oct 08 update

In the aftermath of Hurricane Gustav, EPA has exercised its authority under the Clean Air Act to temporarily waive certain federal clean fuel requirements for areas of Alabama, Georgia, and North Carolina until Sept. 15, 2008. In addition, EPA has approved a request to extend the existing waiver for Louisiana from Sept. 8 to Sept.15, 2008. These actions will allow greater flexibility for the fuel distribution system to support an adequate supply of gasoline.

The waivers were granted by EPA in coordination with the Department of Energy, at the request of each state. EPA Administrator Stephen L. Johnson determined that extreme and unusual supply circumstances exist, which are likely to result in a shortage of gasoline compliant with federal regulations. The federal waivers will help ensure an adequate supply of gasoline in the affected area.

The waivers apply to the 7.0 and 7.8 RVP (Reid vapor pressure) gasoline volatility requirements that apply to certain areas in Alabama, Georgia, Louisiana, and North Carolina. Gasoline volatility standards are imposed during summer months to help control emissions from motor vehicles; temporary suspension of such standards will allow for the sale of available supplies of conventional gasoline that have higher volatility limits. As required by law, EPA and DOE carefully examined all aspects of the fuel supply situation in the requested areas and determined that granting a short-term waiver was consistent with the public interest.

EPA Okays Fuel Waiver for Six Florida Counties

As a result of the disruption in the supply of fuel caused by Tropical Storms Fay and Hanna, Hurricane Gustav and Hurricane Ike, the U.S. Environmental Protection Agency (EPA) has exercised its authority under the Clean Air Act to temporarily waive certain federal clean fuel requirements for six counties in Florida until Sept. 15, 2008. This waiver allows greater flexibility for the fuel distribution system to be used to aid in the evacuation from Hurricane Ike and subsequent return of affected residents.

This waiver was granted by EPA in coordination with the Department of Energy, at the request of the State of Florida. The waiver affected the following counties in south Florida: Broward, Dade, Duval, Hillsborough, Palm Beach and Pinellas.

EPA Administrator Stephen L. Johnson determined that extreme and unusual supply circumstances exist, which are likely to result in a shortage of gasoline compliant with federal regulations. The federal waiver will help ensure an adequate supply of gasoline in the affected area during and in the immediate aftermath of the approaching storm.

The waiver applies to the 7.8 RVP (Reid vapor pressure) gasoline volatility requirements that apply in certain areas of Florida. Gasoline volatility standards are imposed during summer months to help control emissions from motor vehicles; temporary suspension of such standards will allow for the sale of available supplies of conventional gasoline that have higher volatility limits. As required by law, EPA and DOE carefully examined all aspects of the fuel supply situation in the requested areas and determined that granting a short-term waiver was consistent with the public interest.

Enviro Group Sues Richmond City, CA over Chevron Refinery Upgrade

Environmentalists are challenging the Richmond City Council's decision to approve Chevron Corp.'s plans to upgrade its Bay Area oil refinery.

In a lawsuit filed September 4, three environmental groups claim the city's environmental review concealed that the project would lead to more air pollution and higher risks for major accidents and oil spills.

Despite strong opposition, the city council voted 5-4 in July to approve a permit for Chevron to replace old equipment, build a new power plant and make other changes at its Richmond refinery.

In exchange, the San Ramon-based oil company offered the city $61 million for programs to help the community.

The Richmond City Attorney's office says it hasn't seen the complaint and can't comment.

DOE says Gulf Coast Refining Capacity Increases

The amount of oil refining capacity along the U.S. Gulf Coast that has been restored after hurricanes Ike and Gustav increased to 1.111 million barrels per day, the Energy Department said on September 16.

That was up from 845,763 bpd on September 15, according to the department. Chevron's 330,000 bpd refinery in Pascagoula, Mississippi and Murphy Oil's 120,000 bpd refinery in Meraux, Louisiana, were back to normal, after operating with reduced runs, the department said.

A total of 14 refineries with a capacity of 3.573 million bpd, equal to one-fifth of total U.S. refining capacity, remain shut after the storms. That represents a loss of about 1.3 million bpd in gasoline production and 900,000 bpd in distillate fuel output, according to the department.

Separately, 23 natural gas processing plants along the Gulf Coast with a combined capacity of 11.29 billion cubic feet of gas a day were still shut due to hurricanes Ike and Gustav, the department said.

However, 10 plants with a capacity of 4.26 billion cubic feet of gas a day were operating at normal levels or reduced rates.

Another five plants with a capacity of 1.9 billion cubic feet a day were capable of restarting once electric power is restored or upstream gas flows resume, the department said.

Texas Refineries Report Little Damage

The Texas refinery complex hit by Hurricane Ike could be fully operational within three weeks, experts said September 15 as companies began to report minimal damage to refineries along the Gulf Coast.

Dan Pickering, research analyst at Houston's Tudor Pickering Holt and Co., said he expects "75 percent are going to be back up this week."

The fear of an extended gap in supply caused the average price of regular gasoline to go up about 20 cents from Thursday, September 11 to Monday, September 15. "This is very lucky from a U.S. consumer perspective," Mr. Pickering said. "There was the risk that 10 or 15 percent of U.S. refining capacity could have been out for a month or more, and now it looks like it's going to be a fraction of that. Within the next 10 days, everything's going to be back to, quote-unquote, normal."

The Department of Energy reported September 15 that nine refineries in the Houston-Galveston region and four refineries in Port Arthur remained out of service. Three Corpus Christi refineries ran at reduced capacity.

With companies reporting little damage to refineries, the most important factor became the availability of power.

"The biggest danger was excessive flooding with highly corrosive saltwater in certain areas, and we certainly haven't seen any reports of that," said Bruce Bullock, director of the Southern Methodist University Maguire Energy Institute.

"We have a history of being sensitive during issues such as huge weather disruptions," said Shell spokeswoman Anne Peebles.

The U.S. Minerals Management Service reported that Hurricane Ike knocked down 10 production platforms out of the 3,800 in the Gulf of Mexico.

Dallas-based driller Ensco International Inc. said it could not find one of its rigs, originally about 90 miles offshore.

The U.S. Department of Energy responded to potential import slowdowns and production disruptions by agreeing to deliver to refineries more than 300,000 barrels of emergency oil from the Strategic Petroleum Reserve.

Overall, Mr. Pickering said, the damage to the industry was not as bad as predicted and shows the increased precautions companies have taken since Hurricanes Katrina and Rita.

Oil companies are working to assess damage and restart operations at Texas refineries that were in the path of Hurricane Ike. Here's where they stood by September 15.

Exxon Mobil: Its Baytown refinery, the largest in the U.S., had power and should be up and running within the week. Its Beaumont refinery did not have power.

Valero: Its Houston refinery had power. Valero was working to restore power to its Texas City and Port Arthur refineries.

BP: Its Texas City refinery, the second-largest in the area, experienced no significant flooding. Employees were working with local authorities and utilities to restore power and water.

Valero to Resume Houston Refinery Operations within Days

Valero Energy Corp. was continuing its efforts to get its Houston Refinery restarted after Hurricane Ike shut down three of the company’s plants on the Gulf Coast.

The plant now has power and steam, company spokesman Bill Day said. However, production at the main process units was not expected for several more days.

Valero was continuing to deal with issues at its Texas City and Port Arthur refineries, but company officials are unable to say when the refineries would be back on line.

Day said production at Valero’s other Gulf Coast refineries remained in operation at planned rates but the company’s refinery in Ardmore, Okla., remained at reduced rates due to supply issues.

While Valero’s top priority is the safe and efficient restart of its three refineries shut down by Hurricane Ike, the company is trying to keep gas prices down.

“Resupplying the market will take care of supply disruptions. In the meantime, we have had very limited price changes at our company-operated retail stores to the point where we are losing money on fuel sales,” Day says. “We do not control the pricing decisions of customers who buy from us, including branded wholesalers. We do expect that our branded wholesale customers will keep consumers’ interests in mind in the wake of Hurricane Ike.”

Total says No ETA to Restore Power at Port Arthur Refinery

European oil firm Total said on September 18 its 232,000-barrel-per-day Port Arthur, Texas, oil refinery remains down and without electric power following Hurricane Ike.

"We do not have power. And I am not aware of an ETA on power restoration," Total spokeswoman Karyn Grace said.

Half of Gulf Coast Gas Plants Operating

Based on information provided by the U.S. Department Energy Friday morning, September 19 of the 38 natural gas processing plants from Texas to Alabama that were impacted by the recent hurricanes were operational. Of these facilities, 6 plants were running at a reduced level while 13 were operating normally. In total, these 19 plants offer 7.2 billion cubic feet per day (Bcf/d) of processing capacity.

The remaining 19 plants were not online as of Friday morning September 19. Nine of these facilities -- located primarily in western Louisiana and eastern Texas and representing 5.2 Bcf/d of capacity -- were shut down. Ten plants, spanning the storm-impacted area from South Alabama to South Texas and designed to process more than 5 Bcf/d of natural gas, were capable of restarting. They had not yet restarted because electricity had not been restored or upstream gas flow had not yet commenced service.

Below is a detailed list of the affected gas processing plants. This information was current as of 7 a.m. Central time on Friday, September 19.

Plant Location	Capacity	Status
East Louisiana & Alabama
Yscloskey St. Bernard, LA	1,850 mmcf/d	Shutdown
Venice Plaquemines, LA	1,300 mmcf/d	Shutdown
Pelican St. Mary, LA	600 mmcf/d	Capable to restart
Larose Lafourche, LA	600 mmcf/d	Capable to restart
Plaquemine Iberville, LA	225 mmcf/d	Capable to restart
Burns Point St. Mary, LA	160 mmcf/d	Capable to restart
Mobile Bay (Duke) Mobile, AL	300 mmcf/d	Normal
West Louisiana & East Texas
Eunice Acadia, LA	1,200 mmcf/d	Reduced level
Sea Robin Vermilion, LA	950 mmcf/d	Capable to restart
Bluewater Acadia, LA	950 mmcf/d	Capable to restart
Cameron Meadows Cameron, LA	500 mmcf/d	Shutdown
Iowa Jefferson Davis, LA	500 mmcf/d	Normal
Grand Chenier II Cameron, LA	400 mmcf/d	Shutdown
Sabine Pass Cameron, LA	300 mmcf/d	Shutdown
Stingray Cameron, LA	300 mmcf/d	Shutdown
Lowry Cameron, LA	265 mmcf/d	Capable to restart
Barracuda Cameron, LA	225 mmcf/d	Shutdown
Gillis Calcasieu, LA	180 mmcf/d	Reduced level
Dubach Lincoln, LA	175 mmcf/d	Normal
East Texas (MarkWest) Panola, TX	780 mmcf/d	Capable to restart
East Texas (DCP) Panola, TX	750 mmcf/d	Normal
Godley (Fort Worth II) Johnson, TX	300 mmcf/d	Reduced level

Port Arthur Jefferson, TX	200 mmcf/d	Capable to restart
Carthage Panola, TX	175 mmcf/d	Reduced level
Indian Springs Polk, TX	150 mmcf/d	Shutdown
Central East Texas
Houston Central Colorado, TX	700 mmcf/d	Normal
Markham Matagorda, TX	300 mmcf/d	Capable to Restart
Armstrong De Witt, TX	250 mmcf/d	Normal
Point Comfort Calhoun, TX	200 mmcf/d	Shutdown
Old Ocean Brazoria, TX	200 mmcf/d	Normal
Wilcox Lavaca, TX	220 mmcf/d	Normal
La Grange Fayette, TX	200 mmcf/d	Reduced level
Waskom Harrison, TX	270 mmcf/d	Normal
South East Texas
King Ranch Kleberg, TX	925 mmcf/d	Normal
Shoup Nueces, TX	290 mmcf/d	Normal
La Gloria Jim Wells, TX	265 mmcf/d	Normal
Gregory San Patricio, TX	150 mmcf/d	Reduced level
Gulf Plains Nueces, TX	150 mmcf/d	Normal

Information provided by U.S. Department of Energy, Office of Electricity Delivery & Energy Reliability

Citgo Pleads Guilty, Sentenced for CWA Violation in Louisiana

CITGO, a Delaware corporation, pleaded guilty September 17 and was sentenced to pay a $13 million fine for the negligent discharge of pollutants into two rivers in Louisiana in violation of the Clean Water Act (CWA), the Justice Department announced. The $13 million fine is the largest ever for a criminal misdemeanor violation of the Clean Water Act.

CITGO pleaded guilty in U.S. District Court in Lake Charles, La., for negligently failing to maintain storm water tanks and failing to maintain adequate storm water storage capacity at its petroleum refinery in Sulphur, La. As a result of these failures approximately 53,000 barrels of oil was discharged into the Indian Marais and Calcasieu Rivers following a heavy rain storm.

In 1994, CITGO converted its lagoon waste water system into a tank system for handling excess waste water and storm water. In order to trim costs, only two storm water tanks were constructed, but as early as 1998, employees and outside contractors advised that an additional tank was necessary. Despite being advised of the inadequate storage capacity, CITGO did not approve construction of a third tank until 2005.

In addition, the company failed to follow standard procedures for maintaining the tanks. During its operations, CITGO failed to remove oil, sludge and solids from the tanks and failed to repair the skimming equipment. Failing to follow these procedures allowed for the build-up of a significant amount of oil in the storm water tanks, which contributed significantly to the overflow.

Between June 19 and June 20, 2006, a heavy rainstorm overwhelmed the capacity of the two existing tanks and forced oil that had collected in the tanks out and into the two rivers. The illegal discharge resulted in limited commercial transportation on the water ways for approximately 10 days.

Along with the fine, CITGO will implement an Environmental Compliance Plan (ECP) by which it will take measures to ensure a spill of this type will not occur in the future. The ECP includes new reporting requirements within the corporate structure regarding environmental issues and tank maintenance, the completion of the third storage tank and the installation of new and more effective oil removal equipment for the storm water tanks.

"Companies cannot make economic choices that sacrifice the environment," said Ronald J. Tenpas, Assistant Attorney General for the Justice Department's Environment and Natural Resources Division. "Sound business decisions must factor in the safeguard of the environment or companies will face consequences that in the long run are more detrimental to their bottom line."

"The protection of the environment is among our highest priorities," said Donald W. Washington, U.S. Attorney for the Western District of Louisiana. "We will not allow corporations or their employees to escape liability for failing to do their part in preventing harm to the environment. We fully intend to use all the tools at our disposal, including criminal prosecution, to punish those who pollute our air and water."

"CITGO failed to properly maintain and operate equipment designed to prevent oil spills," said Granta Y. Nakayama, Assistant Administrator for EPA's Office of Enforcement and Compliance Assurance. "Companies that harm the environment and their community as a result of their own negligence, will be prosecuted and pay a heavy price."

This prosecution is the result of an investigation conducted by the EPA, Criminal Investigation Division led by Special Agent Michael Centola, and the U.S. Coast Guard led by Special Agent James White. The case is being prosecuted by Rocky Piaggione and Eric Heimann of the Justice Department's Environmental Crimes Section, and Assistant U.S. Attorney Stephanie Finley of the Western District of Louisiana U.S. Attorney's Office.

Refinery Carcinogen Emissions Increase According to Report

Carcinogen emissions from U.S. refineries increased between 2004 and 2006 and seven of the 10 biggest emissions sources are located in Texas, according to the nonprofit Environmental Integrity Project.

The EIP study, based on an analysis of data reported by refineries to the U.S. Environmental Protection Agency, concluded that carcinogens emitted by U.S. petroleum refineries climbed about 74,000 pounds — more than 2 percent — between 2004 and 2006.

The study also found that 10 U.S. refineries together accounted for more than a third — 36 percent — of total carcinogen emissions.

The 10 refineries reported to have the largest total emissions of carcinogens in 2006 are: 1. BP: Texas City; 2. Exxon Mobil: Baytown; 3. Citgo, Lake Charles, La. 4. Houston Refining Co.: Houston; 5. Flint Hills Res: Corpus Christi; 6. Motiva: Port Arthur; 7. Chalmette Refining: Chalmette, La. 8. Conoco Phillips: Sweeny; 9. Conoco Phillips: Roxana, Ill.; and 10. Valero: Corpus Christi.

The EIP report also found that some refineries emitted substantially more carcinogens per barrel of oil produced than others. Texas refineries reported more than eight times more carcinogens emitted per barrel of oil than California refineries, it said.

BP’s reported emissions of carcinogens — 2.4 lbs per 1,000 barrels of oil — is 4.6 times more than the national average and 240 times more than the best U.S. refineries, which emit only .005 lbs of OSHA carcinogens per 1,000 barrels of oil, the report said.

The EIP report also cautioned that millions of pounds of carcinogenic formaldehyde and benzene emissions from refineries are underreported, a finding that has been documented by regulators and environmental organizations in Texas.

The City of Houston filed a petition on July 10, 2008, asking the EPA to replace outdated and inaccurate emission factors that are used to estimate refinery emissions with newer and more accurate methods of measurement.

“It’s shocking that these numbers actually increased during this two-year period,” said Matthew Tejada, director of the Galveston-Houston Association for Smog Prevention (GHASP).

“The lack of significant progress and now an actual reported increase in emissions totally negates any excuse not to do everything in our power to reduce industrial emissions. We need to use every available tool, including new measuring and monitoring technologies, to get at the real source of these emissions and get these pollutants out of the air we breathe.”

Mayor Takes on Houston Refinery Giant over Its Emissions

Mayor Bill White raised the stakes in the fight over Houston's air September 29, formally challenging the city's largest refinery to publicly defend its emissions of the carcinogen benzene before receiving another permit from the state.

In an unusual request by the city, White asked the Texas Commission on Environmental Quality, which is responsible for the state's air quality, to grant a hearing before a judge on the latest permit application for Lyondell Chemical Co.'s refinery along the Houston Ship Channel.

The refinery is in the city's cross hairs because it's one of the nation's largest emitters of benzene, according to the most recent industry-provided estimates. And, it yields more emissions of the toxic chemical per barrel of product than other refineries across the nation and thus poses an unreasonable risk to Houston residents, city officials said.

"If the company believes that it's just fine to put tons and tons of benzene in the air," White said in an interview, "then we would like to hear what scientific evidence they have that benzene is good for you."

The confrontation comes after two years of lobbying and threats by White over air quality. Most recently, the mayor promised to use a city nuisance ordinance to punish plants — many of them outside the city's borders — that did not reduce emissions of benzene within six months.

CANADA

BP Canada Signs Long-term Deal with Secure Energy, with Plant Construction Projected at $550 Million

BP Canada Energy Marketing Company (BP) and Secure Energy, Inc. announced that they have entered into a long term natural gas sales agreement whereby BP will purchase up to 67 million cubic feet of natural gas per day from the Secure Energy Decatur Plant once it has been constructed and becomes operational. Secure Energy will have the option to separately sell natural gas to industrial customers in the Decatur, Illinois area for a portion of its production and BP has agreed to purchase any natural gas not sold locally.

The Decatur plant will convert approximately 1.4 million tons of high-sulfur Illinois coal into over 20 billion cubic feet of natural gas each year. "We are quite pleased to have contracted with such a substantial counterparty as BP because the strength of BP's gas marketing enables Secure to focus on constructing and operating our plant knowing that our natural gas will be sold in our market. Completing this agreement is an important part of Secure Energy's plan to utilize America's abundant coal resources in an environmentally responsible way to help reduce our country's reliance on foreign sources of energy," said Jack Kenny, Co-Founder of Secure Energy.

"BP is proud to have been selected by Secure to market the output from their Decatur gasification project. We are also pleased to be a partner in Secure's vision of providing local solutions to Midwest natural gas consumers," said Lee Lunde, VP of Marketing and Trading for BP.

The Secure Energy Decatur Gasification Plant will convert coal to pipeline quality synthetic natural gas. It will be located at an existing industrial site in Decatur, Illinois. The projected plant construction cost is estimated to be $550 million and will provide employment to approximately 60 full time employees. In addition to jobs created at the plant, the project will create a considerable number of construction, mining and trucking jobs in the Decatur area. The gas produced will be transported to an interstate pipeline with access to a number of delivery points in and around the greater Chicago, Illinois area. The preliminary construction of the plant is currently underway and it is anticipated that the plant will be in operation in the summer of 2011.

Secure Energy, Inc. is focused on commercially developing, constructing and operating coal conversion plants utilizing proven technologies.

Praxair to Supply Oxygen for North West Upgrader

Praxair, Inc. announced September 18 that North West Upgrading Inc. (NWU) has selected Praxair Canada Inc., the largest industrial gas supplier in Canada, to provide the industrial gases needed for its heavy oil upgrader in Sturgeon County, Alberta, Canada. North West’s process eliminates production of coke, uses gasification to make hydrogen from the heaviest components of bitumen, and enables the capture of pure carbon dioxide.

Under the agreement, Praxair will build a large state-of-the art air separation plant, equipped with advanced process controls and energy-efficient process cycles.

The Upgrader will significantly increase the economic value of Alberta’s bitumen and heavy oil production by producing light, low-sulfur product, 85% of which is ultra-low-sulfur diesel and diluent. North West’s process eliminates production of coke, uses gasification to make hydrogen from the heaviest components of bitumen and enables the capture of pure carbon dioxide. A commercial arrangement to sell carbon dioxide for enhanced oil recovery makes North West the only upgrader designed with an integrated carbon dioxide management solution. The North West Upgrader will have a total processing capacity of 231,000 barrels per day of blended feedstock over three phases. Site preparation is complete and the first phase of operations is expected to commence in 2012.

Petro-Canada says Fort Hills Cost Estimate May Rise By 50 Percent

Petro-Canada, the operator and a 60 percent owner of the Fort Hills Project (Project), along with its Partners in the Fort Hills Energy Limited Partnership, said that the preliminary results of the Front-End Engineering and Design (FEED) work suggests that estimated costs for the Fort Hills Project have risen considerably. The Project, as currently conceived, consists of an integrated oil sands mine and bitumen extraction plant 90 kilometers north of Fort McMurray, Alberta and the upgrader in Sturgeon County, northeast of Edmonton, Alberta.

The Fort Hills Partners remain fully committed to the Project and are assessing these preliminary estimates and a range of options to reduce or defer capital costs.

While both the preliminary cost data and the Project scope are still under review, initial indications suggest that the estimated capital costs for the Project, as currently conceived, have increased in the range of 50% from those announced when the Partners approved the Design Basis Memorandum for the Project in June 2007.

"We've seen a dramatic rise in capital costs in the past year," said Ron Brenneman, Petro-Canada's President and Chief Executive Officer. "Once our FEED work is done, we will develop our definitive cost estimate. This will be the basis for our final investment decision."

The major increases are costs associated with construction materials, labor, project management and engineering.

The Fort Hills Partners are discussing options for development of the Project, including the phasing of various aspects of the Project. Selected options are expected to be reflected in the final FEED outcome. Once FEED work is complete, Fort Hills will develop a definitive cost estimate, which will be the basis for the final investment decision planned by the Fort Hills Partners for the fourth quarter of 2008.

Proceeding with the Fort Hills Project is also subject to certain regulatory approvals being received. Fort Hills is working with the regulators and various stakeholders to obtain the necessary approvals.

The first phase of the Project, as currently conceived, is planned to produce 140,000 barrels per day (b/d) of synthetic crude oil. Associated bitumen production is expected to be about 160,000 b/d. First bitumen production is expected to begin in the fourth quarter of 2011, with first synthetic crude oil production from the Sturgeon Upgrader anticipated in the second quarter of 2012. The Fort Hills project is expected to produce up to a total of 280,000 b/d of synthetic crude oil by 2015, once all phases are complete.

Petro-Canada is one of Canada's largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally.

U.S. Financial Crisis could be Hurdle for Irving Oil Refinery Project

The second Irving Oil Ltd. refinery project is facing tough, new challenges as the company comes to grips with changing consumer demand and the U.S. credit crisis, says a leading industry expert.

There is a cultural shift developing in how people consume petroleum products and Irving Oil, just like every other refining company, must decide whether the financial pain inflicted in 2008 is an anomaly or whether it is part of a growing trend. Michael Ervin, president of the Calgary-based MJ Ervin & Associates, said 2008 has been a bleak year for refineries as margins are squeezed, consumer demand declines, and the U.S. economy struggles with a staggering downturn. These factors combined leave little doubt in Ervin's mind that the second oil refinery project's future is entering a precarious phase.

"Obviously it is less likely, there is no question about it. They are going to have to base their decision on the future demand of petroleum products," Ervin said. "What will be the future demand of petroleum products in light of the economy, in light of changing consumer choices in the vehicles they drive and in light of new vehicles that might displace or eventually replace gasoline."

Ervin said there is a cultural shift developing in how people consume petroleum products and Irving Oil, just like every other refining company, must decide whether the financial pain inflicted in 2008 is an anomaly or whether it is part of a growing trend. For instance, he said refiner's margins this spring and summer were dismal, stuck in the eight to 10 cents per liter range when they are normally between 15 to 20 cents per liter.

Ervin said demand has dropped significantly and the downswing in the U.S. economy will force executives to make difficult decisions.

"(We may) see a long-term downturn in demand which would make a multi-billion dollar investment in a new refinery really a white elephant," he said.

Irving Oil and BP PLC are spending up to $100 million on a feasibility study, environmental impact study and other pre-development work on the $7-billion refinery project. The two companies are expected to make a final decision on whether to proceed with construction sometime in 2009.

Lesley MacLeod, a spokeswoman with Irving Oil Ltd., said the company is still studying how rising capital costs, labor availability, global competition and the recent financial crisis will impact on the project's future.

"We've always said the market will decide if projects will go ahead," MacLeod said. "Those (projects) that are most efficient and committed to the best environmental performance will be the ones that will proceed to fruition."

Oil companies are starting to face the harsh realities of changing economic times. Even before the recent collapse of the global stock markets, Shell Canada announced in July it would halt planning for an oil refinery in Sarnia, Ont. At the time, the company cited market conditions and inflationary pressures in the oil and gas industry as the key culprits behind its decision.

Tim Curry, president of the Atlantica Centre for Energy, said business cases are evolving for mega-projects all the time, pointing directly to Shell's decision to scrap its planned refinery project.

"There are no guarantees in any of this. If we get the individual business case elements that don't come together properly, the project won't go forward," Curry said.

However, Curry said the consumer trend toward driving more environmentally-friendly vehicles can also translate into a desire for higher quality petroleum products.

"This is a robust almost post-industrial economy and North America is still going to need refined petroleum products. As a matter of fact, as we get more engaged on the subject of climate change, managing emissions, insisting on cleaner and cleaner fuels, the job of the refining sector gets harder," Curry said. "That means there is a bunch of refineries out there that will be hard pressed to continue to operate without significant investments."

The second oil refinery is a linchpin in the Liberal government's broader energy hub strategy aimed at southern New Brunswick. Energy Minister Jack Keir has spoken with industry officials and does not believe any projects, such as the refinery or the potential second nuclear reactor at Point Lepreau are in jeopardy because of the sagging U.S. economy.

Keir argues that even when obtaining credit becomes difficult, that capital will flow to companies that have solid projects. While the energy minister said he wouldn't be surprised if executives are taking a second glance at their proposals, he doesn't believe any delays or cancellations are on the horizon.

"I don't think it changes anything. I think they are taking a look at the effect it is having on the American market, I think they will try to analyze what affect it will have on the Canadian market as part of putting the business case together," Keir said. "I don't think it drastically changes much. I think they take a step back and look at it and see how it affects the business case."

DOMINICAN REPUBLIC

Dominican Republic Buys Shell's $110 Million Stake in Refinery

The Dominican Republic's government September 9 reached an agreement for the purchase of Royal Dutch Shell's stake in the Refidomsa refinery, giving Santo Domingo full ownership of the facility.

The $110 million deal was sealed in a press conference by Finance Minister Vicente Bengoa and Shell representatives.

Bengoa said the purchase would be closed within 90 days following an asset inventory and a financial audit of Refidomsa.

The Dominican government will then control 100 percent of the stock of Refidomsa, which has been operated as a 50-50 joint venture with Shell since it’s founding in 1972.

Since Shell announced plans to sell its stake in the refinery, the Dominican government has claimed the right of first refusal as a partner.

Dominican officials have been weighing the possibility with the government of oil-rich Venezuela of allowing Caracas to become a shareholder in Refidomsa.

Dominican President Leonel Fernandez and his Venezuelan counterpart, Hugo Chavez, discussed a possible deal at a regional energy summit last month.

The presidents agreed to create two technical teams to hammer out the operating terms for such a partnership and moved forward with plans for state-owned Venezuelan oil giant PDVSA and Refidomsa to work together as partners on petroleum exploration and production projects in Venezuela's Orinoco Belt.

BRAZIL

Larsen & Toubro Wins $160 Million Order from Petrobras

Engineering major, Larsen & Toubro’s heavy engineering division has got a $160 mn contract from Petrobras’ refinery project in Brazil, the largest order from South America for the Mumbai-based company.

The contract is to build 10 hydrotreating reactors and 12 coke drums for Petrobas’ 2,00,000 barrels per day Northeast refinery, L&T said in a statement, adding that the contract is scheduled to be completed by 2011.

The reactors and the coke drums will be made from advanced technology steels containing chromium, molybdenum and vanadium. The contracts are in line with L&T’s recent focus on the hydrocarbon sector in the Middle East.

"Further, anticipating the growing demand of hydro-carbon, L&T has expanded its manufacturing facility at Hazira in Gujarat. In addition, a new heavy fabrication facility is under construction at Sohar, Oman," the company said.

This facility will have the capability to manufacture critical equipment for refineries, petrochemicals and fertilizer projects apart from other process industries.

Skanska to Expand Capuava Refinery in Brazil for $125 Million

Skanska has secured a contract to build a Sulfur Recovery Unit (SRU) and a Tail Gas Treatment Unit (TGTU) at Capuava refinery (RECAP) in SAGBPo Paulo, Brazil. The total contract value is US$125 million. Skanska's share is 40 percent, US$50 million, about SEK 310 M, which is included in order bookings for the third quarter.

The customer is RECAP, an oil refinery owned by the Brazilian oil company Petrobras; that is one of Skanska's repeat customers in Latin America.

The SRU facility will have a capacity to recover 20 ton/day of sulfur and the TGTU will clean 40 ton/day of Tail Gas. The scope of the contract includes detail engineering, purchasing, construction, electromechanical installations and assistance with commissioning and start-up of the plant.

The project is part of a nationwide environmental program to reduce sulfur contaminants in petroleum by-products.

Work begins in October 2008 and is scheduled for completion within 24 months. The partner in the consortium is the Brazilian engineering company Promon.

Skanska Latin America has extensive experience in refinery works and, in the last three years, has carried out several major projects for the same client in Brazil.

Skanska Latin America is one of the continent's leading construction companies and one of Skanska's most profitable units. Operations focus primarily on construction, operations and services for the international energy industry. In 2007, the company had some 12,000 employees and sales of about SEK 4.3 billion.

PERU

Two European Companies Win Contract to Modernize Peru Refinery for $1 Billion

The task of modernizing Peru's biggest oil refinery has gotten underway with the selection of two European companies to manage the project, officials said.

The president of state-owned Petroperu, Cesar Gutierrez, said the process of modernizing the Talara refinery, one of the country's largest oil-sector projects, has begun in earnest with the awarding of the contracts to France's Axens and Denmark's Haldor Topsoe.

The work of expanding and modernizing the refinery, located some 1,200 kilometers (745 miles) north of Lima, will involve the revamping of existing units, desulfurization of diesel and gasoline, the production of sulfuric acid, electricity generation and other objectives.

The project is expected to last three years and cost some $1 billion, although some sections of the refinery are to be onstream by 2010.

Speaking at a public ceremony at Petroperu's headquarters, Gutierrez said Axens and Haldor Topsoe have several decades of experience in the energy sector.

Haldor Topsoe and Axens are catalyst companies that have developed technology to reduce the amount of sulfur in fuels since 1940 and 1944, respectively.

Current Peruvian production of refined hydrocarbons will nearly double from 24,000 barrels per day to 45,000 bpd as a result of the modernization of Talara, allowing the

ASIA

CHINA

HaiKe Chemical Group Partially Reopens Refinery Facilities on Improved Market

China-based HaiKe Chemical Group Ltd. said it has partially reopened its oil refinery facilities as a result of improved market conditions.

The AIM-quoted petrochemical, specialty chemical and biochemical company had said on July 23 that it was temporarily shutting down its oil refinery facilities for a major overhaul but added that it saw operations resuming during the current year following an expected increase in the price of refined oil products.

INDIA

India’s Mathura Refinery Asks Government for OK to Expand

Indian Oil Corporation is planning to raise its Mathura refinery capacity to 11 million tonne from eight million tonne currently.

"We have approached the Ministry of Environment and Forest for clearance to expand our Mathura refinery," company Director B N Bankapur said.

The Mathura refinery expansion is caught in an environmental controversy because of concerns about the impact the project might have on the 17th century monument: Taj Mahal.

The refinery processes low sulfur crude from Bombay High, imported low sulfur crude from Nigeria and high sulfur crude from the West Asia.

VIETNAM

Vietnam May Sell Stakes in Dung Quat to Foreign Firms

The state-owned Vietnam National Oil and Gas Group (PetroVietnam) has proposed the Vietnamese government allow it to sell stakes in the country's first oil refinery to foreign partners, according to the Hanoi newspaper Investment, September 8.

Some foreign firms, including India's Essar, the Netherlands' Shell, and Russia's Zarubezhneft and Rosneft are discussing with PetroVietnam about the potential stake purchase and the expansion of the oil refinery named Dung Quat which is under construction in central Quang Ngai province.

Under the proposal, foreign partners can hold up to 49 percent of the stakes. Foreign partners that can supply crude oil to or arrange the supply for the refinery will be preferred.

Dung Quat, having an annual processing capacity of 6.5 million tons of crude oil and investment of 2.5 billion U.S. dollars, is scheduled to operate in February 2009. Its sole investor, PetroVietnam, has recently proposed the government raise the refinery's capacity to 10 million tons of crude oil.

Vietnam imported 9.6 million tons of petroleum products totaling 9.1 billion dollars in the first eight months of this year, up 13.7 percent and 94.3 percent, respectively, according to the country's General Statistics Office.

Meanwhile, it exported nearly 9 million tons of crude oil worth roughly 7.9 billion dollars, down 10.8 percent in volume, but up 53.3 percent in value.

Foster Wheeler Wins Feed for Grassroots Refinery and Petrochemicals Complex in Vietnam

Foster Wheeler Ltd. FWLT announced that its UK-headquartered subsidiary Foster Wheeler Energy Limited, part of its Global Engineering and Construction Group, has been awarded a contract by Nghi Son Refinery & Petrochemical Limited Liability Company (NSRP LLC) for the planned Nghi Son Refinery, which will be Vietnam’s second refinery. NSRP LLC is a joint venture company comprising PetroVietnam and its international partners.

The Foster Wheeler contract value for this project was not disclosed, and will be included in the company’s third-quarter 2008 bookings.

Foster Wheeler will execute the pre-front-end engineering design (pre-FEED) followed by the FEED for this new complex, which will include a 10 million tonnes per annum refinery and a petrochemical complex. The FEED phase is expected to be completed during the fourth quarter of 2009.

EUROPE / AFRICA / MIDDLE EAST

GREECE

Foster Wheeler Italiana Awarded Refinery Equipment Contract by Taneco

Milan-based Foster Wheeler Italiana has been awarded a contract by Russian oil company Tatneft's Taneco unit for the supply of fired heaters for the Nizhnekamsk integrated refinery and petrochemicals complex in Tatarstan, Russia.

The terms of the contract, which will be included in Foster Wheeler's second-quarter 2008 bookings, were not disclosed.

Foster Wheeler Italiana, a subsidiary of Foster Wheeler's global engineering and construction group, will engineer and supply the materials for two hydrocracking unit furnaces, and a charge heater and three interheaters for the continuous catalytic reformer unit. Foster Wheeler said that it has already successfully completed the front-end engineering design for the new complex and the process design package for the delayed coker at the Nizhnekamsk refinery, which operates under the Taneco name.

In addition, at the end of 2007, Foster Wheeler Italiana was also awarded a contract for the detailed engineering of two heaters for the new delayed coker. These contracts are expected to be completed by the end of 2009.

Marco Moresco, CEO of Foster Wheeler Italiana, said: "We are indeed very pleased to be awarded these contracts by Taneco. The excellent relationship we have already established with the Nizhnekamsk refinery is demonstrated by these additional awards."

THE NETHERLANDS

BP Shuts Dutch Nerefco Refinery Crude Unit for Maintenance

Energy major BP is to shut a 200,000 barrel a day crude distillation unit at its Nerefco refinery in the Netherlands in early October for a month's maintenance, traders said on October 1.

One trader said the shutdown of the unit, one of two at the 400,000 barrel a day refinery, would start on October 6 but another said it was scheduled for a day later.

BP declined to comment on operations at the refinery, which is the second largest in Europe after Shell's Pernis plant.

NIGERIA

Pipeline to Nigeria's Warri Refinery Ruptured

Nigeria's Warri oil refinery may be forced to shut down within days after a feeder pipeline was ruptured October 1, a Nigerian newspaper said, citing an anonymous source at the plant.

The 125,000 barrels per day refinery was shut down for two years when its main feeder pipeline was blown up by militants in February 2006. The plant reopened in February this year after repairs estimated to have cost some $50 million.

The Punch newspaper said unconfirmed reports suggested that militants may again be responsible for the latest rupture on the Chanomi Creek pipeline, which supplies crude from the main oil hub of Port Harcourt to the Warri and Kaduna refineries.

An official for the Nigerian National Petroleum Corporation (NNPC) said he could not immediately confirm the newspaper report while Brigadier-General Wuyep Rimtip, head of the military taskforce in the western Niger Delta, said he had heard of no militant attacks on any pipelines.

The newspaper report said the refinery's current stock of crude could only last for three days.

SOUTH AFRICA

South Africa’s PetroSA Gets License for New $11 Billion Coega Refinery

National oil and gas company PetroSA announced that it has been granted a manufacturing license for its planned $11-billion, 400,000-bl/d crude oil refinery, to be constructed at Coega, in the Eastern Cape.

The company said in a media statement that the granting of the license by the Department of Minerals and Energy was a "significant milestone" in fast-tracking the project, called project Mthombo.

"The awarding of the license demonstrates government's commitment to, and confidence in, PetroSA's capacity to provide a feasible, sustainable and commercially viable solution to the liquid fuels supply challenges facing South Africa," stated PetroSA CEO and president Sipho Mkhize.

The license allows PetroSA to manufacture refined petroleum products at the Coega site, but this was still subject to certain other conditions, such as environmental permits.

Construction of the refinery was expected to start in 2010, with the refinery set to come on stream in 2014.

The refinery, which was expected to be the biggest in Africa, would create about 25 000 direct and indirect jobs.

Further, Mkhize stated that the project was also of strategic importance to South Africa's economic development, as it would not only deal with the security of supply of oil, but would also provide a strategic "new energy hub" for the country.

He added that it would also present an underdeveloped region of the country with an opportunity for economic growth.

Meanwhile, PetroSA would soon award an engineering contract for the construction of the refinery, which would start off the feasibility and front-end engineering and design phases of the project.

In August, PetroSA external communications manager Thabo Mabaso said that it had received about 30 bids from local and international companies that wanted to participate in the project.

RUSSIA

Foster Wheeler Italiana Awarded Refinery Equipment Contract by Taneco

The terms of the contract, which will be included in Foster Wheeler's second-quarter 2008 bookings, were not disclosed.

KUWAIT

Kuwait Petroleum's Target Investments at $55 Billion in next Five Years

Kuwait Petroleum Corporation's (KPC) CEO Saad Al-Shuwaib said the corporation's target volume of investments within the next five years, both in the country and abroad, would reach US$55 billion.

Speaking to reporters on the sidelines of KPC's annual Ghabqa on September 9, he said the investments made in 2007 were thanks to efforts of the corporation's employees and their efforts to place KPC among the leading oil institutions of the world.

Asked about the latest developments in the fourth refinery project, he said, "We have commenced execution in as far as the memorandum of understanding with the contractors, but we have not signed any contracts with any party at this stage."

He underlined the role of the Audit Bureau in evaluating the refinery project, saying, "The issue has been left to the Audit Bureau, and it is the judge in all facts pertaining to the project."

The CEO also spoke about gas production in Kuwait, saying that it would not be sufficient to accommodate energy requirements of the country.

He said that given the circumstance, Kuwait would need to import gas until the fourth refinery was constructed, adding that KPC was studying with the Ministry of Electricity and Water the country's future energy requirement.

As for importing gas from Qatar, Al-Shuwaib explained that the Gulf state could only provide Kuwait with a certain amount of gas for the three-month summer period because it was bound by contracts with European states.

Asked if gas could be imported from Iran, he said this issue was still under negotiation after four years.

He said, however, that should the Kuwaiti and Saudi governments reach an agreement, gas excavations could be launched at Al-Durra field.

On KPC's oil investment projects abroad, Al-Shuwaib said that the corporation had two projects.

The first project, he said, was a petrochemical complex and fueling stations in Vietnam in which KPC would be investing with strategic Vietnamese and Japanese partners.

As for the second project, he explained that it was a refinery in China with a 300,000 barrel output capacity, along with a petrochemical complex and fueling stations there as well. The project involves local and international partners.

On a different note, he hoped that accidents would not reoccur at oil installations, noting that these were usually the cause of bad maintenance.

On the northern oil fields, Al-Shuwaib refuted reports that KPC had presented a draft of any kind on the project to the National Assembly.

Kuwaiti Parliament Puts $14.355 Billion Refinery Deal in Limbo

Japanese plant engineering firm JGC Corp. and other companies that have been awarded a contract to build a petroleum refinery facility in Kuwait are left in limbo due to a parliamentary deadlock in that nation.

JGC, South Korea's GS Engineering & Construction Corp., and U.S. firm Fluor Corp. were among those selected in May by Kuwait National Petroleum Co. to build the plant in Al-Zour.

The contract, which is estimated at roughly US$14.355 billion (1.5 trillion yen), has not been officially signed because the Kuwaiti opposition camp is seeking details on the bidding process.

The opposition camp is accusing the government of insufficient transparency, saying that Fluor won its portion of the deal without a proper bidding process and that a government-affiliated oversight organization was bypassed.

SAUDI ARABIA

Sumitomo, Saudi Aramco Eye $10 Billion Petro Rabih Expansion

Sumitomo Chemical Co. Ltd. and Saudi Arabian Oil Co. may sign a preliminary agreement to expand their $10 billion Petro Rabigh refinery and chemicals project in the kingdom before the end of the year, a senior official familiar with the plans said.

Sumitomo, Japan's third-largest chemical producer and state-controlled Saudi Aramco are still looking into "feasibility, commercial and business issues" of expanding their Petro Rabigh joint venture, located north of Jeddah on the Red Sea, the official told Dow Jones Newswires September 7.

"Discussions are ongoing. I hope there will be a memorandum of understanding this year," the official said.

The expansion would represent the second phase of the giant complex, for which Aramco and Sumitomo signed up in 2005.

Under the project's first phase, the two companies are developing and integrating an existing 400,000-barrel-a-day refinery at the Rabigh site with petrochemical plants to benefit from economies of scale.

The plants, set to cost about $10.3 billion, will use feedstock including ethylene, a natural gas derivative, for the production of polyethylene among other chemicals, which are used to make plastics.

Petro Rabigh, also known as Rabigh Refining and Petrochemical Co. and listed on the Saudi bourse, said in a statement that the start-up of parts of phase one may be pushed back to the first quarter of 2009.

"Portions of it will be delayed," the official said, adding that the launch of several units was rescheduled due to technical issues. He didn't provider further details.

Aramco and Sumitomo have yet to award the contract to manage the phase-two expansion of the refining and petrochemical complex.

The companies last year invited engineering firms to participate in the tender for the project management and front-end engineering design contract but no award has been made so far.

The Petro Rabigh 2 project is intended to produce specialist petrochemicals such as paraxylene and vinyl acetate monomer, and will add gasoline production.

Given the size and complexity of the phase two plans, and rising cost for equipment, materials and labor, the project may have a similar or higher price tag than the first phase.

A Sumitomo Chemical spokesman said it was still too early for the two companies to talk about an expansion.

"We are focusing on starting the first phase of the project and operating it in a stable way. This is not the time to talk about a next stage," the spokesman said.

Sumitomo is competing with rivals such as Dow Chemicals Co. (DOW) in developing integrated refinery and chemical plants in the kingdom.

Aramco, the world's largest oil company by production, and Dow in May 2007 signed a memorandum of understanding to develop a similar integrated complex at Ras Tanura on the Persian Gulf, which according to industry estimates will cost $22 billion-$24 billion.

Cheap gas has made Persian Gulf countries an attractive destination for investments in petrochemical industries, which are booming on the back of strong global demand, especially from fast-growing markets in Asia.

Saudi Petroleum Ministry Releases RFP for New Refinery

Saudi Arabia's Ministry of Petroleum and Mineral Resources announced September 6 that it has released the request for proposal package (RFP) for establishing an export refinery in the kingdom's Jazan Region. The RFP is available through a secured website.

The Petroleum Ministry stated that each of the eight applicants pre-qualified by the kingdom, as well as the pre-qualified international oil companies that have demonstrated their interest in the project, can download the RFP from that website.

The ministry declared March 7, 2009, as the deadline for receiving the detailed proposals from the applicants.

UAE

TRC Synergy Gets Brunei Government OK for Oil Refinery Project

TRC Synergy Bhd has received approval from the Brunei Government through its associated company, PetroBru (B) Sdn Bhd, to proceed with an oil refinery project in the sultanate.

The company has completed a feasibility study on the economic viability of building and operating crude oil storage and a refinery in Pulau Muara Besar.

"I am pleased with the positive results of the economic feasibility study which revealed the viability of the potential oil refinery in Brunei, with a processing capacity of 200,000 barrels of oil per day.

"We will now proceed with the detailed feasibility study which will take about six months. We expect the project construction to start in the first half of 2010," TRC executive chairman Datuk Seri Sufri Mohd Zin said in a statement.

Sufri said the potential oil refinery had also attracted Kuwait Petroleum International.

"We are in talks to see how we can further maximize the potential of the oil and gas industry in Brunei," he said.

He said TRC strongly believe its investment in the oil and gas industry will contribute positively to the group's future earnings.

To date, TRC has invested RM2.5 million in Brunei. Its order book stands at RM1.5 billion until 2010.

UOP to Upgrade Abu Dhabi Refinery

Abu Dhabi Oil Refining Co. (Takreer) selected UOP LLC, a Honeywell International company based in Des Plaines, Ill., to supply technology and engineering services for upgrading its 120,000 b/d Ruwais refinery in the UAE.

The refinery, 240 km west of Abu Dhabi City, will produce propylene, unleaded gasoline, naphtha, liquefied petroleum gas, aviation turbine fuel, kerosene, gas-oil, bunker fuel, and other hydrocarbon derivatives. Basic engineering design is under way and is expected to be completed in 2014.

The facility will utilize a wide range of UOP technologies for the production of low-sulfur distillate and gasoline, including its Unicracking and Unionfining processes to upgrade heavy feedstocks and produce ultralow-sulfur diesel and its Merox process to remove sulfur from saturated LPG streams. In addition, the company's BenSat process will manage the benzene content in the gasoline pool.

The refinery includes a hydrotreating unit that will use UOP's naphtha hydrotreating process and a distillate Unionfining unit to produce low-sulfur kerosine. The unit is the largest kerosine-fed hydrotreating unit ever licensed by UOP.

Through an alliance with Albemarle Corp., UOP also provides catalyst requirements for the new Takreer units.