sept 06 update

Venezuela's state oil company PDVSA has agreed to sell its stake in a Houston refinery to joint venture partner Lyondell Chemical Co., Oil Minister Rafael Ramirez said on August 15.

"PDVSA will receive for this sale $1.314 billion in cash that will go directly to Venezuela," Ramirez said. PDVSA's stake in the plant was held by its U.S. refining and marketing arm Citgo.

Ramirez said the total price being paid before taxes by Lyondell for the 41.25 percent share in the 270,000 barrels per day refinery was equivalent to $20,000 per barrel of refining capacity, or about $2.23 billion, according to a Reuters' calculation.

Lyondell officials were not immediately available to confirm the purchase, although industry sources told Reuters earlier in August that Lyondell had agreed to buy out PDVSA.

The government of Venezuelan President Hugo Chavez has been critical of many of PDVSA's overseas refining investments, claiming that supply contracts between PDVSA and its foreign refineries were unfavorable for Venezuela.

DuPont Starts Building Texas Facility

DuPont Co. is building a facility at Western Refining Inc.'s refinery in El Paso, Texas to recycle spent sulfuric acid and convert sulfur gases to sulfuric acid.

The process will reduce the refinery's sulfur dioxide emissions from processing sulfur gases by 74 percent, DuPont said.

This is DuPont's third sulfuric acid regeneration facility at refinery. The others are at the Valero Energy refinery in Delaware City and at the ConocoPhillips refinery in Linden, N.J.

Citgo Indicted in Environmental Case, Denies all Charges

Citgo Petroleum and the environmental manager of its Corpus Christi refinery broke environmental laws, federal prosecutors alleged August 9.

Citgo, the Houston-based subsidiary of Venezuela's state-owned oil company, denied all the charges in a 10-count criminal indictment issued by a Corpus Christi grand jury.

A company spokesman declined to comment beyond a written statement that said Citgo was confident no criminal conduct occurred.

The Justice Department said in a prepared statement that the refinery operated two open-top tanks as oil-water separators without installing the required emission-control devices that prevent the release of benzene, a potential carcinogen.

During an unannounced inspection in 2002, Texas inspectors found about 4.5 million gallons of oil in the two open tanks, according to the government. Prosecutors said birds that landed in the open-top tanks were found coated with oil, prompting charges that the company violated the Migratory Bird Treaty Act.

Such tanks are supposed to be covered with netting or other material to keep birds out.

Prosecutors also allege Citgo's Corpus Christi refinery released more than 57 megagrams of benzene in waste streams exposed to the air in 2000, although federal regulations limit refineries to 6 megagrams of benzene a year. A megagram equals 1 metric ton.

If convicted, Citgo could face fines of more than $500,000 and five years' probation.

Citgo said in the statement that the laws the government is invoking don't pertain to the tanks in question. It also said that since at least 1993, the company told regulators how it measured benzene in certain waste water streams at the refinery and that after a 1998 inspection, the Environmental Protection Agency found Citgo was in compliance with those regulations.

"Throughout the investigation leading to these charges, Citgo has maintained its innocence and continues to maintain today that none of these issues warrants criminal prosecution," the statement read. "At most, they involve a good faith dispute over the interpretation of highly complex and vague environmental regulations."

Philip Vrazel, the refinery's environmental manager, was charged with failing to identify in a report to Texas regulators all the locations in the refinery's wastewater system where benzene was generated.

Vrazel, who faces fines of up to $500,000 and up to five years in prison, could not be reached for comment.

Environmental Groups Want Changes at Chalmette Refinery

An environmental group on August 9 asked a Chalmette refinery to adopt the group's four-point plan that includes buying homes around the plant to create a buffer and phasing out use of hydrofluoric acid.

During a news conference in Chalmette, the Louisiana Bucket Brigade, together with the St. Bernard Citizens for Environmental Quality, also asked Chalmette Refining to install "high-tech" air monitoring equipment and a siren warning system.

Chalmette Refining is a joint venture of ExxonMobil Corp. and Petroleos de Venezuela.

In pitching what it calls its first post-Hurricane Katrina "Community/Refinery Collaborative Plan," the group said it is not asking the Chalmette refinery to do anything that refineries in other communities have not already done.

Anne Rolfes, director of the Bucket Brigade, said the group has not spoken to anyone at the refinery about the plan, but hopes company officials take it seriously.

"It's a positive situation, a real opportunity," she said.

The four-point proposal is the latest push by the St. Bernard Citizens for Environmental Quality and the Bucket Brigade, which in recent years have stepped up their criticism of the refinery on St. Bernard Highway.

Refinery officials, meanwhile, contend that the company, one of the parish's largest employers, is investing some $200 million on environmental projects that will reduce plant emissions.

Carolina Asirifi, the plant's public affairs adviser, said the company had not seen the four-point plan but that it has worked hard to be a good neighbor, donating time, money and company resources to help the parish's recovery from Hurricane Katrina.

"We have taken actions to address the concerns of the Louisiana Bucket Brigade and have worked with federal and state agencies to ensure compliance with environmental laws and regulations," she wrote in an e-mail.

She said the company already has installed three air monitors in the community.

The environmental groups want the refinery to enact a voluntary program in which it would give neighbors the option of selling their homes and property to the company, at pre-Katrina prices.

For decades, environmental groups have pushed refineries using hydrofluoric acid to switch to safer alternatives. Hydrofluoric acid, a corrosive chemical used to make an octane-boosting additive in gasoline, can cause injuries if released into the air.

Murphy Oil USA's refinery in Meraux, the ConocoPhillips Alliance Refinery in Belle Chasse, and Marathon Ashland Petroleum in Garyville also use hydrofluoric acid, according a recent report by U.S. Public Interest Research Group.

Flint Hills Plant Sees no Impact from Alaska’s Prudhoe Bay Outage

Flint Hills Resources said on August 10 it doesn't anticipate crude oil production shut-ins at BP PLC's (BP) Prudhoe Bay field to impact its 220,000-barrel-a-day Alaskan refinery.

BP and the state of Alaska agreed to maintain the crude supply to Flint Hills, according to Flint Hills' spokesman Jeff Cook.

The refinery is the state's largest, and normally buys its crude supply directly from the state. Alaska generally sells the crude oil that it receives as royalty payment from BP and the state's other producers.

As a result of the sustained crude supply, Flint Hills doesn't anticipate reduction in production of diesel and jet fuel, Cook said. The two fuels are the primary products made in the company's Alaskan plant.

Kansas-based Flint Hills is a unit of Koch Industries. The company operates two other refineries, located in Texas and Minnesota.

BP announced August 6 that it planned to shut its Prudhoe Bay facility in light of problems with pipe corrosion. BP had already shut down the eastern portion of Prudhoe Bay after discovering an oil spill in a pipeline, and production in the western portion has been reduced to 120,000 b/d.

Murphy Oil’s Meraux, LA Refinery is Back Online

Arkansas-based Murphy Oil Corp. expects to have its Hurricane Katrina-damaged refinery in Meraux, LA fully operational for the rest of the year.

The 125,000 barrels per day refinery on the Gulf Coast next to New Orleans was restarted in May, and was back to about 100,000 barrels as the second quarter ended June 30.

The Meraux operation has four times the capacity of the company’s smaller refinery in Superior, and the impact of that shutdown is apparent in the company’s bottom line this year.

On July 25, Murphy Oil reported a $13.2 million second quarter loss from refining and marketing operations compared to a record $67.4 million profit in the year-earlier period. A big factor was a $39.5 million second quarter charge for refinery repairs Murphy Oil deems to be unrecoverable from its insurance carriers. The company has spent about $200 million to restart operations at Meraux since it was knocked off line by the hurricane last August.

Overall, the company produced a second quarter net profit of $214 million, compared to $347.7 million a year ago.

During the first half of 2006, refining and marketing operations produced a $50.5 million loss compared to a $61.9 million operating profit in the same 2005 period.

In a July 26 briefing with analysts and media, Claiborne Deming, Murphy Oil’s president and chief executive, said the smaller Superior refinery performed well, generating gross profit margins of $10 per barrel in the second quarter.

The largest margins in the oil business, of course, are from exploration and production, where Murphy Oil is a relatively small, but significant player. The company reported a $327.9 million operating profit in the second quarter from exploration and production.

But, with retail gas prices hovering around $3 a gallon — up by one-third since Katrina battered the Gulf Coast refining sector last year — the refining sector also is producing hefty profits.

Since 1976, when the last new U.S. refinery opened, refining has been a tough, low-margin business and about half of the refineries operating then have closed. Katrina showed how little excess refining capacity remains, and how a small constriction in supply can trigger big fuel price hikes.

It has U.S. Energy Secretary Samuel Bodman urging oil companies to use some of their hefty profits to expand refining capacity, and Congress debating whether to relax some environment regulations to encourage the same.

It may take more than a big carrot or two to make an industry expand that’s benefiting from tight supplies, however.

While the number of operating refineries has diminished, those remaining have been buying each other up. Since 1993, the market share controlled by the five largest U.S. refiners has jumped from 35 percent to 56 percent, according to a 2002 Senate report. It concludes 28 states then were served by refining “oligopolies,” markets with limited competition.

Congress itself can share the blame, for approving the mergers that have given the largest refiners the market power to influence the price of what they sell.

Bechtel and Jacobs Awarded Proposed 325,000 bpd Refinery Expansion Project by Motiva

Bechtel Corporation and Jacobs Engineering Group Inc. announced that they were awarded a contract by Motiva Enterprises LLC (jointly owned by Saudi Refining, Inc. and Shell Oil Company) to provide engineering, procurement and construction services for a proposed 325,000 barrel per day refinery expansion at its Port Arthur, TX facility.

In making the announcement, Bechtel Oil, Gas & Chemicals President, Bill Dudley, said "We are delighted to have been selected by Motiva to design and build this important expansion in the refining capacity of the United States. The project is of major importance to all stakeholders -- industry as well as community. Its impact will be far reaching and we are committed to building a safe, reliable state-of-the-art facility."

Jacobs Group Vice President Pete Evans stated, "We are pleased about the opportunity to provide Motiva the proven resources of our two organizations to execute one of the largest refinery expansions ever undertaken in North America. Our established working relationship and knowledge of the Port Arthur Refinery enables us to develop programs and approaches that are tailored to the unique aspects of this project. We look forward to continuing to be part of the Port Arthur community."

Comment Period on North Dakota Tribal Refinery Extended

Federal officials are giving people more time to comment on a refinery near Makoti, ND being proposed by the Three Affiliated Tribes.

The deadline for comments on a draft environmental statement has been extended until Sept. 13.

The Three Affiliated Tribes are proposing a plant that would produce 15,000 barrels of gasoline and diesel fuel a day from Canadian crude oil.

The Environmental Protection Agency and the Bureau of Indian Affairs recently held a series of public hearings. The two agencies eventually will decide whether the plan can move forward.

Yorktown Refinery Changing Hands again as Western Refining Acquires Giant Industries

Arizona based Giant Industries, the parent company of the state’s only refinery, was acquired August 28 by El Paso, Texas-based Western Refining. Scottsdale, Ariz.-based Giant had purchased the refinery in 2002 from British Petroleum for $170 million.

Western will pay $1.23 billion in cash and will also assume $275 million in debt for Giant. The deal is expected to close in the fourth quarter.

The refinery which was built by Amoco in 1956, later merged with BP. The Yorktown refinery was the largest of three owned by Giant. Western Refining owns one large refinery in El Paso and sells its gas primarily in the Southwest.

Western paid $83 a share for Giant, which has seen an incredible run-up in its stock price and gained $10.43 a share Monday to close at $82.22. Giant stock sank to less than $2 a share in 2002 after the company bought the Yorktown refinery. As crude prices have risen over the past four years, the company's profitability and stock price has skyrocketed.

The change in ownership in the refinery shouldn't lead to any job losses. Yorktown has about 134 unionized employees, who have a contract through 2009.

The combined company expects to save $20 million a year by eliminating duplicative positions at the corporate level and taking advantages of larger economies of scale for purchasing.

A Western Refining presentation on the merger August 28 estimated that 42 percent of that savings, or about $8.4 million, will come at Yorktown. The slide says this can be accomplished in part by producing more so-called ultra low sulfur diesel fuel.

The federal government started requiring refiners to begin making at least 80 percent of their total diesel gas a lower-sulfur diesel starting last June. By 2010, all diesel will be at this lower sulfur level, requiring a large investment by refineries such as Yorktown.

Giant has spent more than half of the $130 million it expects to spend to process oil into low-sulfur diesel gas at Yorktown. About $35 million was spent in 2005.

Giant has been considering expanding the plant, but had not made any official plans. The press release on the merger says Yorktown "has the flexibility to incorporate future growth initiatives given its flexibility to process cost-advantaged feedstocks."

Yorktown sometimes buys lower-quality imported crude oil from places such as West Africa that is cheaper because it's harder to process. Yorktown upgraded its plant in 2004 to process lower-quality oil from the North Sea supplied by Norway-based Statoil under a long-term agreement.

"Giant recently modified this refinery to process significantly higher quantities of high-acid heavy crude, and that strategy has proven to be very successful," said Foster.

Western Chief Executive Officer Paul Foster touted Yorktown's ability to receive barges and tankers of oil from around the world on the York River, where the company has a pier.

"With its water access, we will have a great deal of flexibility for raw materials and finished product," said Foster on a conference call with Wall Street analysts.

Excluding firms such as Exxon that produce oil, Giant and Western combined will be the fourth-largest publicly traded refinery operator in the country. The others are Valero Energy, Sunoco and Tesoro.

The Yorktown refinery converts about 62,000 barrels of crude oil into gas a day. The other two Giant refineries in New Mexico process a combined 37,000 barrels, and the Western El Paso plant uses 117,000 a day.

Adding Giant will increase Western's production capacity by about 85 percent to 216,000 barrels a day. The El Paso company will also get two petroleum distribution companies owned by Giant, which also runs 159 gas stations in the Southwest.

The profit margins at Yorktown were $2.32 a barrel, or 8.6 percent, in 2002. By 2005, the profit on each barrel more than tripled to $8.72 a barrel, with a 17 percent profit margin. These increasing margins for refineries have driven up their stock prices along with the cost of gas.

When Giant first bought the refinery in February 2002, the stock price was at $9.39. For $1,000, someone could have bought about 106.5 shares. At Monday's closing price, they would be worth $8,756.

EPA Issues Final Decision on Chevron Cleanup

U.S. Environmental Protection Agency Region 5 has announced its final decision on the cleanup plan for ground water at the former Chevron refinery in Hooven, Ohio. "We are confident that this plan will protect public health and the Great Miami River from the contaminated ground water," said EPA acting regional administrator Bharat Mathur.

The plan calls for:

High-volume pumping of ground water in highly contaminated areas to remove water contaminated by petroleum hydrocarbons
Ground-water testing to ensure the contamination has not spread.
Following the pumping, allowing natural processes to break down the contaminants, EPA will review progress every five years.
Gradual shut-down of the previous pumping well network.
Restrictions on ground water use and basement construction on the former refinery property.
Restrictions on redevelopment of the site for industrial use only.
Continued monitoring of soil gas wells in Hooven.
Collecting contaminated vapors (gas) under Hooven on a periodic basis.
Barriers to prevent erosion of contaminated material into the Great Miami River
Backup plans if the performance measures are not met.

This plan is one of five EPA considered for addressing contaminated ground water at the former refinery. The proposed plan was explained to the public at a hearing on May 9. EPA reviewed public comments before making its decision and made changes to the proposed plan as a result of those comments.

For instance, in response to public comments, EPA split sampling with Chevron, confirming in EPA's labs that soil gas results show the existence of a clean layer of soil gas about halfway between the ground water surface and the ground surface. This data support EPA's conclusion that residents are not currently exposed to contaminated ground water from the refinery.

Also in response to comments, the frequency of soil-gas sampling over the next two years will be increased and the cleanup time frame estimate increased from 30 to 42 years.

COLOMBIA

Glencore International Wins Bid with $656.4 million to Expand Columbia Oil Refinery

Glencore International AG has won the bid for a majority stake in a company that will expand and operate Colombia's second-largest oil refinery.

Glencore, headquartered in Switzerland, offered to pay US$630.7 million (€494.2 million) for a 51 per cent stake in the new company, beating out the only other bid of US$595 million (€466.2 million) by Brazilian oil giant, Petrobras.

The Swiss-based company with worldwide interests in metals, minerals and energy, has investments in Jamaica having bought the 65 per cent stake in bauxite/alumina producers Alpart formerly owned by Kaiser.

Glencore will end up paying $656.4 million (€514.7 million), which the government has determined the stake is worth, Colombia's presidency said in a statement.

Glencore's investment will help finance the $800 million (€627 million) expansion of the Cartagena refinery, said Ecopetrol Vice President for Refining Federico Maya.

The refinery is currently owned entirely by Ecopetrol, a state-run company.

Ecopetrol will retain the other 49 per cent of the company, Maya said.

The expansion will nearly double the refinery's processing capacity to 140,000 barrels per day, and should be operating by the first half of 2010.

The upgrade is seen as critical to reducing Colombia's reliance on importing oil derivatives.

Oil is Colombia's largest legal export, accounting for about 25 per cent of all sales abroad.

NEWFOUNDLAND

Harvest Energy Bets on $1.6-billion Deal to Buy Newfoundland Oil Refinery

Harvest Energy Trust, which began its life four years ago picking up undervalued oil assets, August 23 bet big on its contrary instincts with a $1.6-billion deal to buy an oil refinery in Newfoundland, making it the first energy trust to get involved in the business of selling diesel and gasoline.

The unexpected move was led by Bruce Chernoff, Harvest's chairman, who has established himself as one of Calgary's savviest entrepreneurs.

“When we started, we were buying types of properties nobody else wanted,” Mr. Chernoff said in an interview. “This feels a lot like that. Once we get a chance to tell the story, people will see it's a huge opportunity for Harvest.”

Harvest is paying $1.6-billion for North Atlantic Refining Ltd., owner of a 115,000-barrel-a-day oil refinery in Come by Chance, near St. John's. Harvest is also buying gas stations and a home-heating business in Newfoundland. The assets were put up for sale in December by Vitol Group, a Dutch-Swiss company that is one of the world's largest traders of oil and refined products.

The refinery business is booming, in stark contrast to previous years, but the Come by Chance concern wasn't considered a premium asset by industry players. It was Vitol's only refinery.

In December, Vitol said it would need to spend $700-million to make the facility a major player. Scale was one issue, as Come by Chance is half the size of North America's larger refineries.

Harvest said it would consider putting more money into the refinery but stressed that the current output is top-notch.

Come by Chance opened in 1973, but the business went bankrupt within three years and sat idle for a decade. Vitol bought it in the 1990s.

While some investors and analysts were critical of the deal, one Harvest unitholder was impressed.

“They certainly paid a reasonable price,” said Tom Cahill, a partner at Beaumont Financial Partners LLC near Boston, referring to the higher price Lyondell Chemical Co. paid this month to buy out a partner in a Houston refinery.

“It's pretty shrewd,” Mr. Cahill said, adding that it will add to cash flow, a key factor for investors putting money in Harvest. “I think it's going to prove to be a good move.”

Units of Harvest slipped 37 cents or 1.1 per cent to $33.59 as investors assessed the deal. It is being funded mostly by debt with new equity expected to be issued at some point.

Standard & Poor's said the deal could have “negative implications” for its credit rating of Harvest. Analyst Jamie Koutsoukis said he was concerned about the scale of the deal and the resulting increase in debt, as well as “the acquisition being a departure from the company's business experience both in terms of geography and operations.”

Harvest said the refinery would provide balance to its operations, bringing diversity and more stability to its cash flow. Acquisitions have been a key part of Harvest's strategy but finding good deals for oil and natural gas properties in Western Canada has become tougher.

“It has been increasingly difficult to find what we think are good value investment opportunities,” John Zahary, chief executive officer, said in an interview. “As it became more difficult, over the last 12 months, we began to look further afield.”

VENEZUELA

Venezuela’s PDVSA Restarts El Palito Refinery Unit

Venezuela's state oil company Petroleos de Venezuela SA said August 10 it had restarted a unit of its El Palito oil refinery that makes components for high-octane gasoline exports after it was shut down in June for maintenance.

The unit was restarted and has returned to normal processing levels of 15,000 barrels of crude a day, said Alejandro Granado, head of PDVSA's refining operations. The unit can process as much as 20,000 barrels a day but normally runs under capacity.

Granado said that the refinery's catalytic cracker, which produces gasoline, also is back on line.

Venezuela is the world's fifth largest oil exporter and a major supplier of gasoline and other fuels to the United States.

2. ASIA

CHINA

PetroChina's NE Refinery Plans Facility for Gasoline

PetroChina Co. Harbin petrochemical subsidiary in northeastern China plans to build a new refining facility to produce high-quality gasoline.

The facility will consist of a 600,000-metric-ton a year reforming unit and a 800,000-metric-ton a year upgrading unit, necessary to produce high-quality gasoline, with a total investment of CNY99.196 million ($12.45 million), according to a statement recently posted on the Web site of Harbin city's environmental protection bureau.

The facility has expected investment return period of 4.5 years, according to the statement. It did not give a time frame as to when the facility could be built.

PetroChina expects to produce high-quality gasoline with the new facility to meet local demand. High-quality gasoline usually consists of 95 RON, 97 RON and 99 RON gasoline whose exhaust emissions pollute less.

The plan undergoing an environmental assessment by local authorities and the public, as the facility would be located in Harbin city of Heilongjiang province.

The area is environmentally sensitive as it is near to the Songhuajiang River, which was heavily polluted by an explosion in another PetroChina's petrochemical unit in Jilin last November.

The Harbin petrochemical unit has a capacity of processing 4 million tons of crude a year, or 80,330 barrels a day.

PetroChina to Build $1.6-billion Refinery in Guangxi

PetroChina and Sinopec, the nation's two leading oil firms, are awaiting final government approval to jointly construct a US$1.6-billion refinery to process Sudanese oil in Southwest China's Guangxi Zhuang Autonomous Region.

PetroChina, which initially proposed the refining project in Qinzhou, a port city of Guangxi, will have a 70-per-cent stake in the new plant, with the remaining 30 per cent going to Sinopec, according to a PetroChina official, who wished to remain anonymous.

The Guangxi project will be the first time the rivals have come together to work on a joint project.

A senior official at PetroChina's refining and marketing division confirmed the partnership with Sinopec, said August 22 that the two firms were still awaiting the final nod from the National Development and Reform Commission to proceed with the construction work.

"It is difficult to predict when the government will approve the project," he said, without elaborating.

Pan Wenfeng, a local government official in charge of Guangxi's industrial projects, last month revealed that the Qinzhou refinery would involve a total investment of 13 billion yuan (US$1.6 billion) and was likely to win the NDRC's approval within four to six months. It satisfied the government's environmental requirements in June.

Sinopec, which enjoys a stronger marketing presence in the south than PetroChina, wanted to build a separate 8-million-ton-per-annum refinery in Beihai, a port city 100 kilometres from Qinzhou. Sinopec already operates a small refinery at Beihai with an annual crude-processing capacity of 600,000 tons.

But amid concerns about overlapping investments, the authorities ordered both companies to compromise on a joint plant in Qinzhou, which has a designed capacity of 10 million tons a year, a Sinopec official told China Daily.

The new refining facility in Qinzhou will process oil from Sudan, where PetroChina's parent company produced 16.38 million tons of crude oil and found new reserves of 78.6 million tons last year.

Expected to come online by 2010, the jointly invested refinery will benefit from the huge market demand in southwestern China, as well as the possibility of domestic oil product prices being brought closer to the international level, analysts said.

CNOOC to use Axens’ Technologies for New Refinery at Huizhou

China Offshore National Oil Corp. (CNOOC) is using Axens’ aromatics production technologies for a new 12 million-tpy oil refinery at Huizhou in Guangdong Province. This is claimed to be the largest single-plant refinery in China with a total investment of around CNY 20 billion and is targeted for completion by 2008.

The complex will use ParamaX technologies (TransPlus, Elux and XyMax), licensed from Axens , to produce nearly 1.2 million tpy of Paraxylene, 250,000 tpy of benzene and 80,000 tpy of orthoxylene.

INDIA

RPL to Raise $1.5 billion Loan to Finance Refinery Project

Mukesh Ambani-controlled Reliance Petroleum Ltd (RPL) will raise $1.5 billion dollars (nearly Rs 6,900 crore) through syndicated term loan facility to finance its new 580,000 bpd refinery and a 0.9 MT polypropylene unit.

A group of 14 lead managers will invite banks around the globe to participate in this landmark fundraising by RPL, a subsidiary of Reliance Industries Ltd (RIL).

"The loan facility comprises of $950 million 7.5 year tranche and a $550 million 10-year tranche with a blended average life of 6.6 years," RPL said in a statement in New Delhi.

The $1.5 billion syndicated loan facility is the single largest limited recourse financing mandated in the Asian market in recent years, excluding China.

The new project will be located in a Special Economic Zone adjacent to RIL's existing refinery in Jamnagar, Gujarat. RPL had offered an initial public offer for the same project in April this year.

The Rs 27,000-crore refinery project is expected to help transform India from a net importer to a net exporter of petroleum products, with target export markets including Europe, the United States and the Far East.

After the new 580,000 barrel-a-day refinery project is completed by December 2008, the total capacity for the RIL-RPL Jamnagar site will be more than 1.2 million barrels per day, making the complex the world's biggest.

Reliance Aims to Complete Oil Refinery Expansion ahead of Schedule

Target Reliance Industries Ltd., India's biggest publicly traded company, aims to complete construction of the world's largest oil refinery as much as six months ahead of schedule to profit from record fuel prices.

``We want to hit the market as soon as possible,'' P.M.S. Prasad, president of Reliance's petroleum business, said in an interview in Mumbai on Aug. 3. He predicts a global shortage of oil-processing capacity will last until about 2011. Reliance had planned to almost double output from its facility in Jamnagar, Gujarat state, by December, 2008.

Reliance is pressing employees and contractors to beat construction targets as rivals including Valero Energy Corp., the largest U.S. oil refiner, expand to benefit from record gasoline and diesel prices. The Indian company run by Mukesh Ambani has earned more than $7 billion since it started its first refinery in 1999.

``They have an incredible track record in building a world- class refinery,'' said U.P. Bhatt, who helps manage equivalent of $111 million in Mumbai at Canbank Investment Management, which has invested in Reliance Industries. ``I don't have any doubt that they can do it ahead of schedule.''

U.S. refiners may spend a combined $18 billion over the next five years to increase production by about 1.9 million barrels a day, or 11 percent, according to the National Petrochemical & Refiners Association.

Reliance's unit, Reliance Petroleum Ltd., is spending $6.1 billion to build a 580,000 barrels-a-day refinery next to its parent's existing 660,000 barrels-a-day plant in Jamnagar in western India, making it the world's largest crude oil processing facility on one site.

The company's refinery is the world's third-largest now and the expansion will put Reliance ahead of Petroleos de Venezuela SA's Paraguana Refinery Complex, which has installed capacity of 935,000 barrels a day and SK Corp.'s 817,000 barrels a day plant in South Korea, according to figures provided by Reliance.

The planned expansions in the U.S. would triple the pace of the past five years. The U.S. currently has 146 operating refineries with combined crude processing capacity of almost 17.3 million barrels a day, or an average of about 119,000 barrels per day per plant, according to the Energy Department.

Reliance is using record profits from its existing refinery and chemicals plants to fund the new venture.

``Funding is not an issue,'' said Prasad. ``We have committed orders for all the equipment that takes 18 to 22 months to deliver. We have our people sitting at every major vendor's office around the world to make sure they're on our job.''

Reliance, which will get tax breaks because its output is exclusively for export, is aiming to sell all of its output in the U.S. and Europe.

Reliance expects to compete for market share in the U.S. with companies such as Exxon Mobil Corp. even after paying to transport the fuel from India to the U.S. partly because the new refinery will cost about 40 percent less than comparable plants elsewhere in the world, Prasad said.

``I can compete with a refiner in the U.S.,'' he said.

Reliance's refinery on India's west coast is among the closest to the Middle East, the source of almost a third of the world's oil. A crude oil tanker from the Persian Gulf reaches Jamnagar in three days, according to Reliance.

``There is a slight differential in freight cost because the Middle East is anyway exporting crude to the U.S.,'' Prasad said. ``Instead of the Middle East exporting crude, I export products. We are geographically very close to the Middle East, so there can be no big difference in freight between Middle East and India, as we export products in large parcel sizes.''

Reliance built its first refinery at a cost of $3.45 billion, 37 percent cheaper than comparable plants elsewhere because of lower engineering and construction costs, Prasad said.

``We have the ability in India to mobilize manpower,'' he said. ``It is a big advantage that no other oil major or any other independent refinery can find.''

Reliance has employed 10,000 workers on the site and has another 10,000 working on the project at various vendors' offices around the world, Prasad said. When construction peaks by February, 2007, about 100,000 workers will be employed at the site, he said.

Reliance's lower-cost strategy emulates India's software services companies such as Infosys Technologies Ltd., which have won orders against global rivals by so-called offshoring, which involves transferring a computer programming job by phone lines to India where an engineer does the work at a sixth of the cost in the U.S.

Bechtel Group Inc., the world's largest engineering and construction company, is managing the engineering and equipment supplies for the new refinery while the construction is handled by Reliance directly, said Prasad.

Of the 661 refineries worldwide, Reliance's plant will be among 31 capable of processing so-called extra heavy oil, which has a larger proportion of pollutants such as sulfur and is about $6 a barrel cheaper than so-called light crude, according to figures provided by Reliance.

Reliance's ability to process cheaper varieties of crude yields a higher profit on each barrel. Reliance said in a statement on July 20 it earned $12.4 a barrel in the quarter ended June 30. Asian refiners earned $11.39 a barrel during the same quarter, according to Merrill Lynch & Co.

GE Oil & Gas to Supply Compression Technology to Reliance Petroleum Project

GE Oil & Gas is supplying Compression Technology to Reliance Petroleum Ltd. (RPL) for a project in Jamnagar, India, that will result in what is claimed to be the world’s largest refinery complex. At a single location. The Jamnagar export refinery is located in a special economic zone in an existing refinery owned by Reliance Industries, Ltd. (RIL). RIL created RPL as a startup venture for the Jamanagar refinery project.

When the new 580,000-bpd refinery project is completed in late 2008, the total capacity for the RIL-RPL Jamnagar site will be more than 1.2 bpd. GE is supplying three reciprocating compressors, two screw compressors and spare parts for the project. The equipment will be shipped during the first and second quarters of 2008.

INDONESIA

Petroleos May Invest, Supply Oil for Planned $5 billion Indonesia Refinery

Petroleos de Venezuela SA, South America's largest oil company, may get a stake in, and supply crude to a $5 billion refinery to be built in Java as Indonesia seeks to secure more fuel to meet domestic demand.

Petroleos may supply half of the crude required by the 300,000 barrel-a-day processing plant, Rudy Radjab, president of the unit of state oil company PT Pertamina leading the project, said. The Caracas-based company is interested in acquiring a 25 percent stake in the venture, he said.

``We are waiting for approvals from Pertamina and the government to go ahead with the plan,'' Radjab said.

Pertamina's subsidiary PT Elnusa Harapan on May 10 signed an agreement with National Iranian Oil Refinery & Distribution Co., which will take a 30 percent stake in the planned refinery. Indonesia needs new oil processing plants as its refineries' daily capacity is insufficient to meet demand and imports of oil products are burdening the state budget.

VIETNAM

Honeywell to Supply Process Controls for Vietnam’s Dung Quat Refinery under $17.5 million Contract

US-based aerospace product manufacturer and service provider, Honeywell International Inc., has said it will supply process controls for Vietnam’s first oil refinery under a contract worth US$17.5 million.

Honeywell says the Technip Consortium of France, which is building the refinery in Dung Quat Economic Zone in the central province of Quang Ngai, has selected Honeywell to supply its process automation system. The refinery is expected to begin production in early 2009.

Dung Quat Refinery is designed to produce 130,000 barrels of oil per day and other products such as propylene, liquid petroleum gas (LPG), motor gasoline, jet A1 kerosene, auto diesel and fuel oil. The main contractors are Technip, JGC of Japan and Reunida Technica of Spain.

PetroVietnam – the Vietnam Oil and Gas Corporation – is the owner of the refinery project. This refinery, one of Vietnam’s most important business projects, is expected to help the country become a player in Asia’s oil market.

PetroVietnam, through its various subsidiaries, covers all the operations from oil, gas exploration and production to storage, processing, transportation, distribution and services in Vietnam.

3. EUROPE / AFRICA / MIDDLE EAST

BULGARIA

Bulgarian Refinery Allots $750 Million in Modernization

Bulgarian Oil-refinery LUKoil Neftochim will invest some $750 million in its modernization over the next five years.

The company will allot another $200 million for petrol stations construction, bringing their number to 292, which will equal 10% of all gas stations across the country.

LUKoil's investment strategy envisages that the company reconstructs its local purifying system and that its fuel production shift to the highest standard Euro 4 and Euro 5 by the end of the year.

FRANCE

DHC Startup Operations Begin at the Normandy Refinery

Total announces the startup of the hydrogen production unit (Steam Methane Reformer - SMR), at the Normandy refinery near Le Havre. This startup is the first step in the commissioning of the new distillate hydrocracker (DHC) project.

Up to 1,000 people a day worked onsite during the construction phase, with the project completed on time and on budget in 26 months at a cost of around $550 million.

The next steps consist of bringing the sulfur recovery units on stream in August then commissioning the hydrocracker, which will be gradually ramped up to reach full product availability at end-September.

The units convert heavy fractions of petroleum into ultra low sulfur distillates, such as automotive diesel and kerosene, to reduce deficits in Europe. They will have an annual production capacity of 1.3 million metric tons of sulfur-free automotive diesel, 200,000 metric tons of sulfur-free kerosene, 500,000 metric tons of high quality bases for lubricants and specialty fluids, and 400,000 metric tons of naphtha feedstock for petrochemicals.

ITALY

CNOOC to use Axens’ Technologies for New Refinery at Huizhou

The complex will use ParamaX technologies (TransPlus, Elux and XyMax), licensed from Axens , to produce nearly 1.2 million tpy of Paraxylene, 250,000 tpy of benzene and 80,000 tpy of orthoxylene.

LITHUANIA

KazMunaiGaz Works on a Refinery Project in Turkey

Kazakh Oil and Gas Company (KazMunaiGaz), Kazakhstan’s national oil company, is carrying out feasibility studies to build a refinery in Black Sea at Turkish coast.

KazMunaiGaz wants to build the refinery to transfer Kazakh oil to the Mediterranean region.

The company, even if it cannot build a refinery, is positive towards a consortium with Russian LUKoil which formally applied to the Energy Market Regulatory Authority (EPDK) to build a refinery in Turkish northern city of Zonguldak.

Recently, Petrol Ofisi as well as Çalık Enerji & Indian Oil Corp. applied to EPDK to build a refinery and petrochemicals complex in oil pipelines terminal town of Ceyhan in Adana province that will become the focal point of the Turkish and foreign groups following the inauguration of the Baku-Tbilisi-Ceyhan Pipeline.

Foster Wheeler Gets Contract to Revamp Lithuania’s Mazeikiu refinery

Foster Wheeler Italiana S.p.A. has a contract with AB Mazeikiu to revamp the Mazeikiu refinery in the Republic of Lithuania. This revamp forms part of a comprehensive modernization program that will enable the refinery to meet future European Union fuel quality specifications. Financial terms were not divulged.

Foster Wheeler will provide basic design, front-end engineering, detailed design and procurement services for the revamp, including a vacuum unit, vacuum gasoil hydrotreater, deisel/kerosine hydrodesulfurizatoin unit, fluid catalytic cracking unit (FCCU), amine and sulfur recovery unit and all related utilities.

The FCCU capacity will be increased from 45,000 bpsd to 60,000 bpsd. Foster Wheeler’s scope also includes a new vacuum flasher, refinery instrumentation, and modernizaton of all the refinery’s heaters.

NETHERLANDS

BP's Nerefco Refinery to Go Into Turnaround

The 400,000 barrel-a-day Nerefco refinery in the Netherlands will go into turnaround in September, oil product traders said August 15.

Nerefco is jointly owned by BP PLC and Chevron Corp., though the U.S. oil major confirmed last month it plans to sell its 31% stake in the refinery, one of the largest in Europe.

A spokesman for BP, which owns a 69% stake in Nerefco, declined to comment.

Opinions on the extent and duration of the turnaround vary. Some market participants said the maintenance work would likely take one month, though one trader said it was expected to last around one week and only affect the crude distillation unit at Nerefco.

Shell’s Pernis Refinery Gives Greenhouses a Boost with CO2 Pipeline

A project to reduce the carbon dioxide emissions from oil refineries by using the gas as "fertilizer" in commercial greenhouses has been so successful it is being extended.

The project, which adds new meaning to the term "greenhouse gas", is the first in the world. It distributes CO2 from Shell's Pernis refinery outside Rotterdam to 400 greenhouses, saving a large amount of natural gas each year, which is equivalent to 170,000 tonnes of CO2.

The companies behind the venture, Hoek Loos and Voker Wessels are now expanding the operation to supply a further 100 greenhouses. Before the project was launched last year the greenhouses, which grow vegetables and flowers, used to generate CO2 by burning natural gas. By tripling the concentration of the gas inside the greenhouse they allow the plants to photosynthesize more quickly. This boosts productivity by up to 25% and cuts growing time, but the CO2 ended up in the atmosphere.

"We came to the conclusion that they used a lot of natural gas to provide CO2. Of course, that's not a very good situation for the environment," said Jacob Limbeek, who with the late Hans Tiemeijer came up with the idea for the scheme called Organic CO2 for Assimilation of Plants.

According to the journal Nature the €100m (£65m) scheme supplies greenhouses with CO2 at between €40 and €70 a tonne - just over half the price of generating the CO2. Once the 100 greenhouses are plumbed in by the end of the year, the distribution network will be delivering up to 130 tonnes an hour.

"Of course, there is a reduction in the use of natural gas at the greenhouse," Mr Limbeek said. "But under European emissions trading rules it is Shell who benefits because CO2 that would have been emitted by them now goes somewhere else."

Shell will share some of the profit from selling carbon credits with the greenhouses after 2008, but Mr Limbeek was not prepared to reveal details of the deal.

NORWAY

Statoil May Abandon $630 Million Refinery Plan

Statoil ASA, Norway’s largest oil and natural gas producer, may abandon a $630mn refinery upgrade and power-plant project unless the Norwegian government overrules a recommendation by environmental regulators.

The Norwegian Pollution Control Authority recommended to the Ministry of the Environment the project proceed only if it included technology for capturing and storing carbon dioxide emissions, Statoil said on August 18.

Such a requirement means “the project will not be executed,’’ Egil Sael, a vice president for business development in Statoil’s manufacturing and marketing unit, said on Friday in a telephone interview. “It remains to be seen what the government finally decides.’’

It needs a decision by September 20, he said.

Statoil, 71% owned by the state, wants to build the gas-fired heat and power plant as part of a 4bn-kroner ($630mn) project to improve the Mongstad refinery and build a pipeline from Kollsnaes to Mongstad.

The plant would provide power to the refinery, helping Statoil to avoid paying market prices for electricity, which have soared to records in the past 18 months. The plant’s efficiency will start at 70%, rising to 80%, Sael said, meaning it will waste only 20% to 30% of the gas it burns.

Many European gas-fired plants waste half the fuel they burn, according to Bloomberg data.

Unless the government overrides the authority’s recommendation, “we will continue with a less-efficient refinery,’’ Sael said.

Norsk Hydro, Norway’s second-biggest oil and gas company and the country’s biggest power consumer, owns half a power plant being developed at Korstoe, the first in the country to burn natural gas.

TURKEY

CEO says Russia's LUKoil could Build up to $3 Billion Refinery in Turkey

LUKoil will build an oil refining complex in Turkey if the country's authorities give their approval to its plans, the head of Russia's largest oil producer said August 8.

Vagit Alekperov discussed the possibility of building the refinery in Turkey's Black Sea province of Zonguldak with the head of the country's Energy Market Regulatory Authority, Yusuf Gunay. He said as much as $3 billion could be invested in the construction of the facility, with planned refining capacity of 60-70 million bbl.

Alekperov said LUKoil's arrival would boost competition on the Turkish market. "I think competition will mount with the entry to the market of a company that [both] produces oil and runs a distribution network."

He said LUKoil would open its first filling stations in Turkey in September.

In Russia, LUKoil owns four refineries and about 1,500 filling stations.

KazMunaiGaz Works on a Refinery Project in Turkey

Kazakh Oil and Gas Company (KazMunaiGaz), Kazakhstan’s national oil company, is carrying out feasibility studies to build a refinery in Black Sea at Turkish coast.

KazMunaiGaz wants to build the refinery to transfer Kazakh oil to the Mediterranean region.

LUKoil Seeks Alternate Turkish Refinery Site in Samsun

Russian oil giant LUKoil has also surveyed the city of Samsun as part of its plans to establish a refinery in Turkey.

The company entered the business of fuel distribution in Turkey, and applied to the Energy Market Regulatory Board to establish a refinery, later announcing that Zonguldak was selected as the site.

The Turkish government offered Samsun as an alternative after the company requested land and tax incentives for the investment.

LUKoil General Manager Fikret Aliev announced that they are continuing their search for an alternative site and said they have not yet made their final decision.

Emphasizing that they are planning an investment of nearly $3 billion, Aliev said the refinery will have the capacity to process 8-10 million tons of crude oil annually.

Hosting the delegation, Samsun Governor Hasan Basri Guzeloglu highlighted Samsun’s richness and noted the importance of this investment will emerge as its infrastructure and criteria for investments are examined.

NIGERIA

Niger Delta Impasse Threatens Foreign Investment

A liquefied petroleum gas firm, Global Energy and Refinery said it has lost a sum of S2.2million to the increasing wave of violence in the Niger Delta, saying the crises in the region is a threat to foreign investment in Nigeria.

The Vice President of the company, Dominic G Benoba who recently disclosed this, explained that the loss arose from the attacks on Shell Petroleum Development Company gas facilities which supply associated gas from its fields to Global Energy Refinery's vessel stationed at Bonny, Rivers state.

G,Benoba said the development is unfortunate, adding that it is a great threat to the efforts of the federal government at mobilizing foreign direct investment in Nigeria.

He however admonished the Federal government to set in motion, moves to ensure early resolution of the crises in the oil rich region.

Business Trust gathered that more than 65 foreign oil workers have been kidnapped since January this year.

Besides, the nation has lost over S11billion of crude oil while the cost of repairing damaged facilities is overwhelming.

RUSSIA

LUKoil to Increase Processing Capacities of Volgograd and Nizhegorodsky Oil Refineries by 5-7 Million Tons

The LUKoil Oil Company OJSC is planning to increase the processing capacities of the Volgograd Oil Refinery and Nizhegorodsky Oil Refinery by 5-7 mln tons per year, LUKoil's President Vagit Alekperov said in an interview.

"We are considering a number of projects in Russia. They are the increase of the Volgograd Refinery's capacity [from 10 mln tons] to 12-14 mln tons per year, and that of 'Norci' because it works for Moscow and St. Petersburg, huge fuel consumers. We want its capacity to reach 14-17 mln tons per year," he said.

Mr. Alekperov added that at present the Company has no plans to build new oil refineries in Russia.

TARTARSTAN

Tatarstan to Start Attracting Investments into Kremenchuk Oil Refinery in 2006

Ukrainian Prime Minister Viktor Yanukovych says that Tatarstan will start attracting investments into Kremenchuk oil refinery this year.

"Tatarstan's government will soon develop the program [of investments into Kremenchuk oil refinery] and the first steps will be made as soon as this year," Yanukovych said at a Donetsk regional business meeting on August 12.

IRAN

Iran’s Isfahan Refinery Bid Postponed to August 30

Isfahan Oil Refinery is to set up another date for a development plan bid which was expected to go into effect back in July 12, 2006.

“The technical proposals forwarded by the participants were delivered to us no earlier than July 30,” Seyyed Nureddin Shahnazizadeh told the Persian service of ISNA.

“The final decision on the contractors’ proposals will be announced in 20 days,” the managing director of the refinery stated, adding that 12 Iranian and foreign firms are anticipated to bid for the project. Moreover, two to three months is required to evaluate and coordinate a mutual plan through correspondence until a winner is selected, he elaborated.

Earlier, according to ISNA, Middle East Economic Digest (MEED) had released a report on a two-month renewal period on Isfahan Refinery call for tender. The initial time was set for June 30, however, an extension date was set up for August 30 due to the estimated cost of the plan, MEED noted.

“At about $1.5b, the law only allows domestic entities to come forward as the general contractors and foreign companies may participate and cooperate as subcontractors,” the report indicated.

Chagalesh, Nargan and Namvaran are mentioned as local bidders while the names of Lurgi and Uhde from Germany, Hyundai of Korea and Chinese Sinopec are noted as foreign participants.

IRAQ

CICSCO, Inc. Expected to Build a New $750 million Oil Refinery in Iraq

CICSCO Inc., a 13-year old Denver engineering and construction firm is the odds-on-favorite to win a $750 million contract to build a new 70,000 barrel-per-day oil refinery in the Kurdish region of Iraq, according to James Prall, company president.

Designated the Koia Refinery in Koysonjac, Iraq, it will be located about 60 miles from Kirkuk, the center of the northern oil fields of the country.

Iraq depends on crude oil revenues to support its economy, but is spending over $200 million a month to import refined oil products to fuel its own domestic and industrial needs. Iraq has total refining capacity of 700,000 barrels-per-day but about half of it is not producing. The new refinery will add about 20 percent to the existing 350,000 barrels-per-day production, and is scheduled to be completed in September 2009, 36 months after the contract is awarded. Approval from Iraq is expected soon.

Despite the turmoil of war and assassinations that have plagued Iraq, a dedicated group of Iraqi petroleum engineers within the Oil Ministry have had the persistence and vision to proceed with a new paradigm that allows creative firms like CICSCO, Inc. to compete with the world's major engineering companies.

"The key to our participation in the bidding process for what will be the first new refinery to be built in Iraq in over 30 years is an Iraqi partner, and technical partnerships with leaders in environmentally sound new refinery technologies," explained Prall. "Due to a variety of adverse circumstances in Iraq, the timetable and plans for reconstruction of the Iraqi oil industry have been delayed. Unfortunately the results of activities of some of the major players who were awarded initial contracts early on have been slow and disappointing," he added.

"Many of Iraq's petroleum engineers have studied in the US, and appreciate American engineering innovations and business creativity," said Sam Zakhem, former US Ambassador to Bahrain, adding, "Creative and expert companies like CICSCO, Inc. represent the best assistance this country can offer emerging economies like Iraq. Instead of the traditional monolithic and structured American contractor, CICSCO, Inc. is poised to execute its contract using the best technologies of its participating partners, with provisions to take maximum advantage of local Iraqi manpower and skilled resources."

"By awarding contracts like this, Iraq gets the best of both worlds," said Ambassador Zakhem, "American advanced technology, guidance, and management designed to be built with local resources -- it's a model to implement and develop advanced technologies in emerging economies -- and is what America can do best. From the Iraqi perspective, working within this kind of relationship ensures that service providers are more responsive and accountable to their needs."

"Contracts involving strategic and local partners are the new global engineering paradigm," said Prall. "It allows creative thinking, innovation, and the flexibility to select the appropriate partner to add needed expertise without brick-and-mortar overhead or redundant staff of the large fixed engineering firms."

"We're looking forward to starting this project, and others as they develop in Iraq and the Middle East region," concluded Prall, adding "this contract will also mean the creation of as many as 250 new professional jobs in the Denver area."

Iraq Government Struggles To Revive Oil Infrastructure

Iraqi Prime Minister Nuri al-Maliki announced to reporters in Baghdad on August 29 that the four-month-long oil crisis has ended. Al-Maliki said the Oil Ministry, under the leadership of minister Husayn al-Shahristani, has taken appropriate steps to contain the crisis.

While it appears that the government has a short-term plan to address the crisis, it remains unclear whether Iraq has a plan to meet the country's long-term oil needs.

Much will depend on the state of security in the coming months. According to recent press reports, the Oil Ministry intends to bring several new refineries online, while continuing to increase imports of refined products. Output has been a recurring problem due to dilapidated equipment and repeated insurgent attacks.

Oil smuggling, particularly from the southern port of Al-Basrah, has become rampant, according to some observers. Still, the Southern Oil Company announced its intention to increase output from southern fields from under 2 million barrels per day (bpd) to 2.5 million bpd by year-end.

Output in the north came to a virtual standstill in July, when insurgents blew up a pipeline linking the Bayji refinery and the Al-Dura refinery in Baghdad. Together, the two refineries were responsible for 80 percent of the country's refining. Whereas Iraq once produced about 20 million liters of gasoline per day in 2003, it now produces around 3 million liters per day.

Oil Minister al-Shahristani told reporters on August 29 that Iraq has begun to increase imports from its neighbors to supplement domestic production. The ministry's latest figures indicate that imports have been raised from 8 million liters to 11 million liters per day.

Iraq previously relied heavily on exports through Turkey, but insurgent attacks have repeatedly disrupted exports through the Kirkuk-Ceyhan pipeline. When the pipeline is down, northern exports flow solely through massive truck convoys. Oil tankers transport the crude out, refine it, and truck it back in, which is both costly and time consuming.

Trucking oil abroad to refine it is costly and slow. In addition, tensions between the two countries arose after Turkey demanded that Iraq agree to buy oil from 17 specific companies, a demand al-Shahristani said was unreasonable.

Some of the oil will reportedly come from Syria. North Oil Distribution Company Director Muhammad Zebari announced earlier this month that the two countries reached an agreement whereby Syria will supply Iraq with fuel.

Al-Shahristani met with his Iranian counterpart, Kazem Vaziri-Hamaneh, in Tehran earlier this month to discuss exchanging Basra light crude for liquefied petroleum gas (LPG) and kerosene produced in Iran. According to Iranian press reports, the two countries signed a memorandum of understanding for Iran to import 100,000 barrels of crude oil per day from Iraq for refining in the Abadan and Kermanshah refineries in exchange for some 2 million liters of paraffin.

The two countries signed a memorandum of understanding last year for the construction of a pipeline between Abadan and Al-Basrah whereby Iraq would supply crude oil to Iran in exchange for gasoline, oil, gas, and kerosene. That project has yet to get off the ground.

Iraq also concluded a new deal this month with Jordan to supply the Hashemite Kingdom with 30,000 bpd of crude oil at "preferential prices," Jordanian Prime Minister Ma'ruf al-Bakhit told parliament this week, Amman's "Al-Dustur" reported on August 28. The details of the deal have not been made public. Iraq and Jordan also signed a memorandum of understanding for the construction of a pipeline between Iraq and the Jordanian port of Al-Aqabah.

Jordan imported some 100,000 bpd at subsidized prices before the fall of the Hussein regime. Al-Bakhit said that Jordan hopes to eventually increase imports to 60,000 bpd.

The new deals will not only help stabilize supply lines, they will also bring in much needed cash to the faltering economy. Iraq's Central Bank noted that inflation soared to 70 percent in July, with a concurrent surge in commodity prices. The bank attributed the rise to fluctuations in oil revenues due to sporadic exports.

Al-Shahristani said on August 21 that Iraq plans to build several new refineries and upgrade existing ones by 2010. One mega-refinery will produce 140,000 bpd of gasoline, diesel, and kerosene, AP reported on August 23. New processing plants will be built at the Bayji, Al-Dura, and Al-Basrah refineries, upping the capacity of each refinery by 70,000 bpd. A new refinery will also be built in Koya, with a production capacity of 70,000 bpd.

Long-term development of Iraq's oil fields will take longer and depend largely on security and a transparent investment law. Oil executives recently told Reuters that they would not do serious business in Iraq until both conditions are met, the news agency reported on August 23. Smaller companies have begun prospecting in the Kurdish region, but bigger firms say that such activities are risky. Kurdish officials counter, however, that the region's new investment law and the Iraqi Constitution make investment virtually risk-free.

Deputy Prime Minister Barham Salih said that the government is now reviewing a new hydrocarbon law, which will be presented to parliament by the end of the year, Reuters reported on August 29. The law, which aims to restructure the oil industry, would open the door to foreign investment, he claimed. With the right investment climate, Salih predicted production could reach 6 million bpd by 2012.

KUWAIT

Kuwait's New Refinery to Produce LSFO

An official with Kuwait Petroleum Corp (KPC) said that the country can export up to 300,000 tonnes a month of low-sulfur fuel oil (LSFO) when the country's new 615,000 barrels per day (bpd) refinery comes up in 2010-2011, Gulf News reported.

KPC's manager of planning and marketing said that this will be the first time the state refiner, which exports only super cracked fuel oil, will be producing LSFO to meet new local emission standards for use mostly by domestic oil-fired thermal plants.

The official said that the new refinery at Al Zour is designed mainly for this purpose, and it can produce up to one million tonnes of straight-run LSFO a year, which will be used mainly for domestic power generation.

The one percent sulfur fuel oil is expected to be sold into East Asia.

SAUDI ARABIA

Arab Refinery Output Rises by 600,000 bpd

Production from the Arab world's refineries has grown by over 600,000 barrels per day over the past five years, and capacity is set to surge by over 2 million bpd when new projects are completed, according to official data.

The Organization of Arab Petroleum Exporting Countries' (Oapec) latest report says most of the increase between 2001 and 2005 came from expansion in refineries in Saudi Arabia, Qatar and Kuwait as production in other Arab countries have remained almost unchanged in the absence of new major projects.

Saudi Arabia, the world's dominant oil supplier, accounted for the bulk of that increase as its refining output swelled from around 1.79 million bpd in 2001 to nearly 2.12 million bpd at the end of 2005.

Kuwait's refinery production surged from 655,000 bpd in 2001 to 930,000 bpd at the end of 2005 while Qatar's refining output rose from 120,000 to 137,000 bpd.

The increase pushed the Arab world's total refining capacity from around 6.86 million bpd in 2001 to 7.48 million bpd at the end of 2005, according to statistics made available to Gulf News.

An Oapec energy expert said refining capacity in the Arab region, particularly the Gulf, is set for a big leap. "There are new refineries being built in almost every Gulf state, and this will boost the combined Arab refining capacity significantly to over 2 million bpd by 2010," he said.

They include two new major refineries in Saudi Arabia with a combined output capacity of 800,000 bpd. The kingdom also has plans to expand its existing refineries within the country and some of those which it partly owns as joint ventures abroad. The projects will push its total refining output to nearly 3.3 million bpd.

Kuwait is also planning to build one of the largest refining projects in the world, with an initial capacity of nearly 600,000 bpd, while the UAE is considering building a third refinery in Abu Dhabi with a capacity of 500,000 bpd.

Qatar is also involved in expansion while Oman has just completed a major refining project in Sohar that will add nearly 115,000 bpd to its refining output.

According to a study by the World Energy Outlook of the International Energy Agency (IEA), the Middle East and North African oil producers are expected to pump $111 billion to nearly double their refining output capacity in the next 25 years.

The investments will add around 7.2 million bpd to the existing refining capacity in the Mena region to push the total refining production to nearly 16 million bpd by 2030.

Yanbu' New Export Refinery Designed to Process 400,000 bpd

Principals representing Saudi Aramco, ConocoPhillips and Kellogg Brown and Root (KBR) gathered in Houston recently to complete signing formalities signaling the start of front-end engineering for a new export refinery in Yanbu'.

The project is one of two new facilities that will substantially increase the Kingdom's supply of petroleum products to the international market.

Dawood M. Al-Dawood, president and CEO of Aramco Services Co., officiated on behalf of Saudi Aramco at the triple-signing occasion with joint venture partner ConocoPhillips and contractor KBR. Attending the ceremony were officials from the three companies, including the Saudi Aramco project management team to be based in Houston.

The Yanbu' Export Refinery, scheduled for completion in 2011, will be designed to process 400,000 barrels per day of Arabian heavy crude oil.

It will produce motor fuels and other refined products for U.S. and European markets. Its twin-sister plant in Jubail, a joint venture between Saudi Aramco and Total, will primarily serve the Far East market.

The combined output from the two new refineries will help meet increasing demand from the world's largest consuming countries and use Saudi Arabia's production from on- and offshore fields. They also will help alleviate the shortage of refining capacity worldwide, particularly of heavy-grade crude oils. Both refineries will be sited near existing Saudi Aramco facilities.

Mohammad Sulaiman A. Al-Subhi will head the initial 15-member Yanbu' project management team in Houston while Abdulhamid Abdullah N. Al-Hatlani will serve as business manager.

Aramco Services Co. will provide project liaison, engineering, logistics and administrative support to the team throughout the project, according to a report of Saudi Aramco.

Technip Receives Saudi Refinery Contract

Technip, a French provider of engineering and construction services to the oil industry, on August 28 said it has received a contract from Saudi Aramco and French partner Total SA to develop an oil refinery on Saudi Arabia's eastern coast.

Under the 18-month pact, Technip will handle front-end engineering, draw up capital and operating cost estimates, prepare subcontracting packages and otherwise manage the project's development.

Technip said it will be paid on a cost-plus-fee basis.

Specific financial terms were not disclosed.

When built, the refinery will have capacity to process about 400,000 barrels per day of Arabian crude oil, the company said.

Technip said its Rome operations and engineering center and its local affiliate, Technip Saudi Arabia, will manage the contract.

UAE

Foster Wheeler Awarded UAE Refinery Feasibility Studies by TAKREER

Foster Wheeler Ltd. has announced that its subsidiary Foster Wheeler International Corporation (Abu Dhabi branch), part of its Global Engineering and Construction Group, has been awarded a contract by Abu Dhabi Oil Refining Company (TAKREER) for a detailed feasibility study for a grassroots refinery to be located alongside TAKREER's existing Ruwais refinery in the United Arab Emirates.

TAKREER is the refining arm of the Abu Dhabi National Oil Company (ADNOC). Foster Wheeler has also won a feasibility study for a new visbreaker unit at the existing Ruwais refinery.

The Foster Wheeler contract values for both projects were not disclosed. The grassroots refinery study was included in the company's second-quarter 2006 bookings, and the visbreaker study will be included in the third-quarter 2006 bookings.

Both feasibility studies are scheduled for completion by the end of 2006. Foster Wheeler will review all commercially available and proven technologies for the production of high quality distillates and for residue upgrading, and it will also develop optimized process configurations, cost estimates, project implementation schedules and the requirements for the front-end engineering design phase. The study for the grassroots refinery also includes a proposed new sub-sea crude pipeline.

"We are pleased to be awarded further study work by TAKREER, having already completed a feasibility study to increase gasoline production and to produce aromatics at Ruwais," said Steve Davies, executive vice president of FWIC. "Our technical experts have particular strengths in refinery investment planning and in refinery/petrochemical integration. In addition, because we are also a global engineering, procurement and construction contractor with tremendous experience in designing and building refinery projects, our proposed process schemes will draw upon our project implementation experience and support the client's business objectives in the market."