Refineries UPDATE
October 2011
McIlvaine Company
TABLE OF CONTENTS
Irving Begins $50 Mln Twelve Week Turnaround
Sunoco Announces Plans to Exit Refining Business
Valero to Buy Meraux Refinery from Murphy Oil for $625 Mln
NuStar, Valero Plan South Texas Pipeline Projects to Three Rivers and Corpus Christie Refineries
Shell Plans Crude Unit Turnaround at Anacortes Refinery
U.S. Refinery Status - Unplanned and Planned Production Outages at U.S. Refineries
ConocoPhillips May Put Two U.S. East Coast Refineries up for Sale
TransCanada Pipelines in South Dakota Linked to Proposed $10 Bln Hyperion Refinery
Oil India May Invest In Hindustan Petroleum's Refinery Projects
Graham Corp Wins $2.4 Mln in India Surface Condenser Orders
Hindustan Petroleum to Conduct Feasibility Study for South India Visakhapatnam Project
Hindustan Petroleum Earmarks Lion’s Share of Capital Expenditure for New and Expanding Refineries
Indian Oil Considering Second East Coast LNG Gas Terminal as Part of Paradip Refinery Complex
San Miguel Corp Malaysia Refinery Upgrade and Business Expansion May Cost $1.2 Bln
Philippines Petron Selects Axens to Supply Technology for Bataan Refinery Upgrade Project
European Refiners Cutting Runs, Conducting Maintenance to Cope with Falling Margins
LyondellBasell Unable to Find Buyer for 105,000 bpd Berre, France Refinery
Equatorial Guinea Ready to Construct 20,000 bpd Refinery
Shell Confirms Decision Not to Invest in Nigerian Refineries
Alfa Laval Wins Order to Supply Kazakhstan Refinery with Heat Exchangers
Iran, China Negotiating $6 Bln Two Refinery Construction Deal
Oman’s Sohar SDA Unit Contract Goes to UOP/Foster Wheeler
Saudi Aramco Selects Axens Tech for Jazan Refinery Units Design
ConocoPhillips said September 7 that it expects to complete the spinoff of its refining arm in the second quarter of 2012 and that, under the deal, stockholders will receive one share in the new refining company for every two ConocoPhillips shares they currently own.
ConocoPhillips Chief Executive Jim Mulva said the new stand-alone refining company is expected to have a capital-expenditure budget of between $2 billion and $2.5 billion per year from 2013 to 2015.
During that time, the refining company would focus on growing its pipeline, storage and chemical businesses and could make strategic acquisitions, Mulva said. The new refining company is expected to have an annual dividend of 80 cents a share, an integrated model that will include pipelines and chemical businesses, and will start with new debt, he said.
ConocoPhillips, the third-largest U.S. oil company by market value after Exxon Mobil Corp. and Chevron Corp., in July disclosed plans to split into two companies in order to boost shareholder value.
The head of ConocoPhillips said September 7 that the upstream assets of its joint venture with Canada's Cenovus Energy Inc. will be part of the new exploration-and-production company, including the Foster Creek and Christina Lake assets. The joint venture's two U.S. refineries will go to the new refining company, Mulva said.
Chevron Phillips, Conoco's chemical joint venture with Chevron, will also be part of the new refining company, Mulva said.
The new exploration-and-production company's capital-expenditure budget is expected to be about $15 billion per year starting in 2013. Total output is expected to be 1.5 million barrels of oil equivalent per day by the end of 2012. Production would grow 3% to 4% from that base starting in 2013, Mulva said.
ConocoPhillips plans to continue selling exploration-and-production assets and also small and less sophisticated refineries in 2011 and 2012 as part of a three-year restructuring plan it started in 2009.
Mulva said the company expects to sell up to $25 billion in assets through next year including sale of its 20% in Russia's OAO Lukoil (LKOH.RS), with a large part of the proceeds going to finance the company's share-buyback program. ConocoPhillips expects to spend $11 billion on share repurchases this year, Mulva said.
ConocoPhillips' plans are based on the assumption that Brent crude-oil prices will average about $104 a barrel from 2013 to 2015 and natural-gas prices will trade at about $5.20 per million British thermal units, Mulva said. If commodities prices trade below those levels, the company will still be able to perform, Mulva said.
Mulva said ConocoPhillips' exploration-and-production arm is expected to have profits of $9 billion this year, while its refining-and-marketing business could have $3 billion in profits.
For 12 weeks starting in September, 700 additional workers were to perform scheduled maintenance on several processing units at Irving Oil’s Saint John refinery. Work was to be underway 24 hours a day, seven days a week, until the project is completed.
The refining industry "turnaround," project represents a $50 million investment and involved maintenance and upgrading work on several units in the refinery's North and South Process areas.
Most of the work was to focus on the refinery's Butamer and Alkylation Units. The Butamer Unit converts butane to alkylation plant feedstock. The Alkylation Units refine less useable oil products into high octane blending material, called Aklylate, which is the key ingredient in premium gasoline. The turnaround also includes other maintenance.
"This investment will ensure our refinery continues to operate safely, reliably and cleanly," says Mark Sherman, General Manager of the Irving Oil Refinery. "Turnarounds are critical to maintaining the reliability of our refinery's units, but they're also important to the broader community through the jobs and spin-offs they bring."
Work on the turnaround will take place around the clock for 12 weeks and is expected to be complete by end of November. In total, the project will represent 350,000 workforce hours.
The $50 million turnaround will include work to the refinery's Butamer Unit, Alkylation Units #1 & #2 and the Sulfuric Acid Regeneration Unit. All units are located within the North and South Process Areas of the refinery.
In total, around 1,000 people will be directly involved with the turnaround, including additional electricians, pipefitters, boilermakers, instrument technicians, laborers, insulators, millwrights, carpenters, bricklayers, iron workers, surveyors and operating engineers.
The Irving Oil Refinery will continue to meet the needs of its customers throughout the course of the project.
Sunoco, Inc. announced September 6 that it plans to exit its refining business and has begun a process to sell its refineries located in Philadelphia and Marcus Hook, Pa.
Sunoco also announced that it is conducting a comprehensive strategic review of the company to determine the best way to deliver value to shareholders, including how best to utilize the company's strong cash position and maximize the potential for Sunoco's logistics and retail businesses. Credit Suisse Securities (USA) LLC has been retained to assist in the review process.
Sunoco will pursue all options to sell its refineries, but if a suitable transaction cannot be implemented, the company intends to idle the main processing units at the facilities in July 2012.
"We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business and focus on our profitable retail and logistics businesses which have higher returns, growth potential, and provide steady, ratable cash flow," said Lynn L. Elsenhans, Sunoco's chairman and chief executive officer.
Together with the separation of SunCoke Energy and the sale of the chemicals business, Sunoco's decision to exit refining marks a fundamental shift away from manufacturing that will re-position the company.
In connection with the decision to exit refining, the company expects to record a pretax noncash charge of between $1.9 billion and $2.2 billion in the third quarter of 2011 related to impairment of the plant and equipment in the refineries. In the event the processing units are idled, additional pretax charges of up to $500 million, primarily related to contract terminations, staffing costs and severance, may be incurred. Most of these costs would be paid over a period of approximately one year. Additionally, upon the sale of the refineries or idling of the main processing units, the company expects to record a pretax gain related to the liquidation of all of its crude oil and a significant portion of its refined product inventories totaling approximately $2 billion at current market prices. The actual amount of this pretax gain will depend upon the market value of crude and refined products and the volumes on hand at the time of liquidation.
Regarding the strategic review process, Elsenhans said, "With SunCoke's recent initial public offering, our complete exit from the chemicals business, and our plan to exit refining, we have an opportunity to take a fresh look at all aspects of the company and gain added perspective on how best to use our cash and maximize the potential for our strong retail and logistics businesses with a view toward creating value for our shareholders."
Sunoco has not set a timetable for completing the strategic review process, and will provide updates as appropriate.
Sunoco also announced that it has substantially completed the $500 million share repurchase program that was announced on August 9, 2011. The share repurchases were funded by the company's available cash reserves and resulted in the repurchase of 13,140,586 shares at an average price of $34.74 per share. As of September 6, 2011, the company has approximately 108 million shares of common stock outstanding.
Valero Energy Corp. announced September 1 that it has agreed to acquire Murphy Oil USA Inc.'s Meraux, La. refinery and related logistics assets for $325 million plus inventories currently estimated at approximately $300 million. The transaction is expected to be accretive to earnings upon closing. Valero plans to fund the transaction from available cash, and the transaction is expected to close in the fourth quarter of 2011, subject to regulatory approvals.
The Meraux refinery has a total throughput capacity of 135,000 barrels per day with a 34,000 bpd hydrocracker and significant hydroprocessing capacity, which gives the refinery the ability to process medium sour crude and produce significant yields of premium products. The plant has a dock on the Mississippi River and pipeline capability to Collins, Miss. On the river, the distance is only about 40 miles from the Valero St. Charles Refinery.
"Our plan is to integrate feedstocks and refined product blending with the St. Charles refinery, especially as our new 60,000 bpd hydrocracker is completed at St. Charles," said Valero Chairman and CEO Bill Klesse. "The Meraux refinery adds more hydroprocessing capacity to our portfolio. It's the right hardware in the right place."
In addition to the refinery, the purchase price includes an adjacent product terminal, a 20 percent equity interest in the Collins Product Pipeline and T&M terminal, and a 3.2 percent interest in the Louisiana Offshore Oil Port (LOOP).
NuStar Energy L.P. announced September 7 that the company has entered into an agreement with Valero Energy Corporation in which NuStar will modify existing sections within its South Texas pipeline system and build new sections to transport Eagle Ford and other crude oils. These projects will help Valero improve transportation of crude and condensate to supply its refineries in Three Rivers, Texas and Corpus Christi, Texas.
NuStar will reverse an eight-inch refined products pipeline that currently runs from Corpus Christi to Three Rivers and will convert it to crude oil service. The pipeline will provide capacity to transport Eagle Ford crude and condensate to Valero's Corpus Christi refinery, and the line is expected to be in full service by the end of September 2011.
NuStar will also build 55 miles of new 12-inch pipeline that will connect to existing pipeline segments to move crude oil from Corpus Christi to Valero's Three Rivers refinery. This system is expected to be completed and in service by the second quarter of 2012.
"These projects are an important part of our ongoing strategy to increase our customers' ability to move crude in South Texas," said Curt Anastasio, president and CEO of NuStar. "With the growing production from the Eagle Ford region, NuStar is in the unique position to provide Valero and our other customers with quick transportation solutions given the fact that we have hundreds of miles of existing pipeline running from that region into Corpus Christi, where it can be refined or transported to other locations."
Royal Dutch Shell PLC will take a crude distillation unit offline for maintenance at its refinery in Anacortes, Wash., according to a government filing made public September 20.
Shell will begin a maintenance turnaround for several units at the 145,000 barrel-a-day refinery starting September 23, with the longest shutdown lasting until November 28, the company said in a filing with the Northwest Clean Air Agency in Washington.
Besides the crude distillation unit, used at the beginning of the refining process, the plant's delayed coker unit and hydrothermal upgrading unit will be taken offline for maintenance, Shell's filing said.
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.
Sunoco, Inc. on September 6 said it will exit the refining industry and will idle main processing units at its east coast refineries by July 2012 if a buyer isn't found by then. Converting the properties into a terminal/storage facility is under consideration.
Valero Energy Corp. on September 6 said upsets over the weekend at its St. Charles oil refinery in Norco, LA., had no material impact on production.
Valero Energy Corp. said on September 9, maintenance at a hydrocracking unit at its oil refinery in Benicia, CA, had no material impact to production. The work resulted in a release of sulfur dioxide to the plant's safety flare system, according to a filing to the California Emergency Management Agency earlier on September 9.
Valero Energy Corp. reported a compressor malfunction and flaring at its refinery in Benicia, CA, according to a government filing made public September 13. The problem had no material impact on production, Valero spokesman Bill Day said.
ConocoPhillips on September 5 experienced an equipment malfunction at its Alliance refinery in Belle Chasse, LA. The refinery was operating at very low rates at that time due to Tropical Storm Lee. No further details were provided.
ConocoPhillips' Bayway refinery in Linden, N.J. resumed production on September 2 after shutting down ahead of Hurricane/Tropical Storm Irene on August 27.
ConocoPhillips on September 12 reported flaring because of a unit startup at its Rodeo, Calif., a government filing said. No further details were provided.
Sinclair Oil Corp.'s Wyoming refinery is operating at reduced rates following two separate fires at the plant's crude processing unit on September 2 and September 3. Repairs and damage assessments underway, the company said on September 6.
ExxonMobil said an electrical power supply failure at its Joliet refinery in Channahon, IL, on September 3 caused emissions and flaring.
Exxon Mobil on September12 said planned work at its joint venture refinery in Chalmette, LA, caused emissions at the sulfur plant on September 11. The work is expected to continue for less than two weeks and is not expected to impact production.
Flint Hills Resources on September 3 reported a second emissions and flaring event, due to the second power disruption in as many days at its oil refinery in Corpus Christi, Texas. Equipment failure at Substation No. 3 on September 3 resulted in a loss of power that caused an unscheduled shutdown of the West Refinery. On September 2 a transformer outage and loss of power affected operations at the Mid-Plant Complex and SRU No. 3.
A pipe leak at Citgo Petroleum Corp.'s oil refinery in Lemont, Illinois, caused a compressor shutdown on September 13 and resulted in an emissions release. Efforts to repair the leak and restart the compressor are on-going, a report by the U.S. National Response Center said. The compressor is used in sulfur recovery, the filing said.
Marathon Petroleum Corp. (MPC) said September 12 it successfully restarted the FCCU at the company's 210,000 barrel-a-day refinery in Catlettsburg, KY, during the weekend. The unit had been down after a fire on August 17.
Total shut down a crude distillation unit over the weekend at its 232,000 barrel-a-day refinery in Port Arthur, Texas, traders said September 12. The company planned the unit to be back up within the week, traders said.
PBF Energy's 193,000 barrel-a-day refinery in Delaware City, DE, experienced an emissions release of sulfur dioxide on September 9 due to maintenance at the plant's hydrocracking unit, not the key gasoline-making fluid catalytic cracking unit as had been reported to state regulators. The company declined to estimate when the unit would restart.
Valero Energy Corp. said on September 9, maintenance at a hydrocracking unit at its oil refinery in Benicia, CA, had no material impact to production. The work resulted in a release of sulfur dioxide to the plant's safety flare system, according to a filing to the California Emergency Management Agency earlier on September 9.
Tesoro Corp. on September 9 said its Los Angeles-area refinery in Wilmington, CA was ramping towards targeted rates following an off-site power interruption the day before.
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
PBF Delaware 193.0 FCCU snag on Sep. 9 results in
Energy City, DE emissions; status of unit un-
clear.
GULF COAST
Conoco Belle Chasse 247.0 Equipment malfunction occurred on
Phillips La. Sep. 4 while refinery was opera-
ting at very low rates due to
Tropical Storm Lee. No details
were provided.
Flint Corpus 300.0 Second power disruption in as
Hills Christi, TX many days shut West Refinery on
Sep. 4. On Sep. 3 the Mid-Plant
Complex and an SRU resumed nor-
mal operations after a brief
power snag.
Total Port Arthur 232.0 Crude unit shut, traders said Sep. 19
TX on Sep. 12; coker 'blow out'
reported to NRC. Restart seen
by about Sep. 19.
Refinery resumed normal rates
on Sep. 7 after early-day up-
set at sulfur recovery area.
MIDWEST
Citgo Lemont, IL 167.0 Pipe leak on Sep. 13 caused a
compressor shutdown and emis-
sions, an NRC report said.
Exxon Channahon 268.0 Power failure on Sep. 3 causes
Mobil IL emissions and flaring; impact
on production unclear.
Marathon Catlettsburg 210.0 FCCU restarted Sep 10-11 after Sep 11
KY Aug. 17 shutdown due to fire.
ROCKIES
Sinclair Sinclair 74.0 Refinery at reduced rates fol-
WY lowing fires at CDU on Sep. 3
and Sep. 4. Repairs and damage
assessments underway, the co.
said on Sep.6.
Exxon Billings, 60.0 Production at minimum rates due
MT to ruptured Silvertip Pipeline.
Company looking for alternative
crude sources, the co. said on
July 5.
WEST COAST
Conoco Rodeo, CA 120.0 Emissions/flaring reported on
Phillips Sep. 12 owing to unspecified
unit start-up.
Tesoro Wilmington 92.0 Refinery returning to targeted
rates on Sep. 9 following an
off-site power outage the day
before.
PLANNED
CANADA
CARIBBEAN
EAST COAST
Sunoco Philadelphia 335.0 Refineries up for sale on
Marcus Hook 190.0 Sep. 6; process units will
be shuttered in July 2012
if no buyer is found.
GULF COAST
Alon Big Spring 67.0 FCCU turnaround maintenance under-
TX way, a filing to environmental reg-
ulators made public on July 24 said.
Exxon Chalmette 192.5 Planned maintenance started Sep.
Mobil LA 11 at sulfur plant; emissions re-
ported to NRC. Work will end in
less than 2 weeks with no impact on co.
said on Sep. 12.
Motiva Port Arthur 285.0 Expansion project to increase 1Q
TX throughput capacity by 325,000 2012
b/d, to 610,000-b/d, slowed.
Completion now seen 1Q
2012, from 2010.
Valero Corpus 315.0 Crude & coker unit turnaround Oct.
Christi, TX to start in Oct. for three 2011
weeks.
Valero McKee TX 170.0 Crude Unit and FCCU to undergo 3Q 2011
turnaround maintenance for six
weeks starting in Oct. 2011, the
co. said on July 26.
Vacuum unit turnaround planned for
first half of 2012, co. said.
Expansion project announced
March 2011 to increase crude oil
throughput by 25,000 b/d to
195,000 b/d.
Valero Norco, LA 185.0 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 at Pipestill 12 de-
layed by 3 months; it was sup-
posed to begin in November, a
source said on Mar 25.
Cenovus Roxana, IL 306.0 Coker and refinery expansion Q4 2011
(Conoco/WRB) project on track for comple-
tion 4th Q 2011, the co. said
on July 26, 2011.
CVR Coffeyville 115.7 Periodic turnaround will take 2012
KS place in two phases beginning in
Fall 2011 and completed in Spring
2012.
Husky Lima, OH 160.0 15-day isocracker maintenance to
Energy replace reactor catalyst will be-
gin in 3rd Q 2011. Refinery will
operate at 90% of capacity during
that time.
15-days of maintenance planned Autumn
at aromatics unit in the fall 2012
of 2012.
Husky Toledo, OH 140.0 Isocracker maintenance and gen-
Energy eral maintenance for 38 days will
commence in Q3 2011, the Co. said
on July 28.
Minor maintenance planned in 4Q
2011, the co. said on July 28;
no details provided.
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 Rodeo, CA 120.0 Emissions/flaring reported on
Phillips Sep. 12 owing to unspecified
unit start-up.
ConocoPhillips may put two refineries on the U.S. East Coast up for sale, energy investment bank Simmons & Co wrote September 6.
"ConocoPhillips has indicated its intent to sell its East Coast Linden and Trainer refineries," a note to clients said.
ConocoPhillips spokesman Aftab Ahmed said the company had not disclosed any such plan. "We've made no statements to that effect," he said. "Not to anybody."
Asked if the company aimed to sell those refineries, Ahmed said, "We have a disposition program, and our whole portfolio is under consideration. We haven't specified anything beyond that."
The company, which plans to make its refining unit a separate company next year, has repeatedly said publicly that it may sell less sophisticated refining assets.
The Bayway refinery in Linden, New Jersey, has a capacity of 238,000 barrels per day (bpd), while the Trainer, Pennsylvania, plant can process up to 185,000 bpd.
Both are in the East Coast region, where refiners have struggled with low margins for at least two years.
Sunoco Inc also said on September 6 that it planned to sell its two remaining refineries, both in Pennsylvania, after its refining segment posted losses in eight of the last 10 quarters.
Refiners in other regions fare better, particularly in the Midwest, where refiners have raked in high profits for months as they exploit their close proximity to cheap landlocked crude oil in the United States.
TransCanada has built one crude-oil pipeline known as Keystone through eastern South Dakota and awaits federal approval to construct a second one called XL through western and south-central South Dakota.
A lawyer representing the Hyperion oil refinery proposed for Union County, SD said a company official couldn’t attend a state permit hearing on September 15 because he was in discussions with TransCanada.
The statements by Hyperion Resources attorney Rick Addison of Dallas, TX linking the $10 billion refinery to the pipeline company came during a hearing before the state Board of Minerals and Environment.
The board listened to final arguments for more than one hour from three sets of lawyers about whether to grant Hyperion an 18-month extension on its permit to commence construction.
The eight board members present, on a voice vote with no dissent, awarded the extension, but added a requirement that economic conditions can’t be the sole reason for another extension later. The company now has until March 2013 to start construction.
Permit conditions also were added or revised pertaining to acceptable amounts of air pollution that can be emitted when the refinery begins operation.
Board member Timothy Johns of Lead, a retired state circuit judge, disagreed with the claim by opposition lawyer Robert Graham of Chicago that the original permit expired February 20 because construction hadn’t started.
Hyperion filed a request for extension in June 2010.
Johns said there were appeals under way in state circuit court by both sides already in fall 2009 and Hyperion shouldn’t be expected to have spent money on construction while legal matters remained unsettled.
“That makes no sense in our today’s world,” Johns said, adding that the project seems to be “extremely viable” economically. “To me it’s an excellent project and should go forward.”
Graham wanted the board to require a timetable and other proof showing when the refinery will be built and by whom. He suggested a better plan would be to have Hyperion come back for a permit when the company is ready.
“We submit to you hope is not enough,” Graham said.
The board held a hearing for four days in July to accept evidence.
Addison said Hyperion vice president Preston Phillips wasn’t able to attend the September 15 proceeding because he was working with TransCanada.
Addison later said Phillips’ absence indicates “construction can begin timely, without another extension.”
The TransCanada pipelines are to haul crude oil from Alberta across the U.S. to Oklahoma and Texas for distribution and refining. Hyperion would be the first U.S. refinery to be built in more than three decades.
In 2007, Jeff Rauh, a spokesman for TransCanada on the Keystone pipeline project, said the new pipeline wasn’t connected to the Hyperion refinery proposal, but TransCanada would be interested in talking with Hyperion about it.
Hyperion’s plans call for processing 400,000 barrels of oil daily.
The Keystone pipeline in its original configuration has a capacity of 591,000 barrels daily. With the addition of the XL pipeline and other expansion, the system will have the ability to deliver 1.3 million barrels daily to refineries and distributors.
A decision by the U.S. Department of State is expected by year’s end whether to allow TransCanada to pierce the U.S. border with the XL pipeline. As part of the final decision-making process, hearings are scheduled, including one in Pierre on Sept. 29.
State board chairman Dick Sweetman of Sioux Falls told all sides September 15 that Hyperion should be forewarned against expecting a second extension on its permit.
Oil India Ltd. is likely to invest in Hindustan Petroleum Corp.'s refinery expansion and new projects, Oil India Chairman N.M. Borah said September 15.
"Our core competence lies in the upstream sector but we would like to have some diversification in the exploration and production value chain," Borah told reporters on the sidelines of an event. "We think HPCL could be a valuable partner."
State-run explorer Oil India and refiner HPCL in August signed an initial pact to pursue business opportunities.
Graham Corp., a global designer and manufacturer of critical equipment for the oil refining, petrochemical and power industries, including the supply of components and raw materials to nuclear power plants, announced September 8 that it has been awarded orders for two surface condensers, both for the Indian market, totaling $2.4 million.
One of the orders is for the expansion of a petrochemical facility to increase production of ethylene, with delivery planned for the quarter ending June 30, 2012. The second order will increase the production of transportation fuels at an oil refinery, with delivery expected to occur in the quarter ending September 30, 2012. Graham's current fiscal year ends March 31, 2012.
James R. Lines, Graham's President and Chief Executive Officer, commented, "We continue to see investments in India in new and expanded capacity to produce fertilizers, petrochemicals, and fuels, driven by population growth and increased industrialization. We believe that we are ideally positioned to capitalize on increased demand in India, with a strong, well-respected, and deeply-established brand. In fact, our relationships with the customers who placed these two orders extend more than 20 years."
"Other developing economies in Asia are also investing in new and expanded production capabilities, and we continue to be involved in the early bidding activity for projects in both the Middle East and South America. We have also received early indications of new investments in North American refining and petrochemical production," added Lines.
Hindustan Petroleum Corp. (HPCL) has invited bids to conduct a feasibility study for a refinery and petrochemical project at Visakhapatnam in southern India.
The last date to submit tenders for the contract is November 15, the state-run refiner said in a newspaper advertisement.
Hindustan Petroleum is reviving the Visakhapatnam project which was stalled earlier as its partners had pulled out due to the global economic slowdown in 2008-09.
The Visakhapatnam project was initially planned as a joint venture by Hindustan Petroleum, Mittal Energy Investments, France's Total SA, GAIL (India) Ltd. and Oil India Ltd. It was projected to have an export-oriented refinery with a capacity of 280,000-300,000 barrels a day and a petrochemical plant of at least 1 million tons of annual capacity.
Hindustan Petroleum Chairman S. Roy Choudhury said GAIL and Oil India were still interested in the project and that was also talking to Mittal Energy and Total.
Hindustan Petroleum Corp. (HPCL) has earmarked capital expenditure of Rs 45,000 crore over the next six years.
Of this, Rs 32,000 crore will go towards setting up new refineries and expanding existing ones. The balance will be spent on exploration & production, gas distribution, tankages, pipelines and retail infrastructure.
Mr S. Roy Choudhury, Chairman and Managing Director, said that HPCL was targeting refining capacity of 42 million tonnes by 2016-17. This will mark a near three-fold jump from the present level of 14.8 mt from the Mumbai and Vizag refineries and ensure that supply is perfectly in sync with demand.
The additional capacity will come from the Bhatinda refinery (nine mt), scheduled for commissioning in the next few months, and expansion of the Vizag refinery to 15 mt. The Maharashtra Refinery, proposed at Ratnagari in the next 4-5 years, will contribute to another nine mt.
Company officials told Business Line that post-2017, HPCL would consider doubling capacity of the Bhatinda and Maharashtra refineries to 18 mt each which will put total capacity at 60 mt by 2020.
HPCL also has a 17 per cent stake in Mangalore Refinery & Petrochemicals where the Oil and Natural Gas Corporation is the majority shareholder with 71 per cent equity. HPCL was the original promoter of MRPL along with the Aditya Birla group but literally gifted it away to ONGC in a move that baffled industry circles.
“Had this not happened, there would have been no need for the Maharashtra Refinery as MRPL would have met the needs of a coastal project,” an oil sector veteran said.
Mr B Mukherjee, Director (Finance) said it was unlikely that crude would go below $100 per barrel. “We have to live with this reality though crude’s volatility, more than its price, is the real issue,” he added. HPCL’s losses on diesel, cooking gas and kerosene are projected at Rs 21,000 crore for the July-September quarter, a steep fall from over Rs 43,000 crore in Q1.
According to Mr Roy Choudhury, the company was equally upbeat on its upstream prospects following the move to make Prize Petroleum a wholly-owned arm. “We are now preparing ourselves for exploration & production efforts both in India and overseas,” he said.
State-run refiner Indian Oil Corp. is considering building a second terminal to import liquefied natural gas on the country's eastern coast as part of its upcoming Paradip refinery complex.
Indian energy companies are increasing gas imports to meet rising consumption as demand for natural gas outstrips supply.
Refineries Director Rajkumar Ghosh told reporters September 27, Indian Oil's fuel requirements will rise sharply as more and more of its expanded capacity comes onstream,
Mr. Ghosh said its refinery units currently burn liquid fuels like naphtha and need to switch over to cheaper alternatives like natural gas.
The Paradip refinery alone will need about 1.2 million metric tons of gas due to which Indian Oil is looking at building a 5 million ton LNG terminal, Mr. Ghosh said. "We're still thinking about it. Other companies may also join."
The country's largest refiner by capacity already has plans to build an LNG terminal at Ennore in a joint venture with the Tamil Nadu Industrial Development Corporation, an agency of the government in the southern state of Tamil Nadu.
The Ennore terminal is expected to have an initial capacity of 2.5 million tons a year, which can be expanded to 5 million tons a year, and cost $610 million (30 billion rupees-40 billion rupees).
"Directionally, we want to expand our gas business and LNG is an important segment," Chairman R.S. Butola told reporters after a shareholders' meeting.
He said the company plans to speed up the Ennore project. "We're going to award the front-end engineering and design, or FEED, contract. It might take six-eight months" to give the contract, he added.
"We're looking for a partner who can assure us that we'll be able to identify some sources of LNG ... we're talking to two-three companies," Mr. Butola said.
India's state-run refining and marketing companies expect their borrowing to rise in coming months as the government hasn't yet released any cash subsidy for the April-June quarter. The government gives the subsidy to share a part of their revenue losses from selling some fuels at state-set prices.
Mr. Goyal said Indian Oil has about 700 billion rupees of outstanding debt, which may rise due to a drop in the Indian rupee's value and high oil prices. He said the refiner plans to raise its borrowing limit by October to 1.1 trillion rupees from 800 billion rupees now.
San Miguel Corp. will likely invest up to $1.2 billion to upgrade a refinery and expand a retail network in Malaysia that it bought from Exxon Mobil last month, a senior executive said September 20.
The company's initial estimates indicate the refinery upgrade will cost up to $1 billion, while the network expansion project will cost around $200 million, Eric Recto, a San Miguel director and president of Petron Corp., the conglomerate's oil refining unit, told reporters.
San Miguel paid $610 million for Exxon Mobil's assets in Malaysia, including a 65% interest in oil refiner Esso Malaysia Bhd.
Recto said San Miguel plans to grow the refining and petroleum retail business in Malaysia to make it a strong player in the industry, but there aren't any plans to merge Petron with the Malaysian oil assets.
Petron Corporation, the largest oil refining and marketing company in the Philippines, has selected Axens to supply technologies for its Bataan Refinery Upgrading (RMP-2 Project). The project aims heavier crudes processing for higher quality products and propylene production.
Axens technologies concern the following units:
The 35,900 BPSD FCC unit will convert heavy vacuum gasoil into higher value products: olefins, gasoline and diesel. The FCC unit will maximize propylene production at over 250 thousand tons per annum through a FlexEne integrated scheme. This solution enables the C4 olefinic streams issued from the FCC unit to be further converted to propylene through an Alkyfining unit (purification step) and Polynaphtha unit (oligomerization step). The selected refinery configuration is the result of an optimization study conducted by the teams of Axens' Performance Programs Business Unit.
The complex is due to come on stream in 2014. With a processing capacity of 180,000 BPSD, the upgraded Petron Bataan Refinery will reinforce Petron's position on the domestic market for clean fuels and propylene.
European refiners are cutting runs or conducting maintenance work to cope with deteriorating margins, traders said September 23, as high crude oil prices coupled with fears about economic growth have slashed profits in recent weeks.
Independent Petroplus, Italy's ERG and Eni , as well as Ineos in France were all reported to be cutting production by 10-15 percent, according to several industry sources.
Royal Dutch Shell's 412,000 barrels per day Pernis refinery, Europe's largest, is likely to run 20-25 percent below its capacity for maintenance from October to January, a union official said.
"These cuts are a lot, and they are real," a distillates trader said.
The reported production cuts suggest refinery utilization rates, which averaged 83.32 percent in August, will fall to match the 77-78 percent levels seen in March and April this year, when Brent futures hit the highest since late July 2008.
Eni declined to comment. Other refiners have not responded to requests to comment.
European refining margins have been squeezed by the recent jump in crude oil prices. Most crude oils trading in Europe have been at premiums to benchmark Brent, including Russian Urals, which is of a lower quality than the North Sea benchmark.
Reuters models showed refining margins have been negative across Europe, with some complex refineries in Northwest Europe just about breaking even.
Even the most profitable gasoline margins have collapsed from almost $12 a barrel at the start of September to trade near the $2 a barrel mark late on September 22.
"Crude oil is too expensive for refiners to process," Olivier Jakob with Petromatrix in Switzerland said.
"They will have to either, cut runs, bring forward maintenance work or keep maintenance shutdowns for an extended period to get away with it."
Jakob added spot differentials on physical crude would gradually ease following run cuts.
A German industry source said refiners in Germany were likely to lengthen refinery maintenance shutdowns rather than curb runs.
Refineries with complex refining systems were also said to be taking additional measures to salvage profits, including switching to heavier, cheaper crudes. This is altering the composition of output with a resounding impact in Asia, where an abrupt drop in supply of lighter fuels from Europe has sent margins to a three-week high.
Physical crude oil traders earlier said spot Iranian crude oil destined for Europe has been sold out for October.
However, the shift to these heavier crudes would be short-lived as they typically have higher yields of gasoline than of middle distillates, physical oil traders said.
Middle distillates include diesel and heating fuel, which in general Europe needs to import to meet regional demand.
ICE gasoil's crack, or premium, to Brent futures has recovered to just below $15 a barrel on September 23, from about $11.35 earlier in the week.
Lower refinery runs have already started drying up some product exports from Europe. Traders said gasoline arbitrage exports to the United States would fall on top of the typical seasonal decline in volume during winter.
Asia has received almost zero arbitrage naphtha flows from Europe for August and September arrivals.
In 2010, Asia took an average of 333,000 tones of Western naphtha a month.
LyondellBasell Unable to Find Buyer for 105,000 bpd Berre, France Refinery
LyondellBasell announced September 27 that the sales offering for the 105,000 barrels-per-day refinery in Berre, France has resulted in no offer to purchase the refinery. As a result, Compagnie Petrochimique de Berre S.A.S. (CPB), the refinery operator, intends to initiate consultations with its works councils, as defined under French law, on a project to cease refinery operations.
"After conducting a thorough sales offering that included reaching out to 85 entities throughout the world with the assistance of Barclays Capital and the Invest in France Agency (AFII), unfortunately not a single bid was received for the refinery," said Jean Gadbois, General Manager of the Berre site.
Equatorial Guinea is about to commence construction of a 20,000-bpd state-owned refinery at Mbini on the Atlantic coast.
The refinery will produce gasoline (petrol), diesel, fuel oil and jet oil for the local market. Any surplus will be sold to the regional market and the refinery could expand to 60,000 bpd, according to Gabriel Obiang Lima, the vice-minister of mines, industry and energy.
Equatorial Guinea is also increasing investment in its gas sector to make up for the anticipated decline in oil production, which is currently 253,000 b/d, down from nearly 360,000 bpd in 2008. Lima estimates that the country has around 1.3 tcf of gas reserves, which is deemed sufficient to support a second LNG export train, which the government is planning to construct from 2016.
Equatorial Guinea has a poorly developed downstream oil sector due to weak local demand, a small population and a lack of infrastructure. The country has completed construction of a USD1.4-billion LNG production facility on Bioko Island, delivering its first cargo in May 2007, which has lifted processed hydrocarbon revenues. The government has been desperate to cushion itself from the future loss of oil revenue as oil-producing fields, mainly at the Zafiro, Alba, and Ceiba/Okume fields, are nearing maturity.
The construction of oil storage and an oil refinery could enable the country to wean itself off oil product imports, while its strategic position in West Africa will mean that Equatorial Guinea has easy access to international markets. Plans to partner with Dutch firm Vopak to construct an oil storage terminal in Malabo could also bolster the government's hopes to become an important crude import and transportation hub in West Africa.
SHELL Petroleum Development Company (SPDC) on September 13 confirmed its decision not to invest in the building of refineries in Nigeria.
Mr. Mike Mullier, Global Leader (Crude Trading) in SPDC, at the ongoing Africa Energy Week in Accra, Ghana, said Shell was no longer considering investing in crude processing. He also said the company’s downstream portfolio was already saturated thereby dashing the hope of fresh investment in Nigeria that ranks as the 6th largest oil producer in Africa and the first in Africa.
The SPDC official blamed the development on the low returns on such investments as African governments regulating prices of petroleum products.
According to him, the company’s investment direction is currently focused on highly profitable areas that offer growth opportunities and adequate returns.
Mullier’s statement may have sealed hopes of visible private investment in domestic refining in Nigeria.
Shell is Nigeria’s biggest petroleum industry operator and produces nearly half of the country’s 2.5 million barrels per day.
Shell has joint venture and production sharing agreements with the Nigerian National Petroleum Corporation (NNPC).
The Moment investigations revealed that Nigeria, despite its position as the largest oil producer in Africa still imports fuel from abroad as the four refineries with Capacity of 445,000 barrels cannot meet national demand for petrol, which is over 33 million liters daily.
The inability of local refineries to meet national demand forced NNPC and few oil marketers to embark on fuel importation.
Government also awarded 22 approvals in principle licenses for the building of new refineries, but the licenses were revoked due to the failure of the prospective promoters to honor the deal of starting the projects.
All the multinational oil firms operating in the country have never indicated any interest in building new refineries in the country due to the government’s regulation of the official pump prices of fuel.
Alfa Laval has won an order to supply Alfa Laval Packinox heat exchangers to a refinery in Kazakhstan. The order value is approximately SEK 55 million and delivery is scheduled for 2012.
The Alfa Laval Packinox heat exchangers will be used in the catalytic processing section in the production of mixed Xylenes used for synthetic nylons, among other things.
"This order confirms the continued high activity level in the process industry," says Lars Renstrom, President and CEO of the Alfa Laval Group. "It is also further proof of the Alfa Laval Packinox heat exchangers' unmatched performance within energy efficiency."
The National Iranian Oil Refining & Distribution Company and a Chinese firm are negotiating 6 billion dollars worth of deals for the construction of two refineries in Iran.
The Mehr News Agency reported on September 26 that the two sides are talking about financing the Anahita Refinery $2.5-$2.7 billion construction project and a $3-$3.5 billion plan for renovating the Abadan Refinery.
The timeline of the projects is the only unresolved issue between the two sides, sources in Iran’s oil ministry told the Mehr. The name of the Chinese company has not been identified.
The Iranian part has offered 32-38 months period for finalizing the two projects, while the Chinese company has said it can implement the projects within 42-48 months.
If the negotiations with the Chinese company fail, Iran will finance the projects via the National Development Fund.
The Governor of Central Bank of Iran Mahmoud Bahmani announced in September that the National Development Fund is ready to lend $21 billion to industrial units and investors.
Foster Wheeler AG announced September 13 that its Global Engineering and Construction Group, through a collaborative agreement with Honeywell's UOP, was recently awarded a contract by Oman Refineries and Petrochemicals Co. (Orpic). UOP/Foster Wheeler will provide a basic engineering design package for a solvent deasphalting (SDA) unit at the Sohar Refinery in Oman.
The SDA unit is a major part of the Sohar Refinery Expansion Project which will significantly increase the refinery's production of petroleum products such as LPG, naphtha, Jet A-1 fuel, gasoline, diesel and propylene. The SDA unit will be designed to process 2.5 million metric tonnes per annum of vacuum residue of Oman Export Blend crude to produce Deasphalted Oil (DAO) and asphalt for road bitumen production.
"We are very pleased that Orpic has selected UOP/Foster Wheeler technology for this strategically important refinery project in the Middle East," said Umberto della Sala, Interim Chief Executive Officer, Foster Wheeler AG. "This latest award constitutes a strong vote of confidence in the added value we deliver in heavy oil processing and continues our successful record in licensing large SDA Units."
The SDA Unit is expected to be on stream in 2015. The terms of the contract were not disclosed. The contract value was included in the company's second-quarter bookings for 2011.
Axens' technologies have been selected by Saudi Aramco for its Jazan Refinery & Terminal Project. The refinery, scheduled to be commissioned in December 2016, will have a capacity of 400,000 BPSD. The units under Axens design are:
These units are designed and integrated to maximize the gasoline production and the aromatics throughput for petrochemical use.
The Gas Oil desulfurization hydrotreater (Prime-D) is also under Axens design. This Prime-D unit—one of the world's largest—will produce ultra low sulfur diesel (ULSD) with less than 10 ppm of sulfur.
The refinery will deliver gasoline and diesel that meet Euro V specifications.
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