Growing competition globally coupled with weak margins are affecting investment decisions of the refining industry both in Europe and the Arab world, the 5th annual global refining summit in Rotterdam heard May 20.

Imad Makki, a top expert at OAPEC -- the Organization of Arab Petroleum Exporting Countries -- told the conference that while all Arab countries had plans to build new refineries, half had been delayed and a further quarter had been shelved.

"Only 23% are under construction" in Saudi Arabia, the UAE and Kuwait, he said.

Other challenges facing investments in the Arab world were "lack of transparency in publishing energy demand," making investors unsure "where the product will be sold", said Makki.

OAPEC's members, which include Saudi Arabia, have a total of 53 refineries with 7.06 million b/d capacity or 8% of the total global refining capacity. Once the new projects are completed they will see their capacity increase to 12.86 million b/d by 2015, Makki said.

Around 60% of the new refineries will be export oriented, mainly into Asia and the European market.

Non-OAPEC Arab countries, including Morocco, account for 1% of global refining capacity.

The new projects underway aim to replace low efficiency refineries, achieve maximum integration with the petrochemicals plants; especially in Saudi Arabia, reduce the fuel oil yield and increase the light product.

They will target the production of 10ppm products "after implementing the products," though some existing refineries, including SAMREF and SASREF in Saudi Arabia, MIDOR in Egypt and SOHAR in Oman can already meet the Euro 5 standards, Makki said.

The new facilities aim to increase the hydrotreating capacity and remove "the imbalance" as "some oil exporters import refined product", he added.

Chris Beddoes, deputy secretary general of Europia, the European petroleum industry association which represents the downstream industry, said hydrocracking investments were also made by European refiners, especially in the Mediterranean.

But he questioned whether these investments would continue given the current gloomy outlook facing European refineries.

"It is not in Europe's interest that the refining industry is pushed into irreversible decline," said Beddoes, adding that while refineries elsewhere were growing, in Europe the industry was shrinking.

European refineries were faced with a demand drop and a diesel-gasoline mismatch, as they were "designed for the world of gasoline" yet tax incentives have made diesel the favored motor fuel in a number of European countries, including France and Belgium, Beddoes said.

The push to slash climate changing carbon missions on the way to the "80-90% decarbonization for Europe by 2050" was imposing a further burden, Beddoes said.

"It can make certain crudes very difficult to process," he said, adding that crude grades might be differentiated on the basis of their upstream emission.

Chris Hunt, director general of UKPIA, the UK petroleum industry association, said tougher European regulations were also putting off potential foreign investors in the region.

Fifty-one Percent of New Refinery Projects in OAPEC Delayed with Twenty-six Percent Canceled

Fifty-one percent of new refinery projects, representing 2.594 million barrels a day of capacity, in OAPEC countries have been delayed because of declining margins, according to the industry group.

Twenty-six percent, or 1.315 million barrels a day, of scheduled new capacity has been canceled, Imad Makki, senior refining expert at the Organization of Arab Petroleum Exporting Countries, said today at the Global Refining Summit in Rotterdam. Only 23 percent, or 1.2 million barrels a day is under construction, he said.

The figures, compiled by OAPEC’s research department, are as of January this year, Makki said.

Delays are also being caused by lower demand during the economic slowdown and fluctuating material costs, he said.

In Saudi Arabia, the Yanbu and Jubail refinery projects are under construction, he said. The plants each have a planned processing capacity of 400,000 barrels a day.

OAPEC’s 11 members comprise Algeria, Bahrain, Kuwait, Libya, Syria, United Arab Emirates, Egypt, Iraq, Qatar, Saudi Arabia and Tunisia, according to the group’s website.

AMERICAS

U.S.

BP to Begin Restarting Second Texas City Refinery Crude Unit

BP Plc may begin restarting a second crude unit today at the 475,000 barrel-a-day refinery in Texas City, Texas, according to a regulatory filing.

Emissions associated with the startup of pipestill No. 3B may occur until May 10, according to the filing with the Texas Commission on Environmental Quality. Pipestills, also known as crude units, heat oil and divide its ingredients according to the temperatures at which they boil.

A power failure April 25 forced the plant to shut down. The refinery restarted another crude unit late April 28, and one of two fluid catalytic crackers was started by May 3.

The plant is operating roughly within the production range it had prior to the power failure, a person with knowledge of the situation said. The person declined to be identified because the information isn’t public.

The refinery operates two sets of processing units, known as “trains,” which are fed by separate crude units. One of the systems was returning to service following planned work prior to the April 25 shutdown, according to the person.

Motiva Awards Port Arthur Pet Coke System Project to KBR

KBR on May 18 announced that its subsidiary Roberts & Schaefer (R&S) has been selected to construct a petroleum coker (pet coke) material handling system for Motiva Enterprises LLC's (Motiva) Port Arthur Refinery Expansion Project in Port Arthur, Texas. The contract is part of a larger effort by Motiva to expand the Port Arthur Refinery. The expansion is expected to increase current capacity to 600,000 barrels per day in 2012, making it the largest refinery in the U.S. and one of the top 10 in the world.

R&S will install, start-up, and test the pet coke system, as well as provide on-site construction management and technical support for commissioning/testing. The $9.1 million contract award follows the execution by R&S of the engineering and procurement phase of the project.

"We are proud to continue our work on the Motiva Port Arthur refinery expansion, a project of vital importance to both Motiva and the Southeast Texas region," said Ted Wziontek, Vice President, KBR Minerals. "I am confident that R&S' comprehensive knowledge of the project, combined with our unique experience and capabilities will provide the best value on this short cycle release project for Motiva."

PBF Said to Plan Crude Oil Feed to Units at Delaware City Refinery

PBF Energy Company LLC, which was formed in 2008 to acquire refineries in the U.S., plans to start units at its Delaware City, Delaware, plant, according to two people with knowledge of the operations.

The refinery, shut since November 2009, is expected to start units May 19, said the people, who declined to be identified because the information isn’t public. A fluid catalytic cracker, which makes gasoline, will start receiving crude to enable its restart on May 22, and a hydrogen unit feed is set to begin today, said one of the people.

PBF is standing by its expectation to start the plant in the second quarter, Michael Gayda, Parsippany, New Jersey-based president of PBF Energy, said in May.

PBF Energy, backed by private-equity firms Blackstone Group LP and First Reserve Corp., bought the Delaware City plant from Valero Energy Corp. for $220 million in June.

Sunoco Philadelphia Refinery Shuts Boiler for Planned Work

Sunoco Inc. shut a boiler at its Philadelphia refinery for planned work, according to Jeff Moran, a spokesman for the city’s health department.

The No. 37 boiler and No. 3 boiler house at Girard Point shut down, Sunoco said in a report May 18.

U.S. Refiners Continue Operating, Monitor Rivers

The smallest of eight Louisiana refineries closely monitoring the swollen Mississippi River was shutting down units of May 15 because of rising flood waters, a source familiar with refinery operations said on May 19.

Alon USA Energy's 80,000 barrel-per-day (bpd) refinery in Krotz Springs, Louisiana, about 44 miles (70 km) west of the state capitol of Baton Rouge, is the only plant among the eight that sits next to the Atchafalaya River. The other seven refineries continue to operate, although output has been reduced by at least 10 percent at the nation's second-largest refinery operated by Exxon Mobil Corp in Baton Rouge, sources told Reuters. Scores of U.S. heartland rivers, from the Dakotas to Ohio have flooded following a snowy winter and heavy spring rains, feeding near-record crests on the lower Mississippi River. There are 10 refineries located along the Mississippi River that can process 2.4 million barrels per day of oil, or 13.7 percent of the country's refining capacity.

REFINERIES AT RISK FROM FLOODS (in bpd)

*Alon USA Energy (ALJ.N) Krotz Springs, Louisiana : 80,000 *Chalmette Refining (XOM.N) Chalmette, Louisiana: 192,500 *ConocoPhillips (COP.N) Belle Chasse, Louisiana: 247,000 *Exxon Mobil Corp (XOM.N) Baton Rouge, Louisiana: 504,500 *Marathon Oil Corp (MRO.N) Garyville, Louisiana: 436,000 *Motiva Enterprises (RDSa.L) Convent, Louisiana: 235,000 *Motiva Enterprises (RDSa.L) Norco, Louisiana: 234,700 *Murphy Oil Corp (MUR.N) Meraux, Louisiana: 120,000 *Valero Energy Corp (VLO.N) Memphis, Tennessee: 180,000 *Valero Energy Corp (VLO.N) St. Charles, Louisiana 185,000

NUCLEAR FACILITIES AT RISK FROM FLOODS

* Entergy's (ETR.N) 1,176-megawatt Waterford nuclear plant in St. Charles Parish, Louisiana. * Entergy's 978-megawatt River Bend nuclear plant in West Feliciana Parish, Louisiana. * Entergy's 1,268-megawatt Grand Gulf nuclear station in Clairborne County, Mississippi. TERMINALS SHUT: Magellan Midstream Partners (MMP.N) said operations would restart at its 2.8 million-barrel storage terminal in Marrero, Louisiana. Magellan's 50,000-barrel storage terminal in Gibson, Louisiana, remained shut. Water levels have crested at Marrero on the Mississippi, while water levels were rising on theAtchafalaya at Gibson.

PIPELINES SHUT: Exxon Mobil (XOM.N) Pipeline Co has shut two 12-inch (30.5-cm) crude line segments of the North Line system north of Baton Rouge and one 16-inch segment of the Southwest line across the river from Baton Rouge. The lines were filled with water and will remain so until flooding ends.

SHIP TRAFFIC: The Mississippi River reopened at Natchez, Mississippi, on May 17. Travel through a 15-mile (24-km) stretch of the river near Natchez was restricted. Fifteen vessels were waiting to transit that section of the river on Wednesday, the U.S. Coast Guard said. That portion of the river may be closed if the river level at Natchez reaches 62.5 feet (19.05 meters).

BARGE TRAFFIC: Barge traffic is moving along the Mississippi River with some restrictions. Barges were running near Baton Rouge, but facing difficult river conditions.

OIL AND GAS PRODUCTION AT RISK BY MORGANZA SPILLWAY OPENING: (Source: Jefferies & Co and La. Dept. of Nat. Resources)

 Operator                                  Barrels oil equivalent/day

 BP (BP.L) America Production Co        10,703

 Petroquest (PQ.N) Energy LLC              8,757

 Apache Corp (APA.N)                            4,986

 ConocoPhillips (COP.N) Inc                   2,661

 Stone Energy (SGY.N) Corp                  2,232

 Chevron (CVX.N) USA Inc                     1,467

 Dune (DUNR.OB) Operating Co            1,407

 Swift Energy (SFY.N) Optg LLC             1,241

Refinery Status: Exxon Closes Docks and Pipelines at Baton Rouge Refinery

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.

Royal Dutch Shell PLC (RDSA, RDSA.LN) was restarting May 17 a hydrocracker at its 155,600 barrel-a-day refinery in Martinez, Ca., sources said.

Exxon Mobil Corp. cut production by at least 50,000 barrels a day at its 504,000 barrel-a-day refinery in Baton Rouge, La., because of flooding in the area, a person familiar the refinery said on May 13. An Exxon spokesman declined to comment on the refinery's production rate.

Exxon Mobil Corp. said May 13 it had shut-in segments of the pipelines servicing its refinery in Baton Rouge, La., because of flooding in the region. The company said on May 14 it had closed the docks at the refinery because of flooding.

ConocoPhillips (COP) restarted a coker unit that was shut down after a power failure hit its oil refinery in Sweeny, Texas, a company spokesman said May 16.

Total S.A.'s (TOT) oil refinery in Port Arthur, Texas, shut down a naphtha hydrotreater and cut rates at a reformer unit because of equipment failure May 11, according to filing with state environmental regulators.

Citgo Petroleum Corp. shut a unit at its oil refinery in Corpus Christi, Texas, to repair a leak May 10, a company official said.

Motiva Enterprise LLC's in Norco, La., was preparing for a possible supply disruption because of rising water levels on the Mississippi River, which could include moving product by rail or truck, a spokesman said May 10.

Chevron Corp. (CVX) quickly extinguished an isolated fire at one of the crude units at the Pascagoula, Miss., oil refinery May 9, a spokeswoman said. The company declined to comment on the status of the unit or the refinery.

For more detailed information, search Dow Jones Newswires using the

code N/REF.

Operator Refinery Capacity Description Restart

(in 000s

bbl/day)

UNPLANNED

CANADA

CARIBBEAN

Valero Aruba 235.0 Refinery was at planned rates

May 9 after restarting a

crude unit shut nearly two weeks

earlier to repair a leak.

EAST COAST

GULF COAST

Exxon Baton Rouge, 506.0 Cut production by at least 50,000 May 13

LA. b/d and closed docks and pipelines

because of flooding in region.

Chevron Pascagoula 330.0 One of two crude units experienced

MS an "isolated fire" early May 10 that

lasted about an hour. Co. declined

to comment on the status of the

unit and the refinery.

BP Texas City 437.0 Restart efforts continue; RHU May 7

TX trains restarted on May 7.

Several process units restarted May 1-7

a source said on May 2. It will

take several days for the plant

to reach normal rates. Power outage

on Apr 25/26 resulted in plant wide

shutdown.

Alon Big Spring 67.0 A 'bad wire' caused emissions at

TX sulfur recovery unit No. 2 May 9.

MIDWEST

Exxon Joliet, IL 238.6 Refinery operating normally after

an upset at a sulfur recovery unit

May 8, Co. said May 9.

Holly Tulsa, OK 125.0 Crude unit shut on April 22 for May 8-

Corp unplanned maintenance restarted; 15

refinery should return to normal

run rates in the week starting

May 8, the co. said on May 5.

ROCKIES

WEST COAST

Conoco Wilmington 139.0 Several processing units re- May 3

CA started and at normal rates on

May 3 after shut down on May 2

due to power dip.

Shell Martinez, CA 156.5 Restarted hydrocracker after May 17

shutdown on May 16.

PLANNED

CANADA

Suncor Edmonton 135.0 4 weeks of planned work starts

Apr 22 at one of two crude units

and associated equip.

CARIBBEAN

Hovensa St. Croix 350.0 Restarting distillate desulfurizer May

unit No. 4 in May, Co. said April

15. Unit was damaged by Feb. 11

fire and a replacement one was

brought online.

EAST COAST

PBF Delaware 210.0 Plant expected to start up in 2nd Q

in 2Q of 2011. 2011

PBF Paulsboro 185.0 Refinery up and running after May 4

NJ recently concluding planned

turnaround maintenance, the co.

said on May 4.

Sunoco Philadelphia 335.0 Refinery operating at planned May

PA rates after multiple outages,

the co. said on May 5.

GULF COAST

Lyondell Houston, TX 270.0 FCCU rate cut on Apr 22 follow-

Basell upset. Unit status remains un-

unclear on May 3; the co. won't

comment.

Motiva Port Arthur 285.0 Expansion project to increase 1Q

throughput capacity by 325,000 2012

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

Completion now seen 1Q

2012, from 2010.

Pasadena Pasadena, TX 56.0 FCCU, 56,000-b/d, will be taken

out of service Feb. 28 for 44 days

days planned work. Co. preparing

statement regarding the FCCU on

May 2.

Valero McKee TX 170.0 Vacuum unit turnaround planned for

first half of 2012, co. said.

Expansion project announced on

March 2011 to increase crude oil

throughput by 25,000 b/d to

195,000 b/d.

Valero Norco, LA 250.0 Turnaround maintenance at FCCU mid-May

and alkylation unit seen ending

by mid-May, the co. said on

April 26. Work began on 3/7.

Hydrocracker project will pro- 2013

ceed and be completed in late

2013, the co. said on 7/27/10.

Upgrade project to build 2012

a new diesel hydrotreater

unit moved from 2010 to

4Q 2012.

Valero Port Arthur 325.0 Hydrocracker project will pro- 2012

TX ceed and be completed in late

2012.

MIDWEST

BP Whiting, IN 405.0 Turnaround will start at the End-May

end of March at Reformer No. 4

and alkylation unit for 60 days,

source said on Mar 25.

Turnaround at Pipestill 12 de-

layed by 3 months; it was sup-

posed to begin in November, a

source said on Mar 25.

Frontier Cheyenne, WY 47.0 Refinery to return to targeted May 8-

run rates week starting May 8 15

after undergoing equipment up-

grades, the co. said on May 5.

CVR Coffeyville 115.7 Periodic turnaround will take place

KS in two phases beginning in Fall 2011

and completed in Spring 2012.

Tesoro Mandan, ND 58.0 Total crude-oil processing capa- 2nd Q

city to increase by 17% to 68,000 2012

b/d by 2nd quarter 2012.

WEST COAST

Conoco Carson, CA 139.0 Planned maintenance under way at

Phillips unspecified units the co. said

on April 25. Traders said work

is being performed at a crude

an coker unit.

Tesoro Anacortes 120.0 Planned maintenance under way May 2

since April 29 expected to con-

clude on May 2; no impact to

production.

Chevron Restarts Efforts to Modify its Richmond, CA Refinery

Chevron Corp. said May 23 that it has applied for a new permit to make modifications to its oil refinery in Richmond, Calif., after two courts ruled that the environmental review for an earlier permit was inadequate.

The company wants to replace equipment at the refinery, which can process about 240,000 barrels of crude a day, to make it operate more efficiently and allow it to process more types of crude.

The San Ramon, CA-based company said it has applied for a new permit with the city of Richmond and plans to complete a new environmental review for the construction work.

"We are committed to working with the city of Richmond to move the Renewal Project forward with an open and transparent permitting process," Mike Coyle, general manager of Chevron's Richmond Refinery, said in a statement.

Coyle added that the planned construction would make the refinery more energy efficient and reliable, and reduce emissions.

In April 2010, a California Appeals Court upheld a decision by a lower court that found that the environmental review completed by Chevron and approved by the city of Richmond was inadequate.

The decisions came in a lawsuit that local environmental groups filed against Chevron and the city of Richmond, which issued the company a permit for the project. The groups alleged that the environmental review for the project did not provide enough information about what types of crude would be processed at the renovated plant or whether higher levels of emissions of heavy metals and nitrogen oxides would result.

In 2009, Chevron had to stop work at the refinery and let about 1,000 construction workers go after a state Superior Court judge halted work until the city of Richmond had a chance to reconsider its approval of the environmental review of the project to ensure it met state emissions requirements.

Chevron plans to process "light-intermediate crudes" at the refinery after the modifications and the company's new environmental review "will eliminate any confusion created by project opponents about the refinery's ability to process heavy crude oil," Coyle said.

MEXICO

Mexico's Pemex Awards Perimeter Wall Contract for New $10 Bln Refinery

Mexico's state-owned oil company Petroleos Mexicanos, or Pemex, said it has awarded the contract for a 14.7-kilometer perimeter wall for its planned Bicentenary refinery, accepting a bid of 90.52 million pesos ($7.5 million).

Pemex said in a statement that the winner of the public bid was Martinez Aguilar Construcciones, which committed to source at least 80% of the direct cost of materials from companies based in the central state of Hidalgo, where the refinery is to be built near the existing Tula refinery.

The oil monopoly said that coming actions toward pushing the refinery project forward include the relocation of high-tension wires of state-owned power company Comision Federal de Electricidad, relocation of irrigation channels, and the removal of three banks of trash on the site, which was used by local municipalities as a garbage dump.

The state of Hidalgo donated the land to Pemex for the $10 billion refinery, which is slated to go into the construction phase in late 2012 and to start up in late 2015 or early 2016. Mexico is a major importer of gasoline and diesel, mostly from the U.S., as its current six refineries fail to keep up with rising domestic demand for motor fuels.

COLOMBIA

Ecopetrol Board Sanctions $3.4 Bln Refinery

The Board of Directors of Ecopetrol on May 13 gave the green light to phase 3 of the Modernization Project of the Barrancabermeja Refinery (PMRB), for a total investment of US$3,386 million.

As a result, operations will officially begin on the construction phase of the project, which is scheduled to commence operations in 2016. The project will enable the country's largest refinery to increase the conversion factor from 76% to 95%, which means that it will be possible to obtain more products, such as gasoline and diesel, and a greater quantity of heavy crudes will be processed, whose production has been increasing in Colombia in recent years.

This project is expected to improve the refinery's profitability and supply the entire Colombian market without the need for any imports.

The modernized refinery is expected to produce fuels of higher quality, which will help reduce pollution and lead to better air quality in Colombia, and place the country among the group of leaders in Latin America in the use of cutting edge technology, with operations that are reliable, safe, efficient and environmentally friendly.

It is expected that the execution of this project will generate great benefits for Barrancabermeja, the region and the country in the form of training of skilled local labor, employment and contracting of goods and services, as well as greater tax revenues and transfers to the national, departmental and municipal governments.

The Barrancabermeja refinery, which supplies nearly 80% of the fuels consumed in Colombia, is located in the department of Santander and has a crude processing capacity of 250,000 barrels per day.

Ecopetrol as Colombia's largest integrated oil & gas company, accounts for 60% of total production. It is one of the top 40 oil companies in the world and the fourth largest oil company in Latin America. The Company is also involved in exploration and production activities in Brazil, Peru and the United States Gulf Coast, and owns the main refineries in Colombia, most of the network of oil and multiple purpose pipelines in the country, petrochemical plants, and is entering into the biofuels business.

$2.84 Bln Export Financing Approval for $5.18 Bln Upgrade of Colombian Ecopetrol’s Cartagena Refinery

The Board of Directors of the Export-Import Bank of the United States May 19 approved a $2.84 billion direct loan/loan guarantee to Colombia's Refinería de Cartagena S.A. (Reficar), a majority owned and controlled independent subsidiary of Ecopetrol S.A., Colombia's national oil company.

The financing will support the purchases of equipment and services from over 150 large and small U.S. engineering/design, equipment supply, contracting and process license firms, including Chicago Bridge & Iron, Foster Wheeler, and Honeywell UOP. Small business exporters and suppliers include companies located in Colorado, Texas, Louisiana, New Jersey, New York, Missouri, Ohio, Oklahoma, and Pennsylvania.

This is part of a $5.18 billion refinery and upgrade project in Cartagena, Colombia supplying petroleum products to the domestic and export markets. About four percent of the transaction will directly benefit small businesses. The transaction will help create or sustain over 15,000 American jobs for a total of four years.

"Colombia is one of the nine countries in the world that Ex-Im Bank has identified as having the greatest potential for U.S. exporters and their workers," said Fred P. Hochberg, chairman and president of the Bank. "Just last February and December the Bank approved nearly $880 million in export financing to help finance the sale of goods and services from various U.S. exporters to Ecopetrol. The export sales to Ecopetrol alone support an estimated 6,700 American jobs."

The Bank's financing may only be used to purchase goods and services produced by American workers and some approved local costs.

Colombia is now second to Mexico as Ex-Im Bank's largest market in Latin America. At the end of fiscal year 2008 the Bank's exposure in Colombia totaled $127.5 million. With the approval of the Reficar transaction the Bank's exposure in Colombia will increase to almost $3.8 billion. The financing approved for Reficar amounts to the second largest transaction ever approved by the Bank.

ECUADOR

Ivanhoe Reports Successful HTL Upgrading Tests in Ecuador

David Dyck, President and Chief Operating Officer of Ivanhoe Energy Inc. and Michael Silverman, Executive Vice President and Chief Technology Officer on May 5 announced that heavy crude oil extracted from Ivanhoe's IP-5B well in the Pungarayacu field in Block 20 in Ecuador has been successfully upgraded to local pipeline specifications using Ivanhoe Energy's proprietary HTL upgrading process.

The successful tests demonstrate the flexibility and robustness of the HTL upgrading process to convert diverse heavy crude feedstocks into more valuable and marketable, pipeline-ready synthetic crude oil. In addition, these tests help position Ivanhoe Energy for full-scale heavy oil operations in Ecuador and in other countries having similar heavy oil characteristics.

Ivanhoe Energy drilled its first two appraisal wells in the Pungarayacu field in 2010. This followed a 26-well appraisal drilling program in the 1980's carried out by Petroecuador, which provided valuable preliminary data on the field but did not include thermal recovery and hence did not produce any oil for characterization and testing.

Ivanhoe Energy's goals for the initial wells in Pungarayacu were to add to its preliminary understanding of the reservoir, to carry out thermal recovery tests, and to extract heavy oil for characterization and upgrading tests using its proprietary HTL upgrading process. Ivanhoe Energy drilled its second well, IP-5B, at the southern end of the Pungarayacu oil field in Block 20. Following thermal operations, heavy crude was extracted and test volumes were sent to Ivanhoe Energy's HTL Feedstock Test Facility (FTF) in San Antonio, Texas. These heavy crude volumes were successfully processed and converted to a product that would meet pipeline specifications in Ecuador and would have a higher value and greater marketability than the raw heavy crude.

"This successful processing test confirms the capabilities and flexibility of our HTL upgrading technology", said David Dyck. "We believe our HTL process provides Ivanhoe Energy with a unique capability to help the Government of Ecuador, and other governments and heavy oil owners around the world, develop this important resource in a cost-effective and environmentally-responsible manner."

Ivanhoe Energy's technical team is pleased with this result given the specific characteristics of the crude samples that were obtained from IP-5B. The crude gravity is similar to Athabasca bitumen, at approximately 8° API, however other characteristics are quite different and present specific upgrading challenges. This included higher residual oil (heaviest fraction of the crude), metals, viscosity, solids, and water. In order to deal with these challenges, the FTF was calibrated and customized to suit the feed, and the processing was successful.

The input heavy crude, with a gravity of approximately 8° API, was upgraded to approximately 17° API, while the viscosity of the feed was virtually eliminated and the metals significantly reduced. All of this was accomplished with an overall liquid yield of 88%. These results were from Ivanhoe's first well of recovered volumes and as such represents an early test result. Ivanhoe anticipates that improvements in technical attributes, including API, will continue to advance as progress is made on the overall Ecuador project. This would be consistent with improvements achieved in the Tamarack Project also operated by Ivanhoe.

"In recent years, we have dramatically improved the overall performance and capabilities of the HTL process from its early stage design," said Silverman. "Over the last twelve months we have focused deliberately on making the process as flexible as possible so we can handle different and more challenging crudes. This preparation served us well when processing the heavy crude from well IP-5B."

An independent review by Gaffney, Cline & Associates estimated that within the 250 square-mile delineated portion of Block 20, and within the Hollin formation, there are between 4 and 12 billion barrels of oil originally-in-place. Canadian reporting standards and, in particular, the Canadian Oil and Gas Evaluation Handbook, stipulate that, until it can be established that oil will flow to the surface, original-oil-in-place must be reported as "undiscovered resources."

Ivanhoe has also begun a 190 kilometer 2-D seismic program on the southern part of the Pungarayacu Block. Ivanhoe anticipates that this initial phase of shooting and processing of 2-D seismic will be completed in early July. The seismic data will be used to better identify sub-surface structures, assist in the selection of future drilling locations and possibly determine deeper geologic trapping systems which may contain lighter quality crude products.

HTL represents a unique competitive advantage as Ivanhoe executes its heavy oil business plan around the world. HTL has demonstrated the ability to upgrade a wide range of heavy oil feedstocks with significant variability in characteristics into a more valuable and marketable synthetic crude oil meeting pipeline specifications. HTL eliminates the need for diluent and blend agents for transport, and eliminates, or virtually eliminates, the need for natural gas for steam generation for thermal recovery. These HTL advantages all come to bear in Pungarayacu in Block 20, as well as in many other heavy oil fields in Ecuador, where access to natural gas and blend agents is restricted, and heavy oil is abundant.

ASIA

INDIA

India's BPCL Plans $2.5 Bln 'Creeping Expansion' of New Bina Refinery

State-owned Bharat Petroleum Corp Ltd (BPCL) on May 4 said it will raise capacity at its just-commissioned Bina refinery in Madhya Pradesh to 9 million tonnes and is looking at the right time for a public offering of the unit.

The 6 million tonnes a year, or 120,000 barrels per day, unit was commissioned in January this year and would be formally inaugurated by Prime Minister Manmohan Singh on May 20, BPCL chairman and managing director R.K Singh said.

The project is being built by Bharat Oman Refineries Ltd -- a joint venture between BPCL and Oman Oil Co (OOC) -- at a cost of US$2.5 billion (Rs 11,397 crore).

"We are looking at expanding the capacity to 9 million tonnes in the first phase in what is called creeping expansion," he said. Under this, capacity of existing equipment will be raised, a process that may take up to three years and may cost about Rs 2,000 crore.

"When we take a maintenance turnaround in three years' time, we plan to hook-up the expanded equipments," he said.

Singh said in the second phase, the Bina refinery capacity would be taken up to 15 million tonnes. "Second phase expansion is contingent upon certain conditions like availability of enough water," he said.

BORL managing director U.N Joshi said the company plans to come out with an initial public offering (IPO) "when the market conditions are right".

"We are ready for the IPO. It all depends on market condition," he said, adding that a public offering of about 25 percent equity shares is planned.

Post-IPO, BPCL will hold 49 percent stake in BORL, while OCC would have 26 percent.

Singh said Bina will initially process crude oil imported from Saudi Arabia. "The refinery is designed to process Saudi crude and we have tied up 2.5-3 million tonnes of crude from Saudi," he said.

The firm has laid a 935-km-long cross-country crude pipeline from Vadinar on the Gujarat coast to Bina for transporting the imported crude oil.

BPCL operates a 12 million tonnes or 240,000 bpd refinery in Mumbai. Its unit Kochi Refineries Ltd runs a 9.5 million tonnes or 190,000 bpd refinery in Kerala. Besides, BPCL also owns a majority stake in a 60,000 bpd refinery in North-East India.

The Bina refinery has a one million tonne per annum capacity naphtha hydrotreater, half-a-million-tonne continuous catalyst reformer, 1.95 million tonne hydrocracker, a 1.63 million tonne diesel hydrotreater and a 1.36 million tonne delayed coker.

Essar Set to Complete Expansion Projects worth $4.9 Bln

London-listed Essar Energy Plc on May 17 said it is on track for completion of expansion projects in the Indian oil and power sector worth US$4.9 billion in 2011.

"The US$1.8 billion Phase-1 expansion project to increase Vadinar refinery (in Gujarat) capacity from 300,000 barrels a day to 375,000 bpd remains on track for completion this year," the company said in a statement.

Ramp-up of the new units will commence in Q3, 2011, and the majority of the increased production is expected from Q4, 2011, which will also significantly increase the complexity of the refinery, allowing it to process much heavier varieties of crude oil and improve margins.

"A further optimisation project to increase capacity to circa 405,000 bpd by September, 2012, is also on track," it said.

Essar said three other power generation projects with a cumulative capacity of 2,910 MW remain on track for completion in Q3 and Q4 of this year.

The commissioning of these projects will almost treble the electricity generation capacity of the company from 1,600 MW to 4,510 MW.

"These are the Salaya-I, Mahan-I (both 1,200 MW) and Vadinar-P2 (510 MW) power plants. Salaya and Vadinar are in Gujarat and Mahan in Madhya Pradesh," the statement said.

Essar said it is also on track to complete its US$350 million acquisition of the Stanlow Refinery in UK from Shell during the second half of 2011.

"An extraordinary general meeting of Essar Energy shareholders will be called soon to approve the transaction, which was agreed with Shell in late March," it said.

The company has been adjudged provisional winner for an onshore oil block in the Cambay Basin in Gujarat. The CB-ONN-2010/11 block was offered in the ninth round of bidding under the New Exploration Licencing Policy (NELP) recently.

Essar owns 17 oil and gas blocks in India, Nigeria, Vietnam, Australia, Indonesia and Madagascar.

The firm's Vadinar refinery earned US$8.71 on processing every barrel of crude oil in Q1 of 2011, up from the US$5.82 per barrel gross refining margin (GRM) earned in the same period a year before.

"This rise in GRMs has been driven by an ongoing increase in demand for petroleum, diesel and other refined products in India and elsewhere, which recently has been further accelerated by rising demand in Asia due to some of the Japanese refineries being out of action following the tsunami and also due to the turmoil in the Middle East," it added.

JAPAN

Japan's Cosmo Oil Unable to Predict Stricken Chiba Refinery Restart

Japan's Cosmo Oil Co still cannot predict when it will be able to restart its quake-hit 220,000 barrels per day Chiba refinery, a company executive said at a news conference on May 9.

The refinery was badly damaged in Japan's devastating earthquake in March, with some LPG tanks catching fire, although it has since resumed some oil product shipments.

Cosmo also said May 9 it expects its net profit to fall 3.2 percent to 28 billion yen in the financial year ending next March, provided the Chiba refinery restarts operations in the second half.

Last financial year, Cosmo turned a net profit of 28.9 billion yen as improving margins and inventory valuation gains from higher oil prices offset special losses including costs related to the halt of the Chiba refinery.

THAILAND

Foster Wheeler Wins Design, EPCm Contract for Thai Oil's Refinery Upgrade

Foster Wheeler AG announced May 11 that a subsidiary in its Global Engineering and Construction Group has been awarded a contract by Thai Oil Public Company Limited for the basic design engineering package and engineering, procurement and construction management (EPCm) services for the Emission Improvement and PSA-3 project at Thai Oil's refinery at Sriracha in Thailand.

The terms of the award were not disclosed and the contract values were included in the company's first-quarter 2011 bookings.

The project's objectives are to give the refinery greater flexibility in the crudes it can process, specifically to enable the refinery to process higher sulfur crudes, to upgrade fuel oil to more valuable end products and to meet new sulfur oxides (SOx) emissions regulations coming into force in Thailand.

Residue production will be reduced through the application of deep cut vacuum technology, which helps mitigate the effects of heavier crude slates. In addition, new sour gas handling facilities will be installed including a sulfur recovery unit and a tail gas treatment unit, and hydrogen production capacity will be expanded by installation of a new pressure swing adsorption unit. Foster Wheeler's scope also includes a significant element of revamp work.

The project is expected to be completed during the first quarter of 2013.

"Foster Wheeler has enjoyed a long track record of successful projects in Thailand, and specifically for Thai Oil at Sriracha," said Umberto della Sala, interim chief executive officer, Foster Wheeler AG. "We are very pleased to have won a further strong vote of confidence in our technical expertise and project execution capability with this latest award. We have put together a very capable and experienced team in our Sriracha operation, and this team is very focused on meeting Thai Oil's objectives for this important project."

EUROPE / AFRICA / MIDDLE EAST

FRANCE

LyondellBasell Seeks to Divest Berre Refinery in France

LyondellBasell on May 31 announced its intention to seek a buyer for the 105,000 barrels-per-day refinery at Berre, France operated by its subsidiary, Compagnie Petrochimique de Berre S.A.S (CPB). An investment banking firm will be retained to assist with the sales offering.

The refinery, acquired in 2008 by LyondellBasell's former management, has not fulfilled economic projections made at the time of the acquisition.

"Divesting the refinery would help us to focus on our core petrochemical assets at Berre. We will move diligently and expeditiously to prepare an offering memorandum for interested bidders," said Jean Gadbois, General Manager of the Berre site.

The Berre site also has a steam cracker and world-scale polypropylene and polyethylene plants that are owned and operated by a subsidiary of LyondellBasell. The company is not looking to sell the olefins and polyolefins units at Berre.

LyondellBasell is one of the world's largest plastics, chemical and refining companies. The company manufactures products at 58 sites in 18 countries.

GERMANY

Rosneft Joins BP’s German Refining JV

On May 1, BP and Rosneft became partners in BP’s German refining joint venture, Ruhr Oel GmbH (ROG).

This follows the completion of the deal announced last October in which BP's existing partner, PdVSA of Venezuela, agreed to sell its 50 per cent interest in the joint venture to Rosneft.

Welcoming Rosneft as BP's new partner, Bob Dudley BP group chief executive, said: "I am very pleased to see the completion of this complex transaction, further strengthening our relationship with Rosneft."

Through the 50:50 joint venture, both companies co-own the following assets:

Gelsenkirchen Refinery (100% ROG)
PCK Schwedt Refinery (37.5% ROG share)
Bayernoil Refinery (25% ROG share)
MiRO Refinery (24% ROG share)

ROG was established in 1983 as a 50/50 JV between Veba Oel GmbH and PdVSA, and has continued to operate successfully since BP's acquisition of Veba Oel GmbH in 2002. It owns refining and petrochemical assets in Germany, including the Gelsenkirchen refining & petrochemicals site as well as shares in PCK Schwedt, Mineraloelraffinerie Oberrhein in Karlsruhe and Bayernoil in Neustadt.

In addition to the above refineries, ROG owns DHC Solvent Chemie, one of Europe's leading manufacturers of solvents and other specialty products from oil. Finally ROG holds shares in various pipeline companies which transport crude oil to these refineries.

The ROG joint venture is operated by BP, and is a major contributor to the manufacture and supply of transport fuels and base petrochemicals in Germany. It owns more than 19 per cent of German refining capacity and 5 percent of the ethylene production capacity in Northwest Europe. The ROG refineries produce most of the fuel sold by BP via its Aral branded service stations.

ITALY

Eni to Convert N. Italy’s Sannazzaro Refinery into Zero Fuel Oil Facility

Eni on May 16 started work on the first industrial application of the Eni Slurry Technology (EST) at its refining plant of Sannazzaro de' Burgondi, near Pavia. EST is Eni's proprietary technology for the conversion of heavy oil residues in fine products, gasoline and gasoil.

The EST technology, funded by Eni with over 1.1 billion Euro, represents the first Italian scientific and technological discover in the oil refining sector and the biggest industrial project currently underway in the country.

The project, which will be completed by the end of 2012 with the start of the 23,000 boe/day-capacity plant, commenced during the 90s by Eni at its San Donato Milanese labs.

Works continued at the Taranto refinery, where a 1,200 boe/day demo plant started operations in 2005, representing the reference point of the Sannazzaro plant. The design of the new plant, which will be carried out in accordance with the highest technological and environmental standards, began in 2008 and involved Saipem for the engineering activities.

The EST technology will enable Sannazzaro to become a zero fuel oil refinery, a standard of excellence for the technologies which will be used and the quality of fuels produced. The crude processing cycle in Sannazzaro is one of the most advanced in the world to date and is capable of producing a high environment-compatible gasoil thanks to the significant investments made by Eni in last 5 years.

The EST technology, which can valorize the exploitation of unconventional crudes, will also enable Eni to evaluate new, important opportunities in this industry, considering the significant reserves of this source in the world.

Unlike traditional oil processes, the EST technology can produce gasoline and gasoil without generating coke or fuel oil, whose market is constantly declining. Furthermore, it is based upon a hydro-conversion process developed through a special catalyst and a current of hydrogen self-produced starting from methane. This means that EST also allows the transformation of methane in a high-quality liquid fuel through hydrogen production.

KENYA

Kenya Petroleum Plant in Mombasa Set to Stop Processing Crude in July

The Mombasa petroleum refinery will stop taking new loads of crude oil for refining from July, the Ministry of Energy has said.

This will mark the shift to importation of refined fuel as the government moves to address frequent shortages that have been attributed to inefficiency at the Kenya Petroleum Refinery (KPRL).

KPRL is currently holding about 154,000 metric tonnes of oil, which are expected to be exhausted in a month.

Energy permanent secretary Patrick Nyoike said a team of government officials had been appointed to steer the impending shift as KPRL is expected to stop intake of crude oil on behalf of the industry and revert to 100 per cent imports.

The Treasury and Energy ministry officials are expected to explore ways of converting the refinery into a merchant refinery allowed to retail fuel products, from a toll one that charges oil marketers a fee to refine crude imports.

“The refinery has been too expensive for the economy because it is inefficient. Now there will be a ceiling on processing costs beyond which KPRL will absorb any additional expenses,” said Mr Nyoike.

Under government policy meant to protect the refinery as a strategic national asset, KPRL refines about 1.6 million tonnes of crude oil imports — equivalent to 40 per cent of the annual requirements — which it then offloads to oil markets.

Mr Nyoike, however, said the envisaged modernisation of the refinery has not happened even after the sale of a half of the refinery’s shares to Essar, an Indian company.

“There is no substantial investment. Any inefficiencies related to power and high cost factor must now be transferred to the owner,” said Mr Nyoike.

The game plan that appears to push the much-anticipated refurbishment to the cold room is being fronted by the government even as it emerged that its officials had taken a unilateral decision before possibly informing Essar at a recent board meeting.

Conversion of the refinery will also end the protection — technically known as base load — currently enjoyed by the refinery where 40 per cent of the national requirements are set aside for it.

“Essar came on board on the understanding that they would transform the operating environment. Since this has not happened, they will now be required to guarantee certain minimum performance,” said Mr Nyoike.

When contacted, Essar was non-committal on the renewed pressure from the government.

“We are continuing to have active discussions over future plans and strategy for the KPRL refinery with our partners, including options for a refinery upgrade, and we will give an update on all this in due course,” said Essar Energy plc spokesman Andrew Turpin in an e-mail response.

A $1 billion (Sh85 billion) upgrade — through addition of secondary units would enable KPRL to process various types of crude — including Uganda’s and Sudanese waxy varieties.

This is three times less than the cost of building a new one with similar capacity of four million metric tonnes a year.

Uganda, which plans to construct a mini refinery with a capacity of 20,000 barrels (159 liters) a day, requires $2 billion, according to studies by Foster Wheeler. A tonne has 1,180 liters.

In its current state, KPRL cannot compete with products from modern refineries, making it urgent to undertake the upgrade or pursue the conversion and the upgrade simultaneously

Recently, there were fuel shortages after KPRL failed to release eight million liters of super petrol.

It starved Nairobi of about three days worth of consumption that is estimated at 1.2 million liters a day.

KPRL supplies 40 per cent of the local demand, but is unable to meet programmed production due to inconsistent power supply, equipment failure and obsolete technology.

This results in significant idle stock owed by KPRL to the industry, but physically not available or accessible because of inefficiency in operation.

Recently, a stand-off between marketers and the refinery over yield shifts usually done from higher value to lower value stocks (from petrol-kerosene- diesel and fuel oil) was put off to relieve consumers of inefficiencies that would cost up to Sh10 per liter.

GEORGIA

Georgia Invites Singapore to Invest in Oil Refinery and Hydropower Plant

Georgia is interested in attracting investments from Singapore in the sphere of the construction of hydropower plant and oil refinery, Georgian Prime Minister Nika Gilauri who is on a visit to Singapore said May 19.

"At present, it is a priority for us, as we intend to build an oil refinery. Also the construction of a hydropower plant is planned, the number of which will reach 11 units by 2015. We know that energy is also a priority for Singapore," he said.

"We want to see such large investment companies as Temasek and GIC in Georgia. They have many interesting investment projects which they implement in developing countries, and we want them to implement them in Georgia," Gilauri said.

He has already met with Singapore's President and Prime Minister, as well as representatives of local business circles.

UZBEKISTAN

Japan’s Marubeni Corp Eyes Role in Uzbekistan Refinery Project

The Japanese Marubeni Corporation showed interest in participation in the project on modernization of the Bukhara oil refinery of Uzbekistan, Uzbekneftegaz reported.

Marubeni's delegation, led by Managing Executive Officer and member of the Board of Directors Shinji Kawai, visited the country for this end. The company delegates expressed intention to partake in the modernization of the plant for further production of Euro-3 standard oil, as well as the processing of shale oil.

During the talks, the sides stressed that they already had an experience of joint activities, in particular in the framework of the project on the construction of the Bukhara oil refinery.

"The Uzbek side expressed its willingness to consider concrete proposals of Marubeni," the report reads.

The Bukhara oil refinery will be modernized to produce Euro-3 oil products. The plant will begin producing high-octane gasoline components by the Euro-3 standards in early 2014.

The Bukhara Oil Refinery was commissioned in August 1997. The plant produces high-quality types of gasoline (Ai-91, Ai 93, Ai-95), kerosene and diesel fuel. Uzbekistan has three refineries -- Bukhara, Fergana and Altyaryk with total processing capacity of 11.12 million tons.

BAHRIAN

Bahrain Earmarks $20 Bln for Oil and Gas Exploration and Bapco Upgrade

Bahrain is set to invest more than $20 billion (BD 7.56B) in the oil and gas sector in the next two decades, according to Energy Minister Dr. Abdulhussain Mirza.

He said most would be used as part of a push to try and find lucrative new oil wells and the remainder on upgrading the Bapco refinery.

"Nearly $15B (BD 5.67B) will be used by oil exploration company Tatweer Petroleum at its operations in the Bahrain Field, where it will dig 3,600 new oil wells, while $6B (BD 2.26B) has been earmarked for the development and upgrade of the Bapco refinery," Dr. Mirza told the GDN.

He was speaking on the sidelines of a ceremony to officially inaugurate the new regional offices of primary energy business advisory firm Contax Partners in Seef.

"A process to dig deeper than ever before for natural gas is also well underway as is also the $350 million (BD 132MM) Saudi-Bahraini crude oil pipeline refurbishing project," said Dr. Mirza.

"Plans are being made in such a way that the 55km pipeline will be routed to circumvent residential and populated areas to spaces outside."

Dr. Mirza said a $430m (BD 162MM) lube base oil project, a joint investment venture between National Oil and Gas Authority (Noga) Holding, Bapco and Finland's NESTE Oil Company, is almost complete and would begin operations soon.

"Another project in the offing is the $120m (BD 45.3MM) waste water treatment project between Bapco and Korea's GS Engineering and Construction Company, which will be completed in 2012," he said.

The minister said confidence was fast returning to Bahrain after the recent unrest.

"Contax Partners setting up their regional headquarters in the country is a sure sign of that," he said.

"We are sure this step will prove to be a catalyst for more international players to set up their base in Bahrain."

Dr. Mirza said Noga welcomed foreign investment and played a vital role in attracting them to the energy field and its supporting services.

"Noga also provides support to overcome difficulties in order to boost business growth and investment for the development of Bahrain," he said.

Contax Partners chief executive Filippo Fantechi said the launch of its Bahrain headquarters was another step forward for the company, which has been in the Middle East energy industry for more than 25 years.

"We look forward to take these relationships to new horizons," he said.

KUWAIT

Dresser-Rand to Install Control Panels for Kuwait Refinery

Dresser-Rand Group Inc. announced an agreement with the Kuwait National Petroleum Co. (KNPC) to produce 45 control panels for installation at the Mina Al-Ahmadi Refinery in Kuwait.

The 45 panels will control a broad range of refinery compressors and pumps, only eight of which are Dresser-Rand equipment.

Dresser-Rand also provided control panels to the Mina Ahmadi Refinery in 2007. This latest order is expected to be delivered in stages throughout this year, with the panels expected for installation next year.

The Mina Al-Ahmadi Refinery, built in 1949, is located about 45 km south of Kuwait City on the Arabian Gulf. It started with a refining capacity of 25 000 bpd and supplied the local market with gasoline, kerosene and diesel. Over the years, the refinery evolved, with a capacity exceeding 415 000 bpd. It covers a total area of more than 10.5 million m.

SAUDI ARABIA

Jacobs Wins Ras Tanura GES+ Contract

Jacobs Engineering Group Inc. announced May 17 that it has been awarded the Ras Tanura Refinery Clean Fuels and Aromatics Project, the first major project to be awarded under the Saudi Aramco General Engineering and Project Management Services (GES+) Contract.

Jacobs is executing the project from its office in Al-Khobar, Saudi Arabia.

The scope of services for the Clean Fuels and Aromatics Project includes pre-front end engineering design (FEED) services. In addition, the project includes modifications to the refinery to comply with future environmental regulations. The Ras Tanura refinery is located in the Eastern Province of Saudi Arabia.

In making the announcement, Jacobs Group Vice President Mike Coyle stated, "We are delighted that Saudi Aramco has chosen Jacobs for this major undertaking that has such environmental significance to the Kingdom of Saudi Arabia. We are proud to support Saudi Aramco's environmental efforts and to further our relationship with them."

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