Integrated energy company ConocoPhillips (COP) has seen a bid coming from unexpected quarters for its East Coast oil refinery. Delta Air Lines, Inc. has reportedly placed a bid for ConocoPhillips' Trainer refinery, and is said to be in advanced talks. The airline has declined to comment on "rumor or speculation."

Delta is reportedly looking to pay between $100 million and $150 million for the Trainer, Pennsylvania-based refinery. If the bid is successful, this will be the first such deal for an airline.

According to a report in the Oil Price Information Service, which first reported Delta's approach on April 2, the Chief Oil Analyst Tom Kloza said, "It's a little like a rabbi buying a church."

The Houston, Texas-based ConocoPhillips had reportedly put up the Trainer refinery on the block in September 2011, and had recently extended the bidding deadline for the facility up to the end of May from the earlier deadline of late March.

The Trainer refinery is said to have the capacity to refine 185,000 barrels of oil per day, employing 400 people, and was closed by ConocoPhillips in September.

Though most of the refining experts were very surprised by the news, Delta Air Lines has the idea of saving money when the cost of jet fuel is continuing to rise. Reports noted that refining petroleum in-house will reduce the outsourcing process and transporting costs.

The rising fuel prices which is nearly 30 percent of operational costs of an airline company, has already pushed some of the airlines into bankruptcy or has seen consolidation in the industry.

Oil refining has also been an unprofitable business, just like the troubles in the airline industry. There has been no new refinery built in the U.S., and most of the major oil giants such as Marathon Oil Corp.'s (MRO), El Paso Corp. (EP), and Williams Cos. (WMB) are in the process of spinning off their refining assets.

ConocoPhillips itself is in the spin-off process, with its board approving the spin-off of its downstream unit earlier in the day. The company is paving the way to join a host of companies that have separated their refining business to unlock shareholder value.

DAL closed the April 4 regular trading session at $10.48, up $0.16 or 1.55% on a volume of 12.34 million shares, while COP closed at $76.18, down $0.13 or 0.17% on a volume of 7.45 million shares.

Shell Exploring Possible Gas-to-Diesel Plant in Louisiana at Cost of $10 Bln

Oil giant Royal Dutch Shell Plc. is exploring the possibility of building a plant in Louisiana that will convert natural gas into diesel fuel, the Wall Street Journal reported April 4, citing people familiar with the matter.

The plant, which would cost more than $10 billion, would reportedly be similar in size to Shell's Pearl gas-to-liquids or GTL facility in the Qatar. The Pearl facility turns natural gas into enough diesel to fill more than 160,000 cars per day.

According to the WSJ report, Shell initially considered locating the facility in Texas and Louisiana, but opted for the latter as the state offered better incentives. Shell may, however, take up to two years to develop construction and engineering plans to see if the project is economically viable.

The boom in natural gas production from shale formations in North America has resulted in lower natural gas prices even as oil prices are rising. This has prompted energy companies to look at turning natural gas into liquid fuels that is seen as financially appealing.

The technology to convert natural gas into a diesel fuel was developed in Germany during World War II. But the high costs of building GTL plants generally have prevented the technology from being commercially viable.

Shell built the first large-scale GTL plants in Qatar as that nation has an abundance of low-cost natural gas. Qatar has taken a strategic decision to diversify its gas production into GTL and access the lucrative global transport markets.

South Africa-based integrated energy and chemicals firm Sasol Ltd. (SSL) has a GTL joint venture with Qatar Petroleum, with a capacity of 21,400 barrels per day. The plant produces a combination of GTL diesel, GTL naphtha and LPG.

EPA to Allow E15 in Gasoline

The U.S. Environmental Protection Agency (EPA) approved the first applications for registration of ethanol for use in making gasoline that contains up to 15 percent ethanol -- known as E15. For over 30 years ethanol, the renewable fuel that can be mixed with gasoline, has been blended into gasoline, but the law limited it to 10 percent by volume for use in gasoline-fueled vehicles. Registration of ethanol to make E15 is a significant step toward its production, sale, and use in model year 2001 and newer gasoline-fueled cars and light trucks.

To enable widespread use of E15, the Obama Administration has set a goal to help fueling station owners install 10,000 blender pumps over the next 5 years. In addition, both through the Recovery Act and the 2008 Farm Bill, the U.S. Department of Energy (DOE) and U.S. Department of Agriculture have provided grants, loans and loan guarantees to spur American ingenuity on the next generation of biofuels.

The April 2 action follows an extensive technical review required by law. Registration is a prerequisite to introducing E15 into the marketplace. Before it can be sold, manufactures must first take additional measures to help ensure retail stations and other gasoline distributors understand and implement labeling rules and other E15-related requirements. EPA is not requiring the use or sale of E15.

Ethanol is considered a renewable fuel because it is generally produced from plant products or wastes and not from fossil fuels. Ethanol is blended with gasoline for use in most areas across the country. After extensive vehicle testing by DOE and other organizations, EPA issued two partial waivers raising the allowable ethanol volume to 15 percent for use in model year 2001 and newer cars and light trucks.

E15 is not permitted for use in motor vehicles built prior to 2001 model year and in off-road vehicles and equipment such as boats and lawn and garden equipment. Gas pumps dispensing E15 will be clearly labeled so consumers can make the right choice.

Preferred Sands May Be Frontrunner to Buy Sunoco Refinery

Preferred Sands, a unit of a privately owned Pennsylvania-based investment firm, is seen as a possible frontrunner to buy Sunoco's Philadelphia refinery, two sources familiar with the bidding process said.

As discussions intensify with a handful of varied firms that are said to be considering a bid for the 335,000 barrel per day (bpd) plant, Preferred is working with a group of local pension funds as well as more traditional financiers to put together a deal.

"We made a very substantial bid on the refinery," confirmed Mike O'Neill, founder and chief executive officer of Preferred Unlimited, the parent company when contacted by Reuters. "We will continue to run it as a refinery and use our substantial logistics experience and leverage our oil industry logistic knowledge," he added.

The oldest continuously operating plant in the U.S., Sunoco's Philadelphia refinery is the largest of three East Coast plants shuttered or put on the sales block as the rising cost of importing crudes squeezed margins. It is still operating but Sunoco has said it will idle the plant on July 1 if it is not sold. The sale has become politically charged on a local and national level, both over potential job losses and a possible squeeze on regional fuel supplies this summer. Preferred Sands, based in nearby Radnor, is a supplier of sand and proppant to the hydraulic fracturing industry, and also operates a fleet of more than 1,500 rail cars with connections to major railroads.

O'Neill said the rail connection would be able to help the refinery run a lot more of the cheaper domestic North American crude including Bakken from North Dakota, which would improve profit margins. Earlier this year, Sunoco said it had already tested small amounts of Bakken crude at its Philadelphia refinery. Other bidders for the refinery include United Refining, a small privately held refining company in the northwest corner of the state.

Flint Hills Idles Its North Pole Alaska Refinery Crude Unit

Flint Hills Resources said April 11 poor refining economics were forcing it to suspend operations at a major fuel processing unit and lay off staff at its refinery in North Pole, Alaska.

The refinery is the latest in the U.S. to either curb production or shut down entirely in the face of falling fuel demand and rising crude oil costs. ConocoPhillips (COP), Sunoco Inc. (SUN), Valero Energy Corp. (VLO) and Western Refining Inc. (WNR) have all idled refineries in the past several years.

Privately held Flint Hills said it has already started idling the 220,000-barrel-a-day refinery's No. 1 crude distillation unit, generally the first unit in the refining process. Flint Hills idled the Alaska refinery's No. 3 crude unit in 2010 but will continue to run the No. 2 CDU to produce jet fuel, gasoline, asphalt and specialty fuels for the Alaskan market.

Idling the unit will force the company to lay off up to 40 of the 151 employees at the refinery over the next five months, the company said.

The company blamed high crude oil prices and "challenging economics."

"Crude oil prices and Alaska North Slope Crude prices in particular are very high and are expected to remain that way for the foreseeable future," Alaska refinery manager Mike Brose said.

Valero Wrongful Death Lawsuit Could Cost Millions

A multimillion-dollar wrongful death and injury lawsuit has been filed in San Antonio as a result of the Memphis Valero Refinery explosion in early March in which a subcontractor was killed and two others were severely burned.

The lawsuit alleges severe and gross negligence - from failing to ensure that there were no hazardous or flammable gases in the flare line to providing timely firefighting assistance and having automatic firefighting equipment in place. It claims that the March 6 fire was the third one at the Memphis refinery in less than two years.

"This is the worst I've ever seen," said personal injury attorney Anthony "Tony" Buzbee of Houston. "This is considered 'hot work.' Valero signs off that it is safe to work. They let these men go in an area where hydrocarbons were still flowing. They really just dropped the ball on many, many kinds of fronts."

While the lawsuit does not specify a monetary amount, Buzbee said the damages would be in the millions of dollars.

A Valero spokesman declined to comment about the lawsuit.

The civil lawsuit was filed by Richard Cuevas, a foreman of the five-man work crew who was on the platform when the explosion happened, and Luis Santos, who was also on the platform. In addition, Cuevas also filed the lawsuit on behalf of his two brothers, Nicolas Cuevas, who died and Daniel Reyes Cuevas, who was at the Regional Medical Center in Memphis with burns over 70 percent of his body.

Guadalupe Torres also is still in The Med with burns over 45 percent of his body. Torres is not a part of the lawsuit.

All five men worked for JV Industrial of Pasadena, Texas. The subcontractor performs maintenance at oil refineries during plant turnarounds.

On March 6, the workers were told to block off a flare line that is on a two-story platform. Before the men were sent to the flare line, the lawsuit said Valero personnel were "supposed to ensure the flare line was free of flammable gases ... (and) that fire protection and fighting gear were immediately available." Flares are the torchlike towers topped by fire at the refinery that act as safety devices where pressurized gases can be routed and burned when necessary.

On the day of the explosion, the workers were removing the bolts from the flare flange when a large flash fire erupted.

Memphis Fire Department officials said that the cause of the fire has not been determined. The fire was extinguished before firefighters arrived on the scene.

In a recent hearing, a judge denied the plaintiff's motion requiring Valero to shut down its Memphis plant so that a 36-inch gate valve could be removed and tested. The suit contends that the valve leading the flare assembly was leaking and allowing hydrocarbons to build up in the work area.

Possible Sunoco/Carlyle JV Would Keep Philadelphia Refinery Running

Sunoco, Inc. announced April 23 that it has entered into exclusive discussions with The Carlyle Group, a global alternative asset manager, regarding a potential joint venture involving Sunoco's 330,000 barrel-per-day refinery in Philadelphia.

If a transaction were to be consummated, Sunoco would contribute its Philadelphia refinery assets in exchange for a non-operating minority interest in the joint venture. In addition, Sunoco would have no on-going capital obligations with respect to the refinery. Carlyle would contribute cash to the joint venture, hold the majority interest and oversee day-to-day operations of the joint venture and the facility. No other financial terms of the potential transaction were disclosed and there can be no assurances that the two companies will come to agreement.

Speaking on the potential joint venture and what it could mean to operations at the Philadelphia refinery, Sunoco's president and chief executive officer Brian P. MacDonald said, "The Carlyle Group has financial depth, broad energy sector experience, and a history of building value. We believe having a strong partner like Carlyle with a track record of leading successful business turnarounds is necessary to preserve the facility's future. Also, a concerted effort by all stakeholders is necessary to ensure the successful completion of this joint venture. We have been encouraged by the offers of support by federal, state, local and labor officials."

Rodney S. Cohen, Managing Director, The Carlyle Group, said, "We are working actively with Sunoco and other stakeholders to explore ways to keep this vital facility operating. The facility has been operating at a significant loss for some time, and we are exploring every avenue to create a viable plan. It is a heavy lift and we are not sure a solution is possible, but we are doing the work."

Leo W. Gerard, International President, United Steel Workers, said, "The USW is more than willing to work with all levels of government and any willing party who has the common goal with us to keep these East Coast refining facilities in operation. We continue to believe their ongoing operation is crucial not only to the thousands of our members employed there but to the surrounding communities and to effectively deal with the nation's fuel and energy issues."

In light of these on-going discussions with Carlyle, Sunoco intends to extend its previously announced timeline and operate the Philadelphia refinery through July 2012. If a suitable transaction with Carlyle cannot be completed, the company would proceed with idling the main processing units at the refinery in August 2012.

EPA Issues Updated, Achievable Air Pollution Standards for Oil and Natural Gas

In response to a court deadline, the U.S. Environmental Protection Agency (EPA) has finalized standards to reduce harmful air pollution associated with oil and natural gas production. The updated standards, required by the Clean Air Act, were informed by the important feedback from a range of stakeholders including the public, public health groups, states and industry. As a result, the final standards reduce implementation costs while also ensuring they are achievable and can be met by relying on proven, cost-effective technologies as well as processes already in use at approximately half of the fractured natural gas wells in the United States. These technologies will not only reduce 95 percent of the harmful emissions from these wells that contribute to smog and lead to health impacts, they will also enable companies to collect additional natural gas that can be sold. Natural gas is a key component of the nation’s clean energy future and the standards released today make sure that we can continue to expand production of this important domestic resource while reducing impacts to public health, and most importantly builds on steps already being taken by industry leaders.

"The president has been clear that he wants to continue to expand production of important domestic resources like natural gas, and today’s standard supports that goal while making sure these fuels are produced without threatening the health of the American people," said EPA Administrator Lisa P. Jackson. "By ensuring the capture of gases that were previously released to pollute our air and threaten our climate, these updated standards will not only protect our health, but also lead to more product for fuel suppliers to bring to market. They're an important step toward tapping future energy supplies without exposing American families and children to dangerous health threats in the air they breathe.”

When natural gas is produced, some of the gas escapes the well and may not be captured by the producing company. These gases can pollute the air and as a result threaten public health. Consistent with states that have already put in place similar requirements, the updated EPA standards released today include the first federal air rules for natural gas wells that are hydraulically fractured, specifically requiring operators of new fractured natural gas wells to use cost-effective technologies and practices to capture natural gas that might otherwise escape the well, which can subsequently be sold. EPA’s analysis of the final rules shows that they are highly cost-effective, relying on widely available technologies and practices already deployed at approximately half of all fractured wells, and consistent with steps industry is already taking in many cases to capture additional natural gas for sale, offsetting the cost of compliance. Together these rules will result in $11 to $19 million in savings for industry each year. In addition to cutting pollution at the wellhead, EPA’s final standards also address emissions from storage tanks and other equipment.

Also in line with the executive order released by the president on natural gas development, the rule released April 18 received important interagency feedback and provides industry flexibilities. Based on new data provided during the public comment period, the final rule establishes a phase-in period that will ensure emissions reduction technology is broadly available. During the first phase, until January 2015, owners and operators must either flare their emissions or use emissions reduction technology called “green completions,” technologies that are already widely deployed at wells. In 2015, all new fractured wells will be required to use green completions. The final rule does not require new federal permits. Instead, it sets clear standards and uses enhanced reporting to strengthen transparency and accountability, and ensure compliance, while establishing a consistent set of national standards to safeguard public health and the environment.

An estimated 13,000 new and existing natural gas wells are fractured or re-fractured each year. As those wells are being prepared for production, they emit volatile organic compounds (VOCs), which contribute to smog formation, and air toxics, including benzene and hexane, which can cause cancer and other serious health effects. In addition, the rule is expected to yield a significant environmental co-benefit by reducing methane, the primary constituent of natural gas. Methane, when released directly to the atmosphere, is a potent greenhouse gas—more than 20 times more potent than carbon dioxide.

During the nearly 100-day public comment period, the agency received more than 150,000 comments on the proposed rules from the public, industry, environmental groups and states. The agency also held three public hearings. The updated standards were informed by the important feedback received through the public comment period, reducing implementation cost and ensuring the achievable standard can be met by relying on proven, cost-effective technologies and processes already in use.

More information: http://www.epa.gov/airquality/oilandgas

ExxonMobil Shuts Down Leaking Pipeline Serving Baton Rouge Refinery

Exxon Mobil Corp has shut the North Line crude oil pipeline in Louisiana after a leak spilled 1,900 barrels of crude oil in a rural area at the end of April, affecting a conduit that supplies the nation's third-largest refinery.

The 22-inch line originates in St. James, Louisiana and provides shippers with access to oil from the giant Louisiana Offshore Oil Port, the St. James terminal as well as offshore Louisiana crude grades, according to Exxon's website.

It was unclear on April 30, the second full day the North Line was shut, how long it might be down. The line pumps crude to ExxonMobil's 502,000 barrel per day (bpd) Baton Rouge, Louisiana, refinery as well as a handful of other plants.

The U.S. pipeline regulator said it had sent an inspector to investigate the leak, but has not issued any orders that would prevent Exxon from resuming operations when it is ready. The company said it had contained the oil in the "immediate area".

"Prior to resuming operation, the failed section of pipeline will need to be repaired and tested in accordance with PHMSA safety requirements," Jeannie Layson, a spokeswoman for the Pipeline and Hazardous Materials Safety Administration, said in a statement. "At this time, PHMSA has not issued any enforcement orders to the operator requiring restart approval," she added.

A spate of recent leaks and incidents has heightened local concerns and prompted calls for tougher scrutiny from regulators. Last July, Exxon' Silvertip pipeline spilled about 1,000 barrels of oil into the Yellowstone River in Montana, an accident that the company said cost it about $135 million.

The leaks are only one-tenth the size of a large spill that occurred on an Enbridge Inc line in July 2010, prompting a massive cleanup effort. That line remained shut for over two months of testing and repair.

"My guess is unless PHMSA is lowering the boom on Exxon, they will be operating the south end of the North Line soon," said a source familiar with the matter. "That will mean that Baton Rouge, Placid and Krotz Springs will be unaffected."

A crude shipper said Exxon had offered no hints on the line's return.

"There are no guesses from Exxon as to when they will restart at this time," the shipper said.

In addition to the Baton Rouge refinery, the nation's third largest, the pipeline provides crude to other refineries including: Alon USA Energy's 80,000 bpd Krotz Springs; Calumet Specialty Products 57,000 bpd Shreveport; Placid Refining's 57,000 bpd in Port Allen all in Louisiana; and Delek's 75,000 bpd El Dorado in Arkansas.

The North Lines also feeds crude to the Mid-Valley Pipeline.

Exxon said the size of the spill was contained near the pipe.

"The oil from the North Line crude pipeline was contained in the immediate area and recovery efforts began on Sunday," said Rachael Moore, who is with Exxon's downstream public and government affairs office.

"Fortunately the oil was contained in the immediate area which will enhance our recovery efforts," Moore said.

Exxon said it had shut the pipeline late on April 28 after it detected a drop in pressure.

Exxon did not immediately reply to questions about the impact of the pipeline's outage on the Baton Rouge Refinery, which is also supplied by crude oil tankers on the Mississippi River.

Alon was seeking more information from Exxon about the outage, a company spokesman said April 30.

"We're looking to Exxon Mobil for more information on the incident to determine what, if any, impact this will have on production (at the Krotz Springs Refinery)," said Alon spokesman Blake Lewis.

The Krotz Springs Refinery has crude waiting to be offloaded from barges on the Atchafalaya River to make up for lost supply on the pipeline, according to a source familiar with refinery operations.

The Placid Port Allen refinery also receives crude oil from the Red Stick pipeline and from ships on the Mississippi.

The Calumet refinery in Shreveport can also receive supply from the Plains All American Pipeline system.

The Delek refinery in Arkansas can take crude from the Mid-Valley Pipeline operated by Sunoco Logistics.

Shell Eyes U.S. GTL as Motiva Refinery Expansion Becomes Operational

The Motiva refinery expansion in Port Arthur, Texas, to a capacity of 600,000 barrels a day has started operations, said Simon Henry, Chief Financial Officer of Motiva partner Royal Dutch Shell PLC on April 26.

The crude distillation unit at the plant is now processing oil and the hydrocracker is expected online by the end of this quarter, he said in a conference call with reporters.

Shell is assessing two sites in Texas and Louisiana where it could build new plants to convert cheap natural gas into high-priced diesel fuel, Henry said. Such plants could be very profitable in the U.S., but a final investment decision will take at least a year, he said.

Shell will have the necessary permits to drill three exploration wells offshore Alaska this year, but the threat remains that litigation from environmental groups could derail those plans, he said.

Shell and its partners completed 11 shale gas exploration wells in China last year and hopes to drill 22 this year, Henry said. Initial results show that production from Chinese shale gas reservoirs is more difficult and costly than in the U.S., but those costs should fall over time, he said.

MEXICO

Mexican Presidential Candidate Calls for Construction of Five Refineries

Mexican presidential candidate Andrés Manuel López Obrador - who represents a coalition of the left-wing PRD, PT and Convergenia parties - called for the construction of five refineries as part of his energy policy proposal laid out on April 9.

The five refineries include the US$11bn-plus Tula refinery in Hidalgo state for which state oil company Pemex is already tendering for engineering, as well as another refinery in Guanajuato state where the NOC plans to expand the Salamanca refinery. The Tula refinery is meant to be fully operational by mid-2016 with capacity to process more than 250,000b/d, while the Salamanca expansion is supposed to conclude in 2015 with an extra 70,000b/d capacity.

Additional projects in López Obrador's proposal are a refining train alongside the current Salina Cruz refinery in Oaxaca state, another refinery in Dos Bocas, Tabasco state for light and super-light crude, and a fifth refinery in Atasta, Campeche state.

"All this to stop importing 500,000b/d of fuels, which means paying US$26bn per year," López Obrador said, according to a transcript.

The Tula and Salamanca projects are part of Pemex's plan to decrease fuel imports. Gasoline imports account for close to 50% of sales. Pemex's CEO Juan José Suárez Coppel said last year he hopes by 2016 for Pemex to reduce imports to 34% of sales and, including alliances outside Mexico, supply 80% of demand. Demand is expected to grow at an annual rate of 4.5% through that year.

López Obrador's policy would aim to cease exporting crude completely and refine it in-country to add value. He also called for investment in the petrochemical industry to halt its "deterioration" and thus "little by little, stop depending on the external market."

Among López Obrador's other proposals were: investment in oil exploration to maintain the crude reserve replacement ratio at 100%; prioritization of national companies as providers for Pemex's goods and services; greater R&D investment by Mexico's national petroleum institute (IMP); and cleansing Pemex of corruption.

Mexico holds presidential and congressional elections in July 2012.

ECUADOR

China Could Finance Ecuador’s $13 Bln Refineria Del Pacifico

Ecuadorean President Rafael Correa said April 21 China could fully finance the $13 billion Refineria del Pacifico, a joint project between Ecuador and Venezuela's state oil companies.

"China is very interested in financing practically all," Correa said during his weekly media address.

According to Correa, China has a surplus in liquidity but a shortage in oil for its consumption, while Ecuador has surplus in oil but needs liquidity, so the operation is attractive for both parties. Correa didn't provide any detail.

Refineria del Pacifico, a refining and petrochemical complex, will be 51% owned by Ecuador's state-run Petroecuador and 49% owned by Venezuela's state-run Petroleos de Venezuela, or PdVSA.

Correa also said his Minister Coordinator of Strategic Sectors, Jorge Glas, has traveled to China to negotiate the financing.

Last month Jorge Glas told Dow Jones Newswires that Ecuador and the Industrial & Commercial Bank of China Ltd. have signed a letter of intent that outlines the bank's interest in providing financing and Ecuador's interest in receiving it.

Glas also said that Chinese companies China National Petroleum Corp or CNPC, and China Petroleum & Chemical Corporation, or Sinopec Corp. are interested in partnering the project.

Refineria del Pacifico will include a refinery to process 300,000 barrels of oil per day, a basic petrochemical plant to produce benzene, xylene and polypropylene as well as on- and offshore marine facilities.

Correa said Refineria del Pacifico, located in the coastal province of Manabi, is scheduled to go on line in 2016.

China has become an increasingly important source of funding for Ecuador.

Ecuador's 2008 default on $3.2 billion of government bonds cut off access to private capital market lenders overseas, but China stepped up to become the Andean nation's top creditor, lending billions of dollars to Ecuador in exchange for future provisions of oil.

VENEZUELA

Venezuela’s PDVSA Awards Refining Projects to S. Korean Firms

Venezuela's state oil company PDVSA has reached several new construction and engineering agreements for refining projects with private firms in South Korea.

A delegation from the NOC signed separate contracts with consortium STX-Daewoo and builder SK Engineering and Construction for the development of pipelines and transport infrastructure at the Junín and Carabobo industrial complexes in the Orinoco heavy oil belt.

PDVSA also signed an MOU with engineering giant Hyundai for the financing of an EPC contract for the US$2.9bn Batalla de Santa Inés refinery in the southeast of Barinas state.

Hyundai was also awarded a contract by the NOC for the construction of a 900MW coked-fired thermoelectric plant at the Carabobo industrial complex.

On the same Asian trip, PDVSA president and Venezuelan energy minister Rafael Ramírez laid a foundation stone at the 400,000b/d Jie Yang refinery in China's Guangdong province.

The refinery, located close to the city of Nanhai, is the first of three refineries in China totaling 800,000b/d capacity being constructed by PDVSA alongside the Asian country's state refiner PetroChina.

The projects will come online at separate stages through 2019, and will process crude sent from Orinoco-based JV's between PDVSA and Asian firms.

Venezuelan officials aim to send around 400,000b/d to China under current agreements, and PDVSA has publicly stated its goal to take this figure up to 1Mb/d within the coming years.

Finally, PDVSA has suffered a fresh accident at its Amuay refinery in Falcón state, according to local press reports.

Caracas-based daily El Universal reports that a catalytic disintegration unit at the 110,000b/d refinery suffered a fault during a reactivation process after being offline for maintenance work.

The incident is the latest in a series to have been reported across the oil company's operations in recent months, including oil spills in the Guanipa and Guarapiche rivers, in which up to 100,000b/d is estimated to have been lost.

Amuay is part of the Paraguaná refining complex (CRP) which also consists of the Cardón and El Palito refineries, and has a total production capacity of more than 900,000b/d of crude.

ASIA

CHINA

Approval of $9.29 Bln Huizhou Refinery Boosts Venezuela and Petrochina Strategy

The Chinese Cabinet's approval of a 400,000b/d refinery - to be built by Petrochina and PdVSA in Guangdong province - will be welcomed by both partners. The project is crucial in Petrochina's regional diversification strategy; it also presents Venezuela with a major opportunity to expand crude exports to China and meet the targets established under an oil-for-loans deal signed by the two countries.

On April 15, 2012, China's State Council, the country's cabinet, officially approved a proposed joint venture (JV) refinery project in the south of the country that will be operated by state-run PetroChina, a subsidiary of the China National Petroleum Corporation (CNPC), and Venezuelan national oil company (NOC) Petróleos de Venezuela (PdVSA). The two partners are expected to invest US$9.29bn (RMB58.5bn) to build a 400,000 barrels a day (b/d) plant in the city of Huizhou in the Guangdong province. Environmental approval was granted in January 2011.

In addition to the refinery, the project also includes a crude oil import terminal, an oil products export terminal, a transit pipeline and a tank farm. CNPC will hold a 60% stake in the project, leaving PdVSA with the remaining 40%. Capacity at the complex will eventually be expanded to reach 1,000,000b/d.

China has an estimated total refining capacity of 10.2mn b/d - dominated by CNPC and the China Petroleum and Chemical Corporation (Sinopec), which together account for 80%. The province of Guangdong, which holds more than 10% of the country's total capacity, is already a large downstream hub. However, plans to significantly expand facilities in the area are already underway:

State-run China National Offshore Oil Corporation (CNC) is looking to double capacity at its 240,000b/d refinery in Huizhou, which was only brought onstream in 2009; and another JV comprising state-run Kuwait Petroleum Corporation (KPC - 40%), Sinopec (50%) and France's Total (10%) plans to build a 300,000b/d plant on Donghai island by 2014-2015, which will then be expanded to 500,000b/d two years later.

Refining in South Central China is dominated by Sinopec, which owns three of Guangdong's four refineries; although CNC ended its rival's de facto monopoly in 2009 after its Huizhou plant came online. In contrast, the majority of CNPC's refineries are located in west and north-east China. The company started making inroads into the wider Zhngnán region by opening the Qinzhou refinery in the Guangdong's neighboring Guangxi province in 2010.

Nonetheless, CNPC, which is eager to diversify its downstream operations geographically, has identified Guangdong as a key province. Indeed, the area is one of China's most developed and rapidly growing industrial regions, and it already benefits from a huge population. The proposed JV will strengthen southern China's oil products market.

Foreign participation in Guangdong's refinery projects is noteworthy given oil producers want to ensure they are locked into long-term supply contracts with China. This is particularly true for KPC and PdVSA. Consequently, the JV refinery is of high strategic importance not only for CNPC, but also for PdVSA, as it provides Venezuela with a secure route to the booming Chinese market.

The refinery project signifies growing cooperation between Venezuela and China in the energy sector, and is another step towards PetroChina's regional downstream diversification. Venezuelan crude oil exports to China have long been on the rise. According to the Energy Information Administration (EIA), exports rose from only 39,000b/d in 2005 to 120,000b/d in 2008. In December 2010, oil minister Rafael Ramírez said Venezuela was exporting 362,000b/d to China, making the country one of China's largest oil suppliers. Underlying the increase is a US$20bn oil-for-loans deal signed in April 2010. That deal requires Venezuela to export up to 700,000b/d by 2015 in order to repay the loan, and volumes could rise even higher, with the Venezuelan government aiming to export 1mn b/d to China by the mid-2010s.

As the refinery will be designed to process heavy crude, it appears highly likely that PdVSA will supply all or most of the feedstock, while the bulk of the investment will likely come from PetroChina. As a result, the plant will help Venezuela double its current crude exports to China and should thus help it comfortably meet the 2015 target agreed under the oil-for-loans deal.

KOREA

Analysis of How S. Korea’s Refiners Are Redefining Their Business

Korea has yet to find any viable oilfields on its territory but one of the country's major export items is diesel fuel - a substantial proportion of its outbound shipments are now explained by that item.

The country has four main refiners, which import almost 1 billion barrels of crude oil every year to refine for both local consumption and exports. Not content with the refining margins in the "downstream" procedures, they are now ready to step into a more lucrative segment of "upstream," or a process of exploring and developing oilfields on their own.

"In the past, refiners were happy with downstream when crude prices were not so strong. But in line with their abrupt appreciation over the past decade, they had to move to the more profitable upstream sector," a Korea Petroleum Association (KPA) official, Jeon Jae-sung, said.

"They are trying to getting bigger and such efforts will continue in the upstream area down the road. Then, Korean players may be able to create more value from the petroleum industry."

In the early 2000s, global crude prices slumped to below $20 a barrel due to mass production, but they started to rise thereafter because of the 2001 terrorist attack on the U.S. and rising demand from developing economies such as China and India. In the summer of 2008, crude oil traded at more than $130 a barrel. Although it plummeted to below $50 in the aftermath of the global financial crisis in late 2008 and 2009, it quickly regained the $100 mark. Currently, it moves in the vicinity of $120 and some fear further rises.

Currently, the nation's refinery business is headed by SK Innovation while GS Caltex is the runner-up. S-Oil is No. 3 and Hyundai Oilbank is the smallest in the four-way competition. As far as downstream is concerned, they are powerhouses based on the relatively simple business model of importing crude oil, refining it and selling a variety of products both at home and abroad.

Last year, Seoul imported a total of 927 million barrels of crude oil and 87 percent of it came from the Middle East with Saudi Arabia being the single biggest trader by any measure. Refiners send oil tankers such as ultra-large crude carriers, whose size is about 1.5 times bigger than Korea's tallest 63 Building. It takes typically about a half month for the ships to reach Saudi Arabia from Korea. After filling their tanks over about five days, they return to Korea, which takes up to 20 days to reach homeport because of the additional weight of their cargo.

Refiners distill crude to come up with products such as liquefied petroleum gas, naphtha, kerosene, gasoline and bunker C fuel and along the way, they generate refining margins. Their facilities work around the clock because shutdown expenses are so great, which means that tankers filled with crude must reach the country every day so that the refineries keep working.

"Originally, Korean oil companies focused merely on the local market, particularly before gasoline prices were directly regulated by the central government before 1997," Jeon said. "Yet, they needed a new bang for their buck soon after the regulations were eased and found a pair of solutions. The first was to turn their eyes to the overseas market and the second was to go upstream."

By the mid 2000s, refinery produce including gasoline and diesel became top export items and last year, their exports amounted to $51.6 billion, trailing just the shipbuilding business. During the first quarter of this year, their exports stood at $13.7 billion in order to top the podium, even nudging past the conventional cash cow of automobiles at $12.8 billion.

Going upstream the downstream business model promised some profits but as crude prices went up during the first decade of the new millennium, their operating income ratio started heading south. Accordingly, they decided to employ the second option of going upstream spearheaded by business bellwether SK Innovation together with the state-run Korea National Oil Corp (KNOC) - they made efforts to explore and develop oilfields on their own instead of buying them from producers. In 2006, SK Innovation had the rights for merely 20,000 barrels of crude pumped a day but the figure more than tripled to 64,500 barrels last year. The Seoul-based outfit's turnover from the upstream business also more than trebled between the six-year period from 335.9 billion won to 1.05 trillion won.

"As you go further upstream, you can find more added value. We have the target of becoming an independent country in terms of energy procurement even though we hardly produce oil or gas," an SK Energy official said. In fact, the task of jacking up the country's self-sufficiency ratio in energy is not just a private mission but also a nationwide agenda, which has been sought by outfits such as KNOC.

Over the past four years, KNOC carried out seven big-sized merger and acquisition (M&A) including Dana Petroleum of the United Kingdom, Petro-tech of Peru and Canada's Harvest Energy. Such efforts worked well - last year, the proportion of Korea-owned oil and gas imports out of its overall fuel consumption amounted to 13.7 percent, up from 9 percent in 2009.

KNOC strives to move the figure up to 18 percent this year and 30 percent by 2019. In achieving the tall tasks, the organization reached a milestone of signing a contract with the Abu Dhabi National Oil Company to win the right to drill in around 11 percent of the United Arab Emirates' oil-bearing territory.

Under business alliance with GS Caltex, KNOC plans to invest as much as $2 billion with which the public corporation hopes to hit a jackpot of giant oil fields in the oil-rich Middle East country. There are some doubts on their performances as the Board of Audit and Inspection recently pointed out that most oil exploration rights do not actually see much crude brought into Korea. In response, Korean refiners and KNOC counter that things would improve in the future while arguing that they have no other options to tap into the upstream segment to stay afloat amid the stiff global competition.

NEW ZEALAND

$365 Mln Upgrade to NZ Refinery Wins Shareholder Support but not Owners

Investors have heartily backed a $365 million upgrade to New Zealand's only oil refinery - but the petrol giants that own most of the company did not show the same solidarity.

The board had already approved the project in February, but the sheer size of the investment required majority shareholder support to get the final sign-off.

After auditor PwC completed the official vote count, the final tally was 64.5 per cent in favor and 35.5 per cent against.

For Refining NZ chief executive Ken Rivers and his senior management team that meant the period of courting shareholders in New Zealand and around the world had paid off.

Non-oil company shareholders holding 17 per cent of the company passed the resolution with an overwhelming 99.8 per cent majority. "I just can't say how grateful I am for their support," Rivers said.

But cornerstone investors and customers Chevron, Z Energy, Mobil and BP, collectively owning 73 per cent of the company, were divided on the issue.

BP and Z Energy confirmed they had voted for the project but voting numbers released by NZ Refining indicated Chevron and Mobil had voted against.

Rivers said it was interesting that others had turned down the "compelling case", but accepted it may not have been in their strategic interests.

"I've got to recognize that some of my customers who are also shareholders, are also my competitors, who are investing in similar projects," he said.

"Clearly, for some, it wasn't as palatable as their alternatives."

The successful vote means construction of the Continuous Catalyst Regeneration (CCR) platformer, to be installed at Marsden Point, will kick off in 2014. It also means the back-up $105m "Re- Life" plan, which would have extended the life of the existing platformer, will be scrapped.

Once up and running, the CCR investment is expected to hike operating earnings by $60m, and increase shareholder dividends by 30 per cent.

The CCR project allows a wider range of crudes to be processed more efficiently, with energy- efficiency measures accounting for 70 per cent of the value.

It is also expected to boost the Northland economy through the creation of 300 new jobs, with twice as many again created in supporting industries nationwide.

However, Rivers will return to Britain before the year is out, and the company is already on the hunt for a replacement.

Rivers said his shareholding in Refining NZ, which he was about to increase, would keep him tied to the company, and to New Zealand.

PAKISTAN

Pakistan’s Byco Set to Begin Commissioning Process for $750 Mln Refinery Infrastructure Project

Byco Petroleum Pakistan Limited, the country's largest oil refinery having capacity of 120,000 barrels per day is all set to Begin commissioning process by the end of June 2012.

"With the commissioning of new refinery, the total refining capacity would reach up to 156,000 bpd making it the single largest oil refining complex in Pakistan," Qaiser Jamal, Country Business Head, Oil Refining, Byco Oil Pakistan said briefing reporters during a visit to the company's new oil refinery, on April 4.

At present, Byco has a smaller refinery having a capacity of 35,000 bpd.

He pointed out that the production of Byco's new refinery, the oil refining complex II (ORC-II) will substitute up to 60 percent of Pakistan's valuable imports.

Byco also has plans to take immediate steps for augmenting the refining capacity.

In the first phase, the refining capacity of ORC-II would be gradually enhanced to 155,000 bpd and in the second phase refinery can be revamped to increase the throughput to l80,000bpd, he said.

He said Byco has, so far, invested over $750 million in this refining and infrastructure project.

"Byco has overcome all challenges involved in the setting up of the refinery and now are moving in the direction where we would be refining first crude oil consignment soon," Qaiser Jamal said.

It shows Byco's commitment with the country and also sends a positive message to investors around the globe branding Pakistan to be a suitable destination for making investments, he maintained.

Besides being the biggest oil refinery in Pakistan, Byco has an associated Isomerization Unit for converting and upgrading light naphtha into gasoline which will be environment friendly as the product will be benzene free with reduced sulfur and aromatic contents.

This will be country's first Isomerization Unit with a capacity of 12,500bbl/day, he said.

Presently, most local refineries export naphtha which can be upgraded to gasoline by processing it through Byco's Isomerization plant, he said, adding that the gasoline obtained from Isomerization, besides rendering value addition to export naphtha, will provide import substitution as currently significant volume of motor gasoline is imported to meet the country's requirement.

Byco Refinery configuration is able to produce EURO-IV quality specifications of gasoline.

"This is an import-substitution project, which would help us move towards self-reliance in specific petroleum products," he said.

Additionally, the new refinery also has an associated desulfurization unit which will help substantially reduced sulfur in HSD produced by Byco.

He said due to geographical and geological features, the area where the plant is located is arid and low salinity water is not available.

To provide continuous and reliable supply of water a reverse osmosis desalination plant with open-intake sea water has been installed.

On a query, Qaiser Jamal said Byco's existing 36,000 bbls/day refinery is currently operating at a much lower throughput of 20,000 bbls/day due to shortage of funds.

Byco is waiting to be paid (circular debt) an amount of Rs 5.37 billion from the state owned entities to get the much-needed breather, he said.

Byco marketing has been able to establish over 216 retail outlets and is growing stronger by the day, he added.

Byco receives imported crude oil at the Fauji Oil Terminal (FOTCO) at Port Qasim.

In order to reduce costs as well as environmental impact, Byco is installing country's first Single Point Mooring (SPM) facility in the deep part of the Arabian Sea, approximately 15 kilometers from the Refinery at Mouzakund, Baluchistan.

Universal Terminal Limited (UTL), wholly owned subsidiary of Byco Petroleum Pakistan Limited, was set up to facilities the logistics of petroleum products.

Imran Farooqui, CEO of UTL, in his presentation said that the company has initiated development of Pakistan's first Single Point Mooring (SPM) Buoy for offloading crude oil and related port facilities with the accompanying infrastructure with the help of China Harbour Engineering Company Limited.

The SPM is being set up in the North Arabian Sea at a distance of approximately 15kms from the Byco's Mouza Kund site located at Hub, Baluchistan.

Work on the project commenced in January this year and will be completed by the end of this month.

He said SPM is strategically located to feed the two Byco refineries with a combined initial throughput of 156,000 barrels per day.

The facility has been designed in such a way that it can support one more pipeline for import and export of petroleum products and petrochemicals.

Muhammad Akram Peracha, General Manager, Oil Refining Complex I & II said on the occasion that the SPM project will be the third liquid cargo port after KPT and PQA with a draught of 25 meters.

This will allow larger crude carriers to come to SPM port.

At the moment; the two existing ports cannot take a crude carrier of larger than 75,000 DWT.

He said importing crude through larger carriers will not only result in lower administrative cost but will also result in a saving on account of difference in freight charges, thus giving SPM a strategic advantage and savings to the exchequer.

UTL has also invested in Crude and Petroleum Product Storage Terminals totaling 140,000 metric tons (MT) at Keamari and Mouza Kund, Hub (Baluchistan).

He said the facility developed at Keamari is being used for jet fuel business.

The technical team of Byco has completed major in-house design modifications and refurbishments at this terminal such as Automated Product Loading, Metering and Weighing Systems and enhanced its capacity to store and dispense 11,400 MT of Jet Fuel.

The storage developed at Mouza Kund site at present can store 130,000 tons of crude oil.

UTL is also developing storages and terminal facilities across the country in phases.

EUROPE / AFRICA / MIDDLE EAST

UNITED KINGDOM

Bidder for UK’s Coryton Refinery Plans to Preserve Jobs

PwC, the UK administrator of independent refiner Petroplus said there was at least one bidder who intended to keep refining, preserving the 850 jobs at the site, or possibly even creating more jobs by increasing operations.

A three-month "tolling agreement" keeping Coryton operational will run out by May 16, when the site could face closure.

Steven Pearson, joint administrator at PwC, said: "If we haven't extended the tolling agreement, if we haven't refinanced it and we haven't got a buyer, there are no other options. If we don't get a deal done, we have to close it.

"If it's sold as a terminal there will be very substantial job losses."

At peak production Coryton refinery provided fuel to 20pc of London and the South East, prompting fears of forecourt shortages if it were to close. However, there is overcapacity in the UK refining sector and a temporary halt to Coryton's deliveries in January caused little disruption as other refineries increased their output.

Pearson declined to comment on the identities of the bidders but it is thought some may be consortia of several companies.

Prior to the April 2 deadline for bids, those expressing interest included The Goldsmith Group, run by German investor Clemens J Vedder, and Gary Klesch of Swiss investment vehicle Klesch Group. The former Russian energy minister Igor Yusufov was also reported to be interested.

Mr Klesch told the Telegraph at the time that he would intend to keep it running as a refinery.

Swiss-based Petroplus filed for insolvency in January, hit by high debt and low refining margins.

Petroplus Refining & Marketing Limited (PRML), the UK business that owns Coryton, owes creditors more than $2.3bn (£1.47bn). Administrators have indicated they favor a debt-for-equity refinancing deal with the creditors to allow PRML to continue refining, in the belief it offers them all parties a better outcome than a sale.

About $1.75bn of PRML's debt relates to guarantees on bonds and notes issued by other European Petroplus companies, despite their being in separate administration proceedings.

PwC met the bondholders in March and told them that a debt-for-equity swap could offer good long-term value as the company was "capable of generating very significant earnings".

However, PRML would also need about $1bn of new financing to keep running.

EGYPT

Major Fire at Egypt’s Nasr Refinery

One of Egypt's major refineries was engulfed in a massive fire, with eyewitness reports saying, as of April 16, that little was being done to suppress the fatal blaze.

The Nasr refinery between the city of Suez and the Suez Canal had been on fire since the afternoon of April 14, according to several reports, shrouding the local area in thick black smoke. Civilian and military emergency forces have been deployed by at the time of this writing seem unable to quell the blaze.

Reports of casualties varied at the time. Earlier reports stated that the fire claimed the life of one refinery worker and injured fourteen, while Chinese newswire Xinhua – referring to sources at the scene - reported four dead and 22 injured.

Eyewitnesses reported a series of loud explosions followed by a fireball from one of the refinery's storage tanks started the blaze. The cause of the fire was not known. Some workers at the refinery told the Egypt Independent that they saw a car burning shortly before the explosion of the first butane tank at the site.

The refinery has a capacity of 146,300 barrels of oil a day (bpd), and is the oldest in both Egypt and Africa, with a refinery on the site since 1913. It is owned by the Egyptian government through its Egyptian General Petroleum Corporation (EGPC) and operated by its subsidiary, the Suez El Nasr Petroleum Company. The refinery was due to be upgraded with a larger hydrocracker to enabled middle distillate production, with EU and U.S. funding, having last been upgraded in the early 1970s.

The fire at Nasr -which processes up to 40% of Egypt's fuel for domestic consumption - comes at a time when Egyptians are already under petrol shortages.

El Nasr has a storage capacity of 100,000 barrels of oil, and without intervention is likely to burn for several days. Egyptians in the area were on Twitter to document the fire and voice concerns that the fire may have spread to gas storage tanks and another refinery.

KENYA

Kenya’s Lamu Refinery Project is Launched

The government of Kenya has launched the construction of a massive port, railway and refinery in Lamu it bills as the biggest ever in an African nation.

The government hopes the Sh2 trillion project will turn the country into a regional economic hub and propel it to become a middle-income economy in the next two decades.

The port is to be constructed with 32 berths and be connected to Ethiopia and oil-rich South Sudan by a super-highway, a railway and a pipeline to export Juba's crude.

The project is expected to be funded by regional financial institutions, governments and international lenders, with China believed to have a major stake.

Lamu residents protest that the huge port, although located some 10 kilometers from the UNESCO-listed Island, will impact on their livelihoods and accuse the government of ignoring their concerns

President Mwai Kibaki said "I want to assure you that my government will compensate those affected by the development of the corridor in accordance with the law. While developing Lamu port, all necessary precautions must be taken to ensure that there is minimal interference with the delicate ecosystem and cultural heritage," he said.

LAPSSET will address transport challenges facing the Northern, Eastern and Coastal parts of the country, and is expected to generate employment and act as a catalyst for productive economic activities in various sectors of the economy.

Minister for Transport Amos Kimunya said the project that has been at least 40 years in the making will spur industrialization along the corridor as well as facilitate technology transfer.

"Other proposed developments include the international airports in Isiolo, Lamu and Lokichoggio. Resort cities along the corridor and oil refineries in Lamu and even one in Isiolo," he revealed.

The Power Purchasing Agreement recently finalized between Kenya and Ethiopia will see up to 400 Megawatts of power imported from Ethiopia to boost construction of the Lamu Port.

Ethiopian Prime Minister Meles Zenawi said the LAPSSET project comes at an opportune time and once complete will be a crucial segment on the Great Equatorial Land Bridge that will connect the Eastern and Western coasts.

"The significant economic gains we have registered in recent years have put a heavy strain on our existing infrastructure. If our region's high rates of economic growth are to continue unimpeded we must ensure our infrastructure development precedes the pace of our economic development," he said.

NIGERIA

Nigeria Sets Budget for Warri Refinery TAM

Nigeria’s federal government has budgeted N94.2 billion for the Turn Around Maintenance (TAM) of Warri Refining and Petrochemicals Company (WRPC).

The TAM, which is part of measures to curtail petroleum products importation, is expected to last between 24 to 36 months with an upgrade for long term operative plan of 50 years.

The Acting Managing Director of WRPC, Mr. Samuel Babatunde, made the announcement to the Senate Committee on Petroleum Resources (Downstream) on a weekend oversight tour of the facility.

A similar TAM is being planned for the Port Harcourt refinery at $463 million, which is scheduled to commence in October with the commissioning date put at December 2012.

In his presentation to the Senator Magnus Abe-led committee, Babatunde, who also doubles as the Executive, said that the original builder of the Warri refinery, Saipem, has been selected as the contractor to handle the rehabilitation of the refinery.

"The $600 million figure is not sacrosanct; it's a rough estimate. It's just an estimated value," adding that there is a "two to three year program to rehabilitate all the refineries in the country."

Major challenges confronting the WRPC, according to Babatunde, are vandalizing of its pipelines and crude oil theft from Escravos.

"We are victims of pipeline vandalizing and disruptions...There is a running battle to keep our plants running at even 25 per cent; it's a directive from Abuja."

On disruptions of crude oil supply to the WRPC, Babatunde said: "Only 40-50 per cent crude pumped from Escravos gets to the WRPC. The remaining are vandalized.

"In fact, in less than 30 minutes of pumping crude from Escravos, there is a disruption in the system...The refineries are in a terrible state of disrepair but some works are in progress."

RUSSIA

Gazprom Adopts Moscow Refinery Modernization Program for 2012

Gazprom Neft has adopted a medium-term Moscow Oil Refinery investment program for the year 2012, according to which over 20 billion roubles will be spent.

The program is aimed at modernizing the production facilities of the Gazprom Neft Moscow Refinery, thus improving the quality of petroleum products, increasing the depth of refining, and enhancing the productivity and environmental efficiency of the enterprise.

In 2012, under the terms of the modernization program, construction of closed mechanical wastewater treatment facilities will be completed. This project will significantly reduce emissions of pollutants into the atmosphere and improve the refinery's waste treatment process. The Moscow Refinery is also planning to complete the reconstruction of its bitumen unit and chemical water treatment plant with a desalinated sulphur recovery unit.

As a part of the medium-term investment program, in 2012 the refinery will continue construction of a light gasoline fractions isomerization unit and a catalyst cracking gasoline hydro refining unit. These facilities will enable the enterprise to begin producing Ecological Class 5 fuels. In addition, the Moscow Refinery will continue the reconstruction of its diesel hydrotreatment unit and gasoline stabilization and secondary distillation unit.

Jacobs Receives Contract from Russia’s Afipsky Refinery

Jacobs Engineering Group Inc. announced April 10 that it was awarded a contract from Afipsky Refinery, located in the Krasnodarskij Region of Russia, to develop a basic engineering package for an amine regenerator unit, a sour water stripper and an expected 55 tons per day (TPD) sulfur recovery unit (SRU). All three units are part of a refinery extension project which includes a hydrotreater unit and a visbreaker unit.

Officials did not disclose the contract value.

The SRU design is based on Jacobs' proprietary EUROCLAUS® process and is being executed from Jacobs' office in Leiden, The Netherlands. Jacobs is working closely with the Moscow-based EPC contractor, Giprogazoochistka, who is Russia's leading engineer of gas treating units and SRU's.

A global leader in the design of SRU's, Jacobs has designed approximately 450 units around the world since 1985, including 15 SRU's in Russia and several countries in the former Soviet Union.

In making the announcement, Jacobs Group Vice President Robert Matha stated, "We are proud to receive this new contract and look forward to working with Giprogazoochistka to support Afipsky Refinery's important expansion project."

IRAQ

Tratos Wins Baghdad Daura Refinery Cable Contract

Tratos has been awarded a €1 million contract to supply Iraq's state-owned Midland Refineries Company (MRC) with cables for installation at the Daura Refinery in Baghdad. A range of power cables, high temperature cables and fire resistant cables have been supplied to MRC, a new customer for Tratos, as part of the modernization process of the Refinery.

The Daura refinery, located in the south of Baghdad, was constructed in 1953 and started operations in 1955. It daily produces 3 million liters of gasoline, 1.5 million liters of kerosene and 2 million liters of gas oil, along with other products going to local power plants and industrial use.

Tratos Cavi has been producing cables for use in the oil and gas industry throughout its 40-year history. The cables are manufactured to all the relevant American, British and European standards including BS6883, NEK 606 & UKOOA.

Iraq Will Need International Help to Hit Refinery Goal

Iraq wants to follow the current expansion of its oil production capacity with an expansion of its domestic refining industry, but won't be able to do so without the cooperation of international companies, the country's Deputy Prime Minister for Energy Hussein al-Shahristani said on April 14.

Iraq aims to produce between 5 million and 6 million barrels of oil a day by 2015, around double its current level, Shahristani said at the Iraq Refinery conference in London. By 2020, Iraq would like to more than double its domestic refining capacity to 1.5 million barrels a day, he said.

"There is an urgent need to upgrade and build new refineries to improve self-sufficiency and reduce reliance on expensive imports," he said. Iraq cannot achieve this goal without, "the full cooperation of international oil companies," he said.

Iraq is willing to improve current incentives designed to attract refining investment by offering guaranteed margins to companies who build plants in the country, he said.

OMAN

Oman’s Duqm Refinery Feasibility Study to Be Ready in Two Months

Oman Oil Co., the state-run petroleum investor, and International Petroleum Investment Co. of Abu Dhabi are preparing a study on the capacity of their planned Duqm refinery, Oman's oil minister said.

"They are finalizing the study to determine the size of the refinery," Mohammed Al Rumhy said yesterday in a phone interview from Dubai. "It should be ready in the next month or two."

Oman, the biggest Arab oil producer that is not a member of the Organization of Petroleum Exporting Countries, is going ahead with the project that has been planned at the port of Duqm since at least 2006, according to Al Rumhy.

IPIC said in a bond prospectus in October it would go ahead with a 230,000 barrel-a-day plant at Duqm that will cost $6 billion with the investment split evenly with Oman Oil. Duqm Special Economic Zone Authority has already reserved land for the project at Duqm, which will take five years to complete.

If everything goes well, this will be the third and the biggest refinery in Oman, after Mina Al Fahal and Sohar.

The refinery, which was originally planned towards the end of 2006, got delayed due to cost escalation. Once refinery takes concrete shape, downstream projects will also come up.

Oman government and private sector are heavily investing for developing a commercial port, drydock, airport, fishing harbor, industrial zone, township, tourism area, logistics area, roads and utilities like power and desalination in Duqm. Oman will produce an average 900,000 barrels a day of crude and condensate this year, little changed from the end of last year, Al Rumhy said last month.

McIlvaine Company,

Northfield, IL 60093-2743

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

E-mail: editor@mcilvainecompany.com