some investors prefer MLPs because they carry tax advantages.

Motiva Port Arthur Crude-Oil Unit Could Be Down Six Months or More

Motiva Enterprise LLC could take longer than six months to restart a crude-oil distillation unit at its expanded refinery in Port Arthur, Texas, a source familiar with the refinery said June 19.

The brand-new 325,000 barrel-a-day crude-oil distillation unit, or CDU, was taken off line mere weeks after being commissioned after corrosion was discovered inside it. The unit is the first step in the refining process, using extreme heat to separate crude oil into different cuts that then become various kinds of fuels.

Initial estimates said repair work would take up to five months, but now the refiner is looking at much longer, the source said.

"Some of the equipment they have to replace will take a while to get, let alone replace," the source said.

Motiva spokeswoman Emily Oberton said the company was still investigating the cause and extent of the damage to the CDU.

"We don't know how long the crude unit is going to be down," Oberton said. "We will start up as soon as possible."

Motiva is a joint venture between Royal Dutch Shell PLC (RDSA, RDSA.LN) and Saudi Arabian Oil Co., or Saudi Aramco.

EPA Okays Sale of E15 Blend but Hurdles Remain

The U.S. Environmental Protection Agency gave final approval on June 16 for a fuel blend containing 15 percent ethanol to be sold at gas stations across the country, but a series of hurdles remain that could prevent it from being available to consumers anytime soon.

Until now, U.S. companies were not allowed to sell to most conventional gasoline-powered vehicles a fuel that contained more than 10 percent ethanol. Most gasoline sold in the United States contains the blend of 90 percent gasoline and 10 percent ethanol.

The EPA, which approved the new blend in January 2011, had to first complete a series of steps before E15 could go on sale in order to prevent misfueling and ensure that the fuel is properly marked and sold. The blend has been approved for use in cars and light trucks from the 2001 model year onward, but it is banned from older vehicles and light equipment.

"I think there are a number of stations particularly in the Midwest that will be very interested in doing this and there will certainly be encouragement from the renewable fuel industry for it to be done as quickly as possible," Agriculture Secretary Tom Vilsack said in an interview.

Vilsack said there are a limited number of flex-fuel vehicles in the United States that can use a fuel containing 85 percent ethanol and 15 percent gasoline. And with most gasoline containing 10 percent ethanol, boosting the additive to 15 percent was one way to increase the use of the renewable fuel, he said.

"Anything that paves the way for E15 is a good thing and today we got the last hurdle removed so we should be able to see additional biofuel use," said Vilsack. Still, he acknowledged it will "take some time" before the E15 blend is readily available though he declined to give a timeframe.

The EPA said while some companies may introduce E15 into the marketplace some federal, state and local requirements, along with other issues, must still be addressed. For example, dispenser and tank compatibility with E15 must be considered by marketers of the fuel. In addition, because a number of states restrict the sale of some gasoline-ethanol blends, law changes may be needed before E15 may be sold in those states.

Iowa is the nation's largest ethanol producing state, with 41 plants that in 2011 produced about 3.7 billion of the 13 billion gallons of ethanol produced nationally. South Dakota ranked sixth with 15 plants producing just over 1 billion gallons last year.

Corn-based ethanol has been touted by the ethanol industry and American farmers who supply corn as a way to reduce U.S. dependence on imported oil, create jobs and boost income for rural communities. Critics counter that ethanol leads to food inflation by driving up the cost of meat and poultry.

Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri at Columbia, said the rollout of E15 to the marketplace could be very gradual.

"I wouldn't expect to be seeing it in gasoline stations across the country any time real soon," said Westhoff, noting the Midwest as one exception where the fuel could appear relatively quickly. "As of right now there appears to be some resistance on the part of consumers because of concerns about mileage and concerns about (its impact) on their vehicle," he said.

A broader distribution of blender pumps could help companies such as Sioux Falls, SD-based Poet, Archer Daniels Midland, and Green Plains Renewable Energy sell more ethanol.

In a joint statement, the Renewable Fuels Association and Growth Energy called the announcement "a victory for American consumers."

The American Petroleum Institute, which represents 500 oil and natural gas companies, downplayed the EPA announcement. "The bottom line is that it's premature to say that it's ready to be sold -- the obstacles remain. Even the EPA acknowledged obstacles remain," said Bob Greco, API's group director for downstream and industry operations. "Our position still remains that the partial waiver of E15 was premature."

A series of studies have highlighted the money ethanol has saved consumers at the pump. Most recently a study conducted by economic professors at the University of Wisconsin and Iowa State University and sponsored by the Renewable Fuels Association estimated ethanol reduced wholesale gasoline prices by an average of $1.09 per gallon in 2011.

A federal renewable fuel standard mandates the use of 13.2 billion gallons of alternative fuels in 2012, with most of it coming from corn. By 2022, the figure would require 36 billion gallons to blended into transportation fuel.

U.S. Appeals Court Sides with EPA on Greenhouse Gas

A federal appeals court on June 26 backed the Environmental Protection Agency's first rules limiting carbon-dioxide emissions, a major victory for the Obama administration.

The U.S. Court of Appeals for the District of Columbia Circuit, in an 82-page ruling, unanimously upheld the EPA's central finding that greenhouse gases such as carbon dioxide endanger public health and welfare.

The court also upheld subsequent EPA rules that imposed greenhouse-gas-emissions standards on cars beginning with the 2012 model year. In another major portion of the ruling, the appeals court rejected industry-backed challenges to the agency's initial greenhouse-gas permitting requirements for power plants and other stationary sources of pollution.

The EPA regulations followed a landmark Supreme Court ruling in 2007 that authorized the agency to regulate greenhouse-gas emissions under the Clean Air Act.

The June 26 opinion, issued jointly by three judges who considered the case, said the EPA's findings about the dangers of greenhouse gases were consistent with the Supreme Court ruling and the Clean Air Act.

The court said the EPA marshaled a "substantial" body of evidence to support its findings, and it rejected arguments that there was too much uncertainty about global warming for the agency to take the actions it did.

"The existence of some uncertainty does not, without more, warrant invalidation of an endangerment finding," the court wrote.

Chief Judge David Sentelle, a Reagan appointee, and Judges Judith Rogers and David Tatel, both Clinton appointees, issued the decision.

The ruling is likely to echo in this year's elections, where Republicans including presidential candidate Mitt Romney are charging the Obama administration with stifling job growth through tighter environmental rules.

The decision was a blow to an array of industry groups, including those representing chemical, energy, farming and mining interests, that brought several challenges to the EPA's regulations. The challengers had argued the regulations were burdensome, costly and not grounded in hard data.

Groups on both sides were quick to respond.

The court upheld the agency's careful determination, based on a mountain of scientific evidence, that carbon dioxide and other heat-trapping pollutants threaten our health and our planet," said David Doniger of the Natural Resources Defense Council.

"We're still reviewing the decision but obviously we're disappointed. It is likely to impose significant costs on the economy and confer few benefits--an outcome consistent for the regulations from this EPA," said National Mining Association spokesman Luke Popovich. The association represents coal-mining companies.

The EPA said in its findings that greenhouse gases likely were responsible for global warming over the last half-century. That finding was the basis for the agency's new auto-emissions standards and industrial permitting rules.

The ruling comes as the EPA works to finalize its first set of national limits on carbon dioxide from new coal-fired power plants. The new standards, first proposed in March, are expected to make the construction of new coal plants increasingly unlikely as power generators opt for natural gas as a generation source.

Pennsylvania’s Public Utility (PUC) Approves Pipeline Transfer to Ease Trainer Refinery Sale to Delta

The Pennsylvania Public Utility Commission on June 21 approved the transfer of pipelines connected with the ConocoPhillips refinery in Trainer, removing an obstacle to the refinery's sale to Delta Air Lines Inc.

The PUC approved the late-hour request on a fast track after the companies involved in the sale realized that some pipelines came under the jurisdiction of the utility commission, and that regulatory approval was required. The application was filed on May 25.

Commission chairman Robert F. Powelson extolled the PUC's contribution to efforts to assist in the Delaware County refinery's sale, which is being supported with $30 million in grants from the Corbett administration. Powelson called the commission's role "an excellent example of how government can aid in economic development while still protecting the public interest."

The $180 million sale, announced in April, is expected to close this month, according to the application with the PUC.

The refinery, which will operate under the name Monroe Energy L.L.C., is scheduled to restart operations in September, after Delta spends about $100 million to upgrade it to optimize jet-fuel production. The plant halted operations in September 2011.

Delta spokesman Eric Torbenson declined to comment until the transaction closes.

The logistics network was a critical attraction to Delta, which wants to produce its own fuel to cut the cost of its biggest expense. The Trainer refinery is tied into the Harbor Pipeline, which runs 80 miles in New Jersey, from Woodbury to Linden, and is a major route for fuel produced in the Philadelphia area to reach New York markets. Delta operates hubs at New York's LaGuardia and JFK Airports.

The pipeline network also ties into oil terminals in Chelsea (Upper Chichester Township), Woodbury, and on G Street in Philadelphia's Juniata Park neighborhood. Those terminals are convenient places for buyers of the refinery's gasoline, diesel, and heating oil to collect the fuel.

Though ConocoPhillips' intrastate pipelines in Pennsylvania carried mostly crude oil and fuel produced by the refinery, they are public utilities available for use by other companies, so their rates are regulated by the PUC. The rate structure is unaffected by the sale.

Cook Inlet Energy to Lay 90,000 Barrel Subsea Inlet Pipeline to Kenai Refinery

Executives with Cook Inlet Energy LLC are looking to lay a subsea pipeline across the Inlet to carry west-side crude oil to Tesoro's Kenai Peninsula refinery.

The Anchorage-based independent, a subsidiary of publicly traded Miller Energy Resources of Tennessee, has been pursuing the project for a couple of years and is deeply engaged in design, engineering and permitting efforts.

"We've spent a fair amount of time, energy and money," David Hall, Cook Inlet Energy chief executive, said.

The small company is among oil producers operating on Cook Inlet's remote west side.

At present, its oil production moves on the Cook Inlet Pipe Line Co. system to the Drift River terminal, where tankers pick up oil for a short voyage across the inlet to the Tesoro refinery at Nikiski.

Houston-based Hilcorp took over CIPL and the terminal January 1 as part of its purchase of Chevron's Cook Inlet oil and gas properties.

Hall said he sees two big reasons for building a subsea pipeline across Cook Inlet.

First, nearby Redoubt volcano is a threat to the existing oil transportation infrastructure. A series of eruptions in 2009 idled west Cook Inlet oil production for months.

Second, a new subsea pipeline could alleviate the high pipeline transportation and tanker costs that west Cook Inlet producers now face.

Hall's team has enlisted engineering consultant Michael Baker Corp. to help with the proposed pipeline.

Already, some key numbers have been hammered out.

The trans-Foreland pipeline, as Hall calls it, would be 25 miles long and run from Cook Inlet Energy's Kustatan production facility to the Nikiski area. The Kustatan facility is near West Foreland point, while the Tesoro refinery is near East Foreland point.

The pipeline wouldn't run straight across the inlet; rather, it would horseshoe to avoid an area of deep water, thus making the line more accessible to divers.

The pipe would be 8 inches in diameter, and would have a capacity of 90,000 barrels per day.

A number of financing options are being explored, and "numerous parties" are interested, Hall said.

"Pipelines are generally low risk from an investment standpoint," he said.

The trans-Foreland pipeline would be open access with a regulated tariff, Hall said.

Most likely, a separate entity would own and operate the line, following the CIPL model, he said.

The pipeline would feature a state-of-the-art leak detection system, and could accommodate "smart pigs," devices that slide through the pipe to check for corrosion or other problems.

The hope is that engineering and permitting can be completed by year's end, with procurement beginning in early 2013, Hall said. The pipeline would be installed in the summer of 2014, creating an estimated 130 construction jobs. The line could be operational by fall 2014.

Hall couldn't say whether an open season might be held to secure shippers on the line. He also declined to say whether Tesoro is a potential investor in the project.

"We have made sure the active players in the inlet are aware of our intentions and plans," Hall said. "We're trying to rally support."

The pipeline would not be the first oil industry line laid beneath Cook Inlet's tidally turbulent waters. It likely would eliminate the need for running tankers across the inlet. Environmental organizations such as Cook Inlet keeper favor a subsea pipeline over tankers.

The pipeline's 90,000-barrel capacity would be very large relative to current west Cook Inlet production, and certainly far above Cook Inlet Energy's current production, which averaged about 1,600 barrels a day in April.

But the company is aiming to greatly increase production from its Osprey offshore platform, where a new drilling rig is nearly ready to start working.

Likewise, Hilcorp is aiming to grow production, and Apache Corp. is aggressively exploring on the west side of Cook Inlet.

BRAZIL

Brazil's Petrobras Expects PdVSA to Remain Partner in $20.1 Bln Abreu e Lima Refinery

Brazil's government-run oil company Petroleo Brasileiro SA expects its Venezuelan peer Petroleos de Venezuela SA to remain as a partner in the construction of a huge refinery in northeastern Brazil, Petrobras Chief Executive Maria das Gracas Silva Foster said June 25.

Petroleos de Venezuela, or PdVSA, still needs to come up with the appropriate financial guarantees to be able to partner with Petrobras in construction of the Abreu e Lima refinery in Brazil's northeast Pernambuco state, Ms. Foster told reporters during a presentation on the company's latest five-year business plan.

"We're not thinking of another partner that isn't PdVSA," Ms. Foster said. Petrobras said that it "understands that PdVSA will resolve the problems it has and will be our partner."

The executive said that it was possible that Petrobras might consider bringing in other partners for its other refinery projects.

Meanwhile, the company acknowledged huge delays and cost overruns in construction of Abreu e Lima--to such an extent that it was held up by Ms. Foster as an example of the company's planning failures.

The refinery had originally been scheduled to start in November 2011, at a cost of $2.3 billion. The latest outlook puts start-up in November 2014, at a final cost of some $20.1 billion, according to the executive's presentation.

COSTA RICA

Costa Rica, China Agree to Seek Financing for $1.2 Bln Refinery

The President of the Republic of Costa Rica Laura Chinchilla and the Vice Premier of China Zhang Gaoli met June 15 to celebrate five years of bilateral relations. They also signed an agreement between the nations to seek funding for a joint oil refinery project.

Vice Minister of Foreign Affairs Carlos Roverssi told journalists in a news conference that the meeting served to reinforce the existing link between the two countries, and to assess the possibility of attracting more investment and cooperation from the Peoples Republic of China to Costa Rica.

Minister of Communication Francisco Chacon mentioned that President Laura Chinchilla vowed to strengthen ties with China and called attention to the establishment of diplomatic relations back in 2007, an event she referred to as one of the most important decisions in the diplomatic field in recent years.

The Chinese delegation of 20 members did not provide statements to the press. The group was led by Zhang Gaoli, who is a member of the Politburo of the Communist Party Central Committee in China.

As part of the visit, the Chinese delegation signed a memorandum of understanding between the state Costa Rican Oil Refinery (RECOPE in Spanish), the Chinese Development Bank (CDB) and the state petroleum entity of China to seek funding for a joint refinery.

The document was signed by the executive director of RECOPE, Jorge Rojas, the delegate of the CBD, Guo Lin, and the representative of the Chinas government refinery, Wu Yam.

The memorandum serves to reaffirm their commitment to the refinery construction project, which will be located in the province of Limon, on the Caribbean region of Costa Rica.

The project will cost about US$1.2 billion.

Both Costa Rica and China agreed to ask the CBD for financing between US$800 and US$900 million dollars, for which they will submit a series of technical and financial requirements in the coming months.

The remaining US$340 or US$440 million will be contributed equally by RECOPE and the Chinese state oil company.

According to RECOPE, the new refinery will save Costa Rica between US$200 and US$300 million in annual oil expenditures, and will expand the Moin refinery capacity in Moin.

VENEZUELA

China’s Wison Engineering Wins Puerto la Cruz Oil Refinery in Venezuela

Wison Engineering Ltd., China's largest private sector chemical engineering, procurement and construction (EPC) service provider has been officially awarded an EPC contract June 27 by PDVSA Petroleo, S.A., Venezuela's state-run oil company, at the Puerto la Cruz oil refinery. Hyundai Engineering & Construction Co. Ltd. and Hyundai Engineering Co,. Ltd. are jointly participating in the project as Consortium Hyundai-Wison. The total contract value amounts to approximately US$2.993 billion, which Wison Engineering will receive a share equivalent to approximately US$927.8 million.

Consortium Hyundai-Wison will carry out Engineering, Procurement, Construction and Start-up assistance of the Environmental Units, Auxiliary Units and Revamp of Atmospheric Distillation Units of the Deep Conversion Project, Puerto la Cruz Refinery, which is located about 250 kilometers east of the Venezuelan capital of Caracas. The project will upgrade refinery facilities to process heavy crude oil, with a capacity of 210,000 barrels / day. In addition, the contract calls for the expansion of gasoline, diesel and aviation kerosene projects and other facilities. The project is expected to be completed within 42 months from its commencement.

Mr. Dong Hua, Vice President of Wison Engineering said: "Venezuela has become one of the key important markets for Wison Engineering as the company focuses on its international business development. We are very proud to be recognized by PDVSA on our project management capabilities that we have accumulated over the years. In addition, we are very happy to partner with Hyundai in this project at the time we are developing the global market"

Internationally, Wison Engineering is exploring the possibility of expanding its business in Southeast Asia and the Middle East, and has conducted a number of feasibility studies to attract potential clients in these areas since 2008. With the increased and continuous market efforts through establishment of sales offices in Saudi Arabia, Singapore and Indonesia, Wison Engineering is speeding up its process of acquiring new international and foreign related projects, including two projects for SABIC (a steel plant debottlenecking project in Saudi Jubail and a Benzene project in Yanbu), BASF Chongqing MDI integration project.

ASIA

CHINA

China's Lu'an Group Start’s Construction of Coal-based Synthetic Oil Facility

China's Lu'an Group said June 26 that construction work has started on its pioneering 5 million tonne/year coal-based synthetic oil production facility in Changzhi City, northern Shanxi Province.

The facility, the Shanxi Lu'an Coal-based Synthetic Oil Demonstration Factory, has reached a production capacity of 2 million tonne/year of synthetic oil, the company said.

Lu'an Group's core technology was developed independently by the Shanxi Research Institute of Coal Chemistry under the Chinese Academy of Sciences, the China Petroleum and Chemical Industry Association said.

The facility has incorporated coal bed methane reforming, which can reduce carbon dioxide emissions by nearly 2 million tonnes/year. The plant facility also contains a water treatment facility to ensure that water treatment reuse can achieve zero discharge of wastewater.

Synthetic oil is a lubricant consisting of chemical compounds that are artificially made (synthesized). Synthetic lubricants can be manufactured using chemically modified petroleum components rather than whole crude oil, but can also be synthesized from other raw materials. Synthetic oil is used as a substitute for lubricant refined from petroleum when operating in extremes of temperature, because, in general, it provides superior mechanical and chemical properties than those found in traditional mineral oils.

INDIA

India's Rajasthan State Still Pushing for Refinery Project

India’s Rajasthan wants an oil refinery even though it is landlocked and even though it would require special concessions from the Centre and states to make such a project financially viable. Chief minister Ashok Gehlot has been pushing for it, and with the blessings of the Prime Minister's Office, the state is finally set to get a 9-million-tonnes per annum refinery project.

The R20,000-crore plus refinery, originally conceived in 2004-05, will come up with joint participation of state-owned Hindustan Petroleum Corporation Ltd (HPCL) and Oil and Natural Gas Corporation (ONGC).

The exact equity participation is yet to be finalized, but a senior government official told HT that HPCL may pick up a 51% equity stake, ONGC 26% and Engineers India Ltd 5%, with the balance stock to be held by the state government.

"ONGC has informed the state government that its discussions over equity participation with HPCL are at final stage. ONGC intends to take 26% and HPCL 51%," he said.

A Rajasthan government official said "The state has already started the process of land acquisition of about 5,719 bigha (926 hectares) for the refinery."

Gehlot has already sought special exemptions from the finance ministry for the refinery, including exemption of the 50% excise duty for 5 years.

ONGC chairman and managing director Sudhir Vasudeva confirmed that discussions were on, repeated attempts and mails to HPCL's chairman and managing director S Roy Choudhury did not elicit any response.

Rajasthan has huge reserves of crude oil and natural gas, and produces about 175,000 barrels of crude per day from Mangla & Bhagyam fields of Cairn India.

Sources said it still remains to be seen if the project will see the light of day, or it is being pushed to woo voters ahead of state elections in 2013. "An announcement on paper is very different from the project coming up," a former petroleum secretary said.

Essar Oil Expands Vadinar Refining Capacity by 11 Percent to 400,000 Bpd

Essar Oil LtdOn June 5 said it has raised the capacity of its lone refinery, at Vadinar in the western Indian state of Gujarat, by 11percent to 400,000 barrels a day.

The Mumbai-based company said the expanded capacity will allow it to process heavier crude, which will help it improve refining margins.

Essar Oil said the share of heavy and ultra-heavy crude in the total crude it processes will go up to 80%.

The company already has long-term crude-sourcing contracts with global suppliers, including several companies in Latin America.

The unit of London-listed Essar Energy PLC said it is targeting markets like Australia, New Zealand and north-west Europe, in addition to countries in the Indian subcontinent, to export fuel products.

ONGC Refutes Claims about Moving Proposed Barmer Refinery

ONGC has refuted claims that it is trying to take the proposed Barmer Refinery out of Rajasthan in order to establish a refinery either in Gujarat or Punjab.

The claim was reportedly made by Om Prakash Kedawat, a representative of Samata Party, who alleged that following the discovery of huge stock of oil in Barmer ONGC had no plans to establish a refinery there and was instead transporting the crude to other states through pipelines. This, he claimed, was causing a loss to Rajasthan.

Responding to this allegation, ONGC stated that it did not have plans to set up a greenfield refinery in Gujarat or Punjab. However, the oil and gas major has examined the viability of setting up a refinery near Barmer and is holding talks with the Rajasthan government and the central government on the outcome of the feasibility report.

Further, pending viability and investment decision on setting up of the refinery at Barmer, transportation of crude oil was being done by Cairn Energy through a pipeline from Barmer to Salaya, the nearest port. This was to ensure production of crude oil from Rajasthan block. The state government was also benefiting from the production through royalty accruing to it.

The pipeline for transportation of crude oil was laid only after the approval of the Ministry of Petroleum and Natural Gas, to facilitate its utilization by existing refineries across the coast. Thus, the observation that it was transporting crude oil out of Barmer was erroneous, ONGC said.

ONGC and Cairn Energy are partners in the Production Sharing Contract of the pre-NELP block, RJ-ON-90/1, in Rajasthan. Cairn Energy is the operator of the block holding 70 per cent equity while ONGC has a minority holding of 30 per cent equity.

In view of the special characteristics of the oil, ONGC and Cairn Energy had, in June 2005, asked the petroleum ministry to explore the feasibility of setting up a wellhead refinery to process crude locally. Subsequently, ONGC carried out a feasibility study for a 7.5-million tpa capacity refinery at Barmer.

The issue of reexamining the viability of the refinery cropped up in August 2009 when the Prime Minister inaugurated commercial production of crude oil from the Rajasthan block.

As a follow-up, the Rajasthan government constituted the Tripathi Committee which gave its recommendations in April 2010. In line with its recommendations, ONGC once again examined the detailed feasibility of a 4.5-million tpa refinery, through Engineers India Ltd in 2010 and a subsequent financial appraisal by merchant banker SBI Caps in 2011. As per the financial analysis of the merchant banker, the project was not viable on a standalone basis and required an interest-free loan of approximately Rs 1,100 crore per annum for 15 years.

The Rajasthan government has conveyed its in-principle approval for 26 per cent equity stake in the project and to provide requisite fiscal incentives to ensure techno-commercial viability. It has, however, insisted that ONGC take majority stake and be the main promoter of the refinery. As a result, ONGC informed the petroleum ministry the need for roping in an existing PSU oil marketing company as lead partner in implementing the project.

Concurrently, ONGC has initiated discussions with HPCL which is considering the proposal favorably and has taken up the matter with the Ministry of Petroleum and Natural Gas. The decision on investment will be taken only after the outcome of the talks is clear.

PAKISTAN

Pakistan to Build 40,000 bpd Refinery in Khyber-Pakhtunkhwa

Pakistan State Oil's (PSO) two-year old plan to enter the refining business has made some headway as Khyber-Pakhtunkhwa (K-P) has agreed to allot 400 acres of land to set up a refinery.

In May 2010, the country's largest oil marketing company PSO announced plans to buy a 30% stake in Pakistan Refinery Limited (PRL) and increase its share to 48% but the deal did not go through. PSO termed 'prevailing dynamics' as the reason for the fallout, however, sources claim that some lobbies intervened to stop PSO from creating a monopoly in oil supply.

The proposed PSO refinery will produce 40,000 barrels per day, only 7,000 barrels less than Pakistan Refinery Limited.

A senior official said that a meeting was held in the petroleum ministry on June 13 between PSO and K-P officials.

"Now K-P will identify a site for the refinery," said a senior government official adding that the oil refinery will process crude oil being produced in K-P.

The province's production of oil and gas is increasing and experts forecast the supply to grow with every passing day.

Pak-Arab Refinery Company is the largest player in the refinery business while the other main companies are Pakistan Refinery, National Refinery, Attock Refinery and Byco.

"PSO has decided to set up refinery to reduce dependence on oil imports and supplies from local refineries," official said adding that PSO is currently finding it hard to get oil supplies from local refineries through Letters of Credit (L/C). A letter of credit is issued from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount.

As on June 13, PSO's total receivables stand at Rs217.45 billion and payables at Rs182.89 billion, showing the intensity of the circular debt.

"PSO has been bound to get oil supply from oil refineries through L/C but the power sector is not ready and the entire plan is in jeopardy," the official said adding that now oil refineries were demanding payments in advance.

Of the total receivables, Rs55.5 billion is due from Wapda, Rs103.21 billion from Hubco, Rs30.19 billion from Kapco, Rs2.93 billion from PIA, Rs396 million from OGDC, Rs7.15 billion from KESC, Rs1.33 billion from Pakistan Railways, Rs551 million from NLC, Rs1.38 billion price differential claims (PDCs) on High Speed Diesel, and Rs1.35 billion PDC on imported petrol.

From the total receivables, PSO has to pay Rs31.42 billion to Pak-Arab Refinery Company, Rs16.02 billion to PRL, Rs8.81 billion to NRL, Rs31.38 billion to ARL and Rs2.63 billion to Byco.

"The establishment of the refinery will also help provide cheap petrol and diesel to consumers of the province due to reduction in inland freight equalization margins (IFEM)," an official said.

EUROPE / AFRICA / MIDDLE EAST

ITALY

Italy's Current Refinery Overcapacity is Twenty to Twenty-five Percent

Italy's refinery capacity is currently between 20% and 25% more than is needed as demand remains weak, said the head of the country's oil association, Unione Petrolifera, June 18.

"Today's situation is much worse [than the past]" as consumption stagnates and "forecasts aren't encouraging," said Pasquale De Vita, chairman of the association, at the shareholders' annual meeting in Rome.

"There's the risk that the crisis in the sector may lead to the closure of some refineries but that doesn't include us," said Chief Executive Massimo Moratti of Saras SpA (SRS.MI).

Italy's service station network needs to shut about 33% of the pumps to reduce them to between 15,000 and 18,000, and to make it "adequate" for the country's needs and lower prices for drivers thanks to efficiencies, Mr. De Vita also said.

SERBIA

U.S.-Dutch Consortium Comico Will Still Build Serbia Refinery

U.S.-Dutch consortium Comico Oil has informed the authorities of Serbia's Smederevo it is not giving up its plans to build an oil refinery in the city, the company's deputy head, Radomir Radivojevic, was quoted as saying by the news agency Beta.

In April, Comico Oil and Smederevo signed a 99-year land lease agreement for the refinery construction and under the deal the investor is due to make a RSD 652mn (EUR 5.7mn) lease payment on the 113 hectares of land until June 26. Yet, earlier Comico Oil notified the city authorities by email it will make the payment with a several-day delay. As Beta reported earlier, Smederevo mayor Predrag Umicevic explained that London-based law firm CMS, which represents Comico Oil, has put several remarks on the contract approved by the city assembly and signed earlier this year.

In particular, CMS does not agree with the texts concerning the number of workers who will be engaged in the refinery construction and who will be later on employed by the Smederevo-based company. That is why the banks that will finance the project are not able to transfer the lease payment to the Smederevo government. Umicevic has said Comico Oil would need some more time to settle the issue with the creditors.

According to Comico Oil's Radivojevic it is much more complicated to receive a payment approval nowadays than it was in 2007 and earlier. He added that the 60-day period granted to Comico might not be long enough but that the company's financials remain solid, as well as its intention to invest. Radivojevic expects construction works on the project could start in mid-September. Under the deal signed in April, the refinery should create 550 jobs.

Comico Oil representative Brian Murray said last year the construction of the refinery would cost between USD 250mn and USD 400mn. Its planned crude oil refining capacity is estimated at 100,000 barrels. The plant was designed to produce unleaded petrol, Eurodiesel, TNG and aviation fuel mainly for export.

There are two oil refineries in Serbia, both operating as part of domestic oil company NIS, controlled by Russian Gazprom Neft.

UNITED KINGDOM

UK’s Coryton Refinery to Become Import and Distribution Terminal

Royal Vopak, Greenergy, and Shell UK Limited reached agreement June 26 with the joint administrators of Petroplus Refining & Marketing Limited, to purchase assets of the former Coryton refinery. The three companies plan to develop and invest in a state-of-the-art import and distribution terminal to be managed by Vopak. The initial storage capacity will be around 500,000 cubic meters (cbm), with potential to expand to up to 1 million cbm in later stages.

Vopak, Greenergy and Shell will be equal shareholders of the new joint venture, which will acquire and develop the assets and the site. After reaching final agreement on the future design and operational capabilities, Vopak, on behalf of the joint venture, will execute the development of this new facility and will operate the terminal when the works have been completed. Greenergy and Shell will sign long-term contracts with the joint venture. The deep water import terminal will play an important role in ensuring a secure supply of oil products to the UK, enabling large import volumes.

The investment will be used to convert components of the current refinery infrastructure for use as a class-leading import terminal and this will involve operational, technical, safety and environmental enhancements to the current infrastructure, including modern blending technology.

Eelco Hoekstra, Chairman of the Executive Board of Vopak: "Following the developments in the refining industry in the current market, we look forward to teaming up with our partners Greenergy and Shell and developing this facility into a state-of-the-art import and distribution terminal at this strategic location, ensuring safe and efficient operations for the UK market."

Andrew Owens, Greenergy Chief Executive: "This investment will create the UK's first deep water fuel import terminal, making it possible to bring in diesel economically from the most modern refineries anywhere in the world. With diesel sales continuing to grow ahead of petrol sales in the UK, this is a vital development to ensure a low cost and reliable fuel supply for the British motorist in the years ahead."

Graham van 't Hoff, Chairman, Shell UK: "This move will provide a long term, secure supply for our customers in the UK and will support the recent expansion of our retail network, delivering competitive supply chain costs."

EGYPT

Investors in Egypt Refinery Get $3.7 Bln Financing

Investors in an Egyptian petroleum refinery project, led by Citadel Capital and Qatar Petroleum, have secured $3.7B in financing for the facility, the project operator has said. The financing, put together by private equity firm Citadel, includes a $1.1B equity investment and is backed by a $2.6B debt package, Egypt Refining Company (ERC) said in a statement.

Project partners include the Egyptian government. The ERC project is to produce more than 4.1 million tonnes of refined products and oil derivatives annually, including more than 2.3 million tonnes of Euro V diesel per year. This is expected to cut Egyptian diesel imports by up to 50 percent.The ERC said the refinery, on the outskirts of Cairo, will contribute $300m in direct benefits to the state and create jobs.

It is set to start operating in 2016." (The project) will reduce present-day diesel import needs by 50 percent, improve air quality in the Greater Cairo Area (and) help reduce Egypt's annual subsidy bill," ERC said. A series of attacks on the natural gas pipeline that runs from Egypt to Israel has cut off supplies to the region and have forced Egypt to seek more fuel from abroad to meet rising demand from power generation and fuel needs for heavy vehicles.

Egypt's military rulers have sought to hike diesel imports as fuel shortages in central Cairo this year have caused long queues at petrol stations and traffic jams in some main thoroughfares, angering the public. In its latest tender, Egyptian General Petroleum Corp (EGPC) was seeking to buy more than 1 million tonnes of gasoil, or diesel, from July to September, worth around $1bn - almost as much as it sought in the preceding six months. Under the financing package for the refinery, EGPC has invested $270m for a 23.8 percent interest in the project while Qatar Petroleum International committed over $362m for a 27.9 percent stake, the statement said.

Citadel has directly and indirectly invested over $155MM and holds an equity stake of 11.7 percent. Other participants include Gulf Arab investor, the World Bank's financing arm, the Netherlands' development bank FMO, Germany's private-sector lender DEG and European Investment Fund's InfraMed Fund. EFG Hermes Investment Bank acted as placement manager for the equity component.

The financing is backed by a $2.6B debt package arranged by ERC's financial advisor, French bank Societe Generale and made up of senior and subordinated debt issued to Asian and African development agencies and banks.

SOUTH AFRICA

South Africa at Crossroads as Refiners Face Investment Decisions

South Africa's refining industry is at a crossroads, given the prospect of tighter fuel specifications and the subsequent need for stay-in-business investment. With some of the current players in the market saddled with ageing plants in less than ideal locations and the threat of a large new refinery project looming on the horizon, difficult decisions will have to be made in the years ahead.

A draft document on the Department of Energy’s website dated March 2011 recommends the adoption of fuel standards equivalent to Euro V for both

petrol and diesel by 2017 and estimates that the extensive refinery modifications required would take four to six years and cost some US$3.7 billion, according to estimates from a consultant hired by the South Africa Petroleum Industry Association (Sapia). Under the proposed timetable, “an additional niche grade of petrol and diesel with sulfur concentrations of 10ppm should be made available” in 2013 in the form of fuel imports, with the goal of gradually increasing volume growth up to 2017.

In 2015, the program calls for 50ppm diesel to become the standard grade and all refineries to be mandated to produce 10ppm sulfur fuels by 2017, although the Department of Energy notes that it would be preferable for at least one refinery to be able to produce Euro V fuels prior to 2017. The refining industry is being consulted about the proposals.

“If you look at Chevref, the Cape Town refinery, our point of view is that it will not go anywhere to make it short and the introduction of this [new] specification will just kill the refinery,” says an analyst with knowledge of the market.

The analyst says that Chevref, owned by Chevron, and Enref, a refinery in Durban run by Engen, a Petronas subsidiary, are at risk due to the fact that both are located in dense urban areas and have been experiencing accidents. He notes that when both were first built, they were out of town, but urban sprawl has led to people settling around them.

“Do you want to upgrade those refineries that are badly located? I'm not sure,” he says.

As far as Enref is concerned, its owner Engen, a subsidiary of Petronas, has “unequivocally” pledged to stand by its commitment to the refinery.

“Our shareholders have also given their assurance that they are committed to the Engen refinery. The business as usual and to operate efficiently has always been our first option. The company continually operates to and ensures that it meets regulatory requirements including health, safety and the environment considerations. We also strive to achieve best practices within the industry,” says managing director and chief executive, Nizam Salleh, in a statement dated November 2011.

“We have reviewed and enhanced our plant safeguarding system, the safe work system and preventative maintenance management system, as well as our critical equipment reliability strategy. We are also increasing our investment considerably in closing technical capability gaps,” he adds.

"Once the South African Government’s financial incentive to the oil companies for the significant capital investment required in respect of the shift to Euro V fuel standards has been finalized, the Engen Board will make a final investment decision in this regard," A Engen representative told GTForum.

Government enthusiasm for biofuels may also create headaches for the industry. In late 2007, a 2% biofuels penetration level was put forward, down from an initially proposed target of 4.5%. In addition, the New Growth Path put forward by the South African government calls for job creation through the production of biofuels, as part of a wider scheme aimed at creating “300,000 additional direct jobs by 2020 to green the economy”.

Another key issue for the market is the proposed 400,000bpd Mthombo refining project in Coega, which is being championed by PetroSA and will have significant implications should it come to fruition. It will process heavy, sour crudes, with deep conversion capacity and will produce Euro V fuels, with a white product yield of over 90% on a volumetric basis. It will produce its own electricity using petcoke from the refining process as a fuel. The refinery is being designed to maximize diesel production, while retaining the ability to swing towards petrol production in response to seasonal and market changes. Completion is expected for 2015, according to Purvin & Gertz in a June 2011 report for the UK’s Department of Energy and Climate Change.

Part of the rationale for the project comes from the expectation that South Africa will have to import 180,000bpd of gasoline and diesel by 2020, without significant additional investment in refining capacity. The analyst interviewed by GTForum says there is some opposition from domestic refiners to the project and he believes this is mainly motivated by concerns over the impact of a large deep conversion, state-of-the art refinery on refining margins in South Africa.

"What is good for this project is that there is a market for refinery – South Africa and its hinterland. With its deep conversion and economies of scale, it will be competitive and therefore profitable. The real question is: does South Africa want to spend billions of dollars on a project that will not create a lot of employment?" the analyst says.

He also makes the point that while refining margins are low today, oil refining is a cyclical business and that when the Coega project comes onstream, which in his view will be around 2018–2020, "we might actually be in a situation of under-capacity where the refining margin would be very high".

"The question is one of timing. If Project Mthombo is streamed post 2020 then no impact is expected on the Engen refinery economics," says an Engen company spokesman.

South Africa’s refining industry may soon have to reassess its current reliance on Iranian crude in light of recent political developments. In 2010, Iran was South Africa’s largest single source of crude, with imports of 5.53Mt or 28.7% of total imports (South African Revenue Service/Sapia). According to a Sapia representative, not all of Sapia’s members are importing Iranian crude oil and “as an industry we are closely monitoring the situation”.

A Engen representative gave the following statement to GTForum: "Enref does run Iranian crude, as well as a variety of PG crude supplemented with West African crude. Being an integrated oil company which requires reliability along our value chain, we are assessing the impact arising from the tightening of US and EU sanctions against Iran to our business continuity and sustainability. Thus, any business decision vis-à-vis latest development on Iran sanction shall be made on commercial grounds aimed at minimizing any potential business disruption, in our endeavor to ensure supply security and safeguard the best interests of our stakeholders."

“Lately, South Africa has been struggling to satisfy her local demand, implying that there may be no excess product to meet the export market,” says a report by the Energy Regulation Board of Zambia, published in January 2012.

The country has also recently been grappling with shortages of petrol and diesel, with Sapia noting an improvement in February (PetroWorld). While the supply of LPG has been good so far this year, according to a representative from gas company Afrox, there were acute shortages of LPG in retail outlets across the country due to unplanned maintenance shutdowns at refineries in the second half of 2011.

“The LPG and bitumen shortages were caused by a combination of planned and unplanned shutdowns at the PetroSA, Sapref and Enref refineries,” says a Sapia press release dated October 2011. While the Sapref closure was planned, the refinery experienced a start-up delay. A fire at the Engen refinery prompted it to fast-track its shutdown. PetroSA experienced an unplanned shutdown, caused by an “electricity issue”

South African LPG consumer demand typically peaks in the winter months (June–August), depending on the weather, making that time particularly sensitive to supply issues.

The LPG shortage has resulted in some long-term consequences for South African utility Eskom, which had been trying to encourage households to switch to LPG as a cooking fuel instead of using electric ovens, as part of a wider strategy to reduce the country’s electricity consumption until new capacity can be brought online. “One of our requirements is that we can actually guarantee the supply of LPG and that we have some confidence about the levels of the pricing. Obviously the pricing is now regulated and that problem has gone away, but the availability of supply is still a concern. We can’t promote anything in the LPG space until we’re confident that the supply is secure and is always available,” says John Thorby, Demand Response, Eskom.

In November, Sapia noted that the shortage had been made more intense by “long import lead-times and limited import facilities”. The association’s executive director Avhapfani Tshifularo, said in a press release: “There is an urgent need to address the pricing of LPG at the import terminals and refinery gates to encourage LPG production at local refineries. For example, the current discount of 74 rand per tonne is not based on operational reality and therefore makes the product of LPG unfeasible… We wish to appeal to government to urgently address issues regarding the current regulations relating to LPG pricing. Pricing LPG at a level that encourages local production and importation would certainly stimulate the supply of LPG.”

Bitumen supplies have recently been under pressure due to problems experienced by Engen’s PDA unit, according to one of the company’s customers, and a planned shutdown of the Chevref refinery, which is expected to resume production on April 2. This has forced Much Asphalt, one of the country’s largest suppliers of asphalt, to import two cargoes as of March 15. Engen confirms that it has had trouble with its PDA unit, but has told GTForum that it is now back online.

An audit of the country’s refineries and their capacities is currently being carried out by the government, along with a 20-year Liquid Fuels Roadmap, which is expected to be concluded in June. “If [the government] do [the audit], hopefully they will understand that the skills loss and the lack of investment in the refineries to upgrade them and keep them up to scratch has been the cause of a whole load of problems, shortages of fuel [and] shortages of bitumen,” says John Onraët, marketing director of Much Asphalt.

At present, South Africa is home to four refineries, one CTL plant and a GTL plant with a combined capacity of 708,000bpd

Capacity of South African refineries (2010, bpd). Source: Sapia 2010 annual report.

Sapref	180,000
Enref	120,000
Chevref	100,000
Natref	108,000
Sasol	150,000
PetroSA	45,000

The Enref refinery recorded a utilisation rate of 60.0% and reliability of 94.1% in 2011, “…mainly due to a plant showdown”, compared with the 68.0% and 95.6%, respectively, seen in 2010. The shutdown was part of a safety programme intended to “ensure plant integrity and safe operations”. Total throughput in 2011 was 26.8mbbl down from the 34.1mbbl recorded for 2010. The Petronas Risk Based Inspection (PRBI), a tool to manage asset integrity “through an effective and optimised inspection programme”, was introduced at the refinery in 2010.

Sapref, in Durban, is a joint venture between Shell and BP. In 2010, it processed 7.54Mt of crude, and its product slate consisted of 40% diesel and jet fuel, 25% gasoline and 28% marine fuel oil and specialties.

Chevref, in Cape Town, has a capacity of 100,000bpd. Chevron South Africa also has an interest in a lubricants manufacturing plant sited in Durban, which includes a laboratory and blending plant. A network of around 200 retail outlets in South Africa supports the refinery.

The Natref refinery, situated in Sasolburg, is jointly owned by Sasol and Total, with Sasol holding a controlling 63.64% stake. It received investment of around 600 million rand to allow it to produce 500ppm diesel to meet tighter fuel specifications introduced in January 2006. According to Total, it is equipped with an FCC unit, a distillate hydrocracker and a black oil hydrocracker.

PetroSA’s 45,000bpd GTL plant at Mossel Bay began operations in 2004, but experienced “initial teething problems in obtaining separation between the catalyst and wax product which required extensive plant modifications to solve”. The plant achieved the criteria for proof of concept in July 2006 and further modifications were carried out between October 2006 and July 2007. It is currently operating on a commercial basis, while seeking to optimise the catalyst-wax separation process and testing catalyst performance under commercial operating conditions. For the year ended March 31, 2011, the facility recorded an output of 6.054mbbl, 5.8% under target.

Sasol’s Synfuels division operates a CTL plant at Secunda and is looking to expand the plant’s capacity by 3%. The IEA puts the plant’s capacity at 160,000bpd in its World Energy Outlook 2011. Sasol has proposed the construction of an 80,000bpd Mafutha CTL project, which is currently at a pre-feasibility stage. The IEA predicts that coal use for CTL in South Africa will grow to around 35Mt of coal equivalent in 2035, up 40% from current levels.

Sharp rises in electricity tariffs are lowering the competitiveness of South Africa’s industry. Electricity shortages became an issue for domestic and industrial consumers in 2007 and electricity tariffs have been rising sharply, to encourage investment in new generating capacity. On March 9, NERSA, the country’s industry regulator, announced that it has approved electricity tariff increases averaging 16% for April, down from the 25.9% originally proposed.

The National Association of Automobile Manufacturers of South Africa (NAAMSA), has reported that domestic new vehicle sales grew by 16% in 2011. In an email dated February 22, it said that “for 2012, domestic sales will probably continue to show growth, but at a more subdued rate”, while predicting growth of 7.5%. The association expects its members to increase their capital spending by 28.3% in 2012 YoY.

The IEA reports that South Africa relied on oil and oil products for 12.8% of its primary energy supply in 2008, compared with 71.1% for coal and peat. Business Monitor International notes that synthetic oil production provides the country with 200,000bpd of hydrocarbon output and has predicted it could grow to almost 300,000bpd by 2021, aided by an estimated 13.7 trillion cubic meters of shale gas resources.

In comparison, the country produced slightly below 18,000bpd of conventional crude in 2011, and BMI predicts this will drop to 16,000bpd by 2021. At the same time, crude consumption is projected to rise from an estimated 538,000bpd in 2011 to 600,000bpd by 2021. In 2011, the country imported over 5 billion liters of diesel and petrol, according to Dipuo Peters, South Africa’s Minister of Energy. During a speech, she noted: “Inadequate infrastructure remains a major constraint for the efficient and economical transport of refined products to the markets.”

UGANDA

Uganda Moves Ahead with Refinery Plans

The Uganda government is pushing ahead with plans for an oil refinery despite warnings that it could be counterproductive if neighboring Kenya makes commercially viable oil finds.

Honey Malinga, the assistant commissioner Geophysics in the Petroleum Exploration and Production department at the Ministry of Energy and Mineral Development, says building a refinery is proceeding because the decision to have it in Uganda reached after discussions between the heads of state of East Africa.

The viability of building an oil refinery in Uganda, which was agreed before Tullow Oil farmed down part of its concession to Chinese oil giant, CNOOC and Total, has come into question since Kenya reported hitting oil early this year. Kenya, which already has a refinery and a sea route for evacuation of export oil products, is considered by some experts to be better positioned. It has also been argued that East Africa is a small market and can only support a few refineries.

"The issue of the refinery didn't come up yesterday; it has been around for some time. The heads of state of the EAC in 2007 agreed that in order to have security of supply, a study should be carried out. It was done by the EAC and it found out that we should have more refineries in the region," Malinga says.

"Against that background, Uganda did a feasibility study. So it doesn't matter whether we have two or more refineries in the region provided they are here to help us," he adds.

The region's total demand for oil is estimated at 164,000 barrels per day but it already has a 70,000 barrel refinery at Mombasa that is also operating at half capacity and can easily be upgraded.

Another official, Irene Batebe, the Petroleum Officer-Refining at Uganda's Ministry of Energy and Mineral development said studies for setting up of a refinery in Uganda that were done in 2010 had shown it was viable to construct a refinery in Uganda. The study concluded that the region has a low refining capacity in the region.

She said the Uganda refinery is to be developed under a Public Private Partnership and that 29 square kilometers of land had been earmarked for the refinery. "The study recommended a phased approach to setting up of the refinery and a small one capable of producing 20,000 barrels per day would be set up first at a cost of US$600 million. Later one capable of producing 60,000 barrels per day would be set up at a cost of US$2 billion," she said.

The push for an oil refinery to meet local demand for oil products it partly based on projected opportunities from oil related industries, and infrastructure projects at the refinery.

According to the feasibility study conducted in 2010 by Foster Wheeler, a UK firm, the proposed refinery will produce diesel, kerosene and oil for electric power generation among others.

A survey by the Uganda Investment Authority (UIA) in 2010 on constraints and Opportunities in Hoima, Masindi and Buliisa classified opportunities like infield services, inspections, international freight services, civil, electrical and mechanical engineering, environmental services, in field transport and specialist trades and indirect services such as construction of infrastructure like airfields, human resource, custom clearance, training, hotel/accommodation, emergency services, information and communication technology services, medical services, security, crane hire among others.

According to Rebecca Nalumu, who was the Principal Researcher of the survey, the project will attract investors to the areas of Buliisa, Hoima, Masindi and Uganda at large the opportunities were classified into specialized, direct and indirect.

"There is likely to be a boom in real estate business, hotels and Tourism among others" she told The Independent.

"We highlighted this to the locals and the country to embrace this development because it is going to be a marketing tool for their (locals) agricultural products, employment, trade, tourism and development of infrastructure."

The survey indicated that since Uganda is in exploration stage, more opportunities are yet to come and Uganda should develop a long term plan targeting support and capacity building for optimal participation in the sector.

The communities in the oil region currently survive on subsistence farming, fishing, and pastoralism.

Development of the refinery will, however, displace over 30,000 people in the nine villages of Nyahaira, Kyapoloni, Bukona, Kabaketo, Nyamasoga, Rugashare, Katooke, Kijumba, Kitegwa and part of Kaayera in Hoima district.

The Ministry of Energy and Mineral Development has earmarked Shs 5 billion for their compensation.

RUSSIA

Russia’s Antipinsky Refinery Selected by Haldor Topsoe to Deploy UOP Hydrogen Purification Technology

UOP LLC, a Honeywell company, announced June 5 that it has been selected by Haldor Topsoe to provide technology to purify hydrogen from a steam reforming unit to be installed at the Antipinsky Refinery in Tyumen, Russia.

Honeywell's UOP Polybed PSA (Pressure Swing Adsorption) System will recover and purify hydrogen to help the refinery meet the increasing need for clean transportation fuels such as diesel and gasoline.

"UOP's hydrogen purification technology will allow the Antipinksy Refinery to meet today's challenge of producing cleaner fuels more efficiently," said Rebecca Liebert, vice president and general manager for gas processing and hydrogen at Honeywell's UOP.

"The impressive hydrogen recovery rates and proven reliability of our solution will help the refinery improve its profitability and ensure dependable operation."

The new hydrogen unit, which is scheduled to start-up in 2013, is part of the refinery's plan to increase its capacity of crude oil processing by as much as 7 million tons per year. It will also enable the production of fuel products that meet the European Union's Euro-5 emission standards aimed at reducing emissions from light duty vehicles.

Refineries use hydrogen in the hydrocracking process to convert heavy oils to lighter, higher-value products such as transportation fuels. Hydrogen is also used in the hydrotreating process to remove contaminants and improve the quality of end products.

To date, Honeywell's UOP has provided more than 900 Polybed PSA Systems worldwide, including more than 390 units to purify hydrogen from steam reformers, such as at the Antipinsky Refinery. Honeywell's UOP has provided Polybed PSA Systems for many Haldor Topsoe hydrogen plants around the world.

The Polybed PSA System is a skid-mounted, modular unit that comes complete with vessels, valve skid, adsorbents, control systems and embedded process technology. The process uses proprietary UOP adsorbents to adsorb impurities at high pressure from hydrogen-containing waste streams and subsequently reject them at low pressure. The system allows hydrogen to be recovered and upgraded to more than 99.9 percent purity to meet downstream processing requirements.

In addition to recovering and purifying hydrogen from steam reformers, Polybed PSA Systems can be used to produce hydrogen from other sources, including refinery off-gases, ethylene off-gas, methanol off-gas and partial oxidation/syngas.

Installation of Safety System for Isomerization Unit at Saratov Refinery

Saratov Oil Refinery (a part of TNK-BP Group) has started the installation of a smoke-free combustion flaring system (SCFS) - a key element of the environmental and industrial safety system at the new isomerization unit, which will be commissioned this autumn.

SCFS is designed to ensure smoke-free flaring of gases generated by the isomerization unit during the start of process equipment, its shutdown and preparation for scheduled maintenance.

The start-up of the new isomerization unit will enable Saratov Refinery to significantly increase the production of high-quality gasolines with improved consumer and environmental characteristics of Euro-4 and Euro-5 standards. Vyacheslav Kurenkov, Vice President HSE Downstream, noted that “TNK-BP is carrying out a phased upgrading of the existing process facilities and construction of new process facilities in compliance with the current requirements and best practices of industrial and environmental safety. The Company’s strategic objective is to ensure continuous improvement of the efficiency of existing industrial safety systems at refineries”.

BAHRAIN

GE Delivers Advanced Water Treatment Technology to Bapco Refinery

The Bahrain Petroleum Company B.S.C. (BAPCO) has chosen GE to design and supply a membrane bioreactor (MBR) system for its oil refinery wastewater treatment plant in Sitra, near Manama. The project and the GE-supplied advanced water treatment technology will support BAPCO’s environmental leadership efforts to achieve the stringent wastewater quality levels specified by Bahrain’s General Directorate of Environment and Wildlife Protection regulation for wastewater discharge into the Gulf.

“BAPCO is committed to managing its precious water resources wisely,” said Mr. A. Jabbar A. Karim, acting general manager, major engineering projects division, BAPCO. “With this project, GE is supporting us to realize our goals of minimizing the environmental impact from our refining operations, while safeguarding the refinery’s capital equipment at the same time.”

Wastewater from refineries is complex and requires extensive treatment. The BAPCO refinery, one of the largest in the Middle East and the oldest in the Gulf Cooperation Council union, refines more than 250,000 barrels of crude daily. GE’s ZeeWeed* technology will handle a maximum wastewater flow of about 24 million liters/day, roughly the amount of water required to fill an Olympic-sized swimming pool, from the refinery and Sitra tank farm.

“The BAPCO wastewater treatment plant is another example in GE’s long history of supporting customers in Bahrain with innovative energy technology—in this case, advanced water solutions—to meet their toughest operational challenges,“ said Joseph Anis, president and CEO, GE Energy for the Middle East.

At the heart of the system is GE’s ZeeWeed MBR technology. GE ZeeWeed technology sets the standard for hollow-fiber ultrafiltration technology combined with biological treatment, which is the preferred way to handle complex wastewater because it produces consistently high-quality effluent suitable for discharge or reuse application. GE will supply a ZeeWeed MBR system consisting of four MBR trains, each with 10 membrane cassettes containing ZeeWeed 500 rugged, reinforced membrane modules. It is being supplied under contract with EPC contractor GS Engineering & Construction and is expected to be operational in the fourth quarter of 2012.

GE also will design the MBR system and provide support during its first five years of operation. GE’s water and process technologies business also has supplied water-treatment chemicals for the BAPCO refinery.

The Middle East is an important region for GE’s water business, and the company has regional centers of excellence in Dubai, United Arab Emirates, and in Dammam, Saudi Arabia, for both research and manufacturing. GE and Miahona signed a memorandum of understanding, which provides a framework for promoting the use of advanced membrane technology such as membrane bioreactors in water reuse and the pursuit of wastewater treatment, wastewater reuse and zero liquid discharge projects in the Kingdom of Saudi Arabia.

KUWAIT

Kuwait’s KNPC Launches June Tender for $14.5 Bln Al-Zour Refinery

Kuwait National Petroleum Company (KNPC) will launch a tender next month to build a long-delayed refinery at Al-Zour with a capacity of 615,000 barrels per day (bpd), a senior executive at KNPC said.

"All the contracts might be awarded by early next year and we're hoping for completion in 2017," Jamal Al-Loughani, deputy managing director of marketing at KNPC, told the MPGC conference organized by Conference Connection in Bahrain. KNPC operates OPEC member Kuwait's three existing refineries, which together have a capacity of 930,000 bpd.

Investment in the Al-Zour refinery, estimated to cost around $14.5 billion, has been delayed for years due to political wrangling. Loughani also said he expected Kuwait to import 40-45 cargoes of liquefied natural gas (LNG) by October 2012, more than it did during the peak summer period from March to October last year.

The Gulf Arab oil exporter needs to import gas for power generation to meet air conditioning demand in hot summer months. Loughani said he expected Kuwait to take delivery of five cargoes in May alone. Kuwait began importing super-cooled gas in 2009 and has term deals to buy it from Royal Dutch Shell and Vitol from 2010-2013.

UNITED ARAB EMIRATES

ENOC to Expand Dubai Refinery Capacity to 140,000 Bpd

Emirates National Oil Company (ENOC), owned by the Dubai government, plans to increase capacity at its Jebel Ali refinery by 20,000 barrels per day (bpd) to 140,000 bpd, the company said.

"The company is in the process of undertaking a refinery debottlenecking project which will increase its refining capacity to 140,000 bbls/day," ENOC said in a statement. The so-called debottlenecking process involves capacity improvements that improve flow.

It did not give further details about the refinery project.

Jebel Ali port is Dubai's main shipping hub, both for general cargo and for oil product shipments. Fuel retailer ENOC is among the biggest oil storage owners at Jebel Ali, with its 1.2 million cubic meters of storage capacity. ENOC is also in the process of building a second jet fuel pipeline to Dubai International Airport from Jebel Ali terminal, it said.

Its wholly owned unit, Horizon Terminals, signed a $100 million sharia-compliant loan to partly fund the construction of a terminal to supply jet fuel to the airport.

Emirates NBD, Noor Islamic Bank and Standard Chartered provided the 10-year loan which is made up of a dollar and dirham tranche, ENOC said.

A 60-kilometer pipeline will link the airport with a bulk liquid petroleum terminal at the Jebel Ali Free Zone industrial park. The storage tanks for the terminal have a capacity of 141,000 cubic meters.

It will be the second jet fuel pipeline to link the industrial area with Dubai's airport, the statement added.

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