The two projects are expected to cost more than $250 million -- making the construction project the company's largest since 1995 in Corpus Christi. The construction project is expected to take 18 months to complete.

"We are committed to efficiently providing quality products to our customers," said Joe Coco, executive vice president of operations for Flint Hills Resources. "With the addition of these two new units, we will enhance our ability to produce ultra low-sulfur diesel for a growing Texas market. In addition, we will gain flexibility when it comes to efficiently processing heavier and sour crudes."

The sulfur recovery unit will allow the refinery to handle additional feedstocks that improve the refinery's competitive position.

The diesel desulfurization unit offers the company opportunities to upgrade low-value products into high-value products such as ultra low-sulfur diesel.

"We have been a part of the Corpus Christi community since 1981 and we've continued to enhance our ability to serve customers in that time," said Phil Gaarder, vice president and manufacturing manager for the Texas refinery. "We were the first to introduce low-sulfur gasoline in Central Texas in 2001. When this capital project is completed, we will have spent about $3 billion on acquisitions and capital expansions, many of which have resulted in significant improvements in our ability to produce cleaner-burning fuels and reduce emissions."

Flint Hills Resources' Corpus Christi refining complex is among the nation's lowest-emitting refineries. Latest data indicate air emissions of commonly regulated substances of 0.09 pounds per barrel of crude oil refining capacity. The industry average is 0.19 pounds per barrel of refining capacity.

The construction project will likely begin this fall and will require help from contractors employing about 500 employees at peak periods.

Flint Hills Resources, LP employs about 900 in Corpus Christi. It produces transportation fuels and aromatic chemicals at its 300,000-barrels-per-day facility. A leading refining and petrochemical company based in Wichita, Kan., Flint Hills Resources has completed capital expansions and acquisitions worth more than $3 billion since 2002. The company employs about 3,700.

Albemarle to Raise FCC Catalyst Prices

Albemarle Corp. will increase the prices of its fluidized catalytic cracking (FCC) catalysts for both heavy feed (Resid) and vacuum gas oil (VGO) cracking applications by 20 percent worldwide, effective September 1, 2008, or as contracts allow. Natural gas and rare earth surcharges will continue to apply.

Albemarle is a leading, global developer and supplier of hydroprocessing catalysts, FCC catalysts for Resid and VGO cracking, environmental and performance additives, and alternative fuel technologies for refineries worldwide. Many of Albemarle's clean energy solutions help operations that convert heavier, more challenging petroleum feedstocks into higher value products that meet strict global fuel quality and environmental standards.

Valero to Kick Off $2.4 Billion Expansion at Port Arthur

Valero will invest $2.4 billion in the Port Arthur Refinery and will add 2,000 more construction workers to the job rolls that local officials say will keep the area's economy expanding.

The project, which is to be completed in 2011, will include a 50,000 barrel-per-day hydrocracker, a 45,000 barrel-per-day coker and changes to other units.

"It will increase our production from 325,000 barrels to 405,000 barrels-per-day," Plant Manager Greg Gentry said. "We've been in the planning stages for a year. It will help us utilize our crude capacity by constructing a hydrocracker unit and a coker unit. It will be a $2.2 billion projects. Thirty permanent jobs will be created and 2,000 construction members a day will be employed at the peak. Construction will start in the next two or three months. The hydrocracker unit should be completed in the fourth quarter of 2010 and the coker unit in the first quarter of 2011."

Valero Chief Executive Officer Bill Klesse said the expansion will meet the demand for diesel both domestically and around the world.

Western Refining Eyes Yorktown Refinery Sale to Lower $1.5 Billion Debt

Western Refining is looking at the possibility of selling its Yorktown, Va., refinery to help reduce its $1.5 billion debt, which has bogged down the company for months.

Some Wall Street analysts doubt there's much of a market for such a sale.

"We don't want to get rid of Yorktown, but we are committed to our lenders, shareholders, analysts and everybody else; that we're going to get our balance sheet shored up, and a transaction involving Yorktown is probably the best way to get a lot of that done," Western CEO Paul Foster told analysts August 7. "It's not a certainty we will sell Yorktown. We have other assets and we are looking at other alternatives to raise capital and reduce debt."

Another possibility is to find a partner to help run the refinery as a joint venture, Foster said.

The El Paso company acquired the Yorktown refinery and two in New Mexico last year as part of its $1.4 billion acquisition of Giant Industries. It also operates an El Paso refinery.

Western has hired Goldman Sachs & Co., and Banc of America Securities to help it evaluate options.

Ann Kohler, an analyst for Caris & Co., a New York investment bank, said this is a very difficult time to sell a refinery. Valero Energy Corp. of San Antonio recently "declined to sell a couple of refineries (which were on the market) because it was not getting appropriate valuations," she said. Delek US Holdings Inc., an oil refiner based in Tennessee, has announced.

“It no longer is pursuing (refinery) acquisitions, and it will wait for valuation levels to go down further," Kohler said.

Michael Tian, an analyst for Morningstar, a Chicago investment research firm, said he also sees this as a difficult time to sell a refinery at a decent price, and a difficult time for a company to get money to buy a refinery. "There's no telling what they can get for this refinery, especially if they are being forced to sell it to raise cash," Tian said.

Foster told analysts that no price has been set for the refinery, and no deadline has been set for a sale.

"We don't feel any pressure to get it (sale) done by a certain time," Foster said. "We're going to do this analysis and go through the process and make a determination on what is best for shareholders. We're not going to give it (Yorktown) away."

Technip Wins Contract for Valero Port Arthur Expansion

Technip has been awarded by Premcor Refining Group, Inc. (a Valero subsidiary) an engineering, procurement, construction and management (EPCM) contract for part of the $2.4 billion major expansion of its Valero Port Arthur Refinery, Texas.

Technip's scope of work consists of:

--two processing units, including a saturate gas recovery unit and an amine treatment unit,

--offsites associated with the expansion of the refinery.

The expansion is expected to boost overall refinery throughput capacity to 415,000 barrels per day making it one of the largest refineries and giving Valero more capacity to process heavy sour feedstocks.

Technip's operating center in Houston, will execute the contract. Mechanical completion of the project is scheduled in the fourth quarter of 2010.

With a workforce of 23,000 people, Technip is one of the leading companies in the field of oil, gas and petrochemical engineering, construction and services. The Group is headquartered in Paris.

The Group's main operating centers and business units are located in France, Italy, Germany, the UK, Norway, Finland, the Netherlands, the USA, Brazil, Abu-Dhabi, China, India, Malaysia and Australia.

BP Awards Fluor $3.8 Billion in Whiting Contracts

Fluor Corp. announced August 12 that the company was awarded multiple contracts by BP America for its Whiting IN Refinery modernization project. Fluor is responsible for overall program and construction management, engineering, procurement, fabrication and construction. For this phase of the modernization project, Fluor will book $3.8 billion into backlog in the third quarter of 2008.

Fluor recently completed front-end engineering and design and began detailed engineering and construction in July 2008 with a projected completion date of fourth quarter of 2011. Fluor's engineering, procurement and fabrication scope will include a new gas oil hydrotreater, significant upgrades to a crude/vacuum unit, and the upgrade and modernization for the utilities and offsites. When complete, the modernization project will increase the Whiting facility's gasoline production by 1.7 million gallons per day and will equip the refinery to process increased amounts of secure Canadian crude oil.

"Fluor is pleased to assist BP with its Whiting modernization project that is the largest private investment ever in the history of the State of Indiana," said David Seaton, president of Fluor's energy & chemicals business. "We have a long and successful history working on numerous global projects for BP and we look forward to successfully executing this milestone project."

About 400 skilled craft workers are currently at work on the project, which should increase to 1,000 workers in early 2009 and reach a peak of approximately 2,500 during 2010. Fluor's engineering and construction professionals in Whiting, Ind., Houston and Manila, the Philippines, will have primary project responsibilities.

Three Companies Propose $1.8 Billion Floating Offshore Texas Port

Three companies are placing a $1.8 billion bet on the U.S. Gulf Coast's ongoing role as a major refining hub.

The proposal, a floating oil port 36 miles off the Texas coast, would provide a docking space for massive ships that cannot enter Texas ship channels. Crude oil from these vessels would then be piped to shore. A similar facility, the Louisiana Offshore Oil Port, or LOOP, already provides this service for refineries in Louisiana and the Midwest as well as some Texas refineries.

This project, known as the Texas Offshore Port System, or TOPS, would make Texas a more attractive destination for the world's largest tankers, streamlining the flow of oil from overseas producers to refiners in the state. The project's backers say the facility would cut costs by allowing tankers to offload directly to pipelines instead of using smaller ships as intermediaries. But TOPS' owners say they plan to focus on light sweet crude, which may not fit with the needs of coastal refiners.

The companies, Teppco Partners LP (TPP), Enterprise Products Partners LP (EPD) and Oiltanking Holding Americas Inc., still face major regulatory hurdles in permitting the project, which they say could come online late in 2010. The proposed port would operate 24 hours a day and be able to unload 100,000 barrels of oil an hour.

"We're not looking for growth in crude oil (volumes) itself, all we're looking for is improved economics for the crude oil that's coming in," said Dan Duncan, chief executive of a private company that holds a controlling stake in both Teppco and Enterprise.

Exxon Mobil Corp. and Motiva Enterprises LLC already have told the consortium that they would receive a total of 725,000 barrels a day from TOPS. The agreement would give the consortium the chance to supply the two largest U.S. refineries: ExxonMobil's plant at Baytown, Texas, and Motiva's Port Arthur refinery, which is currently undergoing a large expansion.

While the facility and its pipeline may not be full on its first days of operation, executives were optimistic about their ability to run the facility at its total capacity.

TOPS would not necessarily have to compete directly with LOOP for additional agreements with refiners. The Louisiana port offloads 1.2 million barrels a day from tankers but can send only 250,000 barrels of that to Texas via pipeline. Most of the oil flows to Louisiana refineries or to Chicago. No pipelines can move oil from Texas to Louisiana refineries.

The agreements with Exxon and Motiva indicate that the project's backers have overcome the main problem that dogged a previous attempt at a deepwater oil port. Unocal Corp. scuttled a port plan in 2003 after it failed to secure enough commitments from area refiners. A third attempt, by a consortium of 14 oil companies, failed in 1990, also over concerns about oil demand.

Affiliates of Enterprise, Teppco and Oiltanking, a unit of German petroleum and logistics company Marquard & Bahls AG, each have one-third ownership in the project.

The Gulf Coast has even more oil supply options than it did in 2003 or 1990. This latest proposal comes as increased volumes of Canadian crude are expected on the Gulf Coast. But the proponents seem undaunted by Canadian competition.

Long-range, most Canadian crude that will come to the U.S. will be heavier, sludgier grades of crude oil that are more challenging to refine. Those grades are seen offsetting current production from Mexico and Venezuela, where crude production is declining, Duncan said.

The port will bring in higher-quality, or "light" crude, of the sort produced in West Africa, executives said on the conference call.

"Most of your West African and South American crude is coming in on ships that will not qualify long-range to come in to Lake Charles, Houston, and other ports," Duncan said.

Others offered a different assessment, noting that much of the refining capacity on the Gulf Coast is geared toward processing lower-quality oil from Canada, rather than light crude from Africa. The port instead appears to be designed to turn a profit purely from reduced shipping costs, said Paul Tossetti, a consultant with PFC Energy in Dallas.

"I guess if the refineries have really signed onto this, then they've run the economics and must be in agreement with (the port's backers)," said Tossetti.

Shipping regulations are changing, and in 2015, it will become increasingly difficult to access the major oil offloading ports of Louisiana and Texas.

A new oil port off the Texas coast could prove devastating to oil shipping companies that operate in the Gulf of Mexico. Small oil tankers carry oil from the largest tankers to Houston and Beaumont-area refineries, in a process known as lightering. The port would reduce the need for lightering in many areas, which "in shipping is not necessarily a good thing," a tanker broker said.

"You have a huge, huge market in the U.S. Gulf for the lightering process," the broker said. "The shipping guys would not be into this."

Major lighterers in the U.S. Gulf include Overseas Shipholding Group Inc. (OSG) and Skaugen PetroTrans Inc., which is jointly owned by Teekay Corp. (TK) and I.M. Skaugen (IMSK.OL).

EPA Sued by Twelve States to Regulate Oil Refineries

Twelve states, including New York, are suing the Environmental Protection Agency (EPA) over greenhouse gas emissions from oil refineries.

The lawsuit, led by Attorney General Andrew M. Cuomo of New York, accuses the agency of violating the federal Clean Air Act by refusing to issue standards, known as new source performance standards, for controlling the emissions.

“The E.P.A.’s refusal to control pollution from oil refineries is the latest example of the Bush administration’s do-nothing policy on global warming,” Mr. Cuomo said in a news release. “Oil refineries contribute substantially to global warming, posing grave threats to New York’s environment, health and economy.”

In a ruling last year, the Supreme Court found that the agency had the power to regulate greenhouse gases under the Clean Air Act. Since then, the agency’s director has said it is the job of Congress to regulate them.

Coalitions of states have also sued the agency to require it to set standards for emissions from power plants and to uphold the right of states to regulate emissions from automobiles.

The suit, filed in the United States Court of Appeals for the District of Columbia Circuit, said about 15 percent of industrial emissions of carbon dioxide, the main greenhouse gas, came from the refineries.

It seeks to force the agency to control refinery emissions and adopt the new source performance standards.

Tim Lyons, a spokesman for the agency, said time and money would be better spent by encouraging Congress to take action on environmental legislation.

The other states in the suit are: California, Connecticut, Delaware, Massachusetts, Maine, New Hampshire, New Mexico, Oregon, Rhode Island, Vermont and Washington. Two cities, New York and Washington, also signed on.

Lake Charles Calcasieu Refinery Settles Clean Air Suit

A Lake Charles oil refinery agrees to reduce pollution and to pay $612,500 in fines for alleged Clean Air Act violations.

Under a legal settlement, Calcasieu Refining Co. will install equipment to reduce nitrogen oxide emissions. It also must monitor benzene waste and try to reduce the number of flaring events.

The refinery is owned by Transworld Oil U.S.A. Inc. of Houston.

The lawsuit and settlement were announced August 26 in the Federal Register.

Jane LaCour, a senior environmental scientist at the Louisiana Department of Environmental Quality, says it's the latest in a nationwide effort by the Environmental Protection Agency to make refineries cleaner.

EPA says that more than 22 settlements since 2000 will reduce more than 86,000 tons of nitrogen oxides and more than 245,000 tons of sulfur dioxide each year.

$1.5 Billion Buffalo-area Plant Would Convert Coal, Petcoke into Natural Gas

Plans are pending for a $1.5 billion Lackawanna, NY plant that would turn coal and petroleum refinery by-products into natural gas.

The project developer, Lackawanna Clean Energy, held the first of a series of informational meetings August 26. The gasification plant would be built on the long-dormant coke oven section of the former Bethlehem Steel site.

The gas produced by the company would be capable of heating about 400,000 homes a year, and would be sold to large natural gas pipeline companies or utilities such as National Fuel.

There is one other such plant in the United States -- in Beulah, N. D. -- that uses a similar technology to convert coal into natural gas, "but they take low-grade coal and turn it into natural gas," Jim Falsetti, chief executive officer of Lackawanna Clean Energy. said.

"We would use more advanced, state-of-the-art technology, commercially proven for gasification," he added.

Falsetti said more than 60 percent to 70 percent of the world's petroleum coke is produced in the U. S., but most of it is shipped overseas to make electricity, cement, ammonia and other chemical products, mostly in China, where it is burned in an environmentally unsound fashion.

"So one of the big issues that people will be concerned about; is carbon dioxide or greenhouse gases. And when it's burned in that fashion, it has a far higher greenhouse gas output than what we would have with this process," Falsetti said.

"Is it 'green-green' like everybody wants? No, it isn't, but it is the next best thing," Lackawanna Mayor Norman Polanski Jr. said.

He and officials of both the Lackawanna School District and Erie County have been negotiating with the developer on a payment-in-lieu-of-taxes agreement. If the hard-core skeptics succeed in the killing the project, he said the developers will merely go to Mexico, India or China, where pollution controls are much more lax.

"We actually will make them conform to our standards. This will be good for Western New York and good for . . . Lackawanna. So I am [a proponent of] this plant here," Polanski said.

BRAZIL

Petrobras to Invest $31 Billion in Refineries

Petrobras plans to invest $31 billion in its two new refineries in northern Brazil, executives said, adding that the facilities would produce export-quality premium fuel.

The most advanced of the projects is the refinery in Ceara state, the company's director of downstream operations, Paulo Roberto Costa, said.

The Ceara refinery will process 300,000 barrels per day (bpd) of crude, producing high-value derivatives, such as diesel and gasoline, for foreign markets.

"The project will be built in the area of the Port of Pecem. Investments are expected to be in the order of $11.1 billion, 90,000 jobs (direct and indirect) will be created, and there will be an increase in tax collection and income generation effect during project deployment," Petrobras said in a statement.

The refinery's output is expected to be 150,000 bpd in 2012, with another 150,000 bpd added in 2016, Costa said in a press conference Tuesday in Fortaleza, the capital of Ceara.

"The last refinery we inaugurated has been in operation for 28 years. Analyzing our perspectives (not including the pre-salt), we will have to process 3.5 million barrels, and our current capacity is for 1.9 million. That is why we need to boost our capacity by building five new refineries," Costa said.

Petrobras said Ceara was chosen as the location for the refinery because the state had the "appropriate infrastructure," especially in the port of Pecem, located in S8o Goncalo de Amarante.

In late 2007, Petrobras announced that it had found what could be the world's largest oil field, called Tupi, in the Santos basin, but the reserves are under the pre-salt layer, which is found below the sea bottom and contains a gel-like deposit of salt that could be up to two kilometers (1.24 miles) deep.

Reaching petroleum in such fields requires drilling down to the ocean floor and then through the salt layer, making such projects expensive and technologically challenging.

Tupi could contain between 5 billion and 8 billion barrels of crude oil, or enough to increase Brazil's current total proven petroleum reserves by up to 50 percent.

Petrobras and Ceara government representatives plan to sign a protocol of understanding in the presence of President Luiz Inacio Lula da Silva.

Lula is also scheduled to inaugurate Brazil's first liquefied natural gas terminal, which will help diversify the country's supply mix. Brazil currently gets more than 50 percent of its gas from Bolivia.

The president will also inaugurate the Quixada biodiesel plant in Ceara.

"The plant will work with several types of oleaginous seeds, such as sunflower seed, castor seed, and soybeans," Petrobras said in a statement.

Petrobras produces nearly 1.8 million barrels per day (bpd) of oil, and its proven reserves, which total about 14 billion barrels of crude, have been growing every year.

In May, Petrobras said it found a "new oil accumulation" in ultra-deep waters in the Santos basin, where the Brazilian oil giant announced it discovered large potential reserves last year.

Petrobras, an integrated energy company and the global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe.

COLOMBIA

Private Investors to Put $2.8 Billion into Colombia Refinery, Duty-free Zones

Private investors plan to pump more than $2.8 billion into two new duty-free zones in the northern Colombian port cities of Cartagena and Santa Marta, with most of the money going into expanding an oil refinery, the Trade, Industry and Tourism Ministry said.

The bulk of the investment, or some $2.7 billion, will be used to expand the duty-free zone in Cartagena, the capital of Bolivar province, where the refinery is located.

The Permanent Special Services Duty-Free Zone operated by the Regional Port Authority in Santa Marta, the capital of Magdalena province, will get some $127 million in investment.

Some 3,500 construction jobs will be created at the duty-free zone in Cartagena when work begins in mid-2010 on the project to double refining capacity at the port's energy complex to 165,000 barrels per day.

The complex is located in the 296-hectare (731-acre) Mamonal industrial park.

The project in Santa Marta, meanwhile, is expected to create 256 jobs, including 169 during the construction phase, which is not expected to be completed until 2020.

Investors plan to modernize the Santa Marta marine terminal, expanding operating and warehousing capacity.

ASIA

CHINA

Big Oil Refineries Turn to Smaller Independents in China

China's small independent refineries have been operating at below half their capacity since the second quarter, struggling to stay profitable amid record oil prices despite recent declines. But many have found a way to reinvent themselves as outsourcing arms of the country's two top oil firms.

The refineries, which account for nearly a fifth of China's total capacity, have gone through declines in recent years as China, the world's second-largest consumer of oil, experienced rapid fuel demand growth that has contributed to the rise in oil prices.

The spike above $147 for a barrel of crude oil in July may have prompted the smallest refineries to close, but many of the bigger independents have managed to survive by taking advantage of the plight faced by the country's refining giants.

Ranging from 40,000 to 120,000 barrels a day, they have found a new niche - processing crude oil on behalf of Sinopec and PetroChina, which have opted to limit output amid heavy losses.

"It costs probably half that of big oil firms for processing each ton of crude," said Qi Fang, vice president of the Petroleum Association, which is a retailer with a dozen service stations.

A decade ago these small plants, dubbed "teapots" because of their size, were under pressure from the government to shut down in a bid to help clean the air.

But they flourished in China's oil boom in 2004 when demand jumped 15 percent. They struggled in 2005 and came back to life in 2006 and 2007, when they nearly doubled capacity. The increased capacity allowed China to reduce its imports of costly refined oil.

China cut imports by 17 percent in the first seven months of this year, the Chinese customs office said.

Crude's $30 slide in the past month may offer an opportunity for the independents to reopen as soon as the autumn harvest season starts and diesel demand rises.

The Chinese government is expected to announce another fuel price increase within weeks, following a 18 percent increase in June.

Jiang Yong, deputy general manager of Dongming Petrochemical, an independent refinery with the capacity of 60,000 barrels a day, said: "Long term, domestic prices won't always lag behind market. Refined fuel prices will definitely go up more."

For now, the government price controls that have cut deep into state refiners' margins have turned out in the teapots' favor.

"Because of the government price control, it's a test for efficiency," Qi said. "It created space for efficient independents." He added that Sinopec and PetroChina had nurtured the growth of the independents.

Independents survived also because they are shielded by local governments, which value them as a necessary part in supplying the regional market in addition to their tax contributions, industry officials said.

The local authorities often turned a blind eye to independent retailers when they charge pump prices above the state-set ceilings, effectively offering a fatter marketing margin for small processors.

A manager at Haike Petrochemical, in Shandong, said, "It's unlikely that the government will force the plants to close down, but likely to influence our survival environment through other means, possibly through acquisition by the big oil firms."

Sinopec, the Chinese company that is the leading Asian oil refiner, posted a 77 percent fall in first-half earnings as soaring crude prices and caps on government-set fuel prices pushed its refining business into a loss, despite government subsidies.

Sinopec reported a net profit of 8.26 billion yuan, or $1.2 billion, for the six months through June, compared with a profit of 36.4 billion yuan a year earlier.

Sinopec to Double Fujian Venture Capacity to 482,000 bpd

China Petroleum & Chemical Corporation (Sinopec) plans to double the production capacity of its joint venture refinery in eastern coastal Fujian Province during the period from 2010 through 2015.

On August 26, 2008, Sinopec and the local government signed a memo to that effect. If the expansion plans get approval from the government regulators, the daily crude oil processing capacity of the refinery will swell from the current 241,000 barrels to 482,000 barrels.

Sinopec is also considering the feasibility to expand the annual production capacity of the refinery's ethylene cracking facilities from 800,000 tons to 1 million tons. The construction of the refinery's production expansion project will be completed at the beginning of 2009.

The venture was set up among Sinopec, Exxon Mobil Corp., and Saudi Arabian Oil Co. (Saudi Aramco), in which the Chinese hold a 50% stake and the foreign parties the remaining 50%. It is uncertain whether Exxon Mobil and Saudi Aramco will invest in the expansion project.

Sinopec to Double Capacity to 502,000 bpd at Maoming Refinery

China Petroleum & Chemical Corp. (SNP, Sinopec), secured the central government's approval to double its Maoming refinery's capacity to 502,000 barrels per day, said a refinery official August 27.

Once completed, the refinery in southern China will become the country's third plant capable of processing more than 400,000 barrels of crude per day. The other two are Dalian in the north and Zhenhai in the east.

"We've just got the approval and will unlikely complete the expansion before 2010," the official told Dow Jones Newswires, when asked if the expansion will be completed within the earlier expected time of 2009.

The expanded facilities will process high-sulfur crude, he said. Maoming's existing facilities also mainly process sour crude from Saudi Arabia and Iran.

The new plant will have five main facilities - a 241,000 barrel-per-day vacuum distillation unit, a 48,200 barrel-per-day hydrocracking unit, a 36,100 barrel-per-day hydrocracking unit to process wax oil, a 100,000 ton-per-year sulfur recovery unit, and a 400,000 ton-per-year aromatics extraction unit, the Nanfang Daily reported, citing the refinery's general manager Li Anxi.

INDONESIA

Indonesia's Energi Laga to Build 200,000 bpd Refinery

Indonesia's PT Energi Laga Ligo will team up with investors from the Middle East and Russia to build an oil refinery on the Selayar island, South Sulawesi.

The President of PT Energi Laga, Iqbal Miad said the oil refinery will have a production capacity of up to 200,000 barrels of oil fuel per day with crude oil feedstock to be imported from the Middle East.

The project is expected to help cope with Indonesia's shortage of around 400,000 barrels of oil fuel per day, Miad said.

Construction of the project is expected to start by the end of this year and it is to be operational next year, he said as quoted by the newspaper Bisnis Indonesia.

SOUTH KOREA / MEXICO

Samsung Engineering Wins $1.5 Billion in Refinery, LNG Projects

Samsung Engineering Co., South Korea's largest industrial plant builder, on August 25 said it has clinched two orders worth 1.6 trillion won (US$1.49 billion) to build a liquefied natural gas terminal in Mexico and to expand a refinery in southeastern South Korea.

Under the 1.16 trillion-won deal with S-Oil Corp, South Korea's third-largest refiner, Samsung Engineering will expand the refiner's plant in Ulsan, an industrial city about 400 kilometers southeast of Seoul, by January 2011, the company said in a regulatory filing.

The US$439-billion deal with Samsung Ingenieria Manzanillo S.A de C.V. also calls for Samsung Engineering to build an LNG terminal in Manzanillo, a port west of Mexico City by December 2011, the South Korean industrial builder said.

Shares of Samsung Engineering rose 3.5 percent to 68,000 won as of 2:48 p.m. on the Seoul bourse.

VIETNAM

U.S. Firm Eyes Refinery in Southern Vietnam

The Pacific Development Group based in the United States wants to build an oil refinery capable of annually processing 10 million tons of crude oil in Vietnam's southern Ca Mau province, according to Vietnam Investment Review on August 11.

The group will sign a memorandum of understanding with Ca Mau next month for developing the project, the newspaper quoted Le Huynh Ky, director of the provincial Planning and Investment Department, as saying.

He said the group had yet to reveal the total investment for the future oil refinery, but said it could be the sole investor. Raw materials for the refinery would come from other countries.

Despite being Southeast Asia's third largest crude oil exporter, Vietnam still relies entirely on petroleum product imports as it lacks its own refineries.

Dung Quat, Vietnam's first refinery with an annual processing capacity of 6.5 million tons of crude oil under construction with investment of US$2.5 billion in central Quang Ngai province, is scheduled to operate in February 2009. Its sole investor is state-owned Vietnam National Oil and Gas Group (PetroVietnam).

Construction of the second oil refinery named Nghi Son in northern Thanh Hoa province with initial investment of US$6.2 billion started in May. It will have refinery capacity of 10 million tons of crude oil per annum once put into operation in 2013.

The Nghi Son project is a joint venture between PetroVietnam, Kuwait Petroleum International and Japanese companies of Idemitsu Kosan Corp and Mitsui Chemicals Inc.

The Vietnamese government has given permission for the third refinery, with the first choice of location to be in southern Ba Ria Vung Tau province, built either solely or jointly by foreign investors, or by local companies.

The refinery, set to be operational before 2015, will be designed to process 10-15 million tons of crude oil annually.

Vietnam exported 7.8 million tons of crude oil worth US$6.8 billion in the first seven months of this year, down 12.1 percent in volume, but up 52.2 percent in value against the same period last year, according to the country's General Statistics Office.

Meanwhile, it imported roughly 8.3 million tons of petroleum products totaling nearly US$7.8 billion, up 11.4 percent and 90.7 percent, respectively.

Idemitsu Plans Refinery and Growth in Vietnam

The lack of a refinery, a large population and a rapidly expanding economy make Vietnam a tempting investment target for companies such as Idemitsu Kosan Co., part of a group planning a refinery there.

But these aren't the only reasons Idemitsu, Japan's third largest refiner by capacity, is becoming the first Japanese refiner to get involved with refining operations overseas. Such investments also help secure crude oil supplies for the future as domestic demand shrinks and its bargaining power with oil producers wanes, said Mitsuru Yamanaka, senior manager of Idemitsu's Overseas Business Group.

"Going forward, oil producing countries will seek more value, like owning and operating refineries and selling products themselves using huge amounts of oil dollars," Yamanaka said in an interview with Dow Jones Newswires. "In this trend, a (middle-sized) company like us might end up in the shadow of big guys like China and India. Then, how can we keep a relationship with them just by continuing to buy crude oil?"

The answer is to become a reliable business partner, he said.

From this month, Idemitsu and its partners will start design work on a new 200,000 barrel-a-day refinery, to be located on the coast near Hanoi. The refinery, which will be the country's second after one now under construction, is scheduled to start operations as early as 2013.

In the $5.8 billion project, Idemitsu and Kuwait Petroleum International, a unit of state-run Kuwait Petroleum Corp., have a 35.1% stake each, while government-owned Vietnam Oil and Gas Corp. has a 25.1%. Japanese petrochemical producer Mitsui Chemicals Inc. (4183.TO) holds the remaining 4.7%.

The 200,000 barrel-a-day capacity is the maximum for a refining line, but the project has secured enough land to add another 200,000 barrel-a-day line if local demand warrants it, said Yamanaka.

The refinery will exclusively use relatively heavy Kuwaiti crude oil, thus keeping feedstock costs down. Any capacity expansion would also use Kuwaiti crude oil, Yamanaka said.

China and India are generally considered the most vibrant and promising of Asia's emerging economies, raising the question of why Idemitsu would partner Vietnam, a county with less than 10% of China's population.

"China doesn't need foreigners' help. It has a complete supply chain from upstream to downstream through the three major national oil companies," said Yamanaka. In contrast, Vietnam Oil and Gas Corp., also known as PetroVietnam, is a pure upstream company, making it an ideal match for an experienced refiner such as Idemitsu, he said.

The nature of the partnership also benefits those at both ends of the spectrum: Kuwait Petroleum can secure crude oil buyers while Mitsui Chemicals can have a stable supply of petrochemical raw materials.

This could be a model for all Japanese refiners, said Shinji Nishio, president of Nippon Oil Corp., Japan's largest refiner by capacity.

"It wouldn't be helpful to hang out with the same kind of people," said Nishio, adding, "Partnering with petrochemical makers makes more sense. It would be a logical consequence of expanding vertically, rather than horizontally, to have a complete supply chain."

Nippon Oil, Japan's leading refiner, hasn't yet invested in any overseas refining projects, although it plans to revamp its 115,000 barrel-a-day Osaka refinery in western Japan and sell a roughly 50% stake to long-time business partner China National Petroleum Corp. All products from the refinery will be exported to China.

However, the company's chairman, Fumiaki Watari, said that eventually, Japan wouldn't have to have refining capacity at all.

"It is inevitable that developed countries are shifting away from fossil fuels to other energies like hydrogen and solar," Watari said. "Then, we won't need to process crude here. We'll probably have refineries in some emerging economies, and import a small part of the products to Japan."

Vietnam and Its Current Refineries Status

Currently, Vietnam has no operating refineries, and consequently most fuels and other oil products (lubricant, bitumen) consumed in the country have to be imported. However, PetroVietnam is in the process of building its first refinery, named Dung Quat refinery, and expected to be in operation in 2009. The US$ 1.5 billion refinery is located in Quang Ngai province.

It will have a yearly capacity of 6.5 million tonnes of oil (130,000 bpd), producing an estimated 3 millionn tonnes of diesel, 1.8 millionn tonnes of gasoline, 400,000 tonnes of jet fuel, among other products such as liquefied petroleum gas (LPG) and propylene. PetroVietnam and Zarubezhneft of Russia each hold a 50% stake in the 25-year project.

In May 2005 Petro Vietnam and the French oil company Technip signed a contract for building the main part of the refinery. Other contractors in the consortium include the Japanese engineering company JGC and Spain's Technicas Reunidas.

Moreover, in October 2006 Petro Vietnam and its partner, Idenmitsu (Japan), completed an updated feasibility study on a setting up a Joint Venture for its second refinery project. The proposed US$ 5.25 billion Nghi Son petrochemical and oil refining complex will have a processing capacity of 180,000 bpd, and will be located in Thanh Hoa province, north of Hanoi. It should be operational by 2013. The refinery will use 100% imported crude oil from Kuwait.

This project is of great importance and it is expected to act as a catalyst for the Vietnamese economy in general and the northern Central provinces in particular, not only promoting the domestic petrochemical and commodity producing industries, but also ensuring energy security.

Finally, the government is approved for building a third refinery at Vung Ro in the southern Phu Yen province. The refinery will have a minimum capacity of 7 million tonnes per year and will be put into operation by 2015.

This refinery will process mainly imported crude oil and only partly use oil domestically produced. Regarding the mode of investment, the Prime Minister of Vietnam, Nguyen Tan Dung, allowed a joint venture, a wholly foreign invested or a domestically invested entity to run the project.

In this context, it should also be noted that PetroVietnam has extended its focus beyond these huge projects. In terms of refineries, VTN-P Petrochemical Joint Venture Co is opening a small-scale refinery on a trial basis in the Mekong Delta City of Can Tho. The refinery may serve as a pilot-project for similar projects.

In addition, PetroVietnam’s business strategy includes oil-processing projects, which require smaller investment and shorter time for implementation. Moreover, as new refineries come on-stream and begin consuming domestic crude supplies, crude oil exports is assumed to tumble to just 45,000 bpd in 2011 in comparison with 427,000 bpd in 2004.

EUROPE / AFRICA / MIDDLE EAST

NORWAY

StatoilHydro Set to Begin Mongstad Maintenance

Norway's 189,000 barrel a day Mongstad refinery will start shutting down for maintenance work on September 2 and will resume normal production in early November, its owner StatoilHydro said August 19.

The refinery will carry out work on a number of different units during the two-month period and will be completely closed for about two weeks, the spokesman said.

"We are carrying out a lot of work over the two months. It is the longest maintenance shutdown we have seen at StatoilHydro," he said.

The next full shutdown is planned for 2013, he added.

NIGERIA

Official says Nigeria’s NNPC might Collapse under Debt

The Group General Manager (GMD) of the Nigerian National Petroleum Corporation (NNPC), Abubakar Yar’Adua said that the corporation is owed N48 billion from cost incurred on buying crude oil at international price and refining products it is mandated to sell at regulated prices.

He said that the NNPC might collapse under the weight of the debt, if the Ministry of Finance does not reimburse it as soon as possible. He also announced that the corporation will embark on massive importation of Automotive Gas Oil (AGO) – diesel – to ease its rising prices.

On the debt burden, he said, “I don’t know how long we can continue to refine when we are selling products at regulated prices. We buy crude oil at the international price, only to refine and sell at regulated price. We have lost about N48 billion through this. We have made our case known to the President. Now, we are discussing with the Ministry of Finance, and we have been assured we will be paid. If we are not paid, I don’t know how we are going to continue.”

On diesel, he said that he has observed that diesel is sold for between N180 and N200 per liter in some parts of the country, saying the only viable solution now is to mass-import the product to drive down prices.

He said that the main source of diesel to Nigeria is through import by the Depot and Petroleum Products Marketers Association (DAPMA), but that with the landing cost of diesel going around N143, most of them are beginning to feel reluctant to import.

He said, however that within the last year, the Warri Refining and Petrochemical Company achieved an average capacity utilization of 80% in the first half of 2008 and currently processing at 100% capacity.

According to Yar’Adua, the Kaduna Refining and Petrochemical Company (KRPC) has its refinery fuel plants running at 68% capacity and the lubes plants running at 60% due to challenges with crude supply.

On the Port Harcourt Refinery, the GMD said the refinery continues to face peculiar challenges which culminated with the destruction of Port Harcourt Jetty by fire in December, 2007.

“This incident drastically impacted on our import and products evacuation capabilities.” There was also a fire incident on the refinery cooling tower in April 2008, but efforts are on-going to repair the damage. He, however, said that despite the challenges, the PHRC operates at 60% capacity.

“One year ago,” he noted, the sale of the NNPC refineries in Kaduna and Port Harcourt was reversed and performance to date has confirmed our belief that these facilities were not scraps”

“Kaduna and Warri refineries were out of operation for about two years due to damage of crude oil pipelines at the Chanomi Creek in Delta State, the only source of crude supply to the refineries”.

“Using 100% local companies, the NNPC Management was able to get the pipelines rehabilitated and re-commissioned within three months. This has made possible the effective delivery of crude oil to the refineries,” he said.

SOUTH AFRICA

Venezuela's Chavez to Sign South Africa Energy Deal

Venezuelan President Hugo Chavez is expected to sign a bilateral energy agreement with South Africa in September paving the way for state-owned oil company PetroSA to acquire an oil-producing asset in Venezuela.

PetroSA has held high-level discussions with its Venezuelan counterpart, PDVSA, on projects including oil exploration and the production of heavy crude oil in the Orinoco belt of Venezuela.

Everton September, VP of PetroSA's new ventures unit, told Reuters on August 25 Chavez's signature was needed to formalize a memorandum of understanding.

"The MOU will come into effect immediately upon signature. PetroSA would like to acquire an oil producing asset in Venezuela (and) receive a direct crude allocation from PDVSA in the short term, between 6 months and one year," September said.

"In the medium term (between 1 and 2 years), offshore natural gas opportunities (and) opportunities that commercialize our GTL technology and LNG opportunities will be investigated."

PetroSA operates one of the world's largest gas-to-liquids (GTL) refineries at Mossel Bay on the southern coast of South Africa, and is actively pursuing oil exploration in Equatorial Guinea, Gabon and Egypt.

September said no projects had been identified yet and it was premature to speculate on the size of the Venezuelan investment or proposed output volumes.

He told Reuters previously that the deal with Latin America's biggest oil company may be worth hundreds of millions of dollars.

September said oil from Venezuela could be earmarked for PetroSA's new $7 billion Coega refinery project, which would produce 250,000 barrels per day.

The refinery, expected to come on stream by 2015, would position PetroSA to export oil throughout southern Africa.

Venezuela is presently South Africa's third largest trading partner within the Andean Community, with total trade between the two countries valued at 896 million rand in 2007.

South Africa's imports are now dominated by petroleum oil, which accounted for 90 percent of total imports from Venezuela in 2007, figures from the Department of Trade and Industry show.

WEST AFRICA

CityView Corp to Ship Refinery to West Africa

CityView Corporation Limited reported August 18 that it is in the process of completing the asset purchase agreement for the acquisition of a crude oil refinery.

It has been decided that CityView will acquire the oil refinery in its own name, rather than through Pensador Resources Inc.

The asset purchase agreement for the acquisition of the oil refinery will be for an aggregate consideration of US$320 million most of which will be debt finance. Financing of the refinery is being negotiated at present, the details of which will be announced later.

A dedicated team of professionals experienced with crude oil refining, processing, logistics and operations as well as civil and electrical engineering, project development and financing, are currently working on the project.

The refinery is being refurbished in the USA giving CityView the opportunity to acquire a refinery in first class condition. The refinery has been constructed so that it can be transported to site in modular form for a more rapid assembly.

According to CityView's consultants, some minor modifications will be required to allow the refinery to treat alternative crude oil feedstock originating from West Africa.

The refinery will be located on the west coast of Africa and the optimum site will be advised in due course.

CityView plans to ship the plant to the construction site in December this year and have it operational by the first quarter of 2010. These dates are dependent on relevant final governmental approvals and the state of available infrastructure (e.g. power, water, nearby port) required for operation of the plant.

Simulation modeling of the refinery flowsheet has been conducted by expert consultants. The results of preliminary simulations to date estimate production at 50,000 bpsd when fed with the likely feed stock for the refinery. It is anticipated that with fine-tuning of the model and the refinery itself, crude rate will exceed 50,000 bpsd.

BAHRAIN

Samsung Wins $300 Million Bahrain Refinery Order

Samsung Engineering Co. said August that it has clinched a US$300 million deal to build a refinery in northeastern Bahrain.

Under the deal with Bahrain Base Oil Co., Samsung Engineering plans to complete the plant by May 2011, the company said in a regulatory filing. The plant will be built on Sitrah Island in the Persian Gulf.

Bahrain Base Oil is a joint venture that Finnish refiner Neste Oil Corp. and two Bahrain oil companies - Bahrain Oil and Gas Holding Co. (OGHC) and the Bahrain Petroleum Co. (Bapco) - set up in June to build a high-quality lubricant base oils plant in Bahrain. New

IRAN

Iran’s $41 Billion Investment in Oil Industry

“During the last 3 years about $41 billion has been invested in the oil industry,” Iran’s Petroleum Minister said in Tehran on August 25.

Talking in a press conference, Gholam-Hossein Nozari referred to production as the primary goal of the petroleum ministry and added: “we hope to keep our 4,230,000 bpd production rate,” MNA reported.

“Currently Iran produces 500mm cubic meter of natural gas and 403,000 barrels of gas condensates per day,” he added.

“South Pars phase 5 will be inaugurated by the end of the current Iranian calendar year (March 20, 2009). At present 7 phases of South Pars are under construction and we will decide about the other phases by the end of year,” the petroleum minister explained.

He went on to note that the implementation of 3 refineries has been started and the petroleum ministry plans to launch 4 other refineries, adding, “by completion of these 7 refineries Iran’s production capacity will reach 3,300,000 bpd.”

Nozari also expressed hope that 12 petrochemical projects will come on-stream by the end of the Iranian calendar year.

Iran to Boost Heavy Crude Refining Capacity

The construction of new heavy and extra-heavy crude oil refineries is on the Oil Ministry’s agenda, the manager of the refining affairs department of the National Iranian Oil Refining and Distribution Company (NIORDC) said here on Wednesday.

“At present, only Bandar Abbas refinery is capable of refining heavy crude oil,” Aminollah Eskandari explained, Mehr News Agency reported.

“Khuzestan refinery is designed to refine 180,000 barrels of heavy crude oil daily,” he said, adding that the refinery is at the basic engineering designing phase. With 5 percent of physical progress done by now, it is anticipated that it would be commissioned by 2011.

IRAQ

Iraq to Award $81 Million Upgrade Contract for Samawah Refinery to CICSCO and VECO

Iraq's Cabinet has approved a multimillion dollar contract to upgrade an oil refinery in southern Iraq, a senior oil ministry official said August 7.

The $81-million contract will be awarded jointly to the U.S.-based Colorado Industrial Construction Services Co. (CICSCO) and CH2M HILL's affiliate VECO Co. for the production of gasoline from the Samawah refinery, according to the official, who spoke on condition of anonymity because he was not authorized to release the information before the contract is signed.

The official said the Cabinet's decision was made recently but gave no further details.

However, Mohammed Ali Hussein, manager of the Samawah refinery, said the contract will add a unit to produce 1,200 cubic meters of gasoline daily by 2010.

Iraq has the world's third-largest known crude oil reserves -- an estimated 115 billion barrels -- but it suffers acute refinery shortages following years of U.N. sanctions and decades of war. The country's three main oil refineries -- Dora, Shuaiba and Beiji -- are running at roughly half the 700,000 barrels per day capacity they hand before the March 2003 invasion.

The shortfall has forced Iraq to turn to imports from neighboring Iran, Kuwait and Turkey. Lines at gas stations, some mile-long or more, is a common sight in Baghdad, where residents rely on fuel for power generators needed to make up for chronic power outages.

Samawah, provincial capital of Muthanna province, is about 230 miles (370 kilometers) southeast of Baghdad. Its refinery was built in 1977 with a 30,000 bpd capacity. The plant suffered 90 percent damage during the 1991 Gulf War.

The facility was used for storage until 2001, when the Oil Ministry partially rehabilitated it. But it was looted during the chaos that followed the 2003 U.S.-led invasion and was left idle until 2005, when a 10,000 bpd unit was rehabilitated.

A second unit with a similar capacity was repaired and began production in 2006.

According to Hussein, a third unit is to be removed from the Dora refinery in Baghdad and added to the Samawah facility. The Dora unit will be replaced by a new one, he added.

In 2006, the Oil Ministry built a refinery in the Shiite holy city of Najaf, about 100 miles (160 kilometers) south of Baghdad. It has a refining capacity of about 20,000 bpd. The Oil Ministry awarded a $85 million contract to CICSCO in March to raise the Najaf plant's capacity by roughly 10,000 bpd.

During July, production resumed at an oil refinery in Iraq's western desert after a three-year halt due to security. The refinery has a capacity of 16,000 bpd.

At least two other refinery construction deals are being negotiated with foreign companies.

KUWAIT

Kuwait Delays $15 Billion Tenders to Upgrade Refineries

Kuwait has delayed tenders for contracts to upgrade refineries and build a power plant, energy officials said August 21.

The refinery tenders for a $15 billion overhaul of Kuwait's Mina Abudullah and Mina Al Ahmadi plants would be issued in the fourth quarter, said Kuwait National Petroleum Company (KNPC) spokesman Mohammad Al Ajmi.

Kuwait had previously planned to launch the tender this month.

Oil Minister Mohammad Al Olaim has come under scrutiny in parliament over the award of contracts to build a giant new refinery in the Gulf state.

But a parliamentary committee last month gave the government the nod for the project after investigating claims that lower bids were ignored when the contracts were awarded.

Prequalified firms could be shortlisted for the next round of refinery upgrade contracts in October, Al Ajmi said.

Approval for the project's budget from the Supreme Petroleum Council is expected by November, he added.

The upgrades could cost as much as $22 billion, sources said.

KNPC chairman Farouk Al Zanki said the projects might be worth 4bn Kuwaiti dinars ($14.96 billion).

KNPC plans to boost the combined capacity of the two refineries to 800,000 bpd from 600,000 bpd by adding more units to Mina Abdullah, and revamping Mina Abdullah.

The refinery upgrade, which is due to take effect after the closure of the ageing Shuaiba refinery in 2011, is part of plans by the major Opec producer to raise its refining capacity to 1.415 million bpd from 930,000 bpd.

The tender would be based on a cost-plus basis like the al-Zour project. Under such a system, companies typically submit detailed cost estimates for the refinery, plus their profit margin.

Kuwait has also extended the closing date for submitting bids in a tender to build turbines for a 700m dinar power plant with a capacity of 2,000 megawatts, said Ministry of Electricity and Water assistant undersecretary Khaled Al Wasmi.

"The closing date was postponed till October 7, based on the request of the (bidding) firms," Al Wasmi said,

He said winners of the tender are expected to be announced by the end of November, adding the power plant is still expected to start operation in 2011 as previously scheduled.

The pre-qualified companies biding for the plant in the north of the country at Subbiya are US General Electric Company, Japan's Mitsui and Company and Marubeni Corporation, Siemens, Spain's Iberdrola Ingenieria Y Construccion, and Canada's SNC-Lavalin Limited. Kuwait plans to launch tenders for power expansion worth more than $2.5 billion to meet rising power demand fueled by economic and population growth. The Opec-member aims to boost its power capacity to around 16,000 MW by 2012 from around 10,000 MW.

SAUDI ARABIA

Chiyoda to Bid for $1.8 Billion JV Saudi Export Refinery Projects

Japanese oil and gas engineering group Chiyoda Corp said on August 19 it and South Korea's Samsung Engineering Co are preparing to bid for two huge export refinery projects planned by Saudi Aramco jointly with Houston-based ConocoPhillips and France's Total SA.

The orders are estimated to be worth 200 billion yen ($1.8 billion).

Chiyoda President Takashi Kubota also told Reuters in an interview that the company plans to announce one or two alliances with other engineering firms when it unveils half-year results in November.

Chiyoda, which saw its profit squeezed last year due to its heavy concentration of contracts in Qatar, is pursuing new contracts in areas such as refineries, development of oil fields and construction of petrochemical production facilities in Asia and Latin America as it aims to diversify income sources and markets.

The company last year also sought 60 billion yen in funds from Japan's biggest trading house Mitsubishi Corp by issuing new shares to fund its growth strategy, planned mergers and acquisitions, and to pursue energy-related projects jointly with Mitsubishi, which now owns 33.4 percent of Chiyoda.

"We hope to lower the ratio of profit from LNG projects (by diversifying more) to less than 50 percent next business year and after from the 70 percent at present," Kubota said.

Chiyoda, which dominates the global LNG project market with a 50 percent share, saw its net profit plunge 59 percent to 9.6 billion yen in the year ended in March hit by cost overruns and delays in six multi-billion liquefied natural gas projects, the world's largest, in Qatar.

The result of the bids for Saudi's Yanbu and Jubail refinery projects, designed to process Arabian heavy crude, will be announced early next year, Kubota said.

He declined to elaborate on the planned alliances with peer engineering companies.

Kubota said Chiyoda plans to double the work force at its Singapore unit, now 150, within two to three years as it aims to boost sales in Asia.

It also plans to increase the staff at its Qatar affiliate established in March, Chiyoda Almana Engineering LLC, to 100 to 200 also in within two to three years.

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