Sunoco, Inc. and The Carlyle Group, L.P. have completed the formation of Philadelphia Energy Solutions, a joint venture that will operate the Philadelphia Refinery. The refinery processes 330,000 barrels of crude oil per day into various refined products.

Under the terms of the joint venture agreement, The Carlyle Group will hold the controlling interest and will oversee day-to-day operations of the joint venture and the refinery. In exchange for contributing its refinery assets to the joint venture, Sunoco retained a 33 percent non-operating minority interest.

Brian P. MacDonald, chairman and chief executive officer of Sunoco, Inc., said: "We are pleased to have facilitated a joint venture with The Carlyle Group which will save existing jobs, create new jobs, and provide additional business opportunities in Pennsylvania."

Utah Awaits Test Results on Holly Refinery Accident

State environmental regulators were waiting for test results after an explosion in early September at the Holly refinery in Woods Cross that sprayed crude oil over area residents.

Residents remain uneasy about the health impacts of the oil. They want to know who can ensure the accident isn't repeated at any of the five refineries in Salt Lake and Davis counties -- an answer the agencies themselves say they can't provide.

"What kind of measures do they have in place to prevent this from happening in the future?" asked Cecilee Price-Huish, who has led refinery-area residents in watch-dogging recent efforts by Holly and other refineries to expand or modify their plants.

"Do we just trust the industry to say we're using the best control practices? How do we know? Who can tell us if this is safe?"

Regulators and residents say HollyFrontier Corp. has responded swiftly to the explosion, which occurred September 6 when a seam ruptured on a heated crude oil storage tank. Some 8,000 gallons of oil spattered over more than a mile from the plant onto cars, homes, yards and anything else in its path.

Mike Astin, the plant's environmental manager, said the cleanup -- tearing out oily lawns and pressure washing homes and pavement -- probably would continue for weeks. Noting that oil is considered non-hazardous and low in volatile organic compounds, he compared the residual oil to what would happen to an exploded can of motor-oil, only "this is gooier and stickier."

And he cautioned against eating any oil-tainted garden vegetables. "Just because [the oil] is non-hazardous doesn't mean you can eat it," he said.

The Utah Division of Water Quality were awaiting test results of Davis County's Mill Creek and state air regulators will look at whether the company exceeded its daily limit of air pollution.

Amanda Smith, director of the Utah Department of Environmental Quality, noted that although her agency oversees various types of pollution, there is no one, single agency responsible for incidents like this one.

"We are in the process of doing an investigation," Smith added. "We're looking for a full accounting [of what caused the explosion] and a report."

A spokesman for the U.S. Environmental Protection Agency said federal regulators have a limited role in such incidents unless the oil goes into a waterway or the state asks for help.

At the Davis County Health Department, Dave Spence, said his agency will continue to monitor the cleanup even though health-related concerns are minimal.

"From everything we've heard from Holly," he said, "there are no health issues" with the waxy crude spatter.

Though residents might question why officials would take the company's word for it that the oil poses no hazard, Spence said that's the approach on all kinds of spills. "They're the ones [at the companies] that know what's in their product," he said.

As for the question about what agency is responsible for preventing future accidents of this kind, Spence echoed other officials when he said: "That's a tough question, and I don't have an answer for it."

Meanwhile, Brian Moench disputed the notion that oil release poses no harm, and he pointed to a key study linking exposure to oil over a few weeks to lung and chromosomal damage.

"Nobody can say what this can do to any particular person in the short term or the long term," said Moench, who co-founded the group, Utah Physicians for a Healthy Environment, to address concerns about the health impacts of the refineries.

Delta Looking to Transport Bakken Crude by Rail to Pennsylvania Refinery

Delta Airlines (DAL) is looking at ways to bring less expensive crude from the Bakken formation in North Dakota to its newly purchased refinery in Pennsylvania, Chief Executive Edward Bastian said September 6.

Speaking at the Deutsche Bank Aviation and Transportation Conference, Mr. Bastian said the company is working with railroads to find a way to take advantage of the price difference between different types of crude.

Crude from Bakken is priced off the U.S. benchmark--West Texas Intermediate, or WTI--while the refinery currently uses north Atlantic crudes, which is based on the European standard, Brent crude. WTI futures cost about $18 less a barrel than those of Brent, and Bakken actually is priced at a discount to WTI because of the lack of infrastructure to transport it from Montana.

"We're looking at options to be able to bring in Bakken crude from the Dakotas at net prices that would be equivalent to WTI or even lower," he said. "It's very early to draw any conclusions, but this could lead to even larger savings."

Delta's subsidiary, Monroe Energy LLC, bought the Trainer refinery from Phillips 66 earlier this year with the aim of producing jet fuel. The 85,000 barrel-a-day refinery has been idle for nearly a year, and Monroe has spent the last several months modifying it to more than double its jet fuel output.

Delta expects to save at least $300 million annually in jet fuel costs once the refinery is up and running, which is expected by the end of the month. Mr. Bastian said the company could save even more if it found a cheaper source of crude oil.

The U.S. pipeline network has been strained by the boom in shale oil production, and companies are scrambling to find other ways to get crude from fast-rising production areas like North Dakota. This year the state jumped ahead of Alaska and California to become the second-largest crude oil producing state in the U.S.

Mr. Bastian said the company is studying whether it will continue to be worth investing in transporting oil from North Dakota if the spread between WTI and Brent crude narrows.

"We're working with the railroads," he said, adding that the company was "getting good intelligence" on rail transport of crude from the region.

Several other refiners and producers have or are thinking of making similar investments.

Valero Energy Corp. (VLO) Chief Executive Bill Klesse said at another conference September 6 that refiners "should all be in the railcar business."

Valero spokesman Bill Day said the company is buying a "significant" number of rail cars to bring crude to its refineries.

"We have found that because of the high lease rates and long lease periods, it's more economical to purchase cars," he said.

Mr. Day said Valero had been moving Bakken crude to its Memphis refinery by rail for some time, and was looking into rail options for other refineries as well.

Phillips 66 (PSX) has bought 2,000 rail cars to bring crude from the U.S. interior to its refineries. Tesoro Corp. (TSO) has said it will start bringing Bakken crude to its Anacortes, Wash., refinery by train starting in September. Statoil ASA (STO, STL.OS) has said it is leasing more than 1,000 railroad cars to carry crude from North Dakota oilfields to refiners.

Early September Outages but Little Damage from Isaac Seen by Energy Companies

Oil and gas companies in the Gulf Coast said September 4 that Hurricane Isaac left little damage to energy infrastructure in its wake, but more than half of the offshore oil output in the region and some refining capacity remained offline as crews worked to restart facilities.

The U.S. Bureau of Safety and Environmental Enforcement, which oversees offshore oil and gas production, reported that about 51.5% of the oil produced in the Gulf's federal waters, or 710,866 barrels a day of crude, was offline. The bureau also said 29% of the Gulf's natural-gas production, or 1.31 billion cubic feet a day, remained shut in.

That is down from 58.3% of oil production and 38.6% of natural-gas production that remained offline September 3.

Crews continued to return to platforms and rigs in the Gulf. Just 21 of 596 Gulf production platforms and two of 76 drilling rigs operating in the Gulf remained evacuated as of the morning of September 4, according to the BSEE's tally, compared with 71 platforms and six rigs without personnel September 3.

Some energy companies operating offshore said they were still waiting on crucial infrastructure to come online before fully ramping up oil and gas production.

Anadarko Petroleum Corp. (APC) said it had restored production at its Independence Hub platform and was ramping up production there and at other platforms "as third-party-operated pipelines and infrastructure allow." The company was waiting on infrastructure availability to restart production at the Neptune platform.

A spokesman for BP PLC (BP) said the company was continuing to restaff offshore operations and was working to resume normal operations there.

Stone Energy Corp. (SGY) said it was producing 18,000 barrels of oil a day in the Gulf as of September 3, about half its normal production there. Two fields, the Amberjack and Pampano, remained shut in while waiting on onshore processing facilities.

Enterprise Products Partners L.P. (EPD) said inspections of its offshore platforms evacuated because of the storm "revealed no significant damage."

Enterprise's onshore natural-gas processing facilities in southern Louisiana and its Acadian natural-gas pipeline system were up and running, but operators of the infrastructure that feeds Enterprise's assets in southern Louisiana were "in various stages of resuming operations as they address lingering high-water and power issues," the company said in a news release.

McMoRan Exploration Co. (MMR) said its rigs, which were secured and evacuated for the storm, were unharmed. Crews have returned, and operations, including exploratory activities and well recompletion, have resumed.

Hercules Offshore Inc. (HERO), an offshore drilling company, said all its rigs and liftboats in the Gulf have been accounted for, and crews haven't found any damage in preliminary inspections.

Refiners said their facilities sustained little damage, and they were working to restart operations. The U.S. Department of Energy reported that nearly all refineries affected by the storm restarted or were in the process of doing so, though some were still running at reduced rates.

Marathon Petroleum Corp. (MPC) said its 464,000-barrel-a-day Garyville, La., refinery was back to normal operations following the storm.

Phillips 66 (PSX) said power was restored to its 247,000-barrel-a-day Alliance refinery in Belle Chasse, La., by early September 4, and staff was in the process of bringing it back online. The company said at the time it would be a few weeks before the refinery was operating at normal rates.

Royal Dutch Shell PLC and Motiva Enterprises said September 2 that the refinery in Norco, LA, was restarting, though some units were still operating at reduced rates. The Convent, LA, refinery was restarting as well, though some electrical power issues were still being resolved.

Hurricane Isaac Creates Slight Delay for Valero Hydrocracker Project

Valero Energy Corp. Chief Executive Bill Klesse said work on a diesel-making unit at the company's St. Charles refinery in Norco, La., is now likely to be completed in early 2013, rather than later this year as the company had previously estimated.

But the hydrocracker is still on track to be fully operational in the second quarter of 2013, he said, though Hurricane Isaac had delayed work at the 205,000-barrel-a-day refinery.

Similar work on the hydrocracker at Valero's 290,000 barrel-a-day refinery in Port Arthur, Texas, is still expected to be operational during the fourth quarter of this year.

"We did have a hurricane at St. Charles that shut down the project," Mr. Klesse said. "So we have lost a couple of months on this project there. But they are getting done and coming together."

Bill Day, a spokesman for the company, said the hurricane might delay the St. Charles refinery unit's operation by a week or so, but "it's pretty much the same time frame," as what was discussed during the company's second-quarter earnings conference call, he said.

Valero began restarting its St. Charles refinery, as well as its 125,000 barrel-a-day refinery in Meraux, La., after shutting them down as a precautionary measure before the storm.

California’s Bay Area Refiners to Pay for New Air Monitors

The Bay Area air pollution board said September 10 it will expand its system of air monitors near oil refineries to detect smoke and fumes that were largely missed in the August 8 Chevron refinery fire in Richmond.

"People have a right to know what's in the air they breathe," said John Gioia, a Contra Costa County supervisor and chairman of the nine-county air board.

The extra monitors should be able to pick up routine long-term pollution as well as toxic releases during emergencies, or during accidental releases, members of the Bay Area Air Quality Management District board said.

Everything from portable sniffing machines to balloon monitors that could be released into smoke plumes will be evaluated, agency managers said at a meeting attended by dozens of West Country Costa residents and environmental leaders.

"We need an expanded monitoring system to know what's in the air after incidents like this," said Gioia, of Richmond.

Gioia said refineries will pay for the new monitors.

Air district board members said they will examine options for new monitoring devices as they create a new rule to regulate what pollution information refineries will be required to collect and report to the public.

The air district had been scheduled to take more than a year to come up with the rule. In the wake of the Chevron fire, the air district now intends to enact the rule in 2013, said Jack Broadbent, the district's executive director.

After the Chevron fire, more than 15,200 people visited hospitals with complaints of lung, eye and throat irritation and headaches and dizziness.

Because the smoke went up 1,000 to 5,000 feet in the air and then dispersed, air pollution monitors in West Contra Costa failed to detect any big jump in smoke particles, air district officials said.

The district has about 40 fixed pollution monitors, including eight that monitor for fine soot particles -- the pollutants suspected of causing the most health problems after the fire.

The air board will investigate the latest technology for portable soot monitors, but they are not as reliable as portable monitors for gaseous pollutants, said Eric Stevenson, the district's director of technical services.

It's not enough to get some pollution data, but rather results that can be quickly analyzed, understood and communicated to the public, Stevenson said.

Several environmental leaders said the air district has dragged its feet for years, talking about better monitoring, but the talk dies after memories fade of the latest incident.

Denny Larson of Global Community Watch based in El Cerrito said the air district has balked at adopting "21st century technology" to monitor refineries.

"Things are about to change," because of the Chevron fire, Larson said.

Sunoco Transfers Philly Refinery to Carlyle Group JV

Sunoco Inc. Chief Executive Brian P. MacDonald on September 19 handed over the ceremonial keys to the company's Philadelphia oil refinery, keeping 850 jobs and giving new life to the 146-year-old facility.

Officials marked the transfer of the plant to a new joint venture operated by the Carlyle Group, the Washington D.C. private equity firm.

Business executives, labor leaders and elected officials of both parties stood together and lauded the cross-cultural, bipartisan cooperation that led to the agreement in July to keep the plant operating after Sunoco announced last year it wanted out of refining.

The Carlyle Group will be responsible for operating the facility, the largest refinery on the East Coast. It says it is "reimagining" the plant as a regional energy hub that will rely upon growing production of Marcellus Shale natural gas to manufacture motor fuels, electricity and chemicals.

"We're not rescuing anything," said Philip L. Rinaldi, the chief executive of the new venture called Philadelphia Energy Solutions,. "We're coming in here to build industries."

Sunoco, which is being acquired next month by Energy Transfer Partners L.P. of Dallas, will retain a one-third ownership in the refinery and will remain commercially conjoined with the venture. Sunoco's retail fuel stations will be the refinery's biggest customer, and the refinery will be a large customer for Sunoco's regional pipeline network.

"Nobody wants this to be a success more than Sunoco does," said MacDonald.

The refinery's transfer to Carlyle marks the end of more than a century of fuel manufacturing for Sunoco, which began refining in 1894 with the acquisition of a plant in Toledo, Ohio.

Sunoco announced last year it planned to exit refining, saying there was an oversupply of regional production capacity to meet a shrinking U.S. market for motor fuel. It closed its Marcus Hook refinery, and said it received little interest in the 330,000-barrel-per-day Philadelphia plant, which Sunoco created out of two refineries - Chevron and Atlantic - that it had acquired about 20 years ago.

But under pressure from political and labor leaders to save the refinery and its jobs, Sunoco's MacDonald reached out to Carlyle in March and suggested the joint-venture structure, which dramatically reduces Carlyle's up-front capital costs.

The deal involved a remarkable degree of cooperation between Sunoco, Carlyle, labor and political leaders, including officials in the White House. Gov. Corbett, a Republican, and Democrat, U.S. Rep. Bob Brady along with Leo W. Gerard, the international president of the United Steelworkers, who extolled the union's cordial relationship with Carlyle executives.

The September 19 transfer was ceremonial - the formal closing occurred about two weeks previously.

The ceremony occurred while leaders of the natural gas industry are convening in Philadelphia for the Shale Gas Insight conference to examine Pennsylvania's Marcellus Shale boom.

A focus of the conference at the Pennsylvania Convention Center is new industrial markets for natural gas. Philadelphia Energy Solutions is an example of a business that is being reconfigured to take advantage of new natural gas supplies, which are priced at about one-sixth the cost of an equivalent amount of petroleum.

Rinaldi said the refinery would be a "major consumer" of shale gas to enhance fuel production, allowing the plant to extract more gallons of gasoline, jet fuel and diesel from each barrel of crude oil.

Rinaldi said the plant would also use shale gas to produce steam and electricity at a new cogeneration plant, He also envisions building units to produce liquid fuels from shale gas and to make urea ammonium nitrate fertilizer from natural gas.

BRAZIL

Petrobras Faces Allegations of Improperly Treating Refinery Wastewater

Brazilian state-run energy giant Petroleo Brasileiro could face criminal and civil actions after federal police alleged the company isn't properly treating wastewater from refining and oil production before releasing it into local waterways and the Atlantic Ocean, a police official said.

"The investigation has been completed and forwarded to the federal prosecutor's office," Fabio Scliar, who heads the federal police's environmental crimes unit in Rio de Janeiro, told Dow Jones Newswires in a phone interview.

According to Mr. Scliar, a federal prosecutor intends to file criminal charges against two executives at a Petrobras refinery after a months-long investigation uncovered evidence that water contaminated with heavy metals and other pollutants has been released from a refinery north of Rio de Janeiro into the Iguacu River.

The investigation also raised questions about how Petrobras treats and discards water produced along with oil at offshore platforms, Mr. Scliar said. Evidence of potential irregularities with treatment of the wastewater was also forwarded to the federal prosecutor's office, which plans to open a civil inquiry, Mr. Scliar said. So far, no criminal misconduct has been discovered related to offshore wastewater treatment, he said.

Petrobras denied the allegations. All contaminated water produced during the refining process is treated and discarded according to law, the company said in an email.

"Water produced with oil on platforms is treated and discarded in accordance with Brazilian law, which is just as rigorous as laws in the U.S. and Europe," Petrobras said. Contaminated water from platforms that lack onboard treatment equipment is sent to other platforms or installations, the company added.

The federal prosecutor also intends to forward the investigation's findings to the attorney general's office in Brasilia, Mr. Scliar said. That will allow all states in Brazil with oil-related activities to accompany the civil inquiry and open investigations, Mr. Scliar added.

The action "will open the debate about how these oil-related residues are being treated," Mr. Scliar said.

VENEZUELA

Venezuela’s Amuay Refinery Operating at Half Capacity

Rafael Ramirez, the Minister of Oil and Mining and the head of Venezuela's national oil company PDVSA, announced September 13 that the Refinery of Amuay is operating at 51% of its capacity producing 330,000 barrels per day.

The announcement follows an explosion and subsequent fires at the 640,000-b/d refinery in Falcon state, northern Venezuela, in late August in which more than 40 people were killed and dozens more injured, and nine storage tanks set on fire. Ramirez explained that of the refinery's five distillation plants four are now operative. On September 1, Jesus Luongo, the general manager of the Paraguana refinery complex, had confirmed that the Amuay refinery has resumed operations and was processing 170,000 barrels per day (b/d) of oil. The Amuay refinery, along with the Cardon refinery, constitutes the Paraguana refinery complex.

The Amuay accident constituted the worst accident in Venezuela's oil industry history, and the resumption of full operation remains a sensitive topic for President Hugo Chavez ahead of the pivotal October presidential election, especially over claims by the opposition that it was caused by a lack of maintenance. In any case, the event--along with earlier accidents at the country's refineries--underlines the increased operational constraints faced by PDVSA following the December 2002-February 2003 oil strike, after which Chavez expelled more than 18,000 workers, most of them experts in their fields.

Meanwhile, doubts will remain over the real damage to the refinery and how long it will take to fully resume operations. Furthermore, the increased number of accidents and system failures reported at the country's existing refineries and upgrades in recent years has raised questions over issues such as safety, maintenance, and investment. The refining sector has also been impacted by electricity shortages.

Foster Wheeler Awarded Design Contract for New Batalla Santa Ines Refinery in Venezuela

Foster Wheeler AG announced September 21 that a subsidiary of its Global Engineering and Construction Group, in consortium with Hyundai Engineering and Construction Co., Ltd., of South Korea, has been awarded a contract by Petróleos de Venezuela, S.A. (PDVSA) for Phase I (Hydroskimming section) of the new Batalla Santa Ines Refinery to be built in Barinas, Venezuela. Foster Wheeler’s scope of work includes early detailed engineering design and the delivery of an open book estimate for the crude distillation unit, storage and blending unit and fuel distribution plant.

“Together with the award of the engineering, procurement and construction management services contract for PDVSA’s El Palito Refinery expansion project, announced on July 19, 2012, this award reflects PDVSA’s continued confidence in the strength of our refining technical expertise and the quality of our project execution.

The terms of the contract were not disclosed. The booking was included in the company’s second-quarter 2012 bookings. The main release of the detailed engineering design work is expected to be booked at a later date, upon release by the client.

ASIA

Asian Refineries Ready to Respond to Demand for Diesel

Asia's oil refineries are getting ready to cash in on a diesel supply crunch that should keep prices high over the next few years as major regional consumers such as Australia step up imports, while refineries in Europe and Japan are closing down.

Asian refiners will capitalize on the situation by producing more diesel and less of its competing transport fuel, gasoline, but the deficit will persist in the face of rising exports to Europe, where poor economics is forcing plants to shut, and Africa, where economic growth is boosting use.

"Growing deficits in China, India, southeast Asia and Australia will provide more opportunities for Asian export refineries to increase exports to these closer-to-home markets," said Sushant Gupta, a senior downstream analyst at Wood Mackenzie.

"Deficits for diesel, mainly in Europe and Africa, will continue to provide arbitrage opportunities for Asian exporters, thereby creating a need for greater diesel production."

Diesel is the oil product Asia uses most widely, accounting for 30-40 percent of refinery output, to run generators and water pumps and keep lorries and trains on the move.

Diesel demand in Asia is poised to grow about 14 percent by 2015 to reach 9.8 million barrels per day (bpd) from around 8.6 million now, led by China, India and Australia, data from IHS and Wood Mackenzie showed.

The switch from gasoline to diesel is likely to yield an additional 250,000 to 300,000 bpd of diesel in Asia by 2015, Wood Mackenzie analysts said.

A refinery can typically switch about 1 to 2 percent of its output between the two fuels without altering its configuration or production process.

But even after the switch from gasoline, Asian diesel production is only expected to grow 9.9 percent to 10 million bpd in 2015 from 9.1 million bpd at present.

That means the diesel surplus pool will shrink to 200,000 bpd by 2015 from 500,000 bpd now, IHS said. The surplus helps keep regional spot prices in check and also helps provide exports to Europe and Africa.

Net diesel exports from Asia to Europe, Africa, Australia and parts of Latin America are expected to increase 5 percent to 765,000 bpd by 2013 from 729,000 bpd in 2009.

The tightness is being reflected in the Asian diesel market. Profits from processing a barrel of crude into diesel averaged US$16.97 in the first eight months of 2012, or more than double those of 2009, data compiled by Reuters showed.

Profits were highest for the year in August, at US$21.01, the most in 14 months.

In contrast, processing crude into gasoline has become less profitable. A refiner earned US$9.18 by producing gasoline in the same months of this year, an increase of 63 percent from 2009, with the year's highest struck on August 13, at US$14.94 a barrel.

Favorable economics for diesel is already prompting some refiners in the region to switch. Diesel yields have risen to 34.6 percent in 2011 from 33 percent in 2006, said Praveen Kumar, an analyst with FACTS Global Energy.

"For this year, we have been producing less gasoline and more diesel as the margins for diesel have been much better," a north Asian refiner said, declining to be identified. "Cracking margins change every day, so it really depends on the trend."

The limitation on altering output, by at best 1-2 percent, means the diesel supply crunch in Asia is here to stay, if not worsen, even though economics dictates that more and more refiners should opt to boost output of the fuel.

"Although refiners are motivated to capture the improved margins by switching yields, they are constrained by several factors including configurations, operational flexibility, crude diet," said Kumar.

Asian refiners mostly own configurations based on gasoline-making fluid catalytic cracking units and a further push towards diesel will need fresh investment for plant upgrades, he said.

That may prove too costly, especially with a weak outlook for overall global energy demand growth.

"It is possible that refiners might switch their fluid catalytic cracking units to maximize diesel production with better margins for diesel, but they won't be able to switch much," another refinery source said.

Older refineries can try to circumvent costly upgrades by importing crude that yields more diesel, but that will also mean added investment on sulfur-removal units to produce the cleaner-burning grades becoming mandatory in most countries.

"In an existing refinery, it is not that easy," said Victor Shum, managing director for downstream energy consulting at IHS Purvin & Gertz. "A diesel-oriented refinery may be more expensive. The market may need more diesel, but it costs less to make a gasoline-oriented refinery."

The diesel supply demand is set to get worse.

Japan, the world's third-largest oil consumer, is scrapping capacity after a government order to boost efficiency by upgrading or mothballing refineries. A shrinking domestic market offers refiners little incentive to invest in costly new units.

The latest refinery shutdown news comes from the country's fourth-biggest refiner, Cosmo Oil Co, which is to close its 140,000 bpd Sakaide refinery next July, and may have to shut further capacity to meet a 2014 deadline.

"From the beginning, Japan is geologically handicapped because we need to import from the Middle East to the Far East and then ship products back to the West again," said Hiroshi Kiriyama, senior executive officer of Cosmo Oil Co.

The increase in demand and refinery upgrades in Asia means the yield of gasoil from regional refineries will reach 36 percent by 2015, according to Kumar at FACTS Global.

That is more so, according to Wood Mackenzie analysts, because additional capacity in the Middle East and declining exports to the United States are likely to shut out 140,000 bpd of gasoline exports from Singapore and India, weighing on prices.

"To balance out gasoline and diesel on a global level, Asia should play some part," Wood Mackenzie's Gupta said.

"We believe that Asia should shift on average around one percent of production from gasoline to diesel by 2015."

AUSTRALIA

Shell Gets $94 Mln Waste Water Treatment Project Underway in Australia’s Geelong Region

One of the largest and most innovative water projects ever undertaken in Australia’s Geelong region has gone into operation.

Waste water has begun to flow into the Northern Water Plant in Corio, which when fully operational will save about two billion liters of drinking water - enough for 10,000 homes - every year.

The $94 million plant will take sewage from North Geelong and waste water from the Shell Geelong Refinery and, using advanced processes including biological treatments, ultra filtration and reverse osmosis, produce top-class recycled water to pump back into the refinery.

It will eliminate up to 95 percent of Shell's reliance on Geelong drinking water for its operations, meaning big water savings for the region.

"Currently the refinery uses about five million liters of water a day, so this drops that down to really just the water that gets used on-site for drinking," Shell Geelong general manager Mark Schubert said.

The recycled water will also be used to water the nearby Stead Park reserve.

"It's about providing water which is fit for purpose and the benefit is it's not seasonal, because Shell will be requiring the water year-round," Barwon Water managing director Joe Adamski said.

Shell was the largest contributor to the project, outlaying $47.5 million, while the Federal Government put in $20 million, Barwon Water $17.5 million and the State Government $9.2 million.

Shell's contribution is seen as a strong endorsement from the oil company in its Geelong operations amid tough times for the refining business.

INDIA

Punj Lloyd Awarded Crude Oil Storage Contract at Mangalore Refinery

In India, the Ministry of Petroleum and Natural Gas has awarded Punj Lloyd, an integrated design, engineering, procurement, construction and project management services provider, an Rs330 crore contract for the construction of a planned oil storage cavern in Mangalore, the Economic Times reports.

The Mangalore-based underground facility, which will be located close to Mangalore Refinery and Petrochemicals, will feature two 900m-long caverns with a total storage capacity of 1.5 million tonnes of crude oil.

The project is slated for completion in just less than 30 months' time. Punj Lloyd's contract includes the engineering, procurement, construction and commissioning of infrastructure related to receipt and delivery of crude oil, metering, heating, wastewater treatment and flaring, among other things.

Speaking about the contract, Punj Lloyd's director P K Gupta was quoted as saying: 'We have constructed over 300 tanks globally, with over 8 million m3 of storage capacity. We are proud to be a part of this strategic initiative of the Government of India to build reserves of crude oil at important locations, which will feed a cluster of refineries.'

India’s Kerala State, BPCL Sign MoU to Expand Refinery

India’s Kerala government and Bharat Petroleum Corporation (BPCL) signed a Memorandum of Understanding (MoU) September 14 at the Emerging Kerala-2012 investment meet for a massive Rs.20,000-crore Integrated Refinery Expansion Project (IREP).

Kerala Chief Minister Oommen Chandy and BPCL chairman R.K. Singh signed the MOU. Currently, BPCL has a refining capacity of 9.5 million metric tonnes per annum (mmtpa) in Kochi, producing Euro 111/IV-compliant auto fuels and other petroleum products.

"This is a huge step for the investment scenario in the state," Chandy said after inking the MoU.

Singh said that the expansion would see the refining capacity of the refinery increase from 9.5 mmtpa to 15.5 mmtpa. The refinery would also be modernized and re-equipped to produce auto fuels complying with Euro 1V/V specifications.

The expansion would also come with the upgrading of low-value refinery residue stream to value-added products and production of propylene, a major petrochemical feedstock that could trigger even further investment.

"The project is scheduled to be completed by Dec 2015. We have also signed an MoU with petrochemical major LG Chem, South Korea, for setting up of a propylene-based petrochemical complex," Singh said.

Once complete, this project is expected to offer direct employment to 1,000 people and indirect employment to 25,000 people.

Industrial units in the state would benefit from the expansion, as about 1.3 mmpta of petcoke (petroleum coke, which could be used as fuel) will be produced by the plant which could benefit state PSUs. The additional production of sulfur will benefit major industries like the FACT Alwaye and Travancore Titanium.

Chandy said that as part of the MoU, the state government has agreed to waive certain taxes, besides extending a soft loan to BPCL.

SINGAPORE

Shell Could Face up to $401,700 in Fines after Being Charged with Safety Lapses in Singapore Refinery Fire

Singapore's government has charged Royal Dutch Shell PLC for safety lapses that led to a major fire at the Anglo-Dutch oil company's 500,000 barrel-a-day refinery in the city state last year.

Singapore's Ministry of Manpower filed a charge against Shell on August 31 for an offense under the Workplace Safety and Health Act for the lapses in safety, the ministry said in a statement emailed to Dow Jones on September 4. The case was to be heard in the Subordinate Courts on September 25. The company faces a fine of up to US$401,700 (S$500,000)for the breach if convicted, according to the statement.

The refinery, at Pulau Bukom, is Shell's biggest plant worldwide.

"We are not in a position to comment, as the matter is currently before the courts. We have extended our full cooperation to the relevant authorities. Safety is a top priority for Shell," a company spokeswoman said in an emailed statement.

"We regret this incident and are applying the learnings to avoid such an occurrence in the future," the spokeswoman added.

The incident occurred in September last year when Shell was conducting maintenance work on a pipeline that started from a naphtha tank and passed through a pumphouse where petroleum products were mixed and blended.

On Sept. 28, a fire broke out at the pumphouse and escalated with multiple explosions. It was fully extinguished after 32 hours, according to the government statement.

The fire didn't cause any serious injuries, although the pumphouse was badly damaged and the Bukom refinery had to be temporarily shut down.

The refinery was using an open-draining method to remove petroleum products from the pipeline. The open-draining method used trays to collect naphtha flowing out of the pipeline through valves and a loosened flange joint that allowed the release of flammable vapors into the air, the ministry said.

Shell had also failed to deploy portable gas monitors that would have allowed measurements to be taken within the proximity of the open draining and would have alerted workers and safety staff to dangerous levels of flammable vapors, it added.

EUROPE / AFRICA / MIDDLE EAST

THE NETHERLANDS

Foster Wheeler Awarded EPC Contract for Distillate Hydrocracker Upgrade by Netherlands’ Zeeland Refinery

Foster Wheeler AG announced September 11 that a subsidiary of its Global Engineering and Construction Group has been awarded a contract by Zeeland Refinery N.V., a joint venture between Total and LUKOIL, for engineering, procurement assistance and construction management assistance for the upgrade of the distillate hydrocracker at the Zeeland Refinery located at Vlissingen, The Netherlands.

The value of the award was not disclosed and was included in Foster Wheeler’s second-quarter 2012 bookings.

The objective of the project is to maximize the throughput of the distillate hydrocracker by debottlenecking the unit’s reaction and fractionation sections of the distillate hydrocracker. Foster Wheeler’s scope of work is expected to be completed by June 2014.

EGYPT

Maire Tecnimont Announces New Contracts for over $173 Mln in Oil, Gas & Petrochemicals

Maire Tecnimont S.p.A. has announced that several contracts have been awarded to some of its subsidiaries for a total amount of over US$173 million (approximately €135 million) for Engineering, Procurement and Technology Services.

In Egypt the Group has been awarded through its subsidiary Tecnimont KT S.p.A. (TKT) an Engineering and Procurement contract for the realization of some processing units in the new refinery of Egyptian Refinery Company (ERC) in Mostorod, Cairo (Arab Republic of Egypt). The clients are a consortium between GS E&C, one of the world’s top EPC leaders, and Mitsui & Co. Ltd. and Mitsui and Co. Plant Systems Ltd., subsidiary of Mitsui & Co; GS E&C and Mitsui & Co are respectively South Korean and Japanese main contractors. The overall project amount is approximately €97 million. Completion is expected by the end of 2014.

The units to be built are:

• one Hydrogen Production Unit (HPU) of 100,000 Nm3/h capacity;

• three Sulfur Recovery Units (SRU) of 162.5 ton/day capacity each;

• one Tail Gas Treatment unit (TGT) of 325 ton/day capacity;

• one Amine Processing Unit of 90 m3/h capacity.

The new units are part of the project developed by the Egyptian Refinery Company (ERC), which involves the construction of a refinery for the production of fuels and other petroleum products, in line with the latest international environmental standards.

Moreover, the Group has received, through its subsidiaries Tecnimont, Stamicarbon and TKT, a series of awards, located in Bangladesh, Russia, China and other countries, for Licensing and Engineering Services, for a total amount of approximately €38 million.

These awards consolidate the track record of the Maire Tecnimont Group in the oil, gas & petrochemical business; in particular, with the refining project in Egypt the Group further strengthens its presence in North Africa, a strategic area in the Euro-Mediterranean region.

NIGERIA

Inter-Ministerial Rivalry May Derail $4.5 Bln Nigeria Refinery Projects

An apparent inter-ministerial rivalry is threatening to derail a move to establish six new refineries that would help reduce fuel importation in Nigeria.

The Ministry of Trade and Investment had last July signed a Memorandum of Understanding with two firms--one American and one Nigerian--to construct six modular refineries with a combined capacity of refining 180,000 barrels of crude oil per day.

The project is estimated to cost $4.5 billion (about N697.5 billion) and the first two of the refineries are expected to be completed within 12 months.

However, a disagreement between the trade ministry, on one hand, and the Ministry of Petroleum Resources and Nigerian National Petroleum Corporation (NNPC), on the other, is threatening to cripple the project.

They are giving conflicting accounts of their involvement, or non-involvement, in the project, even as their individual actions further reinforce the dispute.

Daily Trust learnt that while the trade ministry has failed to get both the petroleum ministry and the NNPC fully involved in the deal from the onset, the NNPC is showing lukewarm attitude towards the project even after receiving an official notification about it.

When the MOU was signed in July between the Minister of Trade and Investment Olusegun Aganga and the two firms, the US-based Vulcan Petroleum Resources Limited (PRSR Ltd) and Abuja-based Petroleum Refining and Strategic Reserve Limited, none of the NNPC's top management staff was there.

During the signing ceremony the minister did say that his ministry would work with the Ministry of Petroleum Resources and the NNPC to ensure the actualization of the project.

Mr Aganga signed on behalf of the Federal Government while the Vice-President of Vulcan Petroleum Resources Limited Jim Mansfield and the Chairman of Petroleum Refining and Strategic Reserve Limited Chief Edozie Njoku signed on behalf of their respective companies.

The NNPC, which controls the petroleum assets in the country, was not represented at the signing ceremony; and it later claimed ignorance about the project.

When contacted by Daily Trust on the issue, the Acting Group General Manager (Group Public Affairs) of the corporation, Mr Fidel Pepple, said he cannot say much because the "NNPC is not involved in that project."

However, Daily Trust learned that the Trade and Investment Ministry did write a letter to the corporation informing them of the project.

The ministry, in the letter, dated April 12, 2012, with the Reference No: PSTI/GEN/2012/294/Vol 1, introduced the firms, particularly the American partner, Vulcan Petroleum Resources, to the NNPC.

The ministry informed NNPC of the request of the American company to sign a Memorandum of Understanding with the government for the construction of the six modular refineries in partnership with the Nigerian firm (Petroleum Refining and Strategic Reserve Limited).

It was gathered that the NNPC did send a response to the trade ministry's letter, indicating its willingness to cooperate in the arrangement.

The letter, dated June 11, 2012, with Reference No: BD/GMD/06.12 and signed by Aminu Baba-Kusa, on behalf of the then Group Managing Director, NNPC, Mr. Austin Oniwon, commented "on the feasibility of the venture and a confirmation for the guarantee of crude oil supply to the proposed refineries".

It said the "establishment of modular refineries is practicable and is desirable to increase local refining capacity".

The letter further assured that the corporation will "make utmost endeavor to ensure crude oil supply to the planned six modular refineries."

However, it said, the crude supply will be "subject to availability and location of the refineries".

When contacted on the said letter, a source at the NNPC, who asked for anonymity, said the letter was the only correspondence they received from the trade ministry on the refinery deal.

"The NNPC management expected the ministry to get back to them for detailed discussion after that letter but they did not, only for us to hear about the MoU signing," the source said.

Some sources said the misunderstanding was a result of communication gap while others said it emanated from an apparent power play between the two sides.

SOUTH AFRICA

PetroSA Urges Govt to Advance $10 Bln to Hasten Mthombo Refinery Project

If government does not move quickly to give the go-ahead on the Project Mthombo oil refinery, South Africa could soon be sitting with a fuel shortage similar to that of Eskom's energy crisis, PetroSA's group chief executive, Nosizwe Nokwe-Macamo, has warned.

She said the country's national oil company was still waiting for the mega-project to receive the green light from government.

Nokwe-Macamo said if a decision was not taken soon, the country could find itself sitting with a fuel shortage, similar to the energy crisis experienced during Eskom's load-shedding period in 2008.

"As PetroSA, we believe firmly that South Africa cannot afford to postpone a firm positive decision on when the construction will begin on Project Mthombo," she said.

Nokwe-Macamo was addressing a business breakfast in Nelson Mandela Bay where Eastern Cape business people and government leaders discussed opportunities presented by the proposed oil refinery at the Coega industrial development zone (IDZ).

On completion, Mthombo, the $10-billion (R82-billion), 360000 barrel-a-day oil refinery, would be the biggest crude oil refinery in Africa and could secure the country's future fuel requirements.

Nokwe-Macamo said the country was already importing vast amounts of liquid fuel annually to meet demand and she warned that this figure was set to increase exponentially as the country's current refineries would need to be upgraded to produce cleaner fuels as required by government.

She said government had proposed implementing cleaner fuel standards by 2017 and said refineries would need to spend billions to modify processes and would therefore not make this deadline.

"All the refineries in the country will have to do one or other modification which will enable them to produce petrol or diesel that is specified according to the Euro 5 specs, which means more environmentally friendly products. This means there will have to be a lot of capital expenditure on all these refineries," she said.

Nokwe-Macamo said there was massive interest from neighboring countries as the project would have the capacity to alleviate fuel demands for the entire sub-Saharan Africa.

The refinery would be strategically located in the IDZ, at the heart of global trade flows, enabling it to market liquid fuel to countries around the world.

The refinery would be the first one on the continent to become operational already producing cleaner Euro 5 specification liquid fuel products that met the necessary requirements allowing it to contribute to the security of liquid fuel supply to the Southern African Development Community region.

"Even if Project Mthombo becomes operational by 2020, there will be a transition phase from 2017 to 2020 where the new product will have to be imported into the country. Therefore a lot of work will need to be done on the pipelines in preparation of this," she said.

Jörn Falbe, PetroSA's vice-president of new ventures - midstream, said the impact Project Mthombo would have on the province's economy should not be underestimated.

"This is described as a mega-project because it has the ability to change the industry's landscape. It will also change the landscape of the IDZ. Globally, mega projects such as these sometimes fail because they are so big and complex, so they need to be managed and planned accordingly," Falbe said.

He said the project would be similar to the combined construction of 100 stadiums and would also have the capacity to be expanded to meet the needs of the petro- chemical sector, including looking at opportunities presented by shale gas in the future.

UGANDA

Growing Rift between Uganda and Partners Sets Back $2.9 Bln Oil Sector Plans

Plans by Tullow Oil PLC, Total SA and CNOOC Ltd. to start pumping Ugandan crude face renewed setbacks, as a growing rift between the partners and the East African nation delays an ambitious plan to develop the country's nascent oil sector.

Less than six months after Uganda approved Tullow's long-delayed $2.9 billion deal to split its oil licenses with CNOOC and Total, Uganda is now withholding approval of the companies' development plan until several issues are resolved, key being Uganda's desire for them to part-fund a large refinery.

With around 1.8 billion untapped barrels of oil, Uganda is expected to soon join Nigeria, Angola and Sudan among sub-Saharan Africa's major crude producers. However, Tullow--and its predecessors--have faced a litany of problems that continue to push back the planned commencement of production.

In an interview, Uganda Junior Energy and Minerals Minister Peter Lokeris said he would rather see initial production delayed by several years than have an unsustainable development plan implemented.

"[Oil production] is a very big project, which we must handle carefully," said Mr. Lokeris. "Oil is a finite resource and it would benefit the Ugandan people better if it isn't rapidly exploited."

While Tullow, Total and CNOOC want to sell crude on the open market--they are mulling $5 billion of investment in pipelines to the East African coast--Uganda insists that most of it is refined locally into fuel products, initially for domestic consumption and then for regional export. While the three had initially agreed to help fund a small 20,000 barrel-a-day refinery at an estimated cost of around $1.5 billion, Uganda now wants them to build a larger facility, capable of producing around 150,000 barrels a day of refined fuel products.

A Tullow spokesman declined to comment, referring queries in this regard to previous statements. Tullow has said in the past that it doesn't intend to invest in a refinery, citing its lack of downstream expertise.

Speaking in July, Tullow's Chief Operating Officer Paul McDade said: "Our view, very strongly, is that an export pipeline is required to underpin the overall [basin] development and the government of Uganda themselves are looking at refinery options."

In an earlier interview, Mr. Lokeris said Total, CNOOC and China's CNPC had expressed an interest in building the refinery. However, the French major was noncommittal.

"Total understands the needs of the government of Uganda for a phased refinery to be built in Uganda, the capacities of which would address market demand," a Total spokeswoman told Dow Jones Newswires.

CNOOC didn't immediately respond to requests for comment.

The differences underscore the challenges inherent in building an oil industry from scratch in a poor, underdeveloped country.

Tullow, Total and CNOOC are eager to quickly recoup the $12 billion they expect to spend turning Uganda into an oil-producing nation. But Uganda's leaders, who are under pressure to translate the new-found oil wealth into jobs, say they are wary of the "curse" that afflicts resource-rich developing nations.

Regional politics are also a consideration. Uganda is a key member of the East Africa Community trade bloc, which has emphasized the importance of greater local refining capacity as a means of boosting growth.

In July, the Ugandan government appointed a panel to oversee oil development--Tullow, Total and CNOOC will only begin their investments in earnest when Uganda approves the plan.

To date, the members of the panel have yet to be appointed and government hasn't indicated when it expects to grant final approval for the projects.

According to Tullow, oil output from Uganda is expected 36 months after approval.

Yusuf Matovu, spokesman for Uganda's Energy and Minerals Ministry, told Dow Jones Newswires that although government is keen to ensure that the oil resources are exploited in time, every effort "must be taken to ensure that government gets the best deals out of every license and negotiations."

RUSSIA

TNK-BP to Invest $40 Million in Reconstruction of Treatment Facilities at Saratov Oil Refinery by 2016

The Saratov Oil Refinery (a member of the TNK-BP Group of Companies) has launched a project to reconstruct its purification facilities. Between now and 2016, TNK-BP will spend around $40 million on the project.

TNK-BP is implementing a comprehensive program to reduce its environmental footprint at the Saratov Oil Refinery - one of its biggest, with a throughput of over 6 million tonnes per annum. The rail loading rack at the Uvek oil depot is currently undergoing reconstruction. Modernization of the treatment facilities will help to achieve a high level of purification of waste water, which can then be re-used for the refinery's needs. Modernization will also lead to a substantial cut in the refinery's hazardous atmospheric emissions.

Elena Kompasenko, TNK-BP Vice President, Health, Safety and Environment, stresses: "Meeting strict international norms and standards is a mandatory requirement of TNK-BP's activities, not only in oil production, but in the refining sector as well. This project will help to ensure a high quality of purification of industrial waste water and to minimize the Saratov Oil Refinery's environmental impact."

TNK-BP, Russia's third largest oil company is owned by BP and the AAR consortium (Alfa Group/Access Industries/Renova) on a parity basis. Additionally, TNK-BP owns approximately 50% of the Russian oil and gas company Slavneft. TNK-BP's share in Russia's oil production (including its share in Slavneft) is about 16%. The Company's total proved SEC LOF reserves are 9.115 billion BOE as of December 31, 2011.

Rosneft &Transneft to Construct an Offshoot of ESPO Trunk Pipeline Linking to Komsomolsk Refinery

Rosneft and Transneft have signed an agreement to jointly construct an offshoot of the Eastern Siberia – Pacific Ocean (ESPO) trunk pipeline linking to Rosneft’s Komsomolsk refinery. Signing of the agreement coincided with the APEC summit. The pipeline offshoot is designed to transport crude to the refinery in Komsomolsk-on-Amur. The pipeline will have an annual capacity of up to 8 million tonnes and construction is expected to take 4 years.

Crude oil is currently delivered to the refinery by rail. Transneft will finance the design and construction of the offshoot from the long-term agreed fee paid by Rosneft in line with a separate agreement. Rosneft will also supply up to 8 million tonnes of crude a year into Transneft’s trunk pipelines for supply to the Komsomolsk refinery.

The offshoot will be built as part of Transneft’s long-term trunk pipeline system development policy under the Russian Federation’s general oil industry development plan and also as part of Rosneft’s large-scale refinery modernization drive, which aims to boost output of high quality products.

KAZAKSTAN

Technip Awarded Two FEED Contracts worth $81 Mln for Refinery Projects in Kazakhstan

Technip has been awarded two contracts, worth a total value of over US$81 million (about €50 million), for the front-end engineering design (FEED) services of two refineries in Kazakhstan.

These awards consist of the modernization of two out of the three existing refineries in the country:

• the first contract, for Pavlodar Oil Chemistry Refinery, is an upgrading project of the Pavlodar refinery, which is scheduled to be completed in the second semester of 2013,

• the second one, for Petrokazakhstan Oil Product, concerns the revamp of the Shymkent refinery, whose FEED documentation is scheduled to be completed by the end of 2013.

The scope of both projects includes new and revamp process units as well as utilities and offsite facilities aiming to increase production capacity and conversion.

Technip’s operating center in Rome, Italy will execute both contracts.

These contracts confirm Technip’s expertise in the oil refining sector and strengthen the Group’s relationships with leading Kazakh energy operators.

IRAQ

Iraq’s Kurdistan Refinery to Receive Help from Baghdad for Two-phased $1 Bln Expansion

Veteran Iraqi oilmen, fed up with the daily violence of Baghdad, have moved north to autonomous Kurdistan to help build a strategic refinery that will meet the region's need for fuel.

Autonomous since 1991, Kurdistan runs its own government and armed forces but relies on the central government in Baghdad for a percentage of Iraq's oil revenues. Yet the region is short of key products such as diesel and kerosene, currently receiving only 15,000 barrels per day (b/d) of supply from Iraq's refineries, Kurdish officials say.

That is set to change thanks to a major expansion of the KAR Group-owned Kalak refinery just outside the Kurdistan capital Arbil. Its capacity is set to rise to 100,000 b/d from 40,000 b/d by the end of this year.

A further 85,000 b/d will be added by the middle of 2014. This two-phased extension, estimated at $1bn, is managed by former senior Iraqi oil officials now working at privately owned KAR Group - an energy services company based in Arbil.

Abdullah Al Zubaidi, a former director general at the powerful South Oil Co in Basra, was first to join. He recruited his peers, among them Najem Hadi, who is now project manager at the Kalak refinery. The 68-year-old Hadi ran the Basra refinery in southern Iraq for two decades.

"With KAR, we're working for the private sector. Things get done quickly and easily. They know how to work." When Hadi moved to Kurdistan in 2007, there was no refinery in the rocky desert of Kalak. KAR won a contract to complete the original 20,000 b/d plant in 2008 and finished the job in less than a year. A further 20,000 b/d was added in 2010. At 40,000 b/d, KAR's Kalak is already Kurdistan's biggest refinery, covering 50 percent of local demand.

The nearly completed expansion will have it producing 100,000 b/d of products such as LPG, petrol, fuel oil and naphtha by the end of the year - enough to cover 70 percent of demand.

A further 85,000 b/d is due to be added by the middle of 2014, taking overall capacity to 185,000 b/d and satisfying the region's consumption. "Anything I need to keep the refinery running, I can get quickly and easily - that's very important," said Hadi. "Working on the government side (in Iraq), sometimes you don't get the money or you have to get approvals at the highest level. Here I can take the decision myself."

Progress has come despite a long-running feud between Kurdistan and the central government over oil and land rights.

ISRAEL

Israeli-owned Refinery Companies, Delek US & Alon USA Ride New U.S. Refinery “Golden Age”

After several bad years during which some U.S. refineries closed U.S. refineries eventually had a good year in 2011. The share price of Valero Inc., the biggest company in the industry with 15 refineries, which serves as the industry benchmark, has risen 53% since the beginning of the year, reflecting the industry's mood. Some analysts believe that the refining industry is on the verge of a new "golden age", a nickname from the mid-2000s, when refineries were cash cows and considered the darlings of investors.

Two Israeli-owned refinery companies - Delek US Holdings Inc, controlled by Yitzhak Tshuva, and Alon USA Energy Inc., controlled by David Wiessman and Shraga Biran - are seeking to cash in on this new golden age.

Alon Israel Oil Company Ltd. subsidiary Alon USA owns three refineries and 300 gas stations and convenience stores. Recently, the company filed a prospectus with the U.S. Securities and Exchange Commission (SEC) to float subsidiary Alon USA Partners LP, which owns the Big Spring Refinery, a move made by several refinery companies, including Delek US, which two months ago filed a prospectus with the SEC to float subsidiary Delek Logistics Partners LP

U.S. refineries are floating some of their operations for tax reasons. U.S. energy companies can float some of their operations as limited partnerships (a structure similar to Israeli oil and gas exploration limited partnership), which pay the individual tax rate, rather than the corporate tax rate, on dividends, thereby lowering the tax liabilities of their controlling shareholders.

While Delek US chose to float its logistics operations, Alon USA opted to float its first and most successful business, its Big Spring refinery in Texas, which was incorporated into Alon USA Partners, and will be listed under the ticker "ALDW", if and when the IPO is held. Two years ago, Alon USA filed a prospectus to float its retail operations, Alon Brands, but never held the IPO.

Alon USA hopes to raise up to $230 million for Alon USA Partners. According to the prospectus, the company will use the net proceeds to repay its $342 million loan from Alon USA, with the balance of debt to be converted into partnership units in Alon Energy Partners. Alon USA will wholly own the management of the subsidiary, similar to the general partner in Israeli gas exploration limited partnerships.

The Big Spring refinery, considered Alon USA's best asset, refines 70,000 barrels of oil a day, and has a very high profit margin due to the structure of the U.S. oil market. According to the prospectus, Alon Energy Partners posted a profit of $146 million in the first half of 2012, after a profit of $294 in 2011.

Alon USA's share price closed at $13.46 Sept. 12, giving a market cap of $757 million.

Delek US owns two refineries, one each in Texas and Arkansas, and 374 gas stations and convenience stores. Delek Logistics initial assets include 200 miles of transportation pipelines and a 600 mile crude oil gathering system with associated storage facilities with 1.4 million barrels of active shell capacity supporting the company's US' El Dorado and Tyler refineries; the 185-mile Paline crude oil pipeline in Texas; Delek US' wholesale marketing business in Texas; and five light product terminals - the Abilene, Big Sandy and San Angelo terminals in Texas and the Nashville and Memphis terminals in Tennessee. These operations posted a net profit of $32.6 million on $765.8 million revenue in 2011. Delek US plans to raise up to a gross $135 million in the Delek Logistics IPO.

The IPO is primarily aimed to create value for Delek US's shareholders, especially controlling shareholder Delek Group Ltd. It seems that a successful IPO is no longer critical: since filing the prospectus with the SEC on July 12, Delek US's share price has risen 43% to $25.89 (as of the Sept.12 close), giving a market cap of $1.52 billion.

Delek Group has exploited the rise in Delek US's share price to sell 10% of Delek US in two blocs, for a total of NIS 591 million, reducing its stake to 56.8%.

A comparison of Delek US and Alon USA: Delek US owns two refineries, and Alon USA owns three refineries as well as paving and roofing asphalt products manufacturer Paramount Asphalt Corporation

Delek US owns 374 gas stations and convenience stores under the Mapco and other labels in Alabama, Georgia, Tennessee, Arkansas, Louisiana, Mississippi, Kentucky, Virginia. Alon USA owns 300 gas stations and convenience stores in Texas and New Mexico as licensee of the 7-Eleven label

Delek US posted a net profit of $67.8 million for the second quarter, and Alon US posted a net profit of $43.1 million for the second quarter.

Delek US had $321.1 million in cash and a debt of $422.8 million at the end of June, and Alon USA had had $57.5 million in cash and a debt of $874 million.

Delek US's share price has risen 121% since the beginning of the year and Alon USA's share price has risen 49.3%.

Hydrocracker Project Update for Israel’s Oil Refineries Ltd

Oil Refineries Ltd. (ORL), Israel's largest integrated refining and petrochemical group, announced September 25 about the status of its Hydrocracker Project.

Pursuant to the declarations made in ORL 's reports for the second quarter of 2012 concerning the construction of the hydrocracker facility, ORL hereby advises that it is at this time completing the hydrocracker, operating items of equipment and pipelines in the various sectors and carrying out partial running in.

In this context it should be noted that essential parts of the hydrocracker, including the hydrogen plant and emergency torch are already operating successfully and have been handed over to the hydrocracker facility operating staff.

According to its updated assessment, the ORL's management expects the foregoing process to be completed, the entire hydrocracker facility to be handed over to the operating staff and the whole system to be operational for the production of commercial quantities of products at the required quality, during the second part of the fourth quarter of 2012.

It should also be noted that at the date of this report, ORL is in compliance with the budget allocated for the project and the updated estimate of the date of completion of the project is not expected to cause any budget deviation.

Further to the provisions in Note 14[D](1)(c)(6)(f) to ORL's 2011 annual financial statements pertaining to the rights of the banks to demand settlement in the event that the project will be operational only after September 30, 2012, ORL is currently negotiating with the lending banks to adjust the foregoing terms to the expected operating date and ORL believes, based on these negotiation, that the banks will consent.

Based on the updated cash flow projections prepared by ORL's management, which take into account inter alia the anticipated operating date of the hydrocracker, as noted above, there is no change in ORL's board of directors' assessment in section 12 of the Board of Directors report for the second quarter of 2012 concerning ORL's ability to meet its current and projected liabilities at their maturity dates.

OMAN

Preliminary Design of Oman’s $6 Bln Duqm Refinery Project Underway

Preliminary engineering design work on a giant refinery complex at Duqm has commenced, marking a key step in the development of, among other things, a major petrochemicals hub on Oman’s Wusta coast. According to an official source at Duqm Refinery and Petrochemical Industries Company (DRPIC), which is spearheading the estimated $6 billion scheme, the preliminary design will provide the groundwork for the all-important Front End Engineering Design (FEED) due to be tendered out by around the end of this year, or early in 2013.

DRPIC is a 50/50 joint venture of Oman Oil Company (OOC), a wholly Omani government owned energy investment vehicle, and IPIC, a commercial entity owned by the Government of the Emirate of Abu Dhabi. The JV is overseeing the development of 11.5 million tonnes per annum (230,000 barrels per day) grassroots refinery at the Duqm Special Economic Zone, to be followed by investments in downstream petrochemical projects in the second phase.

It is understood that the preliminary engineering design is being primarily undertaken in-house by DRPIC’s newly appointed Project Management Consultant, Shaw Energy and Chemicals Limited (acquired recently by French oilfield services giant Technip). Their appointment as Project Management Consultant, along with Christopher Wszolek as Project Director, was formally announced by DRPIC last month. The latter is a veteran of the international refining and petrochemicals industry with over three decades of experience, including the last 20 years as Senior Project Manager at Saudi Aramco.

Around eight firms have been prequalified to participate in the FEED tender, documents for which are currently under preparation. They include some of the world’s biggest players in refinery and petrochemical engineering design and execution. A tender for the Engineering-Procurement-Construction (EPC) contract is likely to be floated in the third quarter of 2013.

As a ‘commercial export-oriented refinery’, the Duqm venture will primarily process crudes imported by sea and shipped out as refined products (and petrochemicals in later phases). According to officials, there are no immediate plans for any pipeline links between the new refinery and the oil network of central Oman.

The refinery itself will be built at a 900-hectare site located just north of the Port of Duqm and connected to a proposed Liquid Jetty by a pipeline system. Duqm Petroleum Terminal Company (DPTC), a joint venture of the Port of Duqm Company (10 per cent), and Oman Oil Company (90 per cent), will operate and manage the jetty. The facility will be designed to accommodate ships of around 150,000 deadweight ton (DWT) capacity, bringing crude feedstock or loading refined products for export.

“We are focused on the overall feasibility study of the Liquid Jetty project, and we are working to align with the different authorities to see how to put everything about this project in place. That work is ongoing,” said Reggy Vermeulen, Commercial Director, Port of Duqm.

“We have a lot to do to set up the joint venture company, and to work in alignment with all the concerned authorities, such as the Special Economic Zone Authority of Duqm (SEZAD), the Ministry of Transport and Communications, and the Ministry of Oil and Gas. A lot of meetings are being held with the different players around the refinery.” According to Vermeulen, the Liquid Jetty will be established along the Lee Breakwater on the northern side of the port. This area of the port will also be suitably dredged to receive crude oil tankers and product carriers that will come visiting starting from 2017, when the refinery is due to be brought into operation.

“The final depth (draft) for the Liquid berths is not yet specified, but it could be between -16 to -22 meters, depending upon on the requirements of the refinery. Basically, we are expecting the draft to be somewhere around -18 meters,” the port’s Commercial Director stated.

"The project is progressing as planned and the start up will be in 2013," Fawwaz Nawwab, President and Chief Executive at Saudi Aramco Total Refining and Petrochemical Co., known as Satorp, said in an email to Dow Jones Newswires.

Satorp has previously said the refinery operations will be steady by mid-fourth quarter 2013, while Saudi Aramco's 2011 annual review said the inaugural crude oil intake is scheduled for December 2012, and the refinery will be fully operational by the third quarter of next year.

An industry source said that the 400,000 barrel-a-day export refinery in Jubail is in the pre-commissioning stage and there is a possibility it may be fully operational before the third quarter of next year.

Mr. Nawwab didn't give further details on the start-up date of the project.

Satorp, which is part of a drive by the world's top oil exporter to boost refining capacity, plans to float a 25% stake in the company around 2014.

McIlvaine Company,

Northfield, IL 60093-2743

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

E-mail: editor@mcilvainecompany.com