The oil-refining industry is reshaping how it does business by creating virtual war rooms where executives and managers can keep a real-time grip on refinery operations.

Valero Energy Corp. (VLO) and Royal Dutch Shell PLC (RDSA, RDSA.LN), among other refinery owners, have been spending millions of dollars in the past two years to link up thousands of pieces of equipment into company-wide Internet-based networks to more effectively monitor operations, supply, energy consumption and environmental issues. The aim for these companies is to prevent operational snags and to fix problems before they result in major accidents, such as the 2005 explosion at BP PLC's Texas City plant. Moreover, some industry officials say the efficiency gains from these actions can save millions of dollars--and are equivalent to adding 2% to 5% to refining capacity.

Technology is providing a rare breather for the U.S. refining industry, which struggles to cope with depressed demand and increasing competition from abroad. Refineries have cut production and a number of plants have been shut down indefinitely.

Producing gasoline, diesel and other fuels is already a highly automated process, but "up until the last 24 months refineries had silos of information" that didn't communicate with each other, said Jim Kiser, energy solutions profession for IBM Global Services.

International Business Machines Corp. (IBM) and SAP AG, two companies that have been developing software to collect data from different parts of the supply chain, say refiners have been early adopters of this technology.

A tight control of real-time information can improve refiners' reliability during the boom cycles and keep costs down during the bust cycles--helping to smooth the effect of the peaks and valleys of the volatile business environment in which refiners live.

The technology is already paying off for some companies by making them more nimble in a rapidly changing market. Up until now, "most of the behaviors you see in refiners have been reactive" to breakdowns or price changes, said Jose Bravo, Shell's chief scientist. The real-time "dashboards" act as a "continuous health check that forewarn you on problems before they bring you to your knees," he said. The ability to build virtual models has also eliminated the need for risky trial-by-error adjustments to temperature, pressure and processing volumes.

Shell's system is so sophisticated it can determine how much corrosion a tube in a heavy-crude processing unit can take before it needs to be replaced, Bravo said. As a result, Shell has been able to coordinate maintenance schedules or decide whether the system could handle certain types of crude on the spot. Shell even uses this information to determine whether it is worth buying a discounted tanker of heavy, acidic crude oil.

Overall, the efficiency gains and improved reliability are equivalent to adding 5% more days to its operations, or "building a little refinery," Bravo said. Shell plans to roll out the technology globally and eventually use it in its upstream operations such as drilling, exploration and production. While the technology is clearly being seen as a way to improve profitability overall, easy access to information also allows top executives to get a more accurate view of facility operations across the entire company.

For Valero, real-time technology is amounting to about $135 million in annualized savings, thanks to dashboards that monitor process safety, unit performance, crude-oil and feedstock inventories, reliability and energy usage, the company said at an industry conference earlier this year. The company recently announced a five-year plan with SAP to develop a flexible information-technology infrastructure. Valero spokesman Bill Day declined to comment for this article.

According to SAP, Mexican national oil company Petroleos Mexicanos, better known as Pemex, and state-run Petroleo Brasileiro S.A. also use SAP technology to improve operations.

Saudi Aramco, arguably one of the best-run national oil companies, touts on its Web site that the company monitors "real-time data points" across its refining and distribution facilities; executives at the company couldn't be reached for comment.

Both SAP and IBM said they are working on deals with other energy companies.

AMERICAS

U.S.

Tesoro, Valero, other Refiners Fight Climate Change Bills

The hot-button issue of climate change spurred Bruce Smith, CEO of refiner Tesoro Corp to come to the nation's capital in September to lobby Congress for the first time since he took the post 14 years ago.

The oil industry has declared it as no less than a life-or-death issue: climate change proposals to make refiners pay for both the greenhouse gases released from smokestacks when they process crude and the emissions expelled from vehicle tailpipes and jet engines when their fuels are burned.

Tesoro's customers and employees have been extorted to flood Capitol Hill with calls, letters and e-mails opposing the measures — another first for the San Antonio-based company.

Company spokesman Lynn Westfall said. “We really see cap-and-trade or climate change legislation as a make-or-break (prospect) for us.”

Refiners have mounted an aggressive, high-profile campaign against pending legislation designed to fight global warming. Both Valero Energy Corp., and Tesoro — two of the nation's largest independent, nonintegrated refiners and both based in San Antonio — have rolled out Web sites against the legislation and paid for ads on top of company-owned gas pumps warning customers about the potential price tag of congressional plans to cap carbon dioxide.

The industry also is spending record amounts on lobbying to combat the climate change legislation, unrelated tax proposals and other initiatives that energy companies say would be bad for business. According to the nonpartisan Center for Responsive Politics' analysis of federal disclosure reports, the oil and gas industry spent $120.7 million to lobby the government during the first nine months of this year — and it is easily on track to beat the 2008 total of $132.1 million.

Industry officials agree that their top lobbying priority is the global warming legislation that passed the House narrowly in June. The bill is now in the Senate, where six committees are tasked with honing the measure before a final version is ready for floor debate sometime next year.

Both the House-passed bill and the Senate measure sponsored by Barbara Boxer, D-Calif., and John Kerry, D-Mass., would place steadily tightening limits on carbon dioxide and other greenhouse gas emissions. Polluters could buy and trade a limited supply of allowances to release the gases or to offset their emissions by investing in carbon-cutting programs.

The House plan would give refiners 2 percent of the valuable allowances annually for free during the initial years of the program under a hard-fought concession that bill supporters granted Texas Democratic Reps. Gene Green and Charlie Gonzalez. The Senate bill would give away 2.25 percent of the allowances to refiners.

Although refiners ultimately could meet new greenhouse gas limits by creating cleaner-burning fuels, industry leaders say it will take time to develop alternative, lower-emission options — long after carbon dioxide caps kick in.

“We've got smart people that can figure out how to bring some of these technologies along, but when you've got deadlines like 2012, 2014 and 2020, and when the technology is not there to replace gasoline,” it's “scary,” said Jim Greenwood, Valero's vice president for governmental affairs. “The technology isn't there.”

Boxer said the free allowances would “lessen the blow on refiners” while they develop cleaner-burning fuels.

“We do have a lot of allowances going in that direction,” Boxer said. “We think (refiners are) going to be able to cover it.”

Boxer cites an August 2009 study by the Stanford Institute for Economic Policy Research that calculated petroleum refiners could maintain their current profits even if they got just 0.6 percent of the allowances.

Still, industry officials complain that free allowances of 2 percent to 2.25 percent would cover only about half of the annual emissions from the refining process, much less the emissions produced when consumers burn their fuels in cars, trucks and planes. All told, refiners ultimately would be responsible for 44 percent of U.S. greenhouse gas emissions, according to the American Petroleum Institute.

At a projected cost of $20 per allowance to emit a ton of carbon dioxide, the National Petrochemical and Refiners Association estimates the industry would be forced to pony up $4.1 billion for emissions from refining facilities and $63 billion for emissions from consumers using their products.

Valero CEO Bill Klesse called the price tag “staggering” and said it would be “devastating for the American petrochemical and refining industries.”

At $20 per ton, Valero estimates it would be responsible for an additional $6 billion a year — including $45 million to $92 million for its Corpus Christi refinery.

Bill supporters and industry leaders expect much of the allowance cost would be passed on to consumers in the form of higher prices at the pump — an estimated 77 cents more per gallon, according to API.

Bill backers say the price increase will drive customers to cut their transportation emissions by carpooling, spending less time behind the wheel and buying more fuel-efficient cars.

But U.S. energy companies say they can't pass on all the added allowance costs and still remain competitive with foreign refiners, which would not have to pay for emissions from the refining process.

The end result, said Marvin Odum, president of Shell Oil Co., is that refiners would move their U.S. operations offshore.

Even without the prospect of new carbon emissions costs, the forecast is bleak for refiners that already are suffering from a drop in demand during the recession and the costs of storing rising inventories.

On November 20, Valero announced it would shut down its 210,000-barrel-per-day refinery in Delaware City, Del. — an announcement that came a month after Sunoco decided to idle its Eagle Point plant in Westville, N.J.

And on December 4, Bloomberg reported that Klesse said the company is considering selling its refinery in Paulsboro, N.J. While a potential buyer did look at the plant previously, those discussions are no longer active, Klesse said.

In addition, Valero is looking to buy additional ethanol plants because they provide a good supplement, Klesse told Bloomberg in an interview at the Platts Global Energy Awards.

As independent, nonintegrated refiners, Valero, Tesoro and Sunoco are among the most vulnerable under the climate change legislation because they do not have revenue from oil and natural gas production to offset higher refining costs, unlike integrated energy companies such as ConocoPhillips and Exxon Mobil Corp.

Meanwhile, the lobbying campaign continues.

“We can't worry about a sprained ankle or stitches on the knee,” Greenwood said; when the climate change legislation “is potentially a terminal disease for us.”

CSB Calls for Improvements at Corpus Christi Refinery

The U.S. Chemical Safety Board (CSB) on December 4 issued urgent safety recommendations calling on CITGO to immediately improve its emergency water mitigation system in the event of another release of potentially deadly hydrogen fluoride (HF) vapor, as occurred following an explosion and fire July 19, 2009, at CITGO's Corpus Christi refinery. The Board also called on CITGO to perform third-party audits to ensure the safety of its hydrogen fluoride units at its Corpus Christi, Texas, and Lemont, Illinois, refineries. The CSB issues urgent recommendations before completion of final investigation reports in cases where CSB Board Members determine an imminent hazard may be present and has the potential to cause serious harm unless rectified in a short timeframe.

On the day of the accident last July, hydrocarbons and hydrogen fluoride were suddenly released from the refinery's HF alkylation unit. The hydrocarbons ignited, leading to a fire that burned for several days. The fire critically injured one employee and another was treated for possible hydrogen fluoride exposure.

CSB investigators determined that a blockage of liquid caused by the sudden failure of a control valve led to violent shaking within the process recycle piping. The shaking broke threaded pipe connections resulting in the release of hydrocarbons. The cloud of hydrocarbons reached an adjacent unit and ignited. The ensuing fire caused multiple additional fires and the release of approximately 42,000 pounds of hydrogen fluoride from equipment and piping within the unit.

The refinery used a water spray system to absorb the released HF, but the CSB cited scientific literature to conclude that at least 4,000 pounds of HF likely escaped from the unit into the atmosphere and left the facility. Investigators determined that during the first day of response efforts CITGO nearly exhausted the stored water supply for the water mitigation system. Approximately eleven-and-a-half hours after the initial release, before the water supply was completely exhausted, the refinery began pumping salt water from the ship channel into the refinery fire water supply. Multiple failures occurred during the salt water transfer including ruptures of the barge-to-shore transfer hoses and water pump engine failures.

CSB Chairman John Bresland said, "It is imperative that refineries have the proper emergency response resources available to control a release of hazardous materials and protect against impact on the surrounding community."

The CSB's urgent recommendations call on CITGO to develop and initiate plans within thirty days to ensure an adequate water supply to the refinery's HF mitigation system. The company should also report planned or completed actions to the Refinery Terminal Fire Company and the Local Emergency Planning Committee every thirty days until all planned activities are fully implemented.

Investigations Supervisor Robert Hall, P.E., said, "Our investigation closely examined emergency response actions related to this accident. Investigators found that the CITGO water mitigation system serves as the last line of defense to protect the community from an HF release. The CSB's urgent recommendation aims to improve the reliability of CITGO's Corpus Christi, Texas, HF water mitigation system."

A second urgent recommendation called on CITGO to commission independent, third-party audits of the safety of its two HF alkylation units at refineries in Corpus Christi and Lemont, Illinois. The audits should compare safety practices at the alkylation units to those recommended by the American Petroleum Institute (API). Investigators said that CITGO had never conducted such an audit of the units, despite an existing industry recommendation for audits every three years.

The CSB also released video of the initial pipe failure, release, ignition, and fire as captured by two refinery surveillance cameras. Bresland noted, "The camera footage shows the release and spread of the flammable vapor cloud and the moment when the flammable vapor was ignited. It shows just how severe the release and fire were during this incident."

Bresland said, however, that the company had raised objections to the CSB's release of the video, saying that doing so would "raise substantial issues of national security" and would "only sensationalize this unfortunate accident." The CSB subsequently received affirmation from the Department of Homeland Security that the video did not fall under certain classifications requiring protection from disclosure.

Bresland said, "We found this claim disturbing and believe that it is contrary to the intent of a recent law passed by Congress, following similar secrecy claims by Bayer CropScience in Institute, West Virginia. This law, the American Communities' Right to Public Information Act; states that national security classifications may not be used to conceal corporate errors, prevent embarrassment, or improperly delay the release of information to the public. An important part of this CSB investigation is to ensure all relevant information and visual materials regarding this accident are made available to the residents of Corpus Christi."

The CSB is an independent federal agency charged with investigating industrial chemical accidents. The agency's board members are appointed by the president and confirmed by the Senate. CSB investigations look into all aspects of chemical accidents, including physical causes such as equipment failure as well as inadequacies in regulations, industry standards, and safety management systems.

The Board does not issue citations or fines but does make safety recommendations to plants, industry organizations, labor groups, and regulatory agencies such as OSHA and EPA.

OSHA Launches Investigation of Texas City Refinery Blast

A day after a deadly accident at Valero's Texas City refinery, officials with the U.S. Occupational Safety and Health Administration arrived at the plant December 5 to begin an investigation into what went wrong.

An instrument and electrical operator, was killed in an explosion December 4 as a work crew was attempting to restart a boiler that had tripped offline earlier in the day. Another Valero employee and a contract worker sustained minor injuries.

Investigations being conducted by Valero and the federal government will try to pinpoint why the boiler failed.

The 245,000 barrel-per-day refinery, Valero's third largest, never shut down, and continued to run at planned rates December 5. The damaged boiler, at the facility's northwest corner, had provided steam to refining units, but the plant was able to run with other boilers on the site.

San Antonio-based Valero, the nation's largest oil refiner, has struggled in recent months amid a downturn in demand for gasoline, diesel and other petroleum-based fuels. Other major refiners have also felt the pinch.

Valero recently said it would permanently close its Delaware City, Del., refinery. It has also indefinitely idled a plant in Aruba and reduced production at other sites.

In Texas City, the company has tried to improve efficiency and install units that are less costly to operate, Day said, but it has not cut any of the plant's roughly 500 employees and has kept safety a top priority, he said.

The December 4 incident marks the second time a worker has been killed at the plant since Valero bought it from Basis Petroleum in 1997.

A worker also died there in 1998, but Day said fatalities have been "very rare" across the company.

Valero officials said they notified governmental and regulatory agencies, including the U.S. Chemical Safety and Hazard Investigation Board, of the incident.

Daniel Horowitz, spokesman for the Chemical Safety Board, an independent federal agency charged with investigating chemical and refinery accidents, said his agency has not yet decided whether it will open a formal investigation.

In part, that's because the agency is stretched thin with eight other open investigations of incidents at U.S. refineries, not all of them fatal, he said.

"It's been a very challenging year for refinery safety," he said.

The Valero accident shines a light on the need for greater training for operators that work with boilers, said Charlie Singletary, business manager with the International Union of Operating Engineers, Local 564, which represents workers in area petrochemical plants but not the Valero facility.

"Boilers are not taken seriously in the state of Texas," he said, noting that no state license is required for technicians as it is some other states.

Valero workers have been extensively trained for their jobs, Day said. But the company plans to discuss safety issues with employees in the wake of the accident.

In October, OSHA said London's BP should pay a record $87 million in fines for failing to make required safety upgrades at its Texas City refinery following a 2005 blast at the plant that killed 15 and injured scores more.

EPA Formally Declares GHGs Threat to Health, Environment

After what it contends was a thorough examination of the scientific evidence and careful consideration of public comments, the U.S. Environmental Protection Agency (EPA) announced December 7 that greenhouse gases (GHGs) threaten the public health and welfare of the American people. EPA also finds that GHG emissions from on-road vehicles contribute to that threat.

According to the EPA, GHGs are the primary driver of climate change that can lead to hotter, longer heat waves that threaten the health of the sick, poor or elderly; increases in ground-level ozone pollution linked to asthma and other respiratory illnesses; as well as other threats to the health and welfare of Americans.

"These long-overdue findings cement 2009's place in history as the year when the United States Government began addressing the challenge of greenhouse-gas pollution and seizing the opportunity of clean-energy reform," said EPA Administrator Lisa P. Jackson. "Business leaders, security experts, government officials, concerned citizens and the United States Supreme Court have called for enduring, pragmatic solutions to reduce the greenhouse gas pollution that is causing climate change. This continues our work towards clean energy reform that will cut GHGs and reduce the dependence on foreign oil that threatens our national security and our economy."

EPA's final findings respond to the 2007 U.S. Supreme Court decision that GHGs fit within the Clean Air Act definition of air pollutants. The findings do not in and of themselves impose any emission reduction requirements but rather allow EPA to finalize the GHG standards proposed earlier this year for new light-duty vehicles as part of the joint rulemaking with the Department of Transportation.

On-road vehicles contribute more than 23 percent of total U.S. GHG emissions. EPA's proposed GHG standards for light-duty vehicles, a subset of on-road vehicles, would reduce GHG emissions by nearly 950 million metric tons and conserve 1.8 billion barrels of oil over the lifetime of model year 2012-2016 vehicles.

EPA's endangerment finding covers emissions of six key greenhouse gases -- carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride -- that have been the subject of scrutiny and intense analysis for decades by scientists in the United States and around the world.

Scientific consensus shows that as a result of human activities, the EPA claimed.

President Obama and Administrator Jackson have publicly stated that they support a legislative solution to the problem of climate change and Congress' efforts to pass comprehensive climate legislation. However, EPA claims that climate change is threatening public health and welfare. The agency contends that is critical for it to fulfill its obligation to respond to the 2007 U.S. Supreme Court ruling that determined that greenhouse gases fit within the Clean Air Act definition of air pollutants.

EPA issued the proposed findings in April 2009 and held a 60-day public comment period. The agency received more than 380,000 comments, which it stated were carefully reviewed and considered during the development of the final findings.

Holly’s Utah Refinery Updates to Reduce Emissions

The Woods Cross refinery of the Holly Refining and Marketing Company recently announced improvements to the flares at the refinery and the replacement of an older compressor with a new one, which results in a reduction in emissions.

"We started these projects back in 2007 and are happy to see them move forward," said Michael S. Astin, spokesman for the Holly Refining and Marketing Company.

He was quick to rebut the suggestion that the changes were made in reaction to the November explosion at Silver Eagle Refinery.

"None of our changes are related to Silver Eagle," he said.

On December 1, the Holly Refinery completed upgrades to the flares -- part of the relief system that allows product to safely burn when there is an upset in the refining process -- that will have a positive impact on refinery operations and the surrounding community.

Instead of having two principal flares, all process relief lines have now been routed to the north flare, stated a Holly news release.

The south flare has been taken out of service and will be used only when service is necessary on the north flare, which is newer and operates more quietly than the south flare.

In addition, Holly has just replaced the propane flare, the smallest of the three flares at the north side of the refinery.

The propane flare burns excess propane from the pressure relief system at the propane storage facility, the release said. The new propane flare is air-assisted to provide better combustion and reduce smoking.

Also, the Holly Refinery recently completed the installation of a new gas plant compressor to replace an older, less reliable one.

The old compressor experienced periodic failures, causing pressure relief of process gases to the flares. Repeated repairs to the compressor were also costly, and the outages reduced refinery output.

The new compressor is driven by an electric motor, while the old one was powered by a natural gas engine.

Replacement of the compressor will result in estimated emissions reductions of about 340 pounds of nitrogen oxides, 33 pounds of carbon monoxide, 13 pounds of hydrocarbons, and four pounds of particulate matter each day, not including the reductions that will be achieved through the increased reliability of the new compressor.

Astin said Holly paid several million dollars to replace the old compressor.

"We've got quite a few plans going on at the refinery."

Cantwell Unveils Alternative Climate Bill

U.S. Sen. Maria Cantwell, (D., Wash.) on December 11 unveiled an alternate climate bill that would auction all emission credits to fund consumer rebates and limit the auction market to polluters.

The proposal, offered as an alternative to the bill passed in the House of Representatives and by the Senate environment committee, has already garnered support from two unlikely allies and promises to stir debate on the controversial policy.

While its fate is uncertain, the proposal may erode efforts to pass the existing climate legislation by attracting support from some lawmakers. Sen. Susan Collins, (R., Me.), has signed up as a co-sponsor. Sen. Lisa Murkowski, (R., Ak.) welcomed the legislation, saying, "it should certainly be one of the approaches we spend time considering in the coming months."

The conventional approach in Congress so far has been to set an emissions cap and distribute billions of dollars worth of emission credits to affected industries--a political effort to win reluctant lawmaker backing. Those industries are expected to then pass the credit value on to consumers, ostensibly protecting them from higher energy prices as new, more expensive but lower-emission technology is built.

"This is a much simpler process," Cantwell said in an interview. "The system of who gets what can obviously be influenced," she said. Her legislation would provide investors with a more "predictable mechanism" for clean energy expansion while cutting greenhouse gas emissions, she said.

Only 2,000-3,000 of the nation's largest emitters would be able to buy and sell emission credits auctioned by the government, with credit values rising as mandated greenhouse gas levels fall. Seventy-five percent of auction revenues would be recycled into monthly tax-free checks to the public to help pay for rising energy costs. She estimates between 2012 and 2030, for the average family, those checks could average $1,100 to $21,000 a year.

The remaining revenues would be funneled into a clean energy fund to finance low-carbon technologies.

President Barack Obama had originally proposed auctioning all the emission credits, a policy his budget office said could raise $650 billion over a decade at a conservative estimate for emission credits. In the House, the chairman of the energy committee, Rep. Henry Waxman, (D., Calif.), also wanted to auction off all the credits but had to agree to distribute emission credits for free in the face of political reality. Without the so-called allocation scheme, Waxman wouldn't have been able to pass the bill.

Cantwell's proposal partly stems from the fear that allowing financial participants into the emissions derivatives market would open the floodgates for market manipulation that could have a harmful impact on the economy. Their concerns were compounded by last year's record oil price spike, as well by the meltdown in the credit derivatives market that helped trigger the current economic crisis.

The financial community, however, says blocking what some predict could be a multi-trillion-dollar futures market would stunt the financial services necessary for cultivating a clean-energy economy. For example, if utilities weren't able to trade in the emission credit futures markets, they may not be able to find financing for new, expensive carbon dioxide sequestration technology.

Pressed on how her proposal could gain traction in the face of Congressional politics, Cantwell said she's counting on the simplicity of the structure and public payments to rally backing.

"Public Citizen supports the Cantwell-Collins legislation as a needed fresh start to address climate change," said Tyson Slocum, director of advocacy group's Energy Program. "Solving climate change is simply too important to entrust to traders at Goldman Sachs and J.P. Morgan Chase," he said.

Citgo Responds To CSB Call for Water System Changes

Citgo Petroleum Corp. stated December 9 that it appreciates the thorough, ongoing investigation conducted by the U.S. Chemical Safety and Hazard Investigation Board (CSB) and has already taken action on the board's recommendations to immediately improve the emergency water mitigation system at its refinery in Corpus Christi, Texas.

Additionally, Citgo announced that it remains committed to fully cooperating with the ongoing CSB investigation into the July 19 incident at the Citgo Corpus Christi refinery and looks forward to reviewing the findings of the full report.

The company reported that its engineering calculations of the amounts of hydrogen fluoride (HF) released were based upon and supported by thousands of air monitoring samples taken by Citgo as well as the U.S. Environmental Protection Agency (EPA) and a rigorous mass balance.

Finally, by raising concerns to CSB's release of the incident videos at this time to the public, the company added that it was simply acting in good faith to maintain and preserve the security of its refinery. Citgo also stated that it has provided these videos to all the investigating agencies that requested them.

Through ongoing efforts and in coordination with participating organizations, the company stated that it remains committed to operating safely and preventing future incidents.

U.S. Refinery Status: Unplanned and Planned Production Outages at U.S. Refineries

The following table lists unplanned and planned production outages at U.S. refineries as reported by Dow Jones Newswires. The information is compiled from both official and unofficial refining sources and doesn't purport to be a comprehensive list.

PLC (BP) began restarting the Texas City, Texas refinery's fluid catalytic cracker #3 after it experienced a problem over a recent weekend, the company reported to environmental regulators. The same refinery began 10 days of maintenance on Friday, December 11, at a residual hydrotreating unit's vapor recovery unit section; the impact on production was unclear.

ConocoPhillips Corp. (COP) reported a partial power failure at its Borger, Texas refinery . The power was restored at the plant, which Conoco operates in a joint venture with EnCana (ECA), according to the environmental filing.

ExxonMobil said Friday, December 11, that an early day upset at an unspecified process unit did not affect production at its Torrance, California, refinery.

Valero Energ Corp (VLO) said Friday, December 11, that its Benicia, California, refinery was operating normally; a brief flaring event wasn't caused by a unit upset or outage.

Alon USA (ALJ) on December 11 reported a brief flaring event at its Big Spring, Texas, refinery owing to a mechanical problem at the plant's No. 2 sulfur recovery unit.

For more detailed information, search Dow Jones Newswires using the code N/REF.

Operator Refinery Capacity Description Restart

(in 000s

bbl/day)

UNPLANNED

CANADA

EAST COAST

CARIBBEAN

GULF COAST

Alon Big Spring 70.0 Mechanical snag at sulfur re- n/a

TX covery unit No. 2 causes brief

flaring event; impact on pro-

duction unclear.

BP Texas City 455.8 Vapor recovery section at Dec 21

resid hydrotreating unit shut

Dec. 11 for 10 days of mainte-

nance.

FCCU #3 restarted after snag Dec. 14

Dec. 12

Conoco Borger 146.0 Partial power failure. Restarted Dec. 13

Flint Corpus 300.0 Gasoil unit will be re- Dec 10

Hills Christi, TX started Dec. 10 after shutting

unplanned on Dec. 9.

Valero Corpus 315.0 Hydrodesulfurization unit in Dec 10

Christi, TX Complex 1 returned to service

Dec 10; shut Dec 8.

Valero Texas City 245.0 Explosion at boiler on Dec 4

TX resulted in one fatality and

injures two workers. Refinery

operations not affected.

MIDWEST

Husky Lima, OH 160.0 Minor fire damages isocracker Dec. 14

on Nov. 21. Repairs to be com-

pleted within two weeks from

Nov 30. Refinery running at re-

duced rate of 120,000-b/d.

ROCKY MOUNTAINS

WEST COAST

BP Ferndale 225.0 Refinery operations nearing Dec 10

WA normal rates Dec 10 after

steam/boiler snag on Dec 11.

PLANNED

CANADA

CARIBBEAN

Valero Aruba 235.0 The refinery that was shut

in June for 2-3 months for

economic reasons is being

closed indefinitely.

EAST COAST

Sunoco Westville, NJ 145.0 Idling all refining Mid-Nov

operations indefinitely due

to poor economics, Co. said

Oct. 6.

Reformer unit shut in Girard n/a

Point section in early Oct

for economic reasons. Shutdown

to last 1-6 months.

Valero Delaware City 210.0 Plant to be permanently shut due

DE to poor economics, announced

Nov. 20. Delaware Official said

it would be shut on Nov. 22.

Valero Paulsboro 185.0 Refinery will operate during Dec. 14-21

NJ FCCU work that began on Nov.

Nov. 28-29. The entire refinery

was scheduled to shut during the

work; the Co. also shortened the

duration of the FCCU work to 2-3

weeks from 6 on Dec. 3.

Western Yorktown 64.5 Planned work scheduled 1Q 2010.

Va.

MIDWEST

ROCKY MOUNTAIN

Western Bloomfield, 16.8 Co. announced plans Nov. 9

NM to idle plant and shift

production to Gallup plant.

Tesoro Salt Lake City, 58.0 Planned turnaround in 2010;

Utah no timetable disclosed.

Tesoro Mandan, N.D. 58.0 Planned turnaround in 2010;

no timetable disclosed.

GULF COAST

Alon Krotz Springs 80.0 Plantwide turnaround starts Nov. Dec.

LA. in Nov.

Chevron Pascagoula, 330.0 Pre-commercial heavy oil 2010

Miss. conversion project delayed

from 2008 to 2010 due to

economic factors.

Conoco Sweeny, TX 247.0 FCCU No. 3 shut 12/7 to con- Dec 17

nect wet gas scrubber.

Flint Corpus 288.1 $250 mln project for new Spr

Hills Christi, TX diesel desulfurization, 2010

sulfur recovery unit to begin

in Fall 2008. Construction

to last 18 months.

Marathon Garyville 245.0 Project to increase crude oil 4Q

LA refining capacity by 180,000- 2009

b/d 85% complete, as of end

April. New units expected

start up in 4Q 2009. Entire

refinery reaches full capacity 2Q'10

Motiva Port Arthur 285.0 Expansion project to increase 1Q

TX throughput capacity by 325,000 2012

b/d, to 610,000-b/d, slowed.

Completion now seen 1Q

2012, from 2010.

Valero Corpus 340.0 Coker unit shutdown for econo- n/a

Christi, TX mic reasons and planned work;

delayed to June 19 from June

12. The 20,000-b/d unit will

remain off line through July

but could restart at any time

if margins improve.

20,000-b/d FCCU in East n/a

Plant shut; West Plant

50,000-b/d FCCU at reduced

rates since mid-Dec for

economic reasons.

15,000-b/d HCU in East Plant

set for 18 days of work in Jan.

36,000-b/d HCU in West Plant

sent for 18 days of work in Feb.

Valero Norco, LA 250.0 Upgrade project to build 2012

a new diesel hydrotreater

unit moved from 2010 to

4Q 2012.

Turnaround at crude/ coker unit 1Q

set for 36 days in Jan.

Entire Plant

to be shut for work.

The coker will operate at

50% of capacity when

restarted due to poor

economics.

Valero Port Arthur 325.0 77,000-b/d FCCU at reduced n/a

TX rates since mid-Dec for

economic reasons.

45,000 b/d HCU to undergo Spring

38 days of work in March.

Valero Sunray, TX 170.0 55,000-b/d FCCU at reduced n/a

rates since mid-Dec for

economic reasons.

Western El Paso, TX 29.5 Planned work at south side of

plant, including crude unit

and FCCU in Jan for 20 days.

WEST COAST

BP Carson, CA 265.0 Refinery operations will n/a

not be impacted by a

planned flaring event

Dec 13-16.

Tesoro Golden Eagle 166.0 40 days of work, including FCCU, Feb.

alky starting Jan. 8

Tesoro Oahu, HI 94.0 Planned turnaround in 2010;

no timetable disclosed.

Valero Wilmington 135.0 Some units restarted, in- Dec 9

CA cluding crude and coker

units, while turnaround work

continues since Nov. 11 at

the FCCU. The FCCU is seen Dec 20

restarting around Dec 20.

BP Vows Appeal after Jury Orders Payout of $100 Mln

BP must pay more than $100 million in damages for exposing contract workers to toxic substances at its Texas City oil refinery in April 2007, a federal jury in Galveston said on December 18 in the latest setback for the troubled plant.

The mammoth verdict arose out of a case brought by a BP contractor who claimed the British oil giant's failure to maintain equipment and provide adequate safety controls led to a poisonous chemical release that sent more than 100 workers to area hospitals on the evening of April 19, 2007.

The company said it was "shocked and outraged" by the jury's decision and vowed to appeal.

Though none of the 10 plaintiffs in the case suffered major long-term health effects from the incident, the jury decided to punish BP with one of the biggest penalties in recent memory from the Galveston court.

The decision came as a sharp rebuke of a company that has been publicly called out many times for lax safety at the Texas City plant since a March 2005 blast there killed 15 workers and injured scores more.

"The reason I brought the case is because BP's record is so horrific, and despite deaths and injuries that continue to occur, nothing's changed," said Anthony Buzbee, attorney for the plaintiffs.

BP has maintained there is no evidence that workers were exposed to toxic substances above permissible limits set by federal regulators, and no proof the company was at fault.

"The verdict, and punitive damages award in particular, is utterly unjustified, improper and unsupportable," the company said in a statement.

The jury awarded the contract workers $10 million each in punitive damages, as well as actual damages ranging from $5,918 to $244,386 for medical expenses, mental anguish and lost income.

U.S. District Court Judge Kenneth Hoyt had instructed the jury it could award punitive damages if plaintiffs proved BP "acted with gross negligence, with malice or willfulness or with callous and reckless indifference to the safety or rights of others."

Aaron Wilson Garner, a contract worker with Houston's HydroChem Industrial Services, first brought the suit against BP. He began in 2007 by pushing BP to release results of an internal investigation into the incident. Eventually, the case grew to include 143 plaintiffs from more than a dozen contracting companies.

Buzbee also represents the remaining 133 workers. He said he is preparing for their cases to move forward and is intent on making sure BP pays for the incident, since government regulators can only do so much.

The Texas Commission on Environmental Quality and the U.S. Occupational Safety and Health Administration looked into the 2007 incident, but investigations were closed without any conclusions or notices of violations, according to online databases for the two agencies.

"They average $3 million a day in profits, and the most TCEQ can fine them for a release is $10,000.," Buzbee said. "If you hit them hard enough, you force them to pull their head out of the sand."

Plaintiffs alleged they were exposed to carbon disulfide, a harmful compound that made them feel like they had flulike symptoms, while working on two refining units known as Pipestill 3B and CAT1.

Monitors workers wore to detect toxic releases did not go off because they are designed to track different fumes, Buzbee said.

BP's Texas City refinery has been under scrutiny since the blast in 2005 and continues to pay for that disaster.

A division of the company paid a $50 million fine and pleaded guilty to a felony violation of the Clean Air Act in connection with the blast.

And in October, OSHA proposed $87 million in fines against BP for failing to make safety upgrades required under a settlement agreement with the agency following the explosion. BP Products North America said it was formally contesting the citations.

Air Liquide Completes Hydrogen Fueling Project for Shell

Air Liquide has completed the installation of a fueling system for Shell Hydrogen in the Bronx, New York.

In addition to the fueling equipment, Air Liquide is also supplying the hydrogen gas and liquid nitrogen required for operations. The station will provide fueling capability in support of General Motors' Project Driveway vehicles and serve as another site in the network being developed in New York in anticipation of other auto manufacturers introducing fuel cell vehicles to the area. Air Liquide's technology is also used at a station in Ardsley, New York.

Air Liquide has also provided fueling systems in California and Delaware, and in many countries around the world. Air Liquide's hydrogen fueling systems are built in the U.S. with proprietary engineering designs from Air Liquide Advanced Technologies U.S. LLC. The technology is capable of filling a car at 700 bar (10,000 p.s.i.) pressure in less than five minutes.

Michael J. Graff, a member of Air Liquide's executive committee and president and CEO of American Air Liquide Holdings, Inc., stated: "Air Liquide's innovative hydrogen technologies are powering vehicles and equipment while protecting the environment. With more than 40 years of experience in hydrogen and numerous related patents, Air Liquide is helping to build the hydrogen energy infrastructure, to demonstrate its benefits to society and prepare for future markets."

Air Liquide is the world leader in gases for industry, health and the environment. It is present in over 75 countries with 43,000 employees. Oxygen, nitrogen, hydrogen and rare gases have been at the core of Air Liquide's activities since its creation in 1902.

COSTA RICA

CNPC Forms Refining JV in Costa Rica

China National Petroleum Corp. (CNPC), China's largest oil and gas producer, on december 17 set up a joint venture (JV) with Costa Rica counterpart RECOPE in San Jose.

The JV, SORESCO, will upgrade and expand Costa Rica's Moin refinery. It is also planning to build a 10-million-tonne/year refinery in the country.

BRAZIL

Petrobras to Invest $3.12 Bln to Upgrade Revap Refinery

Brazilian state-run energy giant Petroleo Brasileiro (PBR) is investing $3.12 billion to modernize its Revap refinery in Sao Paulo state, a company official said December 14.

The renovations at the refinery, responsible for about 14% of oil processing in Brazil, will be completed in 2011. The upgrades will allow the refinery to process oil from recently discovered offshore oil deposits.

"We're going to produce derivatives that are 100% Brazilian when these fields enter production," Claudio Pimentel, general manager at the refinery, told the local Estado news agency. Revap currently makes aviation fuel and other derivatives from imported light oil.

The refinery has already processed oil from the much-heralded Tupi field. In November 2007, Petrobras shocked the world by announcing Tupi held recoverable reserves of 5 billion to 8 billion barrels of oil equivalent, or BOE. That was the Western Hemisphere's largest discovery in more than 30 years. MO< Petrobras plans to build four new refineries and adapt existing facilities to process oil from the so-called subsalt oil discoveries. The subsalt finds were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt.

The refineries will likely boost capacity to 3.6 million barrels a day. Petrobras currently processes about 1.9 million barrels daily.

Petrobras Awards KBC $4 Mln Refinery Software Contract

KBC on December 15 announced a new software contract award with Petroleo Brasileiro S.A. (Petrobras), the state national oil company of Brazil, for the licensing of KBC's refinery simulation software, Petro-SIM.

The contract encompasses reactor models, the Petro-SIM engineering flowsheet and elements of support and model building for all of Petrobras's Brazilian domestic refineries, a number of their international sites, and their head offices in Rio de Janeiro.

The value of the contract is more than US$4m and the licenses are granted for a period of three years.

KBC performed several large profit improvement projects for Petrobras in the first half of this decade, which included the licensing of some of KBC's earlier simulation software technology, before Petro-SIM was launched in late 2004. This sale effectively upgrades Petrobras to KBC's latest technology.

George Bright, KBC Chief Executive, said: "We are delighted to have won this contract with another longstanding customer further validating the power and continuing loyalty of our blue-chip customer base. Following receipt of this contract we are also pleased to confirm that we expect to meet current market expectations for the year to 31 December 2009."

ARGENTINA

Petrolera Argentina Invests $100 Mln to Boost Refining Capacity

Argentine refinery operator Petrolera Argentina S.A. is investing $100 million to upgrade its Cutral Co refinery in Neuquen province, Argentina's planning ministry said December 14 in a statement.

The refinery is being upgraded with help from the government's "Refining Plus" incentive program, according to the ministry.

The investments will increase crude oil processing by 50%, to 1,400 cubic meters per day by March 2010, the ministry said.

The upgraded plant will supply 7% of Argentina's total fuel needs, which is enough to supply demand in Neuquen as well as the surrounding provinces of Mendoza, Rio Negro, La Pampa and Chubut, said Miguel Schartzbaum, a director at the company.

The refinery produces a wide range of products, including liquefied petroleum gas, the ministry said.

COLOMBIA

Foster Wheeler to Consult for Cartagena Refinery Expansion

Foster Wheeler AG announced December 15 that Refinería de Cartagena S.A. (REFICAR) has accepted the offer by a joint venture of Foster Wheeler USA Corporation and Process Consultants, Inc. (a Foster Wheeler company) to serve as REFICAR's consultant (PMC) for the expansion of the Cartagena refinery in Colombia.

The project will expand the refinery's capacity from 80,000 barrels per day (bpd) to 165,000 bpd. It will also improve the fuel quality to meet Colombian and international environmental specifications. The upgraded facility will produce ultra low sulfur gasoline and diesel from a heavy crude oil slate.

Overall investment for the upgrade project is over US$3 billion. Foster Wheeler's award value, which was not disclosed, will be included in the company's fourth-quarter 2009 bookings.

Umberto della Sala, president and chief operating officer of Foster Wheeler AG, said, "This award is a reflection of the excellent work that Foster Wheeler has been providing to Ecopetrol and indicates our client's continued confidence in our project management capabilities. We are very pleased to be recognized for our experience, capabilities and resources to support the REFICAR project This work follows the award of a similar project by Ecopetrol last year for the front-end design, PMC and partial engineering, procurement and construction of the Barrancabermeja refinery expansion project. The synergies between the two projects will be maximized to deliver added value for Ecopetrol and REFICAR and to ensure project success."

ASIA

CHINA

Sinopec Agrees To Speed up Jiangxi Complex Construction

The Sinopec Group, China's leading oil refiner and the second largest oil and gas producer, inked a strategic cooperation agreement with China's central Jiangxi Province on December 6.

According to the agreement, Sinopec is to speed up the construction of Jiujiang Petrochemical's refining and petrochemical complex project to produce an annual refining capacity of 8 to 10 million metric tons (tonnes).

At the same time, Sinopec also plans to gear up construction of the pipeline to link Jiangxi province to Sichuan, ensuring natural gas supplies from Sichuan to fuel the province's economic development.

The pipeline, a branch line of Sichuan-Shanghai gas artery, will be completed in February 2010 and start natural gas supplies of 2 billion cubic meters per year to Jiangxi by 2012.

The Jiangxi provincial government has pledged its full support for the Sinopec Group's operations in the province, and provides a favorable environment for the development of the Sinopec Group's projects.

Both sides have agreed to work side by side to build the province into an important oil refining and petrochemical base in central China.

The Sinopec Group is the parent company of the China Petroleum & Chemical Corporation.

PHILIPPINES

Petron Earmarks P$10 Bln for Refinery Upgrade

The Philippines Petron Corp. is allotting P$10 billion over the next three years for the rehabilitation of its refinery’s power generation system to meet its growing steam and power requirements.

In a filing with the Securities and Exchange Commission, Petron said the system is being upgraded to a more efficient technology to improve the reliability, sourcing flexibility and cost efficiency.

The company is considering further upgrading its refinery to higher conversion capability that will completely eliminate production of the low value fuel oil and increase production of higher margin products. The project is estimated to cost around $1 billion over a five-year period.

To further strengthen its leadership in the domestic oil industry, Petron will continue its service station network expansion with around P1 billion to be spent over the next five years.

Funding for its projects will come from a planned preferred share offering, estimated to generate as much as P10 billion, as well as internally-generated funds and borrowings from the local and international debt markets.

The company is planning to sell 30 million to 60 million preferred shares with an oversubscription option of between 20 million and 40 million shares at P50 to P100 apiece.

Petron said it may also use proceeds from a preferred share offering to prepay short-term debt or invest in special savings or other short-term money market instruments. As of end-September 2009, the company had consolidated short-term debt of P45.6 billion.

The preferred shares will be listed on the first board of the Philippine Stock Exchange. They are non-voting and non-convertible with a par value of P1 each share and are redeemable at the option of the company.

The oil firm has taped BDO Capital & Investment Corp., BPI Capital Corp. and ING Bank N.V. (Manila branch) as joint lead managers and bookrunners for the issue.

In May this year, Petron also issued P10 billion worth of five-year and seven-year fixed-rate corporate notes. The issue, one of the largest corporate note issuances in the history of local debt capital markets, was more than three times oversubscribed.

Petron is the market leader in the domestic oil industry with an overall market share of 36.4 percent as July 2009. It has the biggest refining capacity, most extensive distribution network and most number of service stations.

Petron has a capacity of 180,000 barrels per day and supplies nearly 40 percent of the Southeast Asian country’s fuel requirements.

In the past few years, Petron has invested more than $400 million in its refinery to ensure the local production of Clean Air Act-compliant fuels.

In the nine months ending September this year, Petron reported a 21 percent growth in net income to P3.37 billion from only P2.78 billion the previous level. Total assets stood at P117.1 billion while stockholders’ equity was at P36.3 billion.

As of September 30, 2009, Petron had a total market capitalization of P47.8 billion.

EUROPE / AFRICA / MIDDLE EAST

EUROPE

'Structural Overcapacities' Saddle European Refiners Says Total Exec

French oil major Total SA loses around EUR100 million a month on its refining activities in Europe, Chief Financial Officer Patrick de la Chevardiere said December 9 in an interview with Dow Jones Newswires.

The entire refining industry in Europe "suffers from structural overcapacities," de la Chevardiere said, adding that the refining strategy is being discussed.

"We have to find the balance point," he said, and so far the current "economic conditions don't justify that the Flanders refinery restarts production," he added, referring to a refinery that was idled in September due to weak markets and pressured margins for refined products.

De la Chevardiere said, besides the Flanders refinery, in northern France, Total has reduced capacity at its Normandy refinery, also in France, where part of the facility has been converted to produce more diesel.

Europe's gasoline surpluses were previously shipped to the U.S., but Total now finds it difficult to do so because the U.S. is now focusing on green fuel, he said.

The group has seen a "few signs of economic recovery" in its sector, he said, such as higher consumption of truck diesel in France in October, when levels were back to those of a year earlier.

Also, the decline in revenue in petrochemicals in Europe has slowed, with revenue down by between 10% and 15% on year in the third quarter after a drop of 20% to 30% on year in the first quarter, de la Chevardiere said.

He said consumption in petrochemicals in China has substantially picked up.

The group is still looking at every acquisition opportunity, though at the moment any potential buy seems "too expensive," he said. "I'm trying to protect investments' profitability," he added.

For instance, Total is considering getting a stake in licenses in Ghana and Uganda. "We're in discussions," de la Chevardiere said, but declined to elaborate.

He confirmed that Total will participate in the second round of the auction for Iraq's Majnoun field. He declined to say which company would be its potential partner for the bid.

Total is still in discussions with Iran's authorities over the liquefied natural gas reserves of South Pars field but so far "contracting conditions are not met to launch the project. Once we reach that point, we'll then consider the political context," he said.

Even though the discussions have been going on for several years now, de la Chevardiere insisted that Total's strategy is a "very long term" one, and that it never drops potential projects unless its bid is definitely rejected.

As the climate change summit in Copenhagen unfolds, de la Chevardiere said he hoped governments would be able to draft some carbon emission regulations that would be stable, allowing oil companies such as Total to have a stable environment to gauge projects' costs.

Oil services are part of projects costs and de la Chevardiere stressed that the group won't accept any more oil services prices as high as those seen until mid-2008, when oil services companies were increasing their prices along with those of crude oil.

The Shtokman oil and gas project, in which Total has a 25% interest, along with Norway's StatoilHydro ASA (STO) which owns 24% and Russia's Gazprom OAO (GAZP.RS) which owns 51%, will be "expensive," de la Chevardiere said, noting that the field is located in extreme arctic conditions.

So far, the companies are waiting for costs estimates, which should be available only in the second half of next year, de la Chevardiere said. This is somewhat postponing the start of the project which was initially planned to be launched in the first quarter of next year.

As for Sudan, the company is still in talks there to resume their exploration activities that have been stopped in 1985 when the country descended into civil war.

"The resume date hasn't been reached yet. We're far from it," de la Chevardiere said. He wouldn't elaborate.

PORTUGAL

Galp, Tecnicas Reunidas Sign Contract for Sines Conversion

Galp Energia and Tecnicas Reunidas on December 18 agreed to a lump sum turn key (LSTK) contract for the Sines refinery's conversion project in Portugal. The agreement now reached corresponds to the conversion to a LSTK of the previous Engineering, Procurement, Construction and Management (EPCM) contract under which Tecnicas Reunidas has been working since the third quarter of 2007.

The contract worth EUR1,080 million includes, in addition to the conversion project, several other projects in energy efficiency, reliability and environmental areas. The expected start up of the new units is scheduled for the third quarter of 2011.

The foremost objective of Sines refinery's conversion project is to adjust the production profile to the needs of the Iberian market, where diesel is currently in short supply, by maximizing the annual production of diesel from 2011 onwards. The project will also allow the increased use of heavy crude oil, which is available on the market at lower prices, reducing raw material costs. The conversion of fuel oil to diesel is imperative as fuel oil demand is expected to shift lastingly from gasoline towards diesel (as the market becomes increasingly diesel-driven) and diesel prices exceed fuel oil prices in international markets.

The project for conversion of the Sines refinery consists of the construction of a new hydrocracker, i.e. a unit for hydrocracking heavy gasoil, for the production of diesel and aviation fuel. This unit will enable the production of diesel through deep conversion of the heavier fractions of crude oil. This technology will make more flexible the selection of crude oil to be processed, which will allow the purchase of heavier crude oil for processing in the distillation column. In addition to the main plant, it will be built a steam reformer for producing hydrogen and a unit for recovering sulfur from produced gases, both of which will be necessary for operating the hydrocracker.

SWEDEN

Shell May Sell Gothenburg Refinery in Sweden

Oil major Royal Dutch Shell PLC (RDSB) may sell its Gothenburg refinery and marketing operations in Sweden, the company said December 15.

"Shell has started to gauge potential interest in the Gothenburg refinery and marketing businesses," company spokeswoman Kirsten Smart said in an emailed statement. "It is very early days and we are at a very early stage of the process," she added.

The move is in line with a shift in Shell's global downstream strategy toward larger, more flexible and sophisticated refinery sites.

"Shell's global downstream strategy is driven by several factors, including the reduction in capital expenditure in some markets and a refocusing of the downstream footprint, including a shift in our refining portfolio toward larger-scale, complex, integrated assets," Smart said.

Separately, Shell is in talks with Indian firm Essar Oil Ltd. over the sale of Shell's Stanlow refinery in the U.K. and the Heide and Harburg plants in Germany.

Shell plans to sell off about 15% of its global refining capacity, or about 600,000 barrels a day of capacity, in the next three years as part of its restructuring program aimed at increasing profitability and efficiency. It agreed in September to sell its fuel and lubricant businesses in Greece for about EUR260 million.

TURKEY

Turkish Refiner, TUPRAS and Spain’s Tecnicas Reunidas Agree to $1.8 Bln Upgrading Project

Turkey's leading oil refining company has agreed with a Spanish engineering contractor for its residuum upgrading project, the company said on December 18 in a regulatory filing.

Negotiations between the Turkish Petroleum Refineries Corp. (TUPRAS) and Tecnicas Reunidas have been continuing since last November for the upgrading of the Izmit refinery.

The project aims at boosting distillation and conversion capacity to allow the refinery to process crude oil with high sulfur content, while adapting the refinery to European Union environmental standards.

TUPRAS had said earlier that the project calls for an investment of around US$1.8 billion and that it expects the work to be completed within five years.

ANGOLA

Economic Downturn Delays Angola Refinery Project

Angola's oil minister said December 22 the global economic downturn will slow the completion of Angola's planned Lobito refinery.

"Lobito refinery will be affected by the downturn; it will happen, but at a slower pace," Angolan Oil Minister Jose Maria Botelho de Vasconcelos told Zawya Dow Jones on the sidelines of the ministerial meeting of the Organization of Petroleum Exporting Countries.

"Lobito will be complete by 2014 or 2015," Vasconcelos said.

The Lobito refinery proposal was approved in 1997 by the Angolan government. State-owned oil company Sonangol announced in January 1998 that it would build a new 200,000-barrel-a-day refinery in Lobito, a coastal city in central Angola, to promote economic development in the region and to reduce the need to import refined products.

Lobito is about 400 kilometers south of the Angolan capital, Luanda.

In late 2008, Angola's oil company Sonangol awarded the U.S. firm Kellogg Brown & Root (KBR) contracts to design and develop the Lobito refinery site, according to KBR.

KENYA

India’s Essar to Invest $400 Mln in Kenya Refinery

India's Essar Group said December 8 it will invest US$400 million in upgrading the refinery it had bought in Kenya.

"The Mombasa refinery is currently operating at 1.6 million tons a year against a capacity of 3.7 million tons," Essar Petroleum (East Africa) Ltd CEO Alok Mathur said.

"We expect to operate at full capacity in two to three years."

Essar had in July completed acquisition of a 50 percent stake in Kenya's only oil refinery at Mombasa, almost 19 months after it entered into an agreement with Shell Petroleum Co Ltd, Chevron Global Energy Inc and BP Africa Ltd for an undisclosed amount, Mathur said.

Essar will build a captive power plant at the refinery to take care of the disruption in power supplies, he said. The Kenyan government holds the remaining 50 percent share in the refinery operated by Kenya Petroleum Refineries Ltd.

The acquisition gives Essar direct access to market its petroleum products both from the Kenya refinery as well as from its Indian refinery in coastal Gujarat.

Essar Oil currently operates a 14-million tons refinery in Gujarat, and plans to expand it to 34 million tons by December 2011.

NIGERIA

Nigeria’s NNPC Chief Meets with Investors About $6 Bln Refinery Project

With just one new refinery in place, Nigeria will be able to stem the flood of oil imports and save over $10 billion annually, the Group Managing Director of NNPC, Mohammed Sanusi Barkindo said December 11 in Abuja. He made the remarks at the maiden meeting of prospective investors in the proposed Lekki Greenfield refinery in Lagos state, which is estimated to cost about $6 billion dollars.

He said preliminary market assessment is that there is room for only two new 200,000-300,000 barrels per day refineries in Nigeria over the next 7 years.

Lekki Greenfield refinery will be the first new refinery to be built in over 20 years after the Port Harcourt refinery in 1989.

Barkindo said the refinery will also be the first refinery that will be integrated with an industrial hydrocarbon park, which will be designed to convert natural gas and refined petroleum products into hydrocarbon derivatives.

On completion, he said, the zone expects to provide infrastructural facilities such as power, water and an oil industry port/jetty.

He acknowledged the separate and legitimate efforts being made by industry players, particularly Oando toward the establishment of the refinery in Lagos.

He, however, noted that to invest $5-6 billion in the downstream sector in Nigeria within a 3-4 year span on a sole basis is a daunting task, adding that the sole risk investment are generally strange to the upstream sector.

He said the ultimate task before Nigeria after meeting its domestic needs will be to reverse the product flows, create a respectable hub for the regional export trade and engage the world of international product trading in an orderly and profitable manner to the greater benefit of the country.

RUSSIA

Lukoil Cuts Oil Production Budget to Focus on Refining

OAO Lukoil Holdings (LKOH.RS) will slash its exploration and production budget by 20% and focus on refining and cash flow generation as Russia's oil output plateaus.

Lukoil, Russia's second-biggest oil producer, will also postpone gas projects in the Caspian Sea and Yamal Peninsula amid uncertain demand in Russia and Europe, Chief Executive Leonid Fedun told journalists December 8.

The company will invest $60 billion rather than $75 billion in exploration and production over the next 10 years as it seeks to boost free cash flow by $20 billion, Fedun said.

Lukoil is aiming to boost free cash flow by $20 billion in the next 10 years, and the company is assuming for its new strategy that oil prices will average $64 a barrel and the exchange rate will be 34 rubles to the dollar.

Drilling activity won't significantly increase next year, he said.

MIDDLE EAST / CHINA / U.S.

Graham Corp Wins Refinery Orders in Excess of $9 Mln

Graham Corp., a manufacturer of critical equipment for energy, petrochemical and other process industries, announced December18 that it has been awarded three orders in excess of $9 million.

The orders are for custom-engineered ejector systems to be installed at new refineries in the Middle East and China and equipment for an existing refinery in the United States. The new Middle East and Chinese refineries will have capacities of 400,000 and 200,000 barrels per day, respectively, while the U.S. refinery is being revamped to improve operating costs and reduce environmental impact. The equipment for the U.S. refinery and a portion of the international orders are expected to be engineered and manufactured in Graham's Batavia, New York, facility.

The shipment of the orders announced December 18 are expected to occur in Graham's fiscal 2011 third and fourth quarters, with the majority of the revenue expected to be recognized during the same quarters. Graham's fiscal year 2011, begins on April 1, 2010.

James R. Lines, Graham's President and Chief Executive Officer, commented, "The Chinese government's stimulus package is supporting construction of new refineries and allowing us to continue to expand our installations of refinery ejector systems. We believe our proven capabilities, including the successful start-up and operation of recently delivered ejector systems in China, along with our value-based sales model puts Graham in an excellent position to win additional orders for the expanding Chinese refining market. We have also been successful pursuing opportunities associated with the massive refinery projects moving forward in the Middle East."

KUWAIT

Kuwait Again Eyes 4th Refinery, while Boosting LNG Imports

State-run Kuwait Petroleum Corp., or KPC, may again invite bids for a $15 billion refinery project, the company's chief executive officer said December 3, after the government canceled contracts earlier this year due to objections from lawmakers.

KPC will refer the project to the Supreme Petroleum Council, the country's top oil decision making body, once it is formed, Saad Al Shuwaib, KPC's chief executive, said in remarks carried by the state-run Kuwait News Agency or KUNA.

The Supreme Petroleum Council's term ended in October and the new formation has yet to be announced.

Kuwait's government in March canceled contracts worth more than $10 billion awarded to one U.S. firm and four South Korean-led groups to build the refinery following parliamentary objections to the tendering process for the refinery, planned as the country's fourth.

The refinery will have a capacity of 615,000 barrels a day of crude oil and produce clean fuels to feed the country's power stations.

Kuwait plans to import LNG, for five years until the fourth refinery is built, Al Shuwaib said.

The Gulf state, which sits on about 10% of the world's oil reserves, started importing LNG for the first time this year to help produce electricity.

KPC signed an agreement with Royal Dutch Shell Group to import LNG in the summer of 2009. KPC has also held negotiations to import LNG from neighboring Qatar, the world's largest LNG exporter.

KPC built an LNG terminal with a capacity of 500 million cubic feet a day to receive the shipments.

Kuwait, which has a crude production capacity of about 3 million barrels of oil a day, plans to boost gas production to 600 million cubic feet a day by 2015 from the current 170 million cubic feet a day, Al Shuwaib said.

The OPEC producer is currently tendering projects to boost its gas output, which will exceed one billion cubic feet a day in the future, Al Shuwaib added.

McIlvaine Company,

Northfield, IL 60093-2743

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

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