Refineries UPDATE
May 2011
McIlvaine Company
TABLE OF CONTENTS
Shaw Grp, Axens to License Advanced HS-FCC Tech
KBR Wins $65 Mln Contract for Pascagoula Base Oil Project
BP’s Texas City Plants Lose Power Causing Release of Emissions
BP’s Cherry Point Plans $388 Mln Hydrogen Diesel Project
Genesis Energy to Expand Texas Oil Infrastructure, Refinery Services
NuStar Energy to Buy AGE S. Texas Refinery, Terminal
Valero Plans Work at Corpus Christi, Three Rivers Refineries Units
TCEQ Says Refinery Emissions Data during Texas Power Outage Invalid
Unplanned and Planned Production Outages at U.S. Refineries
Oxford Catalysts GTL Demo Plant Arrives at Petrobras Refinery in Brazil
Hovensa Refinery Expects Higher Returns after Older Unit Closures
Shell May Convert Australia’s Sydney Refinery into Import Terminal
Kuwait Petroleum Plans for Refinery JV with China Investors
China Plans to Phase out More Smaller-Capacity and Polluting Oil Refining Units
Saudi Aramco Considers Refinery Growth in China, Indonesia
India’s IOC Plans Investment of $8.9 Bln for New Coastal Refinery
India’s IOC to Enter Power Trading Business and Expand Panipat Refinery
Pertamina's Fire Damaged Central Java Refinery Resumes Ops
S. Korean Refiners Expanding into Middle East
Korean Refining Industry Poised for Q2 Export Boom but Petchem Slump Seen
Venezuela and PetroVietnam Plan Vietnam Refinery Upgrade, Product Sales
Kenya Plans $907 Mln Petroleum Refineries Upgrade
Kuwait to Complete New Refinery in 2016
Jacobs Wins Engineering Services Contract from Saudi Aramco
Saudi Aramco GES+ Contract Goes to KBR
Abu Dhabi’s IPIC Plans to Proceed with $3 Bln Fujairah Refinery
The Shaw Group Inc. and Axens have been selected to license a next-generation catalytic cracking technology that will help refiners maximize the production of propylene and other high-value refinery products.
The advanced technology, High Severity Fluidized Catalytic Cracking (HS-FCC), will produce higher yields of propylene and other light valuable products than conventional fluidized catalytic cracking units. The technology developers selected Shaw and Axens to promote and license the technology
The HS-FCC technology has evolved during a 15-year development effort that combines the innovation of five separate entities. During phase one, Japan's JX Nippon Oil & Energy Corporation (JX) and Saudi Arabia's King Fahd University of Petroleum and Minerals (KFUPM) formed a research venture. JX, who leads the technology developers, provided technical research, and KFUPM provided the location for initial laboratory testing facilities.
During phase two, Saudi Aramco joined JX and KFUPM to continue developing the technology. The expanded team designed, built and operated a 30-barrel-per-day demonstration unit at Saudi Aramco's Ras Tanura refinery.
JX embarked on the third phase of development including the scaling-up of the demonstration unit to a 3,000-barrel-per-day pre-commercial demonstration unit, which is being built at JX's refinery in Mizushima, Japan. Shaw and Axens provided engineering services for the unit, which is expected to be operational in 2011.
"This next generation technology will be of great interest to refiners who are looking to convert intermediate oils into more valuable products than those available from conventional fluid catalytic cracking units," said Lou Pucher, president of Shaw's Energy & Chemicals Group. "HS-FCC potentially will become the preferred platform for integrated refinery and petrochemical complexes."
"We are excited about promoting this new technology to refiners seeking the most innovative process known for higher propylene production," said Jean-Paul Gouzard, Axens Executive Vice President - Process Licensing.
The HS-FCC design uses Shaw and Axens' regeneration and catalyst transfer technology and expertise that stems from their 25-year fluid catalytic cracking relationship. The two companies are recognized leaders in the FCC arena having licensed 50 grassroots units and performed more than 200 revamp projects.
KBR on April 27 announced it has been awarded a $65 million contract by Chevron Products Company to execute a Base Oil expansion project at Chevron's refinery in Pascagoula, MS.
The construction project includes building a new lubes hydrocracker and a lube dewaxing / hydrofinishing unit. KBR intends to hire staff locally for the execution of this project. Work is expected to begin in May, and upon completion, the facility is expected to be one of the largest premium base oil plants in the world.
"We are proud to have been selected to execute the delivery of this project, helping Chevron become one of the world's largest producers of premium base oil," said David Zimmerman, President, KBR Services. "KBR has a long history of executing major construction projects in this region and at this refinery. We look forward to continuing this tradition, using local resources to deliver a project that meets schedule and cost targets while maintaining KBR's absolute commitment to safety excellence."
Refinery and power company officials are trying to piece together why several Texas City plants lost power, causing shelter-in-place warnings, school closings and emissions from plant flares that lit the skies over the coastal town.
The brief power outages, which occurred in two clusters April 25 and April 26; prompted BP, Valero and Marathon Oil to shut down their refining operations. Dow Chemical also shut down equipment at its Texas City chemical plant, which makes components used in consumer and industrial products.
Flare towers designed to burn off emissions glowed late April 25 and in the predawn darkness of April 26 at BP's sprawling refinery and chemical complex. A fire broke out in one unit shortly after the facility lost power, but it was quickly put out with no injuries.
Dow Chemical said it had no emissions following its shut-down and did not need to flare. Valero said it only flared early the morning of April 26.
A Texas Commission on Environmental Quality investigator measured emissions with a handheld device at seven locations the morning of April 26. The measurements for volatile organic compounds -- a broad class of chemicals found in crude oil, pesticides and common solvents such as turpentine -- exceeded the instrument's capability, said Terry Clawson, an agency spokesman.
"Based upon our monitoring values, we believe that the city manager's decision to issue a shelter in place was appropriate," Clawson said, adding that the decision to lift the warning at noon on April 26 was based on all monitoring data available then.
The facilities that reported outages must report any emissions to Texas Commission on Environmental Quality within 24 hours.
Valero's data showed up on the agency's database, reporting release of an estimated 43,000 pounds of sulfur dioxide from emergency and startup flaring. Sulfur dioxide can react with other compounds to form ultrafine particles associated with heart and lung disease.
Neil Carman, air program director for the Sierra Club's Lone Star chapter, said it's better for an industrial plant to use flares to burn off pressurized gas during emergencies than to allow an uncontrolled venting.
But he is skeptical of industry-provided estimates of emissions during "upset events" -- non-permitted releases caused by lightning strikes, human error, startups and shutdowns -- because of they assume the flares are working at high efficiency.
"The big dilemma with flares is that there is no monitoring," said Carman, a former Texas environmental regulator. "It's a big leap of faith."
On the afternoon of April 26 Valero, Marathon and Dow said power was restored and they were restarting operations as they determined equipment was operating properly.
BP said its 473,000-barrel-per-day refinery had only limited power by that time, however, and it had not restarted most processes.
BP's refinery has on-site power generation capacity and generates more electricity than it uses. The other three facilities rely on power from the local grid, which is owned and operated by Texas New Mexico Power Co.
The outages April 25 appeared to be due to failure of equipment owned and operated by the plants, said TNMP spokeswoman Cathy Garber. The ones April 26 occurred when a buildup of soot, dust, salt and other residues on transformers and insulators caused TNMP equipment to short-circuit.
Normally rain washes away such residue, but this month's lack of rainfall apparently allowed the buildup, Garber said.
CenterPoint Energy, which owns the power lines in areas surrounding the TNMP service area, said it has been rinsing off equipment because of similar concerns in the past week, particularly on Galveston Island.
Tom Kloza, an analyst with the Oil Price Information Service said "The bottom line is that we've seen this movie before. Spring brings refinery maintenance, storm-induced shutdowns, and the various problems that come up when refineries come back from turnarounds."
The BP Cherry Point oil refinery is ready to undertake a major project next month installing hydrogen diesel units that will help the company meet stricter air quality laws.
Once in place, the last of the diesel currently allowed to be sold at higher sulfur levels will be converted into ultra-low-sulfur diesel. The project, scheduled to be completed at the end of 2012, is estimated to cost the company $388 million, considered one of the most expensive single investments a private sector company has made in Whatcom County.
"With this project, we won't be making one more drop of fuel, but it will be a cleaner burning product," said Michael Abendhoff, a spokesman for BP Cherry Point, noting it will also result in lower emissions coming out of the facility.
Genesis Energy, L.P. announced April 11 that it has entered into several agreements and commenced work to expand its crude oil pipeline and terminaling capabilities in the upper Texas coast and to expand its refinery services operating footprint with a new sour gas processing facility.
Genesis has acquired three above-ground storage tanks, located in Texas City, Texas, representing aggregate capacity of approximately 230,000 barrels that Genesis will refurbish and convert into crude oil capable tanks. It has also acquired an existing barge dock at the same location, all approximately 1.5 miles from its existing Texas pipeline system.
Genesis also intends to construct a truck station, tankage and possible pipeline interconnects at West Columbia, Texas, to be able to provide incremental transportation service for Eagle Ford and other Texas production through its system to refining markets in the greater Houston/Texas City area as well as markets accessible via barge from the new Texas City terminal. Once the refurbishment, tie-in and all interconnecting pipe is completed, estimated to be in the fourth quarter of 2011, Genesis will be able to handle approximately 40,000 barrels per day of crude oil through the Texas City terminal. In connection with its activities in Texas, Genesis is also constructing interconnecting pipeline and other required facilities to provide transportation services for all of the crude oil production from the Hastings field, near Alvin, Texas, that is in the very early stages of a CO2 tertiary recovery program.
"Genesis is very excited about the expansion of our Texas crude oil infrastructure. With our existing access to local refineries and the added ability to access, via barge transportation, other refining markets, we believe Genesis can provide quality, value enhancing services for Eagle Ford and conventional oil produced in, and transported to, the upper Texas coast," said Grant Sims, Genesis Chief Executive Officer.
Genesis also announced it has entered into agreements and commenced work on a new sour gas processing facility to be installed at Holly Refining and Marketing's refining complex located in Tulsa, Oklahoma. The new facility, expected to be completed no later than the fourth quarter of 2012, will remove a portion of the sulfur from the crude oil refined at such complex and result in the potential addition of 24,000 dry standard tons ("dst") per year of sodium hydrosulfide (NaHS), the by-product Genesis receives for its sulfur removal services.
"Genesis has experienced a rapid recovery in the demand for NaHS from its diverse customer base, driven in large part by the demand from emerging market economies for many of the products in which NaHS is used," Sims added. "We have recently placed into service an expansion of our sour gas processing facility in Corpus Christi, Texas, to add approximately 8,000 dst per year to our mix. The incremental capacity and strategic location of our new sour gas processing facility in Oklahoma will add to our ability to meet that growing demand while providing needed sulfur removal services for Holly."
NuStar Energy L.P. announced April 15 that it has agreed to purchase certain refining and terminal assets of AGE Refining from the Chapter 11 Bankruptcy trustee for $41 million excluding net working capital. NuStar received clearance from the bankruptcy court April 14 to proceed with the purchase, and the company expected to close on the acquisition April 19.
"This relatively small transaction is a great acquisition for our investors, employees and community," said Curt Anastasio, President and CEO of NuStar Energy L.P. and NuStar GP Holdings, LLC. "We expect the refinery to generate attractive returns, and it is projected to be immediately accretive to our earnings and distributable cash flow. And we can lock in guaranteed margins through the futures market for crude, distillates and gasoline-related products for the next three to four years."
The AGE refinery is a low-cost 14,500 barrel per day refinery based on the South Side of San Antonio, which has been operating near capacity since the March 9 completion of a state-of-the-art, seven-bay truck loading rack. The acquisition also includes a 200,000-barrel terminal in Elmendorf, Texas.
The refinery purchases and processes crude oils and condensates from across South Texas: including the rapidly developing Eagle Ford Shale. It produces and sells various products, including jet fuels, ultra-low sulfur diesel (ULSD), naphtha, reformates, liquefied petroleum gas (LPG), specialty solvents and other highly specialized fuels, to commercial and retail customers and the U.S. military.
"The refinery's proximity to the Eagle Ford Shale is big plus," said Anastasio. "The light crude oil that is coming out of the Eagle Ford Shale is well-suited to the refinery and it is in our backyard so our transportation costs are low. We expect this will provide a significant economic benefit because we're able to take advantage of these lower cost South Texas sweet crudes and realize transportation cost savings which will enhance the refinery's profitability.
"We are very excited about acquiring this refinery because it's great news for our hometown of San Antonio. We are looking forward to investing in the refinery and working with the AGE employees to ensure the plant meets the highest standards for safety, environmental stewardship and reliability. We have a lot of refining expertise in-house and our employees have a strong record for safety and environmental excellence. So we are well-positioned to not only improve the plant's operations, but also to maximize its profitability.”
AGE filed for Chapter 11 bankruptcy protection on Feb. 8, 2010, and the company has been in the midst of a court-supervised sales process. "Operating in bankruptcy for over a year has been a great challenge for the employees of AGE Refining and I applaud their perseverance," said Eric Moeller, the Chapter 11 Bankruptcy Trustee.
"We are very pleased that a company of NuStar's caliber has agreed to buy these assets. NuStar not only offered a good purchase price, but is a financially strong and growing company with the resources and expertise to invest in the refinery, run it safely and reliably, serve as a good neighbor, and provide the employees with outstanding compensation and benefits. NuStar also has a track record of taking care of all of the stakeholders when it makes an acquisition. This agreement represents a major milestone as we bring the bankruptcy to a positive conclusion for everyone involved," Moeller said.
Valero Energy Corp. (VLO) said it plans work on units at its refineries in Corpus Christi and Three Rivers, Texas, during the second half of the year.
The Corpus Christi refinery complex, which has two plants, will perform maintenance on a hydrotreater, a crude unit and a coker in the third quarter, Lane Riggs, Valero’s senior vice president of refining operations in San Antonio, said during the company’s first quarter earnings conference call.
The Three Rivers plant will perform repairs on a crude unit, vacuum unit and a fluid catalytic cracker in the fourth quarter, Riggs said. Three Rivers, about 70 miles (113 kilometers) south of San Antonio, is linked to the Corpus Christi refineries by a 70-mile pipeline.
The Texas Commission on Environmental Quality on April 29 called "inaccurate" its initial estimate of the air pollution refineries emitted during a late-night power outage in Texas City, Texas that started Monday, April 25.
On Tuesday, April 26 the TCEQ said the air quality around the Texas City refineries run by Valero Energy Corp., Marathon Oil Corp.), BP PLC and Dow Chemical Co. (DOW) was higher than their hand-held monitoring devices could measure. The refinery upsets caused city government officials to declare a state of emergency and order residents to stay indoors.
"These readings have been determined to be invalid," the agency said April 29 in a prepared statement, adding, however, that the city's emergency order was appropriate.
TCEQ spokeswoman Andrea Morrow said the agency is in the midst of determining how much pollution the refineries emitted during the outage, which was caused by a build up of residue on electrical transmission equipment. The manufacturer of the monitoring equipment is studying whether the mistake was caused by the equipment itself or how TCEQ agents used it, Morrow added.
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.
Suncor Energy Inc. (SU) said April 19 it would begin planned maintenance at its Edmonton refinery starting April 22 that will last about four weeks. This work will take place on one of the refinery's crude units and associated processing units, and will include tie-in work for several capital projects, the company said.
Hovensa LLC has completed the shutdown of older equipment that reduces its crude-processing capacity by 30% to 350,000 barrels a day, a company executive said. The total cost of this plan is estimated at $5 million, of which about $4 million was spent in the first quarter.
Chevron Corp. (CVX) reported that equipment malfunction at its Pascagoula, Mississippi, refinery resulted in a control shutdown of units and resulted in flaring activity, the company reported in a regulatory filing April 18. The refinery also had excess flaring recently because of a planned start-up of a hydrogen unit on April 17.
Valero Energy Corp. (VLO) said April 20 that units hit by a brief power outage at its Corpus Christi, Texas, refinery will resume normal operations by April 21.
Exxon Mobil Corp. (XOM) said April 20 that its refinery in Joliet, Ill., is operating at normal rates after experiencing operational issue at a key gasoline-making making unit earlier in the week.
A contract worker was found dead from unknown causes at Motiva Enterprise LLC's refinery in Port Arthur, Texas on April 18, according to the local sheriff's department.
Tesoro Corp. (TSO) reported that an unidentified process unit shut down unexpectedly at its Los Angeles County oil refinery on April 19, according to filings with state environmental regulators.
Alon USA Energy Inc. (ALJ) reported emissions from a compressor outage at its Big Spring, Texas, refinery, according to a filing with state environmental regulators April 19. The incident had no impact to production.
BP PLC (BP) reported that planned flaring activity will take place at its Carson, CA, refinery on April 18 through April 26, according to a filing with state environmental regulators.
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
EAST COAST
Sunoco Marcus Hook 178.0 Reformer, Crude Unit, gas plant 1st Q
PA shut Jan. 7 for maintenance, a 2011
source said on Jan. 6. Co. said
on Feb. 3 work will conclude 1st
quarter 2011.
Sunoco Philadelphia 335.0 FCCU shut for several weeks of un-
PA planned work, the co. said on
March 7.
Fire at vacuum tower was quickly
extinguished on March 7 with no
injuries or off-site impact, Co.
said March 8.
GULF COAST
BP Texas City 437.0 Resumed normal operations on Mar 20
TX Mar. 20 following early-day
power surges that led to in-
stability at several process
units.
Valero Corpus 315.0 Operations returning to normal Mar 23
Christi, TX on Mar. 23 following plantwide
power outage in West Plant on
Mar. 22. No units were damanged.
West Plant HOC shut Mar. 18 Mar 23
after restarting earlier that day
from a Mar. 16 shutdown will re-
start in sequence with all units
affected by Mar 22 power outage.
Valero Port Arthur, 287.0 Unplanned emissions at refinery. Mar 27
TX Company investigating cause.
WRB Borger, TX 146.0 Brief process upset reported at N/A
Refining unspecified unit on Mar. 19.
Alon USA Big Spring, TX 67.0 Compressur tripped offline April 18,
but did not impact production, Co.
said April 19.
MIDWEST
ROCKIES
WEST COAST
BP Carson, CA 264.0 Hydrotreater unit shut Mar. 19 N/A
rates the co. said on Mar 21.
Restart estimate not available.
Valero Benicia, CA 170.0 Refinery nearing normal operating Mar 21
rates, the co. said on March 21,
following hydrocracker shutdown,
unplanned on March 18.
Exxon Torrance 149.0 Unidentified unit breakdown
CA reported April 15.
Valero Wilmington 135.0 Sulfur recovery unit returned to
CA service after briefly tripping
offline the morning of April 18.
Tesoro Wilmington 97.0 Flaring may occur while piping
CA is replaced on Mar 23 at an un-
specified process unit.
Unidentified process unit tripped
offline April 19.
PLANNED
CANADA
Shell Montreal 130.0 The refinery will be converted
Quebec into a terminal.
CARIBBEAN
Hovensa St. Croix 500.0 Shutting smaller, older process
units on west side of plant, which
will reduce crude distillation to
350,000-b/d, Co. said Jan. 26.
Coker, FCCU will not be affected.
Restarting distillate desulfurizer
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
Sunoco Westville 145.0 Idling all Eagle Point refin- n/a
NJ ing operations indefinitely due
to poor economics, co. said
Oct. 6, 2009.
Valero Delaware 210.0 PBF Energy has closed Apr
deal to buy plant. Petroplus 2011
said May 5 the plant would be
restarted in 2Q of 2011.
Valero Paulsboro, 185.0 Sale of refinery to PBF Energy Dec.17
NJ completed on Dec. 17.
Western Yorktown 64.5 The refinery closed in Sep.
VA 2010 for economic reasons.
Terminal operations will continue.
GULF COAST
BP Texas City 437.0 FCCU No. 1 in restart on Mar.
TX 21 following planned mainte-
nance underway since about Jan.
12. Work at the plant's crude
unit was included in that turn-
around work, a person familiar
with ops said on Jan. 25.
Conoco Belle 274.0 Turnaround maintenance concluded
Phillips Chasse, LA at unspecified units the co. said
on March 16. Traders previously
said the work that got underway
on Feb. 3 involved an FCCU.
Conoco Westlake, 239.4 Turnaround maintenance at un-
Phillips LA specified units completed the co.
said Mar 26; work began in early
Feb, the co. said previously.
Exxon Baton 504.5 Several weeks of work got under N/A
Mobil Rouge, LA way on Feb 5, the company said
on Feb 7. It would not comment on
what unit, or units, are involved,
but said the turnaround was still
in progress on Mar. 22.
Exxon Chalmette 90.0 Crude throughput reduced from
LA 120,000 to 90,000-b/d as redun-
dant units and about 70 jobs
were cut for economic reasons,
the co. said Aug 26.
Lyondell Houston, TX 270.0 FCCU unit down for turnaround Mar
Basell until late March. 2011
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.
Alon USA Big Spring, TX 67.0 Changing amine at SCOT Unit 2 on
April 15.
Pasadena Pasadena, TX 56.0 FCCU, 56,000-b/d, will be taken
out of service Feb. 28 for 44 days
for planned work, Co. reported
Jan.25.
Valero McKee TX 170.0 Expansion project announced on
March 16 to increase crude oil
throughput by 25,000 b/d to
195,000 b/d.
Hydrocracker project to
commence April 2011. Vacuum
unit turnaround planned for
first half of 2012, co. said.
Valero Norco, LA 250.0 Hydrocracker project will pro- 2013
ceed and be completed in late
2013, the co. said on 7/27/10.
Work planned at 90,000-b/d
alky unit in March for 56 days.
Upgrade project to build 2012
a new diesel hydrotreater
unit moved from 2010 to
4Q 2012.
Valero Port Arthur 325.0 Crude and coker work lasting Mar 24
TX 51 days ends on Mar. 24.
Six coker drums will be re-
placed in 2011.
Hydrocracker project will pro- 2012
ceed and be completed in late
2012, the co. said on 7/27/10.
Western El Paso, TX 122.0 Plant is running at full capacity to
take advantage of discounted prices
fortis crude supply and to make up
for outages earlier this year, Co.
said March 3.
Western Gallup, NM 20.8 Plant is running at full capacity to
take advantage of discounted prices
fortis crude supply and to make up
for outages earlier this year, Co.
said March 3.
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, a
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.
Expansion project that will in-
crease Canadian heavy crude pro-
cessing capacity by 260,000 b/d
on track for completion by mid-
2010, a source said on Mar 25.
Marathon Canton, OH 78.0 Turnaround began last week and is
ongoing, Co. said March 7.
CVR Coffeyville 115.7 Periodic turnaround will take place
KS in two phases beginning in Fall 2011
and completed in Spring 2012.
Valero Ardmore, OK 90.0 37 days of plantwide turnaround
has been underway the co said
on Mar 14.
Suncor Commerce 93.0 Planned turnaround maintenance Apr 16
Energy City, CO got underway on Mar 19/20 at
2 crude units and associated
process units; to conclude in
about four weeks.
Tesoro Mandan, ND 58.0 Total crude-oil processing capa-
city to increase by 17% to 68,000
b/d by 2nd quarter 2012, the co.
said on Mar. 21.
WEST COAST
Conoco Rodeo, CA 120.0 Planned maintenance underway, Co.
said Jan. 20, but declined to say
what units are involved and how
long the work will last.
Exxon Torrance 149.5 Hyrocracker, Sat. Gas Plant and
Mobil CA hydrogen unit shut Feb 1 for several
weeks of planned turnaround mainte-
nance. Turnaround still in progress
the co. said on Mar 22.
Tesoro Wilmington 97.0 Flaring may occur on Mar 26-27
CA while planned maintenance is per-
formed at an unspecified process
unit.
BP Carson, CA 265.0 Flaring may occur on April 18-26,
Co. reported April 15.
Oxford Catalysts Group PLC, the leading technology innovator for synthetic oil production, announced that its Gas-to-Liquids (GTL) demonstration plant has recently arrived in Fortaleza, Brazil following the timely completion of its construction in Asia last year.
The integrated GTL demonstration plant incorporates the Group's proprietary microchannel reactor and catalyst technologies for the key Steam Methane Reforming ("SMR") and Fischer-Tropsch ("FT") steps of the GTL process. The demonstration is fully funded and managed by the Group's partners Toyo Engineering Corporation and MODEC, Inc., in collaboration with the Brazilian national oil company Petroleo Brasileiro S.A. ("Petrobras") which is hosting the demonstration at its Lubnor refinery in Fortaleza, Brazil.
The GTL plant will be reassembled at the demonstration site, and will then progress to the pre-commissioning and commissioning stages. These are expected to be completed within four months. The demonstration plant is scheduled to start up in September, subject to successful commissioning and availability of the required utilities from Petrobras. Following start up, the demonstration will operate for approximately nine months.
Roy Lipski, CEO of Oxford Catalysts Group said:
"We are very pleased to be able to announce continued progress towards demonstration of our GTL technology. We are grateful for the continued support from our partners Toyo Engineering and MODEC, and for the very significant investment they have made in our technology.
"This project at Petrobras is an important early demonstration of the Group's technology for GTL with one of the world's largest users of FPSOs. Not only could it stimulate adoption of our products in the offshore market, but could also pave the way for early deployment in the larger onshore market."
Oxford Catalysts designs and develops technology for the production of synthetic oil from both conventional fossil fuels and renewable sources such as bio-waste. The Group is focused on the emerging market for distributed smaller scale production of synthetic oil via Fischer-Tropsch ("FT") synthesis — a market that has the potential of producing as much as 25 million barrels of fuel a day.
The FT reaction is used when converting natural gas, coal or bio-mass into clean high-performance synthetic oil, processes known as GTL, CTL and BTL respectively. The Group is the recognized world leader in the design and development of high-activity catalysts and associated novel chemical reactors for the smaller scale production of synthetic oil. (The Group's reactor technology — known as microchannel process technology — is marketed under the brand name of Velocys).
Oxford Catalysts Group PLC has some 80 employees with facilities near Oxford, UK and Columbus, Ohio, USA.
Hovensa LLC has completed the shutdown of older units that reduces its crude processing capacity by 30% to 350,000 barrels a day, a move that is expected to boost earnings by focusing on selling higher-profit fuels such as gasoline and distillates, a company executive said April 20.
The refinery, located in St. Croix of the U.S. Virgin Islands, typically sells products largely into markets located along the U.S. East Coast and Gulf Coast with occasional sales to Latin America. Profits from processing heavy crude oil into higher valued, lighter fuels are just now recovering from years of weak demand and low gasoline prices during the U.S. recession.
Hovensa first announced plans to reduce crude distillation by 150,000 barrels a day in January by shutting older, less efficient units. The company is a joint venture between Hess Corp. (HES) and Venezeula's national oil company Petroleos de Venezuela S.A. Hess reduced its share in Hovensa to less than 1% of capital employed, the company said in January.
"The reconfiguration has enabled the refinery to produce a higher percentage of more valuable light end products, and a lower percentage of less valuable heavy products," Hovensa Chief Financial Officer Michael Fennessy said in an interview.
Hovensa shut down older units in the western part of the refinery at a total expected cost of $5 million. About $4 million has already been spent in the first quarter, he said.
Hovensa's fluid catalytic cracker, a key gasoline-making unit, and coker continue to operate at the same rates prior to the conversion. "We have reduced our crude distillation capacity but not our ability to upgrade [products]," Fennessy said.
The shutdown improved reliability and reduced the amount of lower-quality fuels the refinery produces. At recent market rates "those products will be sold at a loss," he said.
Hovensa and other U.S. refiners could experience a challenging summer season. Although demand has started to recover, the worry is that rallying pump prices ahead of the key summer driving season will force consumers to cut consumption. As a result, the refining industry has been focused on cutting costs to bolster profits. Pump prices averaged $3.837 a gallon April 20, up 34% from a year ago, according to the AAA Daily Fuel Gauge Report.
Meanwhile, with PBF Energy expected to restart in May the 182,000 barrel-a-day Delaware City, DE, refinery that it bought from Valero Energy Corp. (VLO) last year, competition for sales on the East Coast will increase.
In addition, Valero Energy Corp. (VLO) said April 20 that units hit by a brief power outage at its Corpus Christi, TX, refinery will resume normal operations by April 21.
The West Plant of the 315,000-barrel-a-day refining complex experienced a brief power outage on April 19 because of "a problem with an off-site electrical provider," spokesman Steve Lee said in an email.
"All units are restarting and should be back at planned rates by tomorrow," he said.
Oil giant Shell will decide within weeks whether to turn its Sydney refinery, which supplies almost half of the state of New South Wales' fuel, into an import terminal.
Shell says the 75,000 barrel per day Clyde Refinery and Gore Bay terminal can no longer compete with a number of mega-refineries being built in Asia, due to its small size.
The company says the outlook for refining margins remains weak due to overcapacity from refineries in India, Korea, Japan and the Middle East.
"There has been a number of new very large refineries built in the region in the past few years and indeed we see more being built in the future," Shell vice president Andrew Smith of downstream operations told media April 12.
"That is creating an overcapacity in refining and recent predictions for the outlook for refinery margins remain weak."
Mr Smith said the proposal to close the 100-year old refinery was not the result of Prime Minister Gillard's proposed price on carbon or the cost of labor.
"Let's be really clear here, this proposal is not the result of any proposed price on carbon," Mr Smith said.
"The issues that face the Clyde Refinery are regional issues and its size."
Shell says Clyde refinery requires significant investment including a maintenance turnaround scheduled for mid-2013.
If the proposal was approved, the turnaround would not go ahead and the refinery would be converted into a fuel import terminal by mid 2013.
Shell said it would replace output from the Clyde refinery, which supplies around 40 percent of NSW's fuel needs, with imports from Asia.
"Those refineries in the region can supply Australian specification products in significant quantities these days, which wasn't necessarily the case in the past," Mr Smith said.
The boards of Shell Australia Ltd and Shell Refining Australia will make a decision within weeks, following a period of consultation with employees, Mr Smith said.
Clyde refinery employs 310 staff, which would be reduced to between 30 and 50 staff to operate as a fuel import terminal.
"We intend to have a smooth transition if we move forward with this proposal to continue to supply all of our client's demands," Mr Smith said.
Kuwait Petroleum International, the international marketing arm of Kuwait Petroleum Co., plans to enter into another joint venture to market fuel that will be produced by its 300,000-barrel-a-day refinery project in southern China, the company's vice president and chief planning officer said April 5.
The company hopes that its Q8 brand, which is used at its service stations across Europe, will be in China, Mohammed Rashed Jasem said on the sidelines of an industry conference in Kuwait City.
China's National Development and Reform Commission recently granted preliminary approval to a joint venture refinery and petrochemical complex between China Petroleum & Chemical Corp. (SNP), also known as Sinopec, and KPC in the southern Guangdong province.
The total investment for the complex is about CNY60 billion (US$8.8 billion) and the refinery is scheduled for completion in 2014.
Sinopec will own 50% of the project, while KPC will own 30%, pending regulatory approval.
Of the remaining 20%, U.S.-based Dow Chemical Co. (DOW) will invest an undisclosed amount to become a partner in the refinery, specifically the petrochemicals portion, while another international oil company will take up the rest.
BP PLC is among the international oil companies that could be a potential partner in the refinery, and the additional partner could be announced in a few months, Jasem said. Jasem also said the "door is open" for any international oil companies who wish to invest.
China, the world’s biggest greenhouse gas emitter, will shut crude distillation units with capacity of less than 2 million metric tons a year by the end of 2013 as it phases out smaller and more-polluting refineries.
The government will restrict construction of crude- processing units with capacity of less than 10 million tons a year, according to directives for industrial development issued by the National Development and Reform Commission April 26.
China has been closing small refineries to increase efficiency in fuel production and reduce pollution from older plants. The government ordered the shutting of oil-processing units with capacity of less than 1 million tons a year under its 2005 industrial development plan.
The government will also limit the construction of gasoline-making units such as catalytic crackers and hydrocrackers of less than 1.5 million tons in annual capacity and cyclic reformers with capacity of less than 1 million tons a year, the NDRC said.
The phase-out plan will reduce the capacity of China’s privately owned oil-processing plants. The largest of the so- called teapot refineries, the Changyi facility in eastern Shandong province, has a capacity of 8 million tons a year, according to data published in May by China Petrochemical Corp., the parent of Asia’s biggest refiner. The 10th-biggest teapot plant has an annual capacity of 2 million tons, the data show.
Teapot refineries account for about 10 percent of China’s total fuel output, said Qiu Xiaofeng, an analyst at Beijing- based Galaxy Securities Co. High crude prices this year have eroded profitability at those non-state-owned plants, causing them to cut back on production and squeezing domestic fuel supplies, Qiu said on April 19.
The NDRC, the country’s top economic planner, also removed coal-to-gas and coal-to-liquid projects from its list of encouraged industries, according to the April 26 statement.
Saudi Aramco chief executive Khalid Al-Falih said on April 26 that the company's daily refining capacity would soon grow 50 percent from its current level to more than 6 million barrels per day.
That growth will be accomplished through two refineries under construction in Saudi Arabia and four more being considered in Jizan in the kingdom and projects in China, Vietnam and Indonesia, he said in remarks prepared for a morning lecture at the Korea Chamber of Commerce.
He also said Saudi Aramco's natural gas production capacity would grow within five years to 14 billion standard cubic feet per day (SCFD).
"The Far East is the destination for two out of every three barrels of crude oil that Saudi Aramco exports," said Al-Falih.
"Companies from Korea and other Asian nations are important suppliers of top quality goods, materials and services to our operations and we are seeing increasing volumes of foreign direct investment from Asia in the kingdom."
He also noted that Saudi Arabia would spend more than $450 billion on capital projects over the next five years, while Aramco will be spending a total capital budget of roughly $125 billion on domestic and global projects over the same period.
This spending covers upstream activities, including new crude oil increments, he said, adding that Aramco would soon expand and upgrade existing refining centers, without elaborating.
India's largest crude oil refining firm, Indian Oil Corporation (IOC) is planning an investment of approximately US$8.9 billion (Rs 40,000 crore) to set up a world-class greenfield refinery-cum-petrochemical complex on the western coast with a capacity to process 18 to 20 million tonnes of crude oil per annum. "We plan to set up a coastal refinery to capture the export market in future as also to strengthen our foothold in the domestic market," chairman and managing director of IOC, RS Butola said.
Butola said while his company will continue to look at all possible areas for expanding business, refining and marketing of fuels will continue to dominate IOC's portfolio of businesses.
"Refining and marketing is our core strength and we have to look at ways to expand our presence in these areas," he added.
IOC's director, refining, BN Bankapur said that while the location of the coastal refinery is yet to be finalized, the possibility is that it will come somewhere between Mangalore and Goa.
"The location will help in importing crude oils from various locations as the refinery will be able to process any variety of imported crude," he told HT.
The proposed refinery is likely to come onstream by 2017-18, he added.
IOC is presently the leader in the refining sector and has a refining capacity of 66 million tonnes per annum.
The company, which controls 10 of the 20 refineries that exist in India at present, expects that its 15 mtpa refinery at Paradip will be commissioned by 2012, augmenting its capacity.
Indian Oil Corporation (IOC) mulls foray into power trading business. The government-owned enterprise also has plans to expand its refinery at Panipat and may set up another coastal refinery after completion of the Paradeep refinery. “We are interested in merchant power business. Definitely, we have the desire. We have the synergies for it,” RS Butola, chairman of IOC, said. Butola, formerly managing director at OVL, took over as chairman of IOC in February.
IOC generates nearly 1,100-1,200 mw from its captive power plants located adjacent to its existing refineries. The refiner plans to use petroleum coke, a by-product after refining crude oil, to generate electricity.
“IOC getting into merchant power trading business is not a huge strategic move as such. A power plant takes at least three-four years to set up. It will not be a big contributor for the refiner at least in the next 5-10 years. It will be one of their by-product kinds of business, which is also done by other energy companies such as ONGC,” said Alok Deshpande, research analyst at Mumbai-based Elara Securities (India).
When asked if IOC already has excess power to sell, BN Bankapur, director of refineries in the company said, “Our power generation is very close to what we need. We have just little more than what we need. Practically speaking, we do not have much power that we can give to others. Only place, we have committed to sell is 5 mw from Digboi refinery to Assam grid. The agreement has already been signed.”
At the same time, IOC will consider exporting petroleum products to Pakistan if government removes restriction on trade of sensitive items. “If the restriction goes, we are ready to supply diesel as well as petrol to Pakistan...it’s an opportunity and a market for us,” said Bankapur. If government lifts the ban, IOC is likely to expand its 15 mt refinery in Panipat, the director added.
“Merchant power trading is at a nascent stage in the country. Out of total energy consumption of 800 billion units in the country, only 30-40 billion units are under short-term contracts,” opined Subhranshu Patnaik, senior director at international consulting firm Deloitte Touche Tohmatsu India.
Indonesian state oil and gas company PT Pertamina said its refinery in Cilacap, Central Java, resumed production April 8 after a fire raged at three tanks a week previously, a spokesperson April 11.
"Since last week, the refinery in Cilacap has started operating, but in stages," M. Harun said.
Harun also said that Pertamina was still investigating the cause of the fire, which damaged three fuel tanks.
"We are also still waiting for the result of investigation on the loss sustained by Pertamina," he added.
The Cilacap refinery used to produce 348,000 barrels of fuel per day, and it was the largest oil processing plant in Indonesia.
The refining facilities consisted of two locations, of which each of the area contained 118,000 barrels and 230,000 barrels per day.
Pertamina was forced to stop producing fuel in the Cilacap's refinery as security procedures after the fire of fuel tanks in the refining area.
Earlier, Minister of Energy and Mineral Resources Darwin Saleh said that production of the refinery dropped 3 percent due to the fire.
The three fuel tanks were burning in two successive days on Saturday (April 2) and Sunday (April 3).
One tank contained high-octane motor gasoline component and the other two contained naphtha.
The Department of Transportation oversees pipeline safety through the Pipeline and Hazardous Materials Safety Administration, but state regulators are responsible for much of the oversight of local oil and gas distribution infrastructure.
A pipeline safety forum for industry leaders and regulators is scheduled for later in April in Washington.
South Korean refiners are expanding their footprint in the Middle East's oil-rich Persian Gulf region in a bid to secure cheaper supplies of crude oil and boost returns from international investments.
Three of South Korea's four refiners are opening offices or expanding their mandates in Gulf Arab states including the United Arab Emirates as they seek to improve relations with crude suppliers, secure more heavy oil, act as listening posts and identify new business opportunities in the Middle East, company officials say.
"I am working as an advance guard for developing business in the Middle East," said Tae Oh Jung, Hyundai Oilbank Ltd.'s representative in Dubai. "I'm gathering information, looking for business opportunities and building strong relationships with partners."
The push by South Korean refiners into the region comes at a time of closer relations between Asia's oil consuming nations and producers such as the U.A.E. and Saudi Arabia, the world's biggest crude exporter. In March, Seoul signed a memorandum of understanding with the U.A.E. to cooperate on oil and gas developments that would give the Asian country future access to crude reserves of as much as 1 billion barrels.
The Middle East already plays a central role in South Korea's refining industry. Almost 80% of South Korea's crude comes from just six countries--Saudi Arabia, the U.A.E., Kuwait, Iran, Iraq and Qatar--all of which are Organization of Petroleum Exporting Countries members.
However, it's still too early to tell what investments South Korean refiners will be targeting. Hyundai Oilbank and GS Caltex opened offices this year in the U.A.E., while SK Energy Co., which first set up shop in 1991, recently added business development to its list of responsibilities, company officials said.
"We've been looking for new opportunities (since the 2008 global financial crisis)," said one representative for a South Korean refiner based in the U.A.E.
"The Middle East is becoming strategically important because it allows us to see demand from the east, west and south," the representative said, referring to growing demand from Africa and the Mediterranean.
GS and Hyundai's moves come after they recently spent billions of dollars to upgrade their refineries to process heavy crude, which typically trades at a discount to light crude because it's more difficult to process into products such as jet fuel and diesel.
More than one-fifth of South Korea's crude imports already are heavy oil, with volumes expected to rise as the refineries buy more cargoes as a way to improve their refining margins and boost profitability.
Absent from the region, however, is S-Oil Corp., which doesn't need a Middle East office because its crude comes exclusively from Saudi Arabian Oil Co., (Aramco). In 1992, Aramco bought a 35% stake in the Asian refiner as a way to guarantee a buyer for its crude.
These days, Aramco is the largest supplier of crude to South Korea, contributing almost 30% to the country's total crude imports in 2010.
Although South Korean refiners are still in the early stages of investment in the Middle East, they could follow a similar path taken by the Japanese and Chinese. Sumitomo Chemical Co. and Mitsubishi Corp. both have long-standing joint ventures with Saudi Arabian companies to produce petrochemicals, while China Petroleum & Chemical Corp. (Sinopec), recently announced a deal to build a joint-venture, 400,000-barrel-a-day refinery and petrochemical complex in Yanbu.
There will be focus on the two countries later this month, when Aramco holds its annual board meeting in Seoul. Aramco's chief executive is expected to meet with the CEOs of all four South Korean refiners to discuss crude supply, among other topics, South Korea's Yonhap news agency reported, citing unnamed industry sources.
South Korea's semiconductor, shipbuilding and refining industries are predicted to see a sharp rise in their exports in the second quarter as production disruptions in Japan hamper industry rivals there, a report said April 3.
The auto and petrochemicals industries, however, are expected to undergo a slump due to high oil prices and problems in parts supply, according to the report released by the Korea Chamber of Commerce and Industry (KCCI).
The report added that South Korean chipmakers and local oil refiners are poised to benefit from a supply shortage in Japan caused by production disruptions there.
The report also said local shipbuilders will receive more orders during the second quarter of the year on rising demand for oil tankers and other vessels.
The production disruptions in Japan, however, may negatively affect South Korean automakers, which import parts from the neighboring country.
Also, higher oil prices will eat into local petrochemicals' profitability, the report said.
Petroleos de Venezuela SA has agreed with state-run Vietnam Oil and Gas Group, or PetroVietnam, to join a project to upgrade the country's sole refinery and to work together in selling refined oil products in the Asian market, the Vietnam News Agency reported April 15.
The PetroVietnam-PDVSA refinery agreement is in line with a string of similar multi-billion-dollar pacts seen elsewhere in energy-hungry Asia, where out-of-region oil producers enter local refining projects to get guaranteed markets for their crude and to cash in on rapidly growing Asian demand for refined products.
PDVSA said that it aims by the third quarter of 2012 to pump an initial 50,000 barrels of heavy crude oil a day from a joint venture development with Vietnam of the offshore Junin-2 block in Venezuela, with output climbing to four times that volume two years after that.
It said it is looking to work with PetroVietnam to help expand output at the country's sole refinery by 100,000 barrels a day.
However, in its report April 15, VNA said output from the two companies' Petromacareo Junin-2 venture would start in the first quarter of 2012, six months ahead of schedule.
A person with direct knowledge of the refinery plan said that a memorandum of understanding to upgrade Vietnam's Dung Quat complex was first signed more than a year ago, after PDVSA abandoned a project to build a separate refinery in Vietnam.
PetroVietnam had previously said it plans to raise the capacity of Dung Quat to 200,000 barrels a day from 130,000 barrels a day.
In March, PetroVietnam said that it had signed a MoU with Gazprom Neft (GZPFY) in which the Russian company would consider working with PetroVietnam to upgrade Dung Quat. It isn't clear if Gazprom will be working side-by-side with PDVSA on upgrading work.
Officials at PetroVietnam and PDVSA weren't immediately able to be reached for comment.
Among other deals signed in Caracas this same week was one for PetroVietnam to work with PDVSA in distributing oil products in Asia, VNA said. It isn't clear whether this will involve selling refined oil processed in Vietnam to buyers elsewhere in Asia.
Vietnam needs to import a large part of the fuel it uses, and is planning a rapid build up of its refining sector to cut its need for costly imports.
However, it will need foreign oil to do this, as Vietnam's domestic output of crude is far below required levels. PetroVietnam is aiming to produce around 300,000 barrels a day of crude this year, the same as in 2010.
Apart from expanding Dung Quat, two other refineries, each with a capacity of about 200,000 barrels a day are planned, with output starting some time after 2014.
The first is the Nghi Son refinery, to be built in Thanh Hoa province, 170 kilometers south of Hanoi, to be followed by the Long Son refinery in the southern province of Ba Ria Vung Tau.
When operational, Nghi Son and Dung Quat will together be able to meet 50% of Vietnam's oil products needs, state media cited PetroVietnam chairman Dinh La Thang as saying earlier this year.
Vietnam's spot imports of gasoline and gasoil in the volatile Asian market fell gradually last year as Dung Quat ramped up capacity.
But frequent operational issues with Dung Quat have forced state-run Vietnam National Petroleum Corp., or Petrolimex, to keep importing spot cargoes of products like gasoline, gasoil, fuel oil and kerosene to supplement long-term supply agreements.
Following a recent 10-day outage at Dung Quat, Petrolimex sought nearly 600,000 tons of oil products from the spot market for its second quarter ahead of a major two-month shutdown of the refinery starting in July.
Apart from its Vietnam project, PDVSA is in long-running talks to build a large refinery in southern China, with China National Petroleum Corp., following in the footsteps of other oil producers.
In March, Kuwait Petroleum International finalized a pact with China Petroleum & Chemical Corp. (SNP), also known as Sinopec, to build a $8.8 billion, 300,000-barrel-a-day refinery and a petrochemicals complex in the same region of southern China.
The Kuwaiti company is still negotiating a side deal to sell some of the output in the Chinese market under its Q8 filling station brand.
Similarly, oil exporters Russia and Saudi Arabia have also entered joint-venture refinery projects in China to allow them to move up the oil value chain.
Indonesia, likewise, has been talking to Iran, Kuwait and other suppliers about building a large refinery in Java.
Kenya will spend $907 million to upgrade Kenya Petroleum Refineries Ltd., the Ministry of Energy said April 21.
The timeframe for the upgrade is 2015-16, the ministry said in a press release.
"An engineering consultant is being hired to perform detailed front end engineering design and a budget of $8 million has been set aside for this purpose," the ministry said. "Additionally, Standard Chartered Bank PLC, has been retained to raise funds for the refinery upgrade project estimated to cost $899 million."
Kuwait aims to complete a new refinery in 2016 if the country’s Supreme Petroleum Council approves the project this year, the managing director for planning at Kuwait Petroleum Corp. said.
Kuwait will continue importing liquefied natural gas until the new refinery comes on line, Hashim el-Refaai said April 5 at a conference in Kuwait City. KPC expects to invest $90 billion over five years on refineries, ships and drilling programs, he said.
Jacobs Engineering Group Inc. announced April 5 that it was awarded a major contract by Saudi Aramco for general engineering and project management services (GES+).
Officials did not disclose the contract value; however, they noted that the work is expected to be executed by its office in al-Khobar, Saudi Arabia. The duration of the GES+ contract is five years and covers all engineering, procurement and construction management services for Saudi Aramco's Capital Program.
Saudi Aramco is offering the GES+ contract to only a select number of companies for the execution of its general engineering and project management services needs. Under the contract award, Jacobs is providing a variety of design and related services, as well as the full range of project management services.
In making the announcement, Jacobs Group Vice President Mike Coyle stated, "Jacobs is delighted to have the opportunity to build upon our longstanding relationship with Saudi Aramco as one of its preferred providers on such a significant program. When fully developed, the GES+ program not only increases our opportunities, but also enhances the stature of Saudi Arabian engineering and construction throughout the world."
KBR on April 13 announced that its newly established Middle East-based engineering company has been awarded an engineering and project management services contract by the Saudi Arabian Oil Co. (Saudi Aramco) as part of its General Engineering Services Plus (GES+) initiative. The partners in this new Engineering Company, including Abdulhadi and Al-Moaibed Consulting Engineering Co. (AMCDE) and Kellogg, Brown and Root, were selected following a competitive bidding process. The GES+ contract period is for five years with options available for extensions.
The finalization of this contract qualifies the new Engineering Company to execute front-end engineering design (FEED), detailed design, material procurement, and project management services (PMS) to support Saudi Aramco's capital programs. The company will be an independent standalone company operating exclusively in the Middle East and will employ and train Saudi nationals.
"We are proud to sign this contract with Saudi Aramco under its GES+ Initiative and look forward to the successful execution of future projects," said Khaled Abu-Nasrah, President, KBR Middle East. "KBR's work in the Middle East is integral to the company's rich legacy and the award of this contract further solidifies KBR's commitment to the region and to our long-time client, Saudi Aramco."
International Petroleum Investment Co., or IPIC, an Abu Dhabi government-owned investment firm, said April 13 it was going ahead with plans to build a 200,000-barrel-a-day refinery at Fujairah in the east of the United Arab Emirates at an estimated cost of $3 billion.
"IPIC is giving this project high priority and importance," IPIC said in an emailed statement.
The refinery, which has a capacity of 200,000-barrel-a-day, is in the pre-front-end engineering, or pre-FEED, design stage and is expected to be completed by mid-2016, the company said. IPIC said it awarded the project management consultancy contract for the FEED design phase to Shaw Stone & Webster this month. Shaw Stone & Webster is part of Shaw Group Inc. (SHAW).
The refinery project was first planned in 2006 as a joint venture between IPIC and ConocoPhillips (COP) but was put on the backburner after the U.S. oil major pulled out a year later due to concerns over rising cost. IPIC didn't say in the April 13 statement whether it would develop the project jointly with a partner.
IPIC managing director Khadem Al Qubaisi, in the statement, said the company would use the "experience of the existing portfolio of companies" to implement the project. IPIC holds stakes in Austria's OMV AG (OMV.VI), and Spain's Cepsa (CEP.MC), which it recently bid to buy out completely.
The Fujairah refinery is being built near the main oil export terminal for Abu Dhabi's new giant crude export pipeline and near deep-water export terminals in Fujairah, which is located outside the Persian Gulf on the Gulf of Oman. The refinery is being designed to process U.A.E. crudes such as Murban, Upper Zakum and Dubai crude, IPIC said in the statement.
A person familiar with the project told Dow Jones in March that IPIC was "pressing ahead" with the refinery but hadn't yet appointed an international partner. The person also said Abu Dhabi would begin pumping first crude oil through its new pipeline, enabling it to bypass the Strait of Hormuz, by mid-year.
The pipeline project will allow the emirate to export as much as 1.8 million barrels a day of crude via Fujairah. The refinery is a key part of that plan.
IPIC said it is considering financing options, including project financing, for the refinery project, which it said "is a strategic initiative of the government."
McIlvaine Company,
Northfield, IL 60093-2743
Tel: 847-784-0012; Fax: 847-784-0061;
E-mail: editor@mcilvainecompany.com