august 04 update

Air Products has announced plans to build a 5- to 7-acre hydrogen plant on the grounds of the Motiva Enterprises refinery in Convent. The plant will supply the Motiva and nearby Marathon Ashland refineries with the extra hydrogen required to remove sulfur from the roughly quarter-million barrels' worth of crude each refines daily.

Although representatives declined to comment on the price of the plant, it has previously been reported as $60 million. Construction will involve 300 workers, but its operation will require only eight people, thanks to its advanced automation and instrumentation, Air Products spokesman Art George said.

The project will be a joint venture between Air Products, based in Pennsylvania, which will own and operate the facility, and French firm Technip, which will provide design and engineering for the plant.

The hydrogen plant, which will come on line in November 2005, will help both refineries comply with Clean Air Act restrictions set to take effect in 2007. Both will be using the hydrogen to clean their diesel; the Marathon plant also will use it to purify its gasoline.

Eliminating sulfur from gasoline and diesel will reduce the amount of dangerous breathable gases in the air; it also will allow heavy-duty diesel vehicles to use more efficient catalytic converters, which normally would be damaged by the higher sulfur content in diesel.

Although the Environmental Protection Agency estimates the sulfur-control measures will increase the cost of producing diesel by as much as 5 cents per gallon, refinery operators are confident the increase will not be passed along to the consumer.

"I don't think consumers are going to see the price of gasoline change, because it's a very competitive product and you have to match what the other competitors are doing," said Gary Miller, external affairs manager for Motiva's Convent refinery.

Miller said the new hydrogen plant may make the fuel supply more stable by making it easier for Motiva to meet EPA regulations.

Executives at both plants denied the hydrogen plant's construction is a result of the Shell Norco refinery's tainted-gas woes a couple months ago. That gasoline had been tainted with elemental sulfur, which is different from the type of sulfur that the EPA-mandated process will remove. In addition, refineries long have known about the approaching change.

"These plans have been in place well in advance," Marathon Ashland spokeswoman Linda Casey said. "Everybody has to meet the new requirements."

The new sulfur requirements are the latest in a long line of federal measures targeting pollutants from gasoline and diesel fuel.

"If you look down the road of history," Miller said, "gasoline will get cleaner and cleaner."

Air Products produces hydrogen and other gases currently used by the two refineries, and it operates 30 similar hydrogen plants globally. Air Products was selected for the job because of that, Miller said.

Environmental cleanup crews are digging up 50,000 tons of dirt and sediment and pumping ponds dry at the site of an old oil refinery that government leaders hope soon will house new businesses and the township hall.

Crude oil has permeated the soil and groundwater on the old Osceola Refinery property near Interstate 75 in Ogemaw County's West Branch Township, making the mostly vacant land smell like a gas station. Layers of earth are tarry, and oil bubbles up from the sediment in ponds.

The refinery closed in 1981, after 45 years of operations that included production of asphalt, gasoline, diesel fuel and jet fuel. Cleanup on the property began in the 1990s.

Efforts so far have included demolishing old buildings, removing storage tanks and tearing out 15 miles of buried pipeline. The last phase involves digging, pumping, filling and hauling.

"There are still some areas on the site that are pretty nasty," Michael R. Jury, an environmental manager for the Michigan Department of Environmental Quality in Bay City, told The Bay City Times.

The cleanup process on the 33-acre site 60 miles north of Bay City is relying on about $4.6 million in voter-approved Clean Michigan Initiative bond funds, and the state has spent about $3.4 million so far, records indicate.

In addition to removing soil and water, about 70,000 tons of new fill will be brought in, and 3 acres of new wetlands will be created.

The property reverted to the state after Texas American Petrochemicals Inc. went bankrupt. The company later contributed to a $2.5 million cleanup fund.

Contaminants in the soil on the refinery site are as much as 360,000 times those considered protective of groundwater, according to a 2003 state report. But though the toxins have contaminated nearby Eddy Creek, they haven't spread to a deep aquifer used for residential and commercial drinking water wells in the area.

BP Launches Clean-Gasoline Unit at Washington State Refinery

British Petroleum Co. Ltd. has started up the clean gasoline unit at its Cherry Point refinery in Blaine, Wash., to produce gasoline exceeding all current and impending gasoline quality regulations.

The $115 million unit at the refinery will make gasoline containing almost no sulfur, the company said. The cleaner burning fuel will reduce annual emissions of nitrogen oxides by 620 tons and benzene by 182 tons per year in the Northwest, said Rick Porter, manager of the refinery.

The Cherry Point refinery produces 3.5 million gallons of gasoline per day. It is the largest refinery in the state of Washington and the third largest on the West Coast, according to the company.

Proposals Would Fast-Track Approval of Logging, Oil Refinery Construction in California

Logging of California's forests and construction of new oil refineries could proceed more swiftly under two new recommendations growing out of a five-month review of cost and efficiency initiated by the governor.

The two proposals in the California Performance Review -- "streamlining permitting to reduce petroleum infrastructure bottlenecks'' and "improving the timber harvest plan development and review process'' -- mirror changes long sought by the timber and oil industries, environmentalists say.

Currently, approval for construction of new oil refineries lies with regional air-quality management districts or with local jurisdictions. The plan would move the authority to a single centralized energy division within a new Department of Infrastructure.

Western States Petroleum Association, a trade group, favors the proposal, and environmentalists oppose it, saying it cuts out community comment. Communities for a Better Environment and three other groups filed a letter last month with the California Energy Commission before the review team's report came out, opposing what it called "one-stop permitting.''

"The governor is letting the oil companies run wild in California,'' Communities for a Better Environment attorney Will Rostov said. "The obvious intention is to cut environmental groups and the public out of the process of permitting oil refining.''

Chris Reynolds, who works as a policy analyst for the Board of Forestry, wrote recommendations on behalf of a dozen-member environmental team.

Reynolds has served as legislative director for former Republican legislators Chuck Quackenbush and Steve Kuykendall and two secretaries of state, Republican Bill Jones and Democrat Kevin Shelley. He was legislative director for the state Air Resources Board and the Assembly Republican Caucus.

In researching refinery permitting, Reynolds said he examined California Energy Commission documents on gasoline shortages, including Commissioner James Boyd's testimony to the Assembly Transportation Committee in April, proposing streamlining of permits, among other measures.

"I didn't talk to anyone in the environmental field," he said. "I had a fairly good understanding of the environmental community without having to talk to anyone.''

In the letter to the CEC last month, the environmental groups complained about conflict of interest, charging that Commissioner Boyd is married to Catherine Reheis-Boyd, the oil company trade group's chief of staff, who has been lobbying the CEC staff for the streamlining proposal.

Boyd and Reheis-Boyd couldn't be reached for comment. A trade group spokesman denied there was a conflict of interest.

Cleanup Begins on Cyril Refinery

The skyline in Cyril continues to change. During the week of Aug. 9, The U.S. Environmental Protection Agency (EPA) and the Oklahoma Department of Environmental Quality (DEQ) began dismantling the abandoned Oklahoma Refining Company (ORC) tank farm.

The deteriorating storage tanks will be cut open in order to remove and dispose of the hazardous wastes left inside.

The tanks will then be salvaged. The removal of tanks is part of the ongoing Superfund cleanup of the northern portion of the old refinery.

This phase of the cleanup project is expected to take approximately two months. The south side of the refinery, formally abandoned in a bankruptcy proceeding, was cleaned up previously.

The DEQ and EPA continue to plan for a long-term cleanup of the soil, ground water, and surface water at the ORC site.

The start date for the long term cleanup project will depend upon the availability of funding from the federal Superfund and the state’s “matching funds.”

Operations at the Cyril refinery ceased in 1983. Attempts to restart one unit of the refinery in the early 1990s were unsuccessful.

The refinery superstructure, which had deteriorated to the point that it was a danger to human health and the environment, was removed earlier this year.

A major overhaul of environmental and tax policies will be necessary before a needed expansion of the U.S. refining sector can commence.

A report issued in August by the Petroleum Industry Research Foundation, Inc. (PIRFINC) concluded that while refinery economics may look rosy right now, a great deal of policy reform is still needed at not only the federal level but within individual states and local governments as well.

"Meeting the economic and regulatory challenge of rehabilitating existing domestic facilities -- not to mention constructing new ones -- would require a comprehensive approach to refining policy that involves the multiple layers of government...and the differing interests within the refining industry itself," the study, that was conducted at the request of the National Petroleum Council, said.

Although likely to be a long and potentially overwhelming process, the report noted that changes in air-quality regulations, fuel specifications and taxation of capital investments in refinery equipment would be needed to provide the industry with the "clear and durable policy" needed to make decisions on hugely expensive projects that will, it is hoped, turn a profit decades down the road.

While U.S. demand for refined products such as gasoline, diesel and jet fuel has expanded annually since the 1980s, refinery capacity has not kept pace and has, according to the 26-page report released this week, gone from "2 million barrels per day (bpd) of excess capacity to a 2 million bpd shortfall."

With U.S. refineries routinely running at what analysts generally call "flat-out" rates of around 95-percent, the conventional wisdom is that the United States would have only limited ability to increase its fuel supplies regardless of the price of crude.

The Energy Information Administration estimates that this year, net refined product imports will meet about 9 percent of U.S. oil demand, up from 7 percent in 2000 and more than double the 4 percent share in 1995," the report said. "Gasoline, including blending components, currently accounts for...about 10 percent of total U.S. gasoline supplies."

But with gasoline hovering around the $2 per gallon mark at the retail level, there has still been little sign of a budding boom in refinery projects on the drawing board -- and the reasons cited by the report have more to do with oil economics than they do with environmental barriers.

"Refining has been a boom-or-bust business during the past-quarter century," the report concluded. "Volatile profits at the refinery gate have generally produced returns averaging less than other investment areas in the petroleum industry. The closure of smaller plants not benefiting from economies of scale has resulted."

In other words, refineries these days tend to be large and located along the ocean so that crude can be brought in easily from overseas, and finished products can be shuttled up and down the various coasts and inland.

Of the 171 refineries that have closed down since the 1980s, most were small and located inland where they relied on pipelines linked to oilfields where production eventually flagged after decades of steady use.

Limits on the amount of fuel that U.S. refiners can produce has become an issue that has proven daunting to unravel and a frustration to some politicians who have blamed a sometimes-nebulous raft of environmental rules for supposedly derailing construction of new plants.

Primary culprits for the blame range from simple so-called "NIMBYism" and ideological tunnel vision on the part of the environmental community to air-quality regulations that not only led to the creation of "boutique" gasoline markets but to the knotty issue of "New Source Review (NSR) that complicates the expansion of existing refineries.

New Source Review requires that power plants and refineries upgrade their pollution controls whenever major expansions are made to the plant's capacity. The rule exempts "routine" maintenance work, which environmental critics allege allows companies to skirt the rule by labeling any expansion as a "routine maintenance job."

At the same time, the PIRFINC report contended, refiners tend to carry out expansions over the course of years in order for the jobs to be considered routine maintenance. Part of the reason, the report said, was that upgrading one piece of refinery equipment can often result in an increase in pollutants and emissions from another connected unit, which can conceivably land the company in hot water with air-quality regulators.

Such is the nature of the regulatory barriers with which refiners contend when they consider going forward with expansion plans; however the bottom line is whether or not expansion will be profitable for the company that is making the investment.

"The federal government would have to be a forum for sifting through the economic, environmental, and regulatory realities of the refining business and synthesizing fruitful possibilities in a world where there are no silver bullets and few short-term solutions," the report said.

In the meantime, the United States will be looking more often to foreign sources of gasoline and diesel fuel, just as it does crude, until the long-awaited refinery construction boom gets underway.

Shell Oil Co. has agreed to keep its Bakersfield refinery in operation for another six months to allow more time to find a buyer for the facility.

"It's a welcome show of cooperation with our effort to keep open this refinery, which is crucial to helping protect California drivers from even higher gas prices than they already pay," says California Attorney General Bill Lockyer. "I appreciate the willingness of Shell executives to work constructively with my office toward a resolution that serves the public interest and Shell's interests."

Mr. Lockyer made the comment after receiving a report that questioned Shell's decision to close the Bakersfield refinery. The report concluded the facility can be run profitably, and that a sale can be structured that is economically viable for Shell and the buyer.

Shell has agreed to keep the refinery running through March 31, 2005, six months later than the planned shutdown date.

But Shell's ability to keep the refinery operating into next year may depend on whether it can obtain a modification of a consent decree that will subject it to financial penalties if it does not reduce air pollution emissions from the facility's heaters and boilers to a specified level by the end of 2004, Mr. Lockyer says.

The report on the refinery's financial viability was prepared for the Attorney General's Office by the Dallas, Texas-based consulting firm of Turner, Mason & Co. The report was ordered as part of an antitrust investigation of Shell's decision to close the refinery. That investigation continues, and Mr. Lockyer says his office is keeping its options open on how to respond should Shell fail to make a good-faith effort to sell the refinery.

Shell's Bakersfield refinery produces about 2 percent of California's gasoline and 6 percent of its diesel fuel.

"Saving 2 percent of the state's conventional gasoline supply and 6 percent of its diesel supply in the tightest gasoline market in history is a huge public victory and today's announcement shows Shell is serious about selling the refinery," says Jamie Court, president of the Santa Monica-based consumers group, Foundation for Taxpayer and Consumer Rights. "It is a sad testament to the anti-competitive nature of the gasoline market, however, that it took regulators, legislators, whistleblowers and consumer groups to force an oil company to sell a refinery for over $100 million, rather than demolish it."

No matter which rumors may circulate in this 18,000-person city regarding the tower-filled maze of steel just north of the border with Norwalk, the Cenco refinery will never produce another drop of gasoline, the company's president said.

However, the owner of the refinery at 12345 Lakeland Road is making progress on plans to redevelop the land, and is enjoying improving relations with the city.

Morse and Cenco's leadership even recently renamed the company, switching from Cenco Refining to Lakeland Development Co.

Morse was appointed by televangelist Pat Robertson to take over the troubled refinery in October 2001, after former Cenco Refining president Nelson Happy left the company.

Robertson had bought the closed Powerine Oil Co. refinery in 1998 and hoped to reopen it under the plant's old operating permits.

Robertson's plan met major community opposition, and a lawsuit blocking the opening was filed by Communities For A Better Environment, an environmental watchdog group.

In 2002, Cenco and Powerine agreed to pay a $1 million fine to the state and set aside nearly $1.5 million to clean up thousands of illegally stored hazardous waste at the site, officials said.

Soon after Morse took over the company, the city's relationship with Cenco improved, Santa Fe Springs City Manager Fred Latham said.

"When Morse became president, his direction from Pat Robertson was to clear the permits and to get the refinery started," Latham said. "To Lowell's credit, he was able to persuade Pat Robertson about the futility of restarting the refinery."

After another company, Energy Merchant Corp., bought all of C enco's stock and took over the company in April, he stayed on as Cenco's president.

Morse has overseen the cleanup and sale of two of the 95-acre refinery's three major properties.

A 20-acre storage property on the southeast corner of Lakeland Road and Bloomfield Avenue has been sold to development company SARES-REGIS, which built three massive industrial buildings.

SARES-REGIS bought another 20-acre property across Bloomfield Avenue and plans to build eight more industrial warehouses, said company spokeswoman Zoe Solsby.

The two parcels, when completed, will be worth about $60 million, officials said.

He has slowly sold off some of the refinery equipment and is using the proceeds to clean up the property, he said.

"In Russia, for instance, this would be one of the cleanest and most sophisticated refineries in the country," he said.

Scott Kuhn, the legal chief at Communities For A Better Environment, said Morse has generally kept his organization in the loop about what was going on at the Cenco site.

Cenco was ordered in court to pay legal fees CBE racked up fighting the reopening of the plant. CBE also secured a written promise from Cenco officials in 2002 to never open the refinery.

Shell Martinez Refinery has awarded Honeywell (NYSE:HON) a $5.3 million contract to modernize its Flexicoker unit. Under the terms of the agreement, Honeywell will install a process control system and provide engineering and construction services. The automation project will enable the Shell Martinez Refinery to upgrade existing controls and maintain plant operations.

The Honeywell automation system includes robust and secure distributed control capabilities that maximize operational efficiency. The open technology offers sophisticated applications, such as multivariable control, batch control, plant-wide history and information management in one unified system. Operators have real-time access to the data they need to make the right business decisions quickly and easily. Honeywell project engineering and construction services lend further support to plant workers, fostering a consistent and reliable operating environment.

"Honeywell is happy to provide Shell with new process control technologies that will give them peace of mind around their operations," said Jack Bolick, president of Honeywell Process Solutions. "With Honeywell's technology, Shell is sure to enjoy greater operational agility and continued plant safety and security in the years to come."

The Ontario government intends to use a carrot-and-stick approach to encourage industry to stop chemical spills in a pollution-prone stretch of the St. Clair River dubbed Chemical Alley, Environment Minister Leona Dombrowsky was to announce today. Dombrowsky was to unveil the government's cleanup strategy in Sarnia in the wake of a report to be released today by the Industrial Pollution Action Team.

The IPAT report calls for a thorough overhaul of the way the Environment Ministry deals with the problem of industrial polluters.

"The ongoing spill-management problem in the St. Clair River region suggests that there are significant gaps in the province's current framework for environmental protection," reads the report.

The group of experts was assembled in the spring to tackle the problem of chronic industrial pollution among the factories and refineries that line the river.

"The community wants to see zero discharge in the river Sarnia Mayor Mike Bradley said, adding he hopes Dombrowsky's announcement will lead to the setting of a date for industries to fully clean up their act.

While something needs to be done in the short term, the government must set key long-term goals if it hopes to address the "failures not only of infrastructure, but of operating procedures and human resources," the report says.

Dombrowsky is expected to say the government will act on all of the report's recommendations. "The IPAT report is a challenge to this government and it is one I am prepared to meet," Dombrowsky says in prepared remarks obtained by Canadian Press.

But it's also a direct challenge to industries to clean up their act, she adds: "I challenge industry to meet that head-on."

On Feb. 1, about 150,000 liters of solvents spilled from an Imperial Oil plant into the St. Clair River, forcing the temporary shutdown of municipal water intakes downstream.

The latest spill happened in April, when an estimated 166 liters of a gasoline-like chemical spilled into the St. Clair from a Sunoco plant, again closing municipal water pipes.

"We will not tolerate industrial spills that shut down water intakes and disrupt lives," Dombrowsky says.

Industrial spills and unplanned air emissions are a threat to health and the environment and a source of great distress for people who live and work in the area, she says.

The government's plan will boost incentives for industries to go beyond compliance with environmental legislation, Dombrowsky says.

"I am confident that working together we will see a day when there are zero discharges into the St. Clair."

In March -- a month after the Imperial Oil spill -- a Canadian environmental group demanded Ontario crack down on chronic air and water polluters who break pollution laws.

The Sierra Legal Defense Fund assailed the province for turning a "blind eye to polluters over the past decade."

The report revealed more than 2,300 violations of Ontario wastewater laws in 2001, including cases in which allowable pollutant limits were exceeded, untreated sewage was released and inadequate paperwork was filed.

Sierra Legal collected its information through a Freedom of Information request to the Environment Ministry and 2001 is the latest year for which data were available.

"What this report shows is that there are a lot of chronic offenders, not one-time spills or acts of negligence, but chronic offenders," said report author Elaine DeMarco. "We need to see the Ministry of the Environment get serious with those as well and not focus on incidents but also on chronic offenders."

The Sarnia plant of organic chemical maker Chinook Group Ltd. reported the most water-pollution violations in 2001, with 355.

Suncor Energy U.S.A. Inc. said August 2 it will begin construction on a $300 million project to modify the company's refinery in Commerce City.

The modifications will meet environmental regulations that limit sulfur levels in on-road diesel fuel to no more than 15 parts per million by June 1, 2006. At the same time, the investment is expected to allow Suncor to process larger volumes of crude blends from the company's Canadian oil sands operations, providing a secure, long-term supply for the refinery and a stable supply of refined products to the Colorado market, the company said.

"This investment confirms Suncor's commitment to building our Denver operations as a key component of the company's long-term strategy," Executive Vice President Mike Ashar said in a statement.

On completion of the project, Suncor said it expects to integrate 10,000 to 15,000 barrels per day of oil sands sour crude into the refinery, and also will increase the refinery's capacity to process bitumen used in asphalt production.

With site preparation finished, work will begin immediately and is expected to be complete by early 2006, the company said.

Plans include an engineering staff of nearly 200 to work on project design and a peak construction work force of approximately 600. About 75 percent of the project budget is expected to be spent purchasing goods and services from Colorado-based businesses.

The investment coincides with the one-year anniversary of Suncor's purchase of the Denver refinery, Denver-area Phillips 66 stations and pipeline assets in Colorado and Wyoming. Suncor employs approximately 620 people in its U.S. business, including 240 at the refinery.

Suncor Energy U.S.A. Inc. is a wholly owned subsidiary of Suncor Energy Inc., an integrated energy company based in Calgary, Canada. Suncor Energy U.S.A.'s business includes refining operations and retail sales in the Denver area under the Phillips 66 brand, and pipeline operations in Colorado and Wyoming.

Jamaica's state-owned oil company is planning a $160 million expansion of the island's sole refinery, which would boost production by about a third, opening up possible export markets.

The expansion would increase the refinery's output to 50,000 barrels a day from 35,000 barrels a day, Commerce Minister Phillip Paulwell said in an interview outside a Caribbean energy conference in Montego Bay, Jamaica. Construction will probably start in the first quarter of next year and be completed in 15 to 18 months.

"The investment will initially be $160 million, but it will depend on which of the options we choose," said Paulwell, whose cabinet responsibilities include energy. The refinery, built in 1963, uses outdated technology, which means that about half of its output is fuel oil for power plants instead of more refined products such as gasoline.

Jamaica, which imports all of the crude oil that is processed at the refinery, is seeking to lower its energy bill, which may rise to $1 billion this year, up from $830 million. The country's overhaul of its refinery coincides with renewed efforts to find oil in the country, Paulwell said.

When the refinery expansion is completed, Jamaica may sell gasoline and other fuel products throughout the Caribbean, Paulwell said. Financing is under discussion, he said. He didn't give details.

"We will be producing more and lighter fuels that will enable us to export to the rest of the region," Paulwell said.

Jamaica is one of 13 other Caribbean countries considering a Venezuelan proposal to create a regional joint venture aimed at lowering energy costs.

Oil PSUs to Upgrade Refineries Abroad

State-run oil firms have been invited by several countries in Asia and Africa for upgrading their oil refineries, Petroleum Minister Mani Shankar Aiyar said on August 17.

Algeria has invited Engineers India Ltd to upgrade Skikda and Algiers refineries while Bangladesh has asked Hindustan Petroleum Corp Ltd to revamp its refinery, the Minister told Rajya Sabha in a written reply.

Indian Oil Corp, the country's largest refinery, has received invites from Myanmar for upgrading Thanlyin refinery and from Yemen for Aden refinery revamp. IOC-EIL consortium has been asked to upgrade Tehran and Tabriz refineries in Iran and Ras Lanuf and Azzawiya refineries in Libya.

ONGC Videsh Ltd, the overseas arm of Oil and Natural Gas Corp (ONGC), has been asked by Sudan to upgrade Port Sudan refinery, Aiyar said.

The Minister said India imported 90.434 million tonnes of crude oil in 2003-04 as against 81.989 million tonnes in the previous year.

"While we are import-dependant to the extent of nearly 70 per cent for crude oil, we have become net exporters of petroleum products," he said.

For the first quarter of 2004-05, crude oil imports have increased in volume terms by around 13 per cent, while the increase in value terms is around 51 per cent.

India imported 25.785 million tonnes of crude oil for Rs 295,51 crore in April-June this year.

ExxonMobil to Upgrade Altona Refinery

Exxon Mobil Corp announced plans to upgrade its Altona refinery in Victoria to meet new cleaner petrol and diesel fuel quality standards.

ExxonMobil Australia chairman, Mark Nolan, said work would shortly commence to modify and upgrade the refinery to meet the 2006 national fuel standards, and to prepare for the new government clean fuels standards which come into force in 2008 and 2009.

"The decision to invest in clean fuels at Altona is a significant vote of confidence in the refinery's future," Mr Nolan said.

He said it enabled Altona to make plans for the rest of the decade and beyond.

Exxon Mobil is the last of the country's four refiners to commit to an upgrade for the standards which the Australian Institute of Petroleum has estimated will cost the country's 800,000 barrels per day industry $1 billion.

The company's refining director for Australia and New Zealand, Glenn Henson, said while Altona had achieved significant improvements in the efficiency, productivity and reliability of the refinery business conditions would continue to be challenging for the refining industry in the Asia Pacific region.

"We are therefore restructuring Altona's operations to focus on supply to the domestic market rather than competing for export business, and we will continue to pursue productivity improvements and operational efficiencies," Mr Henson said.

"The new Altona Refinery will be a much more competitive operation and will continue to supply a full range of petroleum fuel products."

Bolstered by bumper oil-refining margins and an 80 per cent surge in petrol sales at its Woolworths co-branded petrol station sites, Caltex Australia said it would have "an ample internal earnings growth opportunity" if it improved the performance of its refineries.

Caltex reported a net profit of $340.6 million for the six months to June 30, up from $76.2 million in the previous corresponding period and in line with market forecasts.

The result was helped by a $113.5million one-off tax consolidation gain and a $46.8 million inventory gain.

On a replacement cost of sales basis, net profits rose 109 per cent to $180.3 million. Caltex said this calculation "presents a clearer picture" of its underlying performance because it excludes the impact of oil price fluctuations.

Shares in Caltex fell 5.6 per cent to $9.27 before closing 12c lower at $9.70, after managing director Dave Reeves said the refining margins had fallen on their first-half average of $US7.08 a barrel.

Yet the Caltex chief said the outlook remained bright, noting margins were well above their 1999 to 2003 average of $US2.57 a barrel.

"Since 1970 demand is up just about 300 per cent in the [Asian] region and continued growth is forecast, underpinned primarily by growth in China and India," he said.

To illustrate his point, Mr Reeves said 33 refineries the size of Sydney's Kurnell would be needed to be built in Asia in the next six years to meet demand.

Caltex also credited the 800 million litre surge in refining sales volumes, to 6.2 billion litres over first half, to the 80 per cent surge in average petrol sales at each of its co-branded Woolworths sites. Since late April, Caltex and Woolworths have set up 285 co-branded sites, and hope to have 470 next year.

But Caltex said overall retail margins were affected, with its non-Woolworths co-branded sites reporting flat sales, albeit on increased revenues.

Caltex boosted imports by 180 per cent to 1.3 billion litres in the period to meet increased sales, but Mr Reeves ruled out building new refineries to meet local demand.

He said Caltex instead would focus on lifting the utilisation of its refineries from 71.2 per cent in the first half to about 85 per cent.

"It is clear there is a significant price to go after, in the range of $100 to $150 million of EBIT (earnings before tax and interest) over the next several years," he said.

Yet Mr Reeves said the production benefits could take some years to flow through, given the $295 million upgrade of Caltex's Lytton and Kurnell refineries to meet new clean fuel standards would hold up local output until 2006.

"Expansion comes from two ways, operating the existing equipment that we have better or it can come from significant capital investment. I don't anticipate that we're going to make significant expansion investment," Mr Reeves said, estimating the cost of building a refinery the size of Kurnell at about $4 billion.

CNOOC to Build China's Largest Oil Refinery Project

China National Offshore Oil Corporation (CNOOC) has got approval for its South China Sea Oil Refinery Project on Aug 3. CNOOC's production chain will be more complete after adding oil refinery, and this is an important step towards its goal to build a comprehensive energy corporation with strong competency in the world.

Situated to the west of the CNOOC and Shell's Petrochemical Ethylene Project in Huizhou, Guangdong, the South China Sea Oil Refinery Project, with total investment of 16.7b bln yuan, is the largest project with annual output of 12 million tons of heavy crude oil with high acid content, and thus the largest oil refinery project in China. The construction of the project will begin at the end of 2005 and be completed in the first half of 2008. Once completed, it will be able to providing raw materials to the South Sea Ethylene Project. Through mutual supply of raw material and share of public utilities, the two projects will enjoy each other's advantages, lower the investment, improve economic profit and enhance ability to resist risks.

Exxon Mobil, China's Sinopec and Saudi Arabia's Aramco August 26 reached agreement on design work for a $3.5 billion expansion of a refinery in China and the addition of a chemical complex.

Fujian Petrochemical Co. Ltd. said in a joint statement the firms had agreed to jointly fund what they called front end loading design activity.

The concern is jointly owned by China Petroleum Chemical Corp. (Sinopec), the Fujian government, along with ExxonMobil China Petroleum and Petrochemical Co. Ltd. and Aramco Overseas Co. BV.

The work includes completing initial engineering and design, selecting contractors, finalizing cost estimates and the development of the pre-ordering of long-lead time equipment. The parties will then make a final decision on joint venture formation and project construction.

Fujian Petrochemical will hold a 50 percent stake in the integrated project joint venture if it is formed, with ExxonMobil and Saudi Aramco each holding 25 percent.

The project would result in a world-class integrated refining and chemicals complex located at Quangang in southeastern Fujian province.

ExxonMobil, Sinopec and Saudi Aramco also agreed to submit a joint feasibility study for a fuels marketing joint venture in Fujian to the Chinese state.

The Fujian integrated project would expand the existing refinery in Fujian to 240,000 barrels a day from 80,000 barrels with a significant product upgrading capability, the three firms said.

Chennai Petroleum Corporation Ltd has commissioned a hydro cracker unit at its Manali Refinery as part of its expansion-cum-modernization project.

The 'once through hydro cracker unit,' which is a part of the three million metric tonnes per annum project, began its operations August 4, a CPCL statement said.

The total cost of the completed project would be within the approved project cost of Rs 2,360 crore, it said.

Earlier on March 31 last, the company had commissioned its other units like crude distillation, vacuum distillation, catalytic reforming, and associated facilities of the project.

The technology of this unit has been provided by US-based Chevron Lummus Global and the engineering and construction supervision was done by Engineers India Ltd, New Delhi.

The unit, with a capacity of 1.65 mmtpa, is designed to process high sulphur gas oils from the existing and new refinery units including the Visbreaker vacuum gas oils.

The CCPL statement said the distillate yields were expected to increase by about six per cent following the commissioning of OHCU project.

Moreover, the superior quality of products from this unit would also enable CPCL to meet the auto fuel quality norms of Bharat Stage-II and Euro-III equivalent, much ahead of the scheduled implementation date of April 2005, it added.

The State Government has clarified that the Indian Oil Corporation (IOC) is committed for oil refinery project at Paradip and there is no compromise or reduction in the scope of the project.

Replying to several points raised by Randendra Pratap Swain on the refinery plant, Industries Minister BB Harichandan said in the Assembly August 4 that IOC has committed to initiate all necessary steps to expedite implementation of the project and complete the construction of the refinery by 2009-10.

If favorable market conditions in the country allowing higher level of domestic sale of products from the refinery as compared to earlier estimate emerge, the company will endeavor to complete the project by 2008-09, the minister said.

Dispelling doubts over the execution of the oil refinery, the Minister said that the State Government had sought specific clarification from both the IOC and the Ministry of Petroleum and Natural Gas and they are committed about the project.

Swain sought to know from the Minister what will happen to the project if the market will not be favorable and if the IOC board has taken any decision about it. He further wanted to know if the State Government has any information that the UPA Government is planning to develop a petro-chemical complex at Paradip with an investment of Rs 20,000 crore.

Nalinikanata Mohanty of Congress and Atanu Sabyasachi, BJD also sought to know about the future of the project.

The minister said that the viability of the project became uncertain after Kuwait Petroleum Corporation withdrew from the joint venture with IOC. However, after series of meetings and discussions between IOC and the Petroleum Ministry and State Government agreeing to provide fiscal incentives, IOC gave its consent for implementation of the project.

IOC has informed that the project was discussed by the project evaluation committee (PEC) of its board of directors which recommended implementation of the project in the second half of the Eleventh Plan period subject to the appropriate incentives by the State Government. The State Government signed a memorandum of understanding (MOU) with IOC on February 16, 2004, he added.

He further clarified that the project, as per the MOU, means establishment of oil refinery and associate facilities. The project cost has been revised to make it economically viable.

Cut in Oil Duty Hits Refiners

The 5 per cent cut in customs duties on petroleum products announced August 18 will benefit the oil marketing companies such as IBP, while oil refining companies like Reliance and Mangalore Refineries and Petrochemicals Ltd (MRPL) will take a hit on their bottom lines.

Companies such as Indian Oil Corporation (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) will see a gain in their marketing divisions but lower margins for their refinery divisions.

Since the prices of the petroleum products will remain at the same level and the excise duties have been lowered, the oil companies will gain as they will be passing on 3 per cent less to the government from their earnings.

A senior official said that IOC will gain Rs 1,800 crore as a result of this decision. Its subsidiary IBP, which ran into a loss during the first quarter, will benefit to the tune Rs 400 crore during the current fiscal.

The reduction in customs duty has, in a way, come as a correction in the distortion in prices as the oil companies were not actually importing any petrol, diesel, or kerosene.

Yet, the marketing companies had to pay a notional customs duty and ocean freight on these goods to the oil refineries as the price was fixed on an import parity basis. With the reduction in customs duty, the import parity price which the marketing companies will pay the refineries will be 5 per cent less.

Reliance, which sells around four million tonnes of liquid fuels to the public sector oil companies and about four million tonnes of LPG, is expected to lose around Rs 500 crore.

MRPL, which has just been turned around by ONGC, is expected to lose around Rs 400 crore during the remaining seven months of the current fiscal.

Chennai Petroleum Corporation (CPC), which is a subsidiary of IOC, also figures among the losers and is expected to take a hit of Rs 200 crore.

Both IOC and HPCL have registered an over 50 per cent increase in their net profit during the first quarter of the current fiscal despite holding the price line because of refining margins that exceed $5 per barrel.

BPCL had seen a 50 per cent dip in profits as it has a smaller refining capacity, which accounts for only 30 per cent of its profits.

The gains of IOC and HPCL due to the customs and excise cuts will to an extent be offset by a reduction in the high refining margins. BPCL will be relatively a larger gainer.

Hindustan Petroleum Corporation Limited (HPCL) has announced the suspension of the Guru Gobind Singh Refinery project in Bathinda district till the clearance of the financial package by the state government, which includes sales tax exemption for 15 years.

In a written reply, Union Petroleum and Natural Gas Minister Mani Shankar Aiyar informed the Lok Sabha that activities of the refinery project were under suspension since April 2003 due to delay in the clearance of the financial package by the state government.

The question in this regard was asked by Mr Sukhdev Singh Dhindsa (SAD) and Mr Avinash Rai Khanna (BJP) both MPs from Punjab. Mr Surinder Singla, Finance Minister, Punjab, had said the HPCL would implement this mega-project on the terms and conditions of the Punjab Government, without any sales tax exemptions.

Elaborating the reasons of suspension of the project, Mr Aiyar said, during 1998-2000, the Punjab Government had agreed to grant a financial package of incentives, including sales tax exemption. Consequently, the HPCL and the state government had agreed to formalize the incentive package through a memorandum of understanding.

“Accordingly, a Deed of Assurance (DOA) covering obligations of the Punjab Government and the HPCL to the project was proposed in September 2001. However, due to a delay in the receipt of DOA from the Punjab Government, major project activities have been under suspension since April 2003,” said the Petroleum Minister.

In fact, with the efforts of previous state government, the HPCL had agreed to set up the refinery at Phulo Khari village in Bathinda district with an estimated investment of Rs 9,806 crore (at June 1998 prices). For this purpose, a subsidiary of the corporation —Guru Gobind Singh Refineries Limited (GGSRL) — was set up to implement the project.

Officials in the Petroleum Ministry and HPCL claim that due to the adamant attitude of the present state government, the project may be ultimately terminated. They said, “with the expansion of the Panipat refinery and surplus capacity generated in the country, the HPCL does not find it attractive enough to invest in a far-flung high-risk border state unless the state government comes forward with a financial package.”

The state would be a major loser, they said, if the HPCL decided to cancel the project. It is likely to provide direct employment to around 1000 persons, besides creating a hub for the ancillary units.

Mr Aiyar admitted that an expenditure of Rs 288.1 crore had already been incurred on the project by July, 2004. Further, 1992 acres of land has been acquired for the refinery, and work relating to site grading, roads, canals, drains, area lighting and tank foundations had been completed.

Without visualizing a change in the stand of the new state government, the HPCL has also acquired 310 acres of land at Mundra to set up a crude oil terminal and 185 acres for site development, besides procurement of steel plates for storage tankers.

Hindustan Petroleum Corp. Ltd., Mumbai, India selected technology from UOP LLC Des Plaines, Ill., to revamp existing fluid catalytic cracking units at its Mumbai and Vishakapatnam (Vizag) refineries.

The revamps are to maximize production of LPG and will feature UOP's latest FCC technology. Hindustan Petroleum will install a new reactor and high-efficiency combustor regenerator to reduce NOx emissions at its Mumbai location. Basic engineering for the 31,000 b/d FCC unit at Mumbai and the 21,000 b/d FCC unit at Vizag was completed earlier this year.

Hindustan Petroleum is the second largest integrated oil company in India, refining and marketing an entire range of petroleum products.

Kuwait is keen on investing in the Indian petroleum sector and supplying more crude oil to the country, its Foreign Minister Sheikh Mohammed Al-Sabah Al-Salem Al-Sabah said August 25.

Speaking to reporters on the sidelines of an event to sign a framework agreement between India and the Gulf Cooperation Council, he said his country was keen to help India by supplying more crude oil.

He said his country was pumping oil at maximum capacity to help ease the high global prices. "It is in our interest that oil prices remain stable. High oil price does not do us any good.

According to official statistics, the six countries of the Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - account for 45 percent of the world's recoverable oil wealth.

In recent months, state-run Indian Oil Corp imported 5.5 million barrels of additional crude oil from Kuwait in three consignments.

India's crude oil imports also rose 12.4 percent in the first three months of the current fiscal because of a surge in demand for petroleum products.

Bharat Petroleum Corporation Ltd. (BPCL) is reconsidering a merger with Kochi Refinery Ltd. (KRL), but has no plans for unification with Numaligarh Refinery Ltd.

"We are examining the merger of KRL with the company and the proposal is at the discussion level," S. Behuria, Managing Director of BPCL, told reporters on August 30 after the company's AGM.

On the proposed mega merger of public sector oil & gas companies, Behuria said that BPCL has not received any communication from the Government.

On the Bina Refinery, Behuria said that the company has appointed Engineers India Ltd. as consultants for the reconfiguration of the project and is re-examining the quality norms and demand-supply equations following the delay in implementation.

"We are also in talks with the M.P. government for deferment of local sales tax for the refinery," Behuria said, adding that the cut in import and custom duties by the Government would also reduce the internal rate of return of the refinery by 2%.

As for the proposed seven MMTPA capacity grass root refinery at Lohagarh in Uttar Pradesh, Behuria said that it would be linked to the Bina Refinery through extension of Mumbai-Indore pipeline to Delhi.

On the company's foray into oil & gas exploration, he said that BPCL has three blocks including two in the deep sea water in the Krishna-Godavari basin and Mahanadi basin in consortium with ONGC and Oil India. It has earmarked Rs2bn for it, he added.

BPCL would spend Rs4bn on its city gas pipeline project including Rs2bn in Kanpur which would come up in one-and-half years while the Pune project would be implemented after the extension of Dahej-Uran pipeline to Pune.

In fiscal 2005, demonstration tests are to be started by the Agency for Natural Resources and Energy, Japan, to determine whether large volumes of high-purity, high-pressure hydrogen can be obtained from refineries in order to supply a futures society based on hydrogen energy.

The economic viability of the scheme will be determined from investigations at one or two refineries and the program will also consider storage and transportation. In fiscal 2005, the budget for the program will be several hundred million Yen.

By 2030, the Agency considers that Japan will be a hydrogen energy society with around 15 M vehicles powered by fuel cells and a total of 12.5 M kW fuels cells in use.

By 2020, the number of vehicles powered by fuel cells is forecast to reach 5 M with 820,000 tonne/y of co-produced hydrogen being available.

Refinery Output Lifts Profit at PTT of Thailand

BANGKOK PTT, Thailand's biggest energy company, said that second-quarter profit doubled to a record as rising prices lifted earnings from its oil refineries.

Net income rose to 14.1 billion baht, or $339 million, from 6.82 billion baht a year earlier, the Bangkok-based company said. Sales rose 26 percent to 150.7 billion baht from 119.5 billion baht.

"A significant portion came from refineries," said Adithep Vanabriksha, a manager at Aberdeen Asset Management.

Rising demand for chemicals and fuels as the Thai economy heads for its fastest pace of growth in nine years may help PTT's president, Prasert Bunsumpun, realize a goal of doubling sales in less than 10 years to rival Indian Oil and Petroliam Nasional of Malaysia.

Shares of PTT, a state-controlled company, rose 2.7 percent to 151 baht.

Earnings from units such as Thai Oil, Thailand's largest refiner, and Aromatics (Thailand), a chemicals company, surged sevenfold to 5.81 billion baht.

"One of the keys was refining margins," said Chaipat Thanawattano, an analyst with Tisco Securities. "Chemical prices were abnormally high in the quarter."

Sales of petroleum products rose 38.1 percent to 112 billion baht. The company sold 10.4 million liters, or 2.74 million gallons, of oil products in the quarter, from 9.45 million liters a year earlier.

Thai Oil is earning more because the prices of refined products have outpaced gains in crude oil prices, which are now trading near a record high. Thailand's crude oil bill rose 11 percent in the first four months of the year to 133.5 billion baht, PTT said in June. Oil and gas consumption rose 7.9 percent, it said.

Refining margins, which measure the difference between the cost of crude oil and the purchase price of oil products, have widened to $9.20 a barrel, "the highest since January," Nithi Wanikpun, an analyst at Phatra Securities, said in a note to investors. "It appears that average refining margin in the third quarter will be higher than that in the second quarter."

Demand in Asia, including China, where economic growth surged 9.7 percent in the first half, helped increase prices of products such as polypropylene, used to make plastic parts in vehicles. Thailand's economy is forecast to expand 7 percent this year.

Net income at Aromatics rose fivefold to 1.61 billion baht because of higher chemical sales. Sales rose 53 percent to 12.5 billion baht.

Net income at Thai Olefins tripled to 912.4 million baht on higher chemical sales. Sales rose 22 percent to 4.89 billion baht. Thai Olefins, which is 45 percent owned by PTT, makes chemicals such as ethylene and propylene.

PTT PCL (PTT.TH) said it will spend up to 6.50 billion baht ($1=THB41.483) to invest in upstream petrochemical projects and to buy out its refinery affiliate from a unit of Royal Dutch/Shell Group (RD).

Thailand's state-owned oil and gas conglomerate and its unit, National Petrochemical PCL (NPC.TH), will enter into a joint venture project to build an ethylene cracker and a polyethylene plant, with a total project value of around $444 million, PTT said in a filing to the Stock Exchange of Thailand.

The move is in line with PTT's long-term strategy to expand its petrochemical business.

PTT and NPC will equally own a 50% stake in the project. The debt-to-equity ratio for the project is 1:1, with PTT injecting $111 million into its equity contribution.

The return on investment for the project is expected to be around 16.3%, PTT said.

Its ethylene cracker production will have a capacity of 410,000 metric tons a year, while its low-density polyethylene production will have a capacity of 300,000 tons annually. The commercial operation is expected to start in the first quarter of 2008.

PTT also said it will join with its unit, Thai Olefins PCL (TOC.TH), to buy out shares in Bangkok Polyethylene PCL, or BPE, at an estimated cost of up to THB3.40 billion.

PTT and Thai Olefins will each invest THB1.70 billion to buy BPE's shares from its shareholders, including Bangkok Bank PCL (BBL.TH) and Japan's Mitsui Group.

After buying the BPE stock, PTT's direct and indirect holding in Thai Olefins will increase to 53.06% as BPE holds a 7.11% stake in Thai Olefins, while PTT and NPC own a combined 45.95% stake.

PTT and Thai Olefins want to take over BPE because it is a major buyer of ethylene from Thai Olefins. The move is also in line with Thai Olefins' strategy to expand into the downstream business.

BPE produces high density polyethylene with an annual capacity of 200,000 tons a year.

PTT said its board has approved the purchase of a 64% stake in Rayong Refinery Co. from a unit of Royal Dutch/Shell Group for $5 million, in a move to support the debt and capital restructuring plan of its refinery affiliate.

PTT, which currently owns a 36% stake in Rayong Refinery, will buy 242.67 million shares from Shell International Holding Ltd. The move is subject to PTT shareholders' approval at a Sept. 24 meeting.

"As part of Shell's ongoing program to upgrade its business portfolio, Shell has decided to divest its shares to PTT to allow PTT to achieve a successful financial restructuring for the company and to help secure Rayong Refinery's long-term future," Shell said in a statement August 20.

However, PTT said it will seek to sell its stake in Rayong Refinery via a share sale to strategic partners or initial public offer, at an appropriate time in the future, as its core refinery unit is Thai Oil PCL.

Due to rising demand for petroleum products in domestic and regional markets, Rayong Refinery's performance and enterprise value are expected to improve in the future, PTT said.

Rayong Refinery has been facing serious financial difficulties since the 1997-98 Asian financial crisis, as its refinery started operations a year before the crisis occurred.

The debt and capital restructuring plan includes a debt buyback at a 15% discount, that will reduce Rayong Refinery's debt to $1.14 billion from $1.34 billion.

PTT will provide additional financial support worth up to $250 million, in the form of subordinated debt or equity, to the company.

The company will also obtain long-term loans worth $650 million to replace the existing loan.

Rayong Refinery, which has a paid-up capital of THB37.92 billion, has a production capacity of 145,000 barrels a day.

Oil giant Shell on August 30 announced that it would not exercise an option to purchase shares in the Czech oil refinery Ceska rafinerska (CeRa), and will instead maintain its minority stake of 16.33 %.

"In the context of the company' s processing capacity in Europe, this stake is considered sufficient to cover our current needs, and a good basis for future growth on the Czech market," Shell CR CEO Pavel Senych told the CTK news agency.

CeRa is part of the Czech Unipetrol group, which was bought by Polish oil giant PKN Orlen earlier this year.

Shell is part of the IOC consortium, which owns a 49 % stake in CeRa. Shell's consortium partners, Agip and ConocoPhillips, can still exercise their options. They each own a 16.33 % stake in CeRa.

The ownership of CeRa is one of the issues that must be resolved before the sale of the Czech state's 63 % stake in Unipetrol is finalized.

PKN Orlen acquired the stake in a tender with the sole bid of CZK 13.05 bn. The firm has paid CZK 1.3 bn of the total to date, and will pay the remainder once CeRa's ownership has been clarified and the European Commission has issued a ruling on public support in the privatization.

The Czech National Property Fund (FNM) said earlier that the balance could be transferred by this fall.

The Unipetrol group consists of the wholly owned subsidiaries Chemopetrol, Kaucuk, and Benzina, and the majority-owned subsidiaries Ceska rafinerska (CeRa, 51 %), Paramo (74 %), and Spolana (80 %).

Russia's oil giant OAO LUKOIL is intending to produce 21.9 mln tons of crude oil (with gas condensate) in the third quarter, according to the company's accounting report.

LUKOIL produced 20.5 mln tons of crude oil in the third quarter of 2003. So, the production is expected to increase by 6.83% on year.

The refineries will process 11.6 mln tons of crude oil (vs. 11.1 mln tons a year earlier, 4.5% up on year).

Oil product (gas processing product) retail is expected at 0.76 mln tons for Russian refineries.

Romanian Petrotel will be put in operation after rebuilding. Permnefteorgsyntez is expected to commission TeStar hydrocracker.

Shipments from the former Soviet Union of gasoline, naphtha and other light products are set to keep rising as Russian oil companies upgrade their refineries to tap into surging global demand for the high-value fuels and to diversify their assets, analysts said.

Even as crude oil prices surged to record levels, refiners in Russia, as well as neighboring countries such as Bulgaria and Belarus, have been building new units to boost output of gasoline and trim production of lower-value products such as fuel oil.

"The trend will continue," said Dmitry Mangilev, an oil analyst at Prospect Investment. "Oil prices can go down as well as up. With investment in downstream assets, you can hedge the risk."

Urals crude prices have risen more than 40 percent in the past year. Shipments of light products from the former Soviet Union rose 37 percent in July from the previous year to 485,000 barrels per day, Geneva-based consulting firm Petrologistics said.

A high volume of exports of low-octane A-76 gasoline cargoes from the Baltic countries formed part of a glut of motor fuel.

Transport bottlenecks stand in the way of growth in Russian crude and oil products exports. But the profitability of selling light products to world markets means refiners will boost those shipments at the expense of fuel oil.

The Economic Development and Trade Ministry expects gasoline output to rise 15 percent from this year to 34.4 million tons in 2007, and fuel oil production to drop 6 percent to 50 million tons. Russia exports half its refined products.

"Export capacity is still tight, so they'll export the highest-value products they have," said Andreas Wild, oil analyst at brokerage BrokerCreditService.

Light products exports are rising as oil majors like LUKoil, TNK-BP, and Slavneft invest in refinery upgrades aimed at boosting production of gasoline and other high-value products.

LUKoil plans to start up a new hydrocracker at its Perm refinery in September, Interfax reported earlier this year. In April, the oil major ramped up output at its Burgas, Bulgaria, refinery after maintenance and upgrade work. It also plans to restart its Petrotel refinery in Romania next month.

"Russian companies are investing billions at the moment in a clear strategy to export more," Wild said. "They're investing in plants closer to export markets. Their first step has been to buy downstream assets in Eastern Europe."

Slavneft, which owns a 42.5 percent stake in the Mozyr refinery in Belarus, switched on a new gasoline-making fluid catalytic cracker at the plant earlier this year. Slavneft's refinery in Yaroslavl began producing Eurograde gasoline in May for export to the European market.

"Exporters are having to adjust to demand from Europe," said Anna Butenko, an analyst at Alfa Bank. "Gradually, internally, there will also be a shift to higher-quality products, but that will take time."

There are indications that another private refinery would soon take off in Ipokia Local Government area of Ogun State.

Indication to this emerged as the Managing Director of South West Refinery and Petrochemical Company (SWRPC) Ltd. Mr. Adewale Adesanya, made a presentation to the Federal Department of Petroleum Resource in Lagos.

He said the refinery would specialize in the production of crude oil and generation of power, adding that the power expected to be about 100MW would be used to run the company and the surplus transferred to the host community.

Highlighting the benefits of locating the refining that has the financial backing of companies in the world, experts were of the view that host community would have a trust fund set aside while there would be job opportunities at the company.

He stated that 95 per cent of its management staff would be Nigerians, who would handle all its policies to ensure proper technology transfer.

Reacting on behalf of the state government, Special Adviser on Energy, Oil and Gas, Femi Tatede, pledged political support of government, saying the state Ministry of Environment and the Environmental Protection Agency should be co-opted to reduce the problem of pollution.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr Funsho Kupolokun, has hinged the regular availability of petroleum products to the establishment of private refineries.

Kupolokun, who spoke August 12 in his message at a public seminar organized by the National Orientation Agency (NOA), regretted that the Federal Government had already spent over $485 million towards rehabilitating the nation's refineries.

He noted that local production from the four refineries cannot meet the country's demand of about 30 million liters of fuel per day.

According to him, without due liberalization of the oil sector, the NNPC may eventually thread the path of the moribund Nigeria Airways, adding that liberalization would create more jobs, as well as a competitive environment.

Kupolokun said, "with private sector participation in the building of refineries, the nation's oil needs would be met with ease," warning that prices of petroleum products would continue to rise, and that price of crude in the international market has tended to go up.

As he puts it, "Since September 2003, the NNPC has had to compete with others at the world market, and it would be counter-productive to use excess funds from crude oil to subsidize import of refined products, which will lead us to going back to fixing of prices and prevent consumers from benefiting."

NOA Director-General, Alhaji Idi Farouk, explained that seminar and briefing was part of an advocacy campaign aimed at promoting dialogue between government and citizens.

He said some of the reform programs of government have had positive impact on various aspects of development.

Libya's state-run foreign oil investment company Oilinvest, said that it wants to buy one of Nigeria's ailing oil refineries.

Nigerian President said that his country has been trying to privatize its four refineries for about a year, but few serious bidders have emerged.

Nigeria's refineries, with a capacity of 445,000 barrels per day (bpd), run far below capacity because of corruption and incompetence in the state oil company Nigerian National Petroleum Corp (NNPC), and frequent sabotage of pipelines.

Africa's top oil producer and exporter spent $2 billion on fuel imports last year, partly because of poor refinery performance, and until recently suffered regular shortages.

Yadavaran is southeast of the giant Azadegan oil field being developed by a Japanese consortium.

President Olusegun Obasanjo said in spite of the low interest shown in the privatization of Nigeria's refineries by operators of the upstream sector, the exercise would continue.

He stated that Federal Government still believed that privatization was the best way forward for the country's refineries.

Speaking in an audience with members of the Institute of Directors at the State House, Obasanjo noted that Federal Government was doing everything possible to ensure that the refineries were successfully privatized.

He observed that government was also forging ahead with its plans to boost national earnings from gas.

"We have Train VI of the LNG going on now and two or three other gas-related projects. We are also looking at the possibilities for Trains VII and VIII," Obasanjo said.

While thanking the Institute of Directors for its declared support for the reform agenda of Federal Government, he stated that he believed that all public officials should subscribe to the principles of good corporate governance advocated by the institute.

The President of the institute, Ms. Bennedickter Molowu, had earlier in her address, applauded the due process mechanism introduced by Obasanjo and called for "near and long term" solutions to recurring problems in the country's oil industry."

Public Protector Lawrence Mushwana has tabled a report in Parliament blaming the PetroSA refinery for a R473-million loss during a shutdown in July 2003.

Mushwana's report clears Minerals and Energy Affairs Minister Phumzile Mlambo-Ngcuka of any misconduct over a controversial labor and maintenance contract that was awarded by the PetroSA refinery last year.

Mushwana said his investigation had established that there was no truth to allegations that the prolonged shutdown of the PetroSA refinery at Mossel Bay in July 2003 was caused by under-qualified contractors.

Mushwana's investigation was the result of a Democratic Alliance complaint about the scheduled maintenance and subsequent shutdown of the refinery.

Among other things, it was alleged the awarding of the maintenance contract to Daluxolo Manpower Services constituted a conflict of interest, because Mlambo-Ngcuka's brother-in-law had an interest in the company.

Mushwana found that nothing prevented a person who had a relative in government or employed by a government agency from doing business with the state.

"The duty of disclosure of an interest is on the member or employee, and cannot bind or disqualify the relative," he said.

Mushwana's key findings included that the minister was not involved in the awarding by PetroSA of a contract for the procurement of labor for maintenance at the refinery during May 2003.

The main causes of the refinery's failure in July 2003 and the resulting financial loss was the incorrect installation of equipment during the maintenance program, coupled with a failure by PetroSA to follow operating procedures, and to provide operators with adequate training.

Major oil marketer, OandoPlc, is to set up a petroleum refinery as part of its strategic plan to control a fair share of the market in downstream sector of the oil industry.

This is in spite of the company's interest to acquire 51 per cent equity in one of the nation's four refineries being privatized by the Bureau of Public Enterprises (BPE), for which it has submitted Expression of Interest (EOI).

Managing Director of the company, Mr Wale Tinubu, disclosed this in Abuja during an investment forum for Oando's present and prospective shareholders ahead of its planned N5 billion offer of shares in the capital market, saying analysis of the petroleum industry shows that the country still requires new refineries to complement those in existence and those licensed.

"The real demand of petroleum products is about 50 million liters a day, what is being supplied is about 32 million liters out of which the NNPC accounts for 18 million liters while other oil companies account for the rest," he said.

He did not give details of the planned size of the refinery, its location and the size of investment envisaged, but said with about 580 outlets in different parts of the country, Oando was best placed to establish and run a refinery

Japan Offers the Transfer of Petroleum and Refinery Technologies to Arab States

Japan Cooperation Center, Petroleum (JCCP) has offered the transfer of petroleum and refinery technologies to oil producing Arab countries including the UAE in its bid to foster its ties with the oil and gas industry in the region, Khaleej Times newspaper reported.

Japan imports 100 percent oil from the Middle East and meets its 60-70 percent oil requirements from the UAE which has necessitated it to establish strong relations with the oil rich country and the region.

JCCP is already working on 23 different oil and gas projects in the AGCC including two projects in the UAE, which has fostered its relationship with the oil producing nations of the region.

Pact for 88 Million Dollar Oman Pipeline Inked

The Oman Refinery Company has signed a contract for the construction of a crude oil pipeline, linking Mina al-Fahal with the refinery under construction in Sohar.

The pipeline will be built at a cost of 88 million dollars by the well-known Italian firm Saipem, in cooperation with the Consolidated Contractors Company, a Greek firm.

The pipeline will have an initial capacity of 116,000 barrels a day, which can later be expanded to 160,000 barrels a day. Its total length will be 266 km and will cover the area between Mina al-Fahal and the Sohar Refinery. What is remarkable is that the project is expected to be completed in just 81 weeks.

Nasir al-Jasmi, Undersecretary at the Omani Ministry of Oil and Gas, speaking after the signing said that the Oman Oil Refinery Company would invest some 119 million dollars in the project and its facilities to provide the Sohar Refinery with sustained feedstock of crude oil, when the plant would be commissioned in 2006.

Master Plan for Tabriz Refinery Envisioned

A master plan for Tabriz Refinery to meet the fuel shortage of the northwestern Iranian province of East Azarbaijan, neighboring provinces and neighboring countries is in the process of being drafted.

The Public Relations Department at East Azarbaijan Governor General Office said in a report, a copy of which was made available to IRNA on August 1, that under the master plan the refinery would meet regional states' need for gasoline and diesel, while presenting state-of-the-art market analysis.

The report said a project is underway to set up the second phase of refining plant with 150,000 barrels per day production capacity. The project is expected to give a drastic boost in the number of jobs. All units of Tabriz Refinery were completed in 1979 with the nominal capacity of 80,000 barrels a day.

By implementing the CROS-Plus project, Iran will take crude oil from the Caspian Sea littoral states and pump it to its refineries inside the country and in return, Iran will sell its own oil from Persian Gulf ports on behalf of the Caspian producers, an official in National Iranian Oil Company (NIOC) said.

“The refining capacity for crude oil from Caspian littoral states at Iran's Tabriz and Tehran refineries will increase from the current level of 170,000 barrels per day (bpd) to 370,000 BPD in the next year,” the head of the Quality and Quantity Improvement of Projects in Tehran and Tabriz refineries, Hamid Sharif-Razi told reporters.

The official said: “Feasibility studies on the project have been carried out however, major modifications in the refinery for the purpose are necessary.”

He stated that about € 380 mln had been invested in Tehran Refinery and nearly € 150 mln in Tabriz Refinery for the purpose.

He said the CROS-Plus project, expected to come on stream in 32 months, would cost around € 520 mln. "The costs will come from the revenues from crude swap between Iran and the Central Asian states," Sharif-Razi also explained.

Under CROS-Plus deal, Caspian region crude producers deliver oil to one of Iran's northern ports, and pick up equal amounts of Iranian crude from a port on the Persian Gulf. A pipeline between Neka and Tehran transports the Caspian oil to the refinery in the capital. The Central Asian states are currently pumping around 170,000 bpd of crude to Tehran and Tabriz refineries.

Bandar Abbas Refinery is preparing to refine heavy crude oil in the near future, the refinery will receive heavy crude from Sorush, Noruz, Azadegan, Hosseinieh and Kushk oil fields, news reports said on August 30.

Once ready, the refinery can handle 320,000 barrels per day (bpd) of crude, Petroenergy Information Network (PIN) said. "In that case, we can produce 13 mln liters per day of lead-free gasoline and more than 3.2 mln liters per day of high-octane fuel," Ali-Reza Jalili, director of the project, told reporters.

He said an Italian company will launch the feasibility studies to handle the project.

Bandar Abbas can also offer 2.34 mln liters per day of jet fuel and 1.335 mln liters per day of kerosene.

Falah Al Khoja, general director of the Administrative and Financial Department in the Iraqi Ministry of Oil, said that the ministry is planning to construct 4 new oil refineries in central and south Iraq, the local newspaper Al Nahdhah reported August 9.

"The ministry gathers all the potentials it has to raise the standards of the Iraqi refineries and restore their former output power in order to help meet the increasing local needs, especially the need of benzene," said Al Khoja.

He added that the output power of the refineries would be increased from 12 million liters of benzene at the beginning of the year to 14 million liters.

Iraq has suffered a big shortage of oil products, especially gas and benzene, since the toppling of the former regime when the oil institutions were totally damaged by the American military operations and the looting and the robbery that followed.