MENA Downstream Launch Issue

For analysis and commentary on these and other stories, plus the latest downstream developments, see inside…

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13 April 2011

Week 01

Issue 01 News

Analysis Intelligence

Published by

NewsBase

COMMENTARY 2

Advantage Middle East 2

Libyan refining sector mulls uncertain future in wake of conflict 3

MARKET COMMENTARY 5

Strong crude, insurance challenge Middle East products market 5

REFINING 6

Algeria could move Tiaret refinery to the coast 6

Iran holds talks to fund refining projects 7

IPIC revives Fujairah plans 7 FUELS 8

North African turmoil impacts jet fuel prices 8

Total’s Yemeni production ‘normal’ 8 PETROCHEMICALS 9

Gulf may require US$55 billion investment in petrochemicals 9

Setback for Algerian methanol facility 9 PIPELINES 10

OGC plans new pipeline to Duqm 10

Egyptian pipeline reopens; gas shipments to Israel resumed 10

TERMINALS & STORAGE 11

ADNOC stalls on Shah contract 11

Aramco-Dow makes progress on Saudi EPC contracts 11

NEWS IN BRIEF 12

TENDERS & CONTRACTS 19

CONFERENCES 21

NEWS THIS WEEK…

Wealth of opportunities Despite swathes of civil unrest and current market uncertainties, low production costs and strong state support bode well for the Middle East’s downstream industries.

The last year has seen a resurgence in downstream projects in the Gulf. (Page 2)

The region is expected to produce around 20% of the world’s total petrochemical output by 2015.(Page 2)

Increasing Asian demand for petrochemicals presents a boon for Middle East producers. (Page 3)

North African questions With major civil unrest in Libya, the country’s refining output has taken an unprecedented hit. Downstream MENA outlines Libya’s importance and the struggle it now faces.

The North African country has a refining capacity of around 380,000 bpd. (Page 3)

Libya has plans to build an export refinery with a capacity of 200,000 bpd at Misrata. (Page 5)

Reviving Fujairah Abu Dhabi’s IPIC has once again announced plans to revive its planned Fujairah crude refinery. (Page 7)

NewsBase Downstream Monitor

–– MENA ––

Downstream Monitor MENA 13 April 2011, Week 01 page 2




The long-term outlook for MENA downstream investment remains positive, despite the current political disquiet sweeping across much of the region.

Investments in new downstream refining and petrochemical capacity are also holding up against lingering economic uncertainties in Europe and North America.

Central to this view is the bottom line economics: as the world’s richest source of oil and gas, the MENA region remains a natural choice to site new downstream ventures.

This has been reinforced by the rise of Asia, especially the high-growth markets of China and India, underpinning demand during the post-2008 financial crisis era.

At the height of this crisis, many high-profile energy investments were held up, with developers spooked by a toxic

combination of an unsettled market, an oil price tumbling downwards, sky-high construction costs and squeezed financing.

Project rebound Things have moved on a great deal since, with oil prices rebounding, demand in Asia holding up, and other input costs levelling out.

There is clear evidence to show that investment in new capacity, both upstream and downstream, has regained momentum.

The number of planned major projects over the next decade across the Gulf oil and gas sector – both upstream and downstream – has significantly increased during the last year, the Kuwait Financial Centre (Markaz) said in a February research note.

The number has climbed to 680

projects compared with 637 projects at the beginning of 2010, reflecting improved market sentiment.

Collectively, these projects have a price tag worth around US$717 billion.

The bulk of this money will be spent in Saudi Arabia, Qatar, Abu Dhabi and Iran, although here the focus will be principally upstream.

Kuwait, Oman and an emerging Iraq are the next biggest downstream spenders.

Significantly, Markaz suggests the total value of cancelled or on hold projects is declining – falling at the end of 2010 into the early months of 2011.

It also highlights a greater robustness among the large petrochemical schemes, with the upstream segment most affected in terms of cancellations and delays, and not downstream and refining, which has seen the revival of a number of projects.

Global significance This will in turn see a surge in new production coming out of the MENA region in the coming years.

Annual petrochemical production from the Gulf countries is expected to jump by 46% to 155 million tonnes per year by 2015, up from the current level of 105 million tonnes, according to a recent report by the Gulf Petrochemicals and Chemicals Association (GPCA).

The Gulf, in particular, will emerge as a world champion in key downstream industries.

The region’s current production represents roughly 16% of the total 700 million tonnes of petrochemicals produced worldwide, the GPCA said.

COMMENTARY

Advantage Middle East Low production costs and strong state support bode well for the region’s downstream industries, despite current prevailing market uncertainties By Martin Clark Despite the current swell of civil unrest, the outlook for MENA downstream is reinforced by Asian demand Downstream projects in the Gulf have seen a resurgence during the last year The Gulf is expected to produce around 20% of global petrochemical output by 2015





By 2015, the Gulf will contribute closer to 20% of total global output.

Plastics are a good example where production is on the march, with capacity set to rise to over 30 million tonnes per year by 2015, according to the GPCA.

The region currently produces over 25 million tonnes of plastic resins per year, out of which nearly 3 million tonnes are converted into finished and semi-finished industrial and consumer plastic products.

Investment is supported by the region’s lower cost profile, where feedstock and input prices are dramatically less than in the developed markets.

According to a 2010 Gulf petrochemicals report by investment bankers Alpen Capital, the Gulf Co-operation Council (GCC) countries buy ethane at US$0.75-1.5 per million BTU, compared with a minimum US$3.20 per mBtu in Europe and the US.

Market shifts Indeed, the ebullient forecasts for growth in the Middle East, and the continuing economic success story that is China,

contrasts with the malaise of the West. According to Fitch Ratings, the market

for new petrochemicals production will remain subdued in certain key areas, still suffering the aftershocks of the 2008 crisis.

It has forecast weak demand for oil products and chemicals in Europe throughout 2011 because of slow growth.

But it also highlights a subtle shift from restructuring in the downstream segment, in the wake of the crisis, to one of cautious expansion.

Across the Europe, Middle East, Africa (EMEA) zone it expects capital expenditure in 2011 to return to 2008 levels.

Asian growth Not that developments in Europe will keep Gulf energy strategists awake at night, given the reshaping of the global market towards Asia.

A joint report by the GPCA and consultants AT Kearney on the potential of the CHIMEA (China, India, Middle East, Africa) region flagged these

shifting dynamics. “Over the past two decades,

CHIMEA’s petrochemical industry, specifically in the Middle East and China, has dramatically altered the footprint and dynamics of the global market,” said one of the report’s authors, Dan Starta, managing director, AT Kearney Middle East.

The report forecast that, with the planned continued growth of ethylene capacity, the CHIMEA region would account for around 45% of worldwide ethylene capacity in 2020 – almost double its 23% share in 2007.

The same is true for polymers, where the region is anticipated to grow from 20% of the global total in 2007 to about 40% in 2020.

It illustrates a point: that amid all the uncertainties of the Middle East at the present time – uprisings in Libya, regime change in Egypt, street demos in Bahrain – this region remains a driving force in the world’s energy markets, and increasingly so in the downstream and petrochemicals industries.

With the conflict in Libya heading towards its second month and heavy fighting continuing despite the ‘ceasefire’ negotiated by the African Union (AU) team in Tripoli under the leadership of South African president Jacob Zuma, plans for a refurbishment of the country’s oil refining sector are definitely on the backburner.

At the outset of the conflict on February 16, it was unclear just how

badly affected Libya’s oil production sector would be. Initially, the rebels made swift gains and captured the oil town of Brega; the key port and oil refinery of Ras Lanuf and the refinery at Zawiyah west of Tripoli.

But it quickly became clear that nothing was off limits to Muammar Ghaddafi’s forces. Both Ras Lanuf and Zawiyah were damaged, as was the port town of Es Sider where storage tanks

were destroyed, when Ghaddafi’s fighters retook the towns.

Most of Libya’s upstream crude oil output has also been affected by the fighting. This includes production at the Hamada oilfield, which has ceased production and the eastern fields of Sarir, Nafoora and Misla, which are yielding around 33% of their normal capacity.

COMMENTARY

Libyan refining sector mulls uncertain future in wake of conflict With major civil unrest in Libya, the country’s refining output has taken an unprecedented hit. Downstream MENA outlines Libya’s importance and the struggle it now faces By Nnamdi Anyadike Libya has a refining capacity of around 380,000 bpd; however, recent events have disrupted output The light, sweet crude that Libya produces is highly sought after If a resolution is reached soon then the shipment of crude supplies to Europe could be resumed quickly





Libya’s five domestic refineries (bpd):

Refinery Capacity Operator

Zawia Refinery 120,000 ZOC

Ras Lanuf Refinery 220,000 Rasco

El - Brega Refinery 10,000 SOC

Tobruk Refinery 20,000 Agoco

Sarir R efinery 10,000 Agoco

Output at the Waha, Dahra, Samah and Gialo fields has also dropped to less than 33% of its normal level, while the Al Jurf offshore oilfield and Mabruk field have stopped producing altogether.

Capacity But analysts have said that damaged oilfields are relatively easy to bring back on line. It is the damage done to Libya’s oil refining sector that is more critical and whose effects could be the more far reaching and longer lasting.

According to the US Energy Information Administration (EIA) and the global consulting partnership Citac, Libya has five domestic refineries, with a combined nameplate capacity of roughly 380,000 barrels per day.

These include: the Ras Lanuf export refinery, completed in 1984 and located on the Gulf of Sirte, with a crude oil refining capacity of 220,000 bpd; the Az Zawiya refinery, completed in 1974 and located in north-western Libya, with crude processing capacity of 120,000 bpd; the Tobruk refinery, with crude capacity of 20,000 bpd; the Brega refinery, the oldest in Libya, located near Tobruk with a crude capacity of 10,000 bpd; and Sarir, a facility with 10,000 bpd of capacity.

Libya also has operations in Europe, where Oilinvest, the overseas arm of Libya’s National Oil Company (NOC), has a network of refineries with 300,000 bpd of capacity.

Libya directly produces and distributes refined products in Italy – where it controls around 7.5% of the country’s retail market for oil products and lubricants – Germany and Switzerland. Libya also has an extensive network of pipelines, which connects its oilfields to Mediterranean terminals, including: Sarir-Marsa el Hariga (Tobruk); Messla-Ras Lanuf; Waha-Es Sider; Hammada El Hamra-Az Zawiya; Amal-Ras Lanuf; Intisar-Zueitina; Nasser (Zelten)-Marsa El Brega.

Importance

Libya’s importance to Europe’s oil refined products sector lies not in the amount of crude oil it produces and its proximity to Europe. With its pre-conflict crude oil production of 1.6 million bpd, equivalent to less than 2% of the world’s daily usage, the country’s oil output is comparatively modest.

Rather, its importance lies in the ‘type’ of crude that it produces, which is of the light and sweet variety that refineries are able to turn into a greater number of usable products. In simple terms, the primary refining process consists of boiling crude oil in a big metal cylinder, where the heat causes the crude to break up into three parts.

The lightest molecules, many of which are petrol, rise to the top of the tube. The medium-weight molecules go into jet fuel, diesel fuel, home heating oil, while the heaviest molecules are used for industrial boiler fuel, ‘residual’ oil, tar and asphalt.

It is the top two parts, or fractions, which contain most of the value. As an increasing proportion of the oil available for global refining is ‘heavy’ instead of ‘light’ and ‘sour’ instead of ‘sweet,’ i.e., containing sulphur, light and sweet crude of the sort Libya produces is especially sought after.

Premium The Libyan premium is likely to widen even further, as the older generation oil refineries in Europe have turned away from the multi-billion dollar, several year refinery upgrades that will be necessary for them to process heavy oil and have

opted instead to continue processing only the lightest and sweetest crude oils available on the market.

Analysts have said that it will be in the refined products sector, rather than crude oil market, where any prolonged shutdown of access to Libyan crude oil will be felt.

Some sources have even suggested that a cessation of Libyan oil production lasting “years” could result in world refined product prices rising by 5% to levels higher than they would otherwise be with consumers in the US, where taxes on petrol are very low by world standards, disproportionately hurt.

Uphill struggle The fact that much of Libya’s domestic refined oil production is effectively within a war zone will render the country’s refinery upgrade plans tricky to say the least.

Libya’s refining sector was badly affected by UN sanctions, specifically UN Resolution 883 of November 11, 1993, which banned Libya from importing refinery equipment. However, in May 2006 the US removed Libya from its list of states that sponsor terrorism, thereby normalising its ties with the North African country.

This cleared the road for multinational oil companies to return to Libya and now the country is seeking a comprehensive upgrade to its entire refining system, with the aim of increasing its output of petrol and other light products such as jet fuel.

Even before the removal of sanctions, upgrades were beginning to take place. In

1995, new units came on line at Ras Lanuf, including a 3,300 bpd catalytic reforming unit and a 5,600 bpd naphtha hydro-treatment unit.

Tripoli has plans to build a new 20,000 bpd refinery in Sebha to process crude from Murzuk.

The anticipated output will be 268,000 tonnes per year of gasoil, 184,000 tonnes per year of petrol

, 84,000 tonnes per year of jet fuel and 274,000 tonnes per year of fuel oil.

COMMENTARY





An export refinery with a capacity of 200,000 bpd is planned for Misrata. Libya has a US$280 million contract with South Korea’s LG Petrochemicals to upgrade the Zawiya refinery.

In Egypt, Libya purchased a 39% stake in the MIDOR refinery in Egypt for US$430 million.

Resolution Much now depends on whether the military stalemate in Libya can be resolved. The consensus is that if a solution is soon reached then at least the shipment of crude oil supplies to Europe can be resumed at their pre-conflict levels fairly rapidly.

But the outlook for Libya’s oil refining sector is darker, it will take considerably longer to repair the facilities and it is unclear when, or indeed how many, of the planned refinery upgrades will now come on line.

Global crude oil prices moved higher again over the last few days, pushed up by the ongoing political unrest in Libya, strong Asian demand and a weaker US dollar.

Libya’s ongoing volatility has caused a shortfall in crude reaching the international market over recent weeks. But, this is now turning into a long-term problem, because of the damage to its oil production and export infrastructure. This will stop Libya from getting back to a normal level of oil output for many months, or indeed years, to come.

Drivers China saw high demand levels for crude oil imports in March. Its import rate of over 5 million barrels per day suggests that a slowdown in Asian demand will not be seen in the near future.

Indeed, damage to nuclear power infrastructure in Japan points to higher fuel oil and natural gas demand there. Also, damage to Japan’s oil products export capability implies a greater demand for products from other suppliers. Hence, Asian demand for crude and products is healthy.

Also, the weakness of the US dollar has impacted the oil price in recent days. Following the move by the European Central Bank (ECB) to raise interest rates last week, the US currency came under renewed pressure, and helped to propel crude prices higher.

Margins On the Dubai Mercantile Exchange (DME), the Oman crude futures contract for June delivery started the week at US$114.40 per barrel on April 5, and settled at US$117.33 per barrel on April 12, down US$1.64 per barrel on the day.

In the oil products sector, the rapidly rising crude price means that Middle Eastern refineries are seeing margins once again under pressure. If there is healthy demand for crude oil in Asia and an adverse direction for refining margins in the Middle East, it is clearly becoming more economical to export crude rather than to refine it into oil products for export.

In such a scenario, refining activity becomes more naturally geared towards domestic demand for fuels, which in many cases in the Middle East and North

Africa is regulated. In addition, high insurance premiums

for tankers loading at leading oil products export terminals such as Fujairah mean that demand for exported Middle Eastern products, such as fuel oil, has diminished in recent weeks. These premiums are being impacted by the perceived high risks attached to the transport of fuel in the Gulf.

Accordingly, Middle East fuel oil prices, which are normally priced off a Singapore fuel oil benchmark agreed among market participants, have weakened. They have been sitting at relatively high discounts to Singapore fuel oil in recent weeks.

Demand But, if Asian demand for oil products is so buoyant, why are Mid-East refiners seeing such low levels of demand?

The answer lies in the fact that demand is being met by inflows of Western oil product cargoes, which have been displacing Middle Eastern cargoes. These have been arriving during early April, under arbitrage trades from low-demand areas of Europe and the US.

COMMENTARY

MARKET COMMENTARY

Strong crude, insurance challenge Middle East products market While global crude oil prices have continued their upward trend, demand for products from the Middle East has dwindled in recent weeks amid concerns over transport By David Flanagan





Market projection for Week 16

First, in the Asian market, underlying demand for oil products is high and rising. Secondly, Japanese oil product exports have been adversely impacted by the earthquake and hence the local fuels trading market is seeing a shortfall in supplies. Balancing this, refinery outage or maintenance, for example in Saudi Arabia and Bahrain, has meant that less Middle Eastern volume has been coming onto the market.

This will turn around soon, as refinery outages are ended, which will bring more Middle Eastern exports to the market. However, the fact that there is no let-up in the volatility of the Libyan market points to continued high insurance premiums, which may also discourage demand.

A complex picture, but the overwhelming impression is that fuel oil prices should move slightly higher from their present weak position.

A similar story has been seen in the natural gas sector, where a glut of cargoes in the West has been addressed by sending cargoes to the Asian market. The demand for Middle East oil products has also been displaced by liquefied petroleum gas (LPG), butane and

propane, trading around the US$875-890 per tonne level.

But, these prices are moving higher, and this may refocus demand back on the fuel oil market.

Also, the volume of European cargoes arriving in Asia appears likely to see a

downturn in the next weeks, which will re-open the door for Middle Eastern exports.

Since Asian demand remains buoyant, it is likely that demand will creep back up again. So, the tide could be turning.

The Algerian Oil Minister Youcef Yousfi stated that the North African country might have to change the location of the Tiaret refinery for logistical reasons as well as start importing heavy crude.

Bloomberg quoted the minister as explaining that to satisfy the need for a water source, the 15 million tonne refinery should be relocated to the coast instead.

“We believe it is better to sell our oil, which is one of the most expensive in the world, and import heavy oil that is better for the refining industry”, Yousfi added.

The Tiaret refinery project has suffered several setbacks since 2007, when it started looking for an international partner to develop the 300,000 barrel per day refinery. It was initially intended to begin exporting in 2008. However, the

Algerian state-owned oil and gas company Sonatrach decided that most of its output should be used locally to satisfy a rise in domestic demand.

The location of the refinery has also been an issue, and since its inauguration it has been apparent that siting the project closer to the coast would have proved more suitable. An APS Review on Algeria stated, however, that the Algiers government had insisted on Tiaret, claiming it would stimulate regional

investment in the country, although it would present several challenges, such as the lack of cooling water.

At the time, a source quoted by MEED said: “The project is economically viable despite being away from the coast. Most of the water will come from Tiraret’s water supply and a new water treatment plant is being built in the town. The rest will come from desalination facilities on the coast. As long as the refinery optimises the recycling of water, there will be enough”.

According to Bloomberg, Algeria plans to double its refining capacity to 50 million tonnes per year (1 million bpd) by 2030, compared with the current 25 million tonnes (500,000 bpd) it produces at present, the Oil Minister explained further.

MARKET COMMENTARY

REFINING

Algeria could move Tiaret refinery to the coast





The National Iranian Oil Refining and Distribution Company (NIORDC) is reported to be holding talks with unnamed foreign companies to speed up development plans for Iran’s oil refineries.

Speaking to local media in Tehran, NIORDC’s managing director Alireza Zeighami said that the company had held talks with foreign companies as well as domestic banks and oil companies to upgrade the Abadan oil refinery.

The country is hoping to sign contracts to design, purchase, construct and finance a wave of upgrades. Iran’s oil refineries are badly in need of an upgrade and the sums quoted are many billions of US dollars. Although the country is the Organisation of Petroleum Exporting

Countries’ (OPEC) second biggest crude oil producer after Saudi Arabia, years of sanctions have crippled its refinery infrastructure and turned it into an importer of petrol.

Zeighani said that the development of the Esfahan oil refinery alone would require US$4 billion worth of investment, of which US$600 million had already been acquired.

He said that the Esfahan oil refinery development plan needed to be speeded up because fuel oil production at the refinery could reduce imports by 70,000 barrels per day. The output of the high value oil products, such as petrol and gasoil, would also be raised.

Meanwhile, the Abadan oil refinery development plan requires US$3.3

billion worth of investment, US$600 million of which has also been met. In aggregate, US$7 billion worth of investment is needed to upgrade both the Abadan and Esfahan refineries. But in total, plans for upgrades at 10 are under way, including: the Shahid Tondgouyan refinery (Tehran); Esfahan; Lavan; Tabriz; Abadan; Bandar Abbas and Arak.

If these projects are successfully launched Iran’s production capacity of petrol, gasoil, kerosene and liquefied natural gas (LNG) will rise by 40 million, 18.2 million, 7 million and 5.5 million litres per day respectively, said Zeighami. However, most analysts believe that many of these plans will fail because of the country’s inability to access foreign capital.

After years of being put on the backburner, Abu Dhabi-based International Petroleum Investment Company (IPIC) has once again started groundwork to revive its planned grassroots crude oil refinery at Fujairah on the east coast of the United Arab Emirates (UAE).

A Gulf-based source said IPIC was “in negotiations with the UK office of the Shaw Group for the position of [project management consultant (PMC)]”.

The source, who wished to remain anonymous, added: “Wood MacKenzie of Edinburgh has prepared a feasibility study for the 200,000 [barrel per day] facility and IPIC will now be working on an FID [final investment decision]. The project is estimated to cost US$3.5 billion, as per initial estimates.”

Project cost had been a major factor

that came in the way of an FID being taken.

In July 2006, IPIC and ConocoPhillips of the US signed an agreement to carry out a feasibility study for the facility that would have a nameplate capacity of 500,000 bpd. However, with project costs estimated to be in excess of US$10 billion, the planned venture was shelved. ConocoPhillips has since pulled out of the scheme.

In mid-2008, IPIC started talks with the US’ Occidental Petroleum Corp., Total of France, Kuwait Petroleum

Corp., the Royal Dutch Shell Group, India’s IOC and Austria’s OMV to partner on its proposed refinery. The facility will process Abu Dhabi onshore crude, with the feedstock being supplied through an at least 325-km dedicated pipeline, to be laid from Habshah to Fujairah.

“A decisive factor will be the marketing of refined products. IPIC has to decide whether it will [target] Europe, the US or Asia. Product specifications are tight in any of the consumer regions and that will impact the final project cost. Construction of a new refinery on the East Coast to take the pressure off Abu Dhabi’s western region will also be another factor,” the source added.

At present, IPIC is also planning its participation in refineries in Oman and Morocco.

REFINING

Iran holds talks to fund refining projects

IPIC revives Fujairah plans





Air carriers around the world are facing more pressure to increase fuel surcharges as the result of the rising cost of crude oil, blamed on the continued political instability in the Middle East and North African regions, as well as the recent crisis in Japan.

According to Eurasia Review, however, jet fuel has continued to show a strong position in the market, amidst increased prices for crude and petroleum products because of emerging and newly industrialised economies such as China, where air travel demand is growing rapidly.

However, it recognises that recent events in the Middle East and Japan could have an impact on demand.

According to a study by the Global Business Travel Association Foundation

(GBTA) published by The Economist, the spread or worsening of instability in North Africa and the Middle East could have a serious impact on jet fuel prices and the survival of airlines.

It gave the example of the US travel market, which could suffer an extra cost of US$9 billion with oil priced at US$200 per barrel. However, GTBA assumed prices would return to normal by 2013.

“The price of oil has had an unnerving ability to blow up the world economy”, the Economist reported, adding that the economic implications of a major oil price shock “should not be underestimated.” It added: “The economic health of the airlines could end up being the least of our worries.”

AMR CEO Gerard Arpey was quoted by the International Business Times as saying: “The bad news is that we’re not faced with another fuel crisis. To the extent that oil dampens economic growth, we are all very worried about what is happening in oil markets.”

This follows reports by market analysts saying that there is widespread scepticism that Libyan oil output will rebound when fighting ends.

Total’s Yemeni liquefied natural gas (LNG) facility – Yemen LNG – has not been affected by the mounting political unrest in the country, CEO Christophe de Margerie has said.

Speaking at an oil conference in Paris on April 6, he confirmed that the plant, which is located in Balhaf area in the eastern province of Shabwa, had carried on normal operations.

To date, the company has shipped two cargoes of LNG every week since the protests began, with its 100th cargo delivered in March.

The company is scheduled to ship 104 cargoes in 2011. Yemen LNG is the world’s 16th largest seller of such gas, and has the capacity to supply up to 6.7 million tonnes per year.

“For the time being, it has not hurt: we produce normally,” de Margerie said, before adding that the firm’s production target for the coming year would remain unchanged despite the uncertainty surrounding the region.

Total, which heads the consortium that owns the plant – the only one of its type in Yemen – had previously stated on March 28 that it would remain committed to its operations in the country as long as the safety of its workers and installations was not compromised.

This announcement came days after it warned customers of potential supply curtailments and a possible force-majeure on exports as a result of the violence, which has seen the recent

bombing of oil pipelines. However, the unrest has already had a

significant impact on many other overseas operators.

On April 8, Kuwait Energy, a MENA focused oil and gas producer, said that it might postpone the initial public offering (IPO) of its shares on the London Stock Exchange (LSE) as a result of the conflict, with its Yemen oil and gas exploration projects also likely to be delayed.

“We’ve always said our IPO will be subject to market conditions and we know the market conditions aren’t ideal as far as the Middle East region is concerned,” said Paul Ditchburn, the company’s vice-president of planning and portfolio management.

FUELS

North African turmoil impacts jet fuel prices

An increase in jet fuel prices would have a

significant knock-on effect on airlines and travel

operators

Total’s Yemeni production ‘normal’





The Gulf region could require an investment of around US$55 billion over the next five years in order to increase annual petrochemical production by 46%, the Gulf Petrochemicals and Chemicals Association (GPCA) has said.

Commenting on the association’s latest report, GPCA secretary-general Dr Abdul Wahab al-Sadoun told Gulf News on April 6 that overall production was expected to climb from the current levels of 105 million tonnes per year to 155 million tonnes by 2015.

“This could require potential investments to the tune of 201.85 billion dirham (US$55 billion) in the next five years,” he said. “By then, the Gulf’s petrochemicals industry will represent

20% of the total global petrochemical output,” he added. No details of potential projects or infrastructure developments were given.

A giant 75% increase in plastics production is predicted to be a driving force behind this rise, with al-Sadoun describing the Gulf region as having become “the centre of gravity with regard to producing and exporting plastics raw material”.

He said: “By 2015, the production of the polyethylene, polypropylene, PVC and polystyrene in the region will double to reach more than 23.6 million tonnes compared with [2010’s] figure of 13.5 million tonnes.”

As a result, firms such as Saudi Basic

Industries Corp. (SABIC), Abu Dhabi Basic Industries Corp. (ADBIC), Abu Dhabi Polymer Company (Borouge), Chemeyaat and the Chemical City in Abu Dhabi could become the world’s leading petrochemicals players.

In total, the global petrochemical industry is worth more than US$600 billion, with the Gulf’s current 11% stake valued at more than US$50 billion, making it the second biggest source of income for Gulf nations. Currently, 55% of the region’s petrochemicals are exported to China and the Far East, with demand from these markets expected to climb rapidly in the coming years.

Kuwait’s Qurain Petrochemical Industries Company (QPIC) has said that a recent management restructuring at partner Sonatrach has led to delays at its Algerian methanol project.

Speaking at the company’s general assembly, chairman Sheikh Mubarak al-Mubarak al-Sabah reported that Sonatrach had “requested radical changes of the agreement”, and that it was currently “re-studying” the project. No timeline or deadline was given.

However, reports have since emerged that Sonatrach’s requests are instead related to gas pricing and ownership structure, which has prompted QPIC’s reassessment.

On April 3, Arabian Oil and Gas quoted an unnamed source as saying that the Algerian government now wanted to sell gas at “international prices and not at preferential prices as agreed initially”.

The source added: “Also, Sonatrach will control 51% of the project instead of the initial 49% as agreed initially, owing to changes in the law in Algeria.”

The contract for the US$900 million facility, which is located in Arzew, 35 km north-east of Oran, was originally awarded in 2007 to a consortium consisting of QPIC, Sonatrach, Japan’s Mitsui and Germany’s Lurgi.

The front-end engineering and design (FEED) work was completed in early 2009, with construction expected to take 32 months after the final agreement has been reached. Once completed, the facility is expected to have a production capacity of 1 million tonnes of methanol per year.

On March 22, Issa Al-Isaa, vice-board chairman of QPIC, reaffirmed his company’s commitment to the facility despite its slow initial progress.

“All agreements are in place and we expect the final signing to happen any day now,” he said in an interview with Petrochemicals Middle East magazine.

“We are ready to award US$200 million EPC contracts for the project in the near future. We expect the commercial start-up in 2013,” he added.

PETROCHEMICALS

Gulf may require US$55 billion investment in petrochemicals

Setback for Algerian methanol facility





Oman’s state-owned gas transport operator, the Oman Gas Company (OGC), has confirmed plans to build a new 200-km gas pipeline to the Duqm area of the Wusta coast on the Arabian Sea.

The new pipeline will supply power to a new port and ship repair yard now being developed there.

“This project is still in the concept phase and we hope to be able to define the scope of the venture before the year end,” the company’s CEO Yousuf al-Ojaili was quoted as saying in the Oman Observer.

He said it had yet to be decided where in central Oman the pipeline’s source of gas would originate.

But he added that discussions on this matter were being conducted with the Ministry of Oil and Gas and other

authorities. “This is a substantial project, centering

on the construction of a roughly 200-km pipeline with a capacity large enough to meet future demand growth in the Duqm area,” Ojaili said.

OGC operates Oman’s 2,500-km national gas grid and has, since its establishment in 2000, expanded into other sectors of the country’s downstream industry, including gas planning and engineering consultancy and project management services.

It plans eventually to expand into the transportation of liquid hydrocarbons.

The company is presently nearing completion of a gas supply station and related pipeline network that will supply a new independent water and power project (IWPP) in Dhofar for the Sembcorp Salalah Power and Water

Company, the Oman Observer reported. The gas-fired plant is due to come into

operation in 2012 with a 445-MW capacity.

The desalination plant will produce 15 million gallons (68.2 million litres) per day. Work is under way on a major compression station in Nimr that will sustain pressure for gas supplies to Dhofar Power, Salalah IWPP, Raysut Cement, Salalah Methanol and the Raysut Industrial Estate.

The company will also build a loop gas pipeline across the existing Salalah line that will guarantee supply to southern Oman.

OGC has been awarded the operatorship of a gas supply station at Sur that will regulate supply for a 2,000-MW independent power project (IPP) to be built on the Sharqiya coast.

Egyptian gas transportation company Gasco has announced that an explosive was removed from its El Arish-Ashkelon pipeline, and this has now been reopened, according to the Ampal-American Israel Corp., which holds a 12.5% interest in East Mediterranean Gas (EMG).

Upstream reported that the pipeline had been shut down as a precautionary measure. However, gas supply is now back to normal in Egypt and Israel.

The Egypt-Israel gas export deal has suffered several setbacks since the fall of former Egyptian president Hosni Mubarak and the North African nation has now resumed shipments of natural gas for the first time since the political turmoil started. However, the long-term feasibility of the US$2.5 billion gas export deal is still a concern, as Egypt’s new government could warm the dispute

between the two countries, the LA Times reported.

In fact, Egypt is also trying to amend gas export deals with other countries. MENA quoted Petroleum Minister Abdullah Ghorab as saying: “there is currently negotiation under way in full force to amend the gas agreements signed with various countries, especially

Israel, with the aim of achieving a better return to Egypt.”

According to Reuters, Egypt exports gas to Israel through the EMG consortium, owned by Egyptian businessman Hussain Salem, Egypt Natural Gas Co., Thailand’s PTT, US businessman Sam Zell, Ampal-American and Israel’s Merhav.

The consortium had been accused of selling gas to Israel – which represents 4% of its total production and 45% of Israel’s gas needs – at below market prices. However, Israel was still considering a contingency plan to cover possible shortfalls in the natural gas supply from Egypt as the Egyptian press published reports saying that Egypt might try to reduce the amount of gas exported to Israel because of its own domestic energy needs.

PIPELINES

OGC plans new pipeline to Duqm

Egyptian pipeline reopens; gas shipments to Israel resumed





The Abu Dhabi National Oil Company (ADNOC) has extended the bid bond for contractors seeking the sulphur storage and export facilities tender at its giant Shah sour gas field project.

Despite the two-week delay, which was attributed to “internal, administrative matters” by an unnamed source quoted by MEED, the Athens-based Consolidated Contractors Company (CCC) is still expected to secure the US$500 million contract.

Originally the deal, which includes the construction of sulphur granulation facilities, liquid sulphur storage tanks and solid sulphur granule storage facilities, alongside conveying systems and a marine terminal, was expected to be finalised by the end of March.

“We are waiting for the award to be issued any time,” the source added. A representative from a rival bidder, who also wished to remain unnamed, went on to say that the delay had not affected CCC’s position as frontrunner for the contract.

“CCC is a strong contractor in the Middle East. Without any big accident or incident, they will get the project,” he said.

Located deep beneath the desert, the Shah sour gas field lies around 180 km south-west of Abu Dhabi. On March 31, a 37 billion dirham (US$10 billion) joint venture agreement was signed between ADNOC and US group Occidental Petroleum that will see the two firms share the cost of the project’s

development. Under the terms of the deal, ADNOC

holds a 60% interest in Al Hosn Gas, which was formed in 2010 to manage and operate the Shah project. In January, Occidental agreed to take over the remaining 40% from US rival ConocoPhillips, which withdrew from the venture in April 2010.

So far, eight of 10 contracts for major development packages at the field have been issued, with just the sulphur operations and the construction of the project’s power and water plants to be tendered. Despite the changes in ownership and delays in the tendering process, the scheme is still expected to reach completion by the intended deadline of September 2014.

A team of Saudi Aramco and Dow Chemical Company of the US is making considerable progress with two major engineering, procurement and construction (EPC) contracts covering its long-delayed Ras Tanura integrated project (RTIP) at Jubail in Saudi Arabia.

The deadline for submission of technical and commercial bids has been extended to April 18 for the offsites and utilities (O&U) package, worth at least US$800 million. Six companies are expected to participate in the tender. They are: WorleyParsons of Australia; Canada’s SNC Lavalin, and Foster Wheeler Corp., Jacobs Engineering, Fluor Corp. and Kellogg Brown and Root (KBR), all of the US.

A tender is also scheduled to be issued by early May for a major storage tank package to serve the planned facility. Prequalification documents for the estimated US$500 million EPC contract have been submitted by 11 companies.

The scope of works will entail the fabrication and installation of 74 general and two cryogenic tanks, inter-connecting pipelines and an export pipeline.

Firms that submitted prequalified papers include: Larsen & Toubro and Punj Lloyd, both of India; CB&I of the US; Daelim Industrial Company, Daewoo Engineering & Construction, GS Engineering & Construction, Hyundai Engineering & Construction and Hyundai Heavy Industries, all of South Korea; the UK’s Petrofac International; Saipem of Italy and China’s Sinopec

Engineering. RTIP plans to build a mega

petrochemical complex that will include a 4 million tonne per year multi-feed world-scale cracker and 35 downstream units, with the aim of producing over 250 different products. The total project cost is reckoned to be US$15 billion.

Over the next few weeks, Aramco-Dow is expected to issue three more EPC tenders to build the hydrogen, carbon monoxide and ammonia plants at the complex, polymeric methylene diphenyl di-isocyanate (PMD) and toluene di-isocyanate (TDI) production facilities, and aniline-formalin and DNT-nitric units.

TERMINALS & STORAGE

ADNOC stalls on Shah contract

Aramco-Dow makes progress on Saudi EPC contracts





COMPANIES

Petrofac Saudi Arabia gets independently certified Petrofac has announced that its Saudi Arabian business, Petrofac Saudi Arabia, has achieved independent certification to international quality standard ISO 9001. The standard is for project management, engineering, design, procurement, construction management, commissioning and training and associated activities for oil & gas production and processing facilities, petrochemical plants, refineries and related utilities. Petrofac said that it has successfully implemented the quality management system for the business in Saudi Arabia. In a statement, Petrofac said that the “system is underpinned by a comprehensive set of technical and business documentation, which has been created in line with best practice. Now fully implemented, the team has also demonstrated their approach to maintaining and continually improving the system.” Imad Shanan, senior vice president and general manager for the Saudi operations commented: “Of our many achievements to date, I am delighted to announce this milestone which demonstrates our commitment to both quality and integrity and to building an enduring business in the Kingdom. My sincere congratulations go to the team on achieving this goal.”

ARABIANOILANDGAS.COM, April 6, 2011

REFINING

Jacobs wins services contract from Saudi Aramco Jacobs Engineering Group Inc. announced on Tuesday 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 Programme. 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 programme. When fully developed, the GES+ programme not only increases our opportunities, but also enhances the stature of Saudi Arabian engineering and construction throughout the world.” Jacobs is one of the world’s largest and most diverse providers of technical, professional, and construction services.

JACOBS ENGINEERING GROUP, April 5, 2011

Yanbu refinery shutdown completed Employees at Saudi Aramco’s wholly owned Yanbu Refinery recently completed a wide-ranging and complex Total Refinery Shutdown (TRS) on schedule and without any safety incidents. The scope of the TRS covered 320 pieces of equipment, 1,000 maintenance work orders and more than 30 projects. The refinery undergoes extensive maintenance every five years to ensure the safety, integrity and reliability of the facility. However, the TRS that ended March 10 was more extensive than

previous shutdowns. The work carried out during this latest shutdown at the refinery included the crude tower trays being upgraded to a new type of high-capacity stainless steel trays, as part of a total revamp to improve the diesel quality and allow a refinery throughput increase to 250,000 barrels per day. Also as part of the TRS, the Continuous Catalyst Regeneration/platformer reactors’ centre pipes and scallops were upgraded to a more robust design to improve the reactor’s integrity and reliability. Despite adverse weather and other issues, the shutdown was completed in the scheduled 38 days. Nearly 3,000 Saudi Aramco employees and contractors worked together to complete the task safely and on time, Aramco said in a statement. Safety and environmental issues were seamlessly integrated into the operation’s scope, and the outstanding performance of employees – and contractors – proved to be a testament to the success of this holistic approach, organisers said. Young engineers and technicians were given major responsibilities, joining their mentors in playing a major role, enabling knowledge-sharing as an added outcome.


NATO rejects Ghaddafi’s refinery bombing claims NATO on Thursday rejected claims by the regime of Libyan leader Moamer Ghaddafi that it had bombed an oil refinery, and said it was looking into allegations that its airstrikes had killed more than 10 rebel fighters. Taking out oil refineries – which are currently meeting only domestic energy needs as exports have been banned by United Nations sanctions – could potentially increase the plight of civilians, which NATO is striving to protect.

NEWS IN BRIEF





“The accusation by Colonel Ghaddafi that NATO was responsible for fires in the Sarir oil fields is false and is a direct result of his attacks on his own people and infrastructure,” the Western military alliance said in a statement. “We are aware that pro-Ghaddafi forces have attacked this area in recent days, which resulted in at least one fire at an oil facility north of Sarir. To try and blame it on NATO shows how desperate this regime is,” said Lieutenant-General Charles Bouchard, who commands NATO operations over Libya. Bouchard said that pro-Ghaddafi forces attacked because they want “to disrupt oil getting to Tobruk.” Separately, a NATO official said the alliance was aware of reports that its planes had killed more than 10 opposition fighters during an air raid between the eastern rebel-held city of Adjabiya and the oil port of Brega, where the opposition is fighting Ghaddafi’s forces. “We are looking into it and we are trying to establish the facts,” the official told the German Press Agency dpa. “It is difficult for us to establish the facts because we have no boots on the ground.” On Tuesday, the alliance admitted that some rebel fighters and civilians were killed during the weekend, after NATO forces mistook celebratory gunfire for an attack.

DEUTSCHE PRESSE-AGENTUR, April 7, 2011

Kuwait increasing oil refining capacity up to 50% Investor confidence in Kuwait’s energy industry should get a welcome fillip from reports that the state-owned oil company is set to increase domestic oil refining capacity by more than 50% over the next five years, the Global Arab Network reported according to OBG. Farouq Al Zanki, the CEO of Kuwait Petroleum Corporation (KPC), told a conference in the US on March 9 that Kuwait plans to build a refinery with the capacity to process 615,000 barrels per day (bpd). This followed a statement in late 2010 from the chairman of Kuwait

Oil Company (KOC), Sami Al Rasheed, who said the country had raised its production capacity to around 3.3m bpd, but that it aimed to reach a target of 4m bpd by 2020. With reserves of some 104bn barrels and 63trn cu feet of gas, Kuwait is currently the fifth-largest producer in OPEC, behind Saudi Arabia, Iran, Iraq and the UAE. Kuwait is also planning to build two olefins plants as part of a $270bn development of projects to be completed over the next 20 years. Of that investment, $81bn is allocated for the next five years and is to be split evenly between production, refining and distribution, Al Zanki said at the CERAWeek energy conference. He also predicted that two-thirds of the world’s energy demand will come from Asia by 2030. Khaled Al Mushaileh, an official from Kuwait National Petroleum Company (KNPC), said in October 2010 that the government would promote new refinery ventures and upgrade facilities already in operation to boost refining capacity to 1.4m bpd. There are currently three refineries in Kuwait – Mina Abdulla, Mina Ahmadi and Shuaiba – with KNPC serving as the refining arm of KPC. Historically, Kuwait has relied on its abundant reserves of light crude oil (crude with a low viscosity, which requires less-intensive refining) to serve its petroleum industry. Burgan field, the second-largest in the world after Saudi Arabia’s Ghawar field, produces 1.7m bpd of light crude and has been the mainstay of Kuwait’s oil production since the 1940s. While various reports had previously stated that the Burgan field was maturing and unable to sustain greater production rates, late last year KOC revealed that it had indentified further crude reserves equivalent to 12bn barrels at Burgan. The field’s reserves were “much higher” than previously announced, the state news agency KUNA reported in April 2011, citing the deputy prime minister for economic affairs, Sheikh Ahmad Al Fahad Al Sabah.

GLOBAL ARAB NETWORK, March 29, 2011

Door is open to Chinese investors 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 on Tuesday. 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 last week 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%, US-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 (BP.LN) 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. A spokesperson for BP in London declined to comment. Another potential investor could be French oil company Total SA (TOT), which has said it is interested in building a refinery in China with a local partner and a foreign oil producer.

NEWS IN BRIEF





In December, Royal Dutch Shell PLC (RDSB.LN) said it was no longer seeking to participate in the Kuwait-Sinopec refinery project. From now, all of KPI’s international refinery projects will include a petrochemicals business because the company wants to take advantage of the entire value chain of the downstream business, Jasem said. He also said India is not a strategic country to invest in as it has a downstream surplus. KPI is also planning a 200,000-barrel-a-day refinery in Nghi-Son in Vietnam, with partners PetroVietnam, Idemitsu Kosan Co. (5019.TO) and Mitsui Chemicals Inc (4183.TO). Its 200,000-300,000-barrel-a-day refinery in Balongan in Indonesia is at the feasibility stage; the refinery will be completed in 2017.

DOW JONES, April 5, 2011

Shazand oil refinery development plan 93% complete The development plan of Arak’s Shazand oil refinery is currently 93.5% complete. The unit will entirely come on stream by the end of Iranian month of Shahrivar (September 22), SHANA news agency reported. The first phase of the project with the capacity to produce 2 million litres of petrol per day came on stream at the cost of US$3.5 billion in February. Once the second phase of the Shazand oil refinery’s development plan come on stream by the end of Iranian month of Khordad (June 21), some 2.7 million litres per day would be added to the refinery’s petrol production capacity. By completion of the remaining phases of the refinery, the nation’s petrol production capacity would be raised by 12 million litres per day. The new development plans for the oil refinery industry are focused on reduction of sulphur and other pollutants in order to get Euro-5 standard in production of petrol for cars, Press TV reported.

The Euro-5 is one of the European emission standards which define the acceptable limits for exhaust emissions of automobiles. The emission standards are defined in a series of European Union directives staging the progressive introduction of increasingly stringent standards. Another significant plan is the production of the Propane, also known as Propylene, which is a waste product created when crude oil is refined into gasoline, diesel fuel and other products.

TEHRAN TIMES, April 12, 2011

Middle east oils rise as processing gains boost refiner demand Middle East oils rose against their benchmarks as refinery demand climbed following increases in processing profits. Murban, produced by Abu Dhabi National Oil Co., for June loading climbed 7 cents to a premium of 18 cents a barrel to its official selling price, according to data compiled by Bloomberg. Qatar Marine for the same period rose 9 cents to a premium of 1 cent a barrel above its benchmark, according to data compiled by Bloomberg. Demand for crude has climbed as refiners ramp up runs to take advantage of rising processing profits. Gasoil’s premium to Dubai, a measure of profitability, climbed 48 cents to US$22.96 a barrel today, according to data from broker PVM Oil Associates Ltd. Oman oil for immediate loading increased US$2.03, or 1.8%, to $117.53 a barrel today, according to data compiled by Bloomberg. Dubai for loading in June was up 1.8% at US$117.05 and Murban crude climbed 1.8% to US$121.07.

BLOOMBERG, April 9, 2011

Cape Middle East contracts Cape’s Middle East business has further expanded its relationship with important customers in the Middle East, Sinopec

E&C Middle East Co. Ltd. and Nasser S Al Hajri Corporation, winning multiple insulation services contracts in support of the Jubail Export Refinery construction project in Saudi Arabia, with a combined value of approximately US$13,000,000. The contracts build on Cape’s existing relationship with Sinopec and Nasser S Al Hajiri on the Kayan site in Saudi Arabia, for both customers.

YIN, April 7, 2011

Saudi Aramco full export allocation Saudi Arabian Oil Co. will supply full contracted volumes of crude to Asian refiners in May, according to refinery officials. Saudi Aramco will provide 100 percent of cargoes sold under long-term contracts for an 18th month, according to refiners in Thailand and Japan who requested anonymity. Saudi Aramco’s full export allocation follows a Dec. 11 decision by the Organization of Petroleum Exporting Countries to leave output quotas unchanged for the seventh time since 2008.

REUTERS, April 11, 2011

Eni pays Iran Oil Co. Eni SpA (E), Italy’s biggest oil and natural gas company said it paid US$888 million to the National Iranian Oil Company for crude last year and purchased a further US$1.1 billion of Iranian oil from others in the same period. Eni’s refining and marketing division bought 1.6 million metric tons of oil from the Iranian state-owned company last year compared with 980,000 tons worth a total of US$419 million in 2009, it said in a filing this week to the U.S. Securities and Exchange Commission.

ENI, April 8, 2011

Iran Oil Show 2011 Tehran Times reported that representatives from 40 countries will participate in Iran’s 16th International Oil, Gas, Refining & petrochemical Exhibition.

NEWS IN BRIEF





Some 927 domestic and 460 foreign companies from countries such as Austria, Spain, Australia, England, Italy, Germany, Turkey, Denmark, Russia, France, the Netherlands, India, Singapore, Japan, China, Taiwan, Thailand, the United Arab Emirates, Canada and Brazil will take part in the event.

TEHRAN TIMES, April 8, 2011

EGPC raises stake The Egyptian General Petroleum Corporation (EGPC) raised its stake in Egyptian Refining Company (ERC) to 24.2 per cent, up from 15 per cent, leaving the Arab Refining Company’s stake at 75.8 per cent. This would raise the public sector stake to 49.5 per cent of an oil refinery to be built in Mostorod, north of Cairo, where there is already a refinery project owned by EGPC’s Cairo Oil Refinery Company, which will lease land and provide ERC with fuel oil as feedstock.

AHRAM, April 11, 2011

Refinery shutdowns boost gasoil Reuters reported that gasoil premiums held firm in the Middle East, supported by refinery shutdowns in the region and Asia while naphtha was firm and fuel oil recovered from a three week slide. One trader said that the market is balanced in general terms despite seeing some tightness in the low sulphur gasoil known as 500 ppm.


Refining margins may improve Essar Oil expects refining margins to stay healthy or even improve further in coming months on the back of the political turmoil in the Middle East. “We see the positive trend seen in the last year as likely to continue,” CEO Naresh Nayyar said. Essar said gross refining margins for the March quarter rose to US$8.15 a barrel from US$5.37 a barrel a year ago.

PTI, April 13, 2011

FUELS

Saudi fuel oil loading April-loading fuel oil exports from Saudi Arabia, the Middle East’s largest supplier, currently stands at 350,000 tons, down from March’s 705,000 tons, partly due to planned refinery turnarounds in the kingdom, traders said on Monday. ExxonMobil sold up to 90,000 tons of high-viscosity 700-centistoke (cst) fuel oil for April 26-28 loading from the joint-venture Samref refinery in Yanbu, to Thailand’s PTT, traders said.


Saudi LPG exports up Saudi Arabia’s exports of liquefied petroleum gas (LPG) such as propane and butane rose 30 percent in February from a year earlier, while exports of petroleum products fell, official data showed. LPG exports increased to 166,786 metric tons from 128,827 tons last year, according to data Saudi Port Authority’s website. The Kingdom exported 39 percent more LPG from the previous month. Exports of all oil products, excluding crude, from Saudi ports fell 2.7 percent in February.

SAUDI GAZETTE, April 11, 2011

Iran delays petrol export Iran has put on hold, plans to export petrol in the near term due to a difference in the specifications of the petrol it produces as compared with market demand, a source close to the matter said Tuesday. The key concern lies in the octane number of petrol produced at state-owned refiner the National Iranian Oil Refining and Distribution Company. While the specifications are equivalent to Euro 2 emission standards, petrol from NIORDC’s refineries have an octane number below 90 RON.

PLATTS, April 5, 2011

QAFAC has expansion in its sights Qatar Fuel Additives Company Limited (QAFAC) aims to increase its current production capacity of methanol and MTBE in the near future according to Rashid Misfer Al-Hajri, General Manager QAFAC. “We are conducting initial studies to increase our production capacity in our site in Messaid and Ras Laffan industrial cities,” Al-Hajri said in interview with Al-Sharq newspaper. “This plan will depend on the approval of Qatar Petroleum, as it provides feedstock for our projects. Once we received feedstock allocation we will proceed to the execution.” The company has a total production capacity of 1.611 million tonnes per year, including 918,000 tonnes per year of methanol and 693,000 tonne per year of MTBE. QAFAC started commercial operation in 1999 with a total investment of US$600m. The company is a joint venture between Industries Qatar, OPIC Middle East Corporation, International Octane Limited and LCY Investments Corp.


Iran petrol production Iran’s petrol production capacity will reach 80 million litres per day by the end of the March 20, 2012, oil minister said here on Monday. Masoud Mirkazemi, Iran oil Minister added that some 23 to 27 million litres would be added to the nation’s petrol production capacity in the current year. The National Iranian Oil Refining and Distribution Company (NIORDC) have said the average Iranian petrol consumption has declined to 61.1 million litres per day.

IIFL, April 7, 2011

NEWS IN BRIEF





PETROCHEMICALS

Petro Rabigh to start 60-day maintenance work Rabigh Refining and Petrochemical Company (Petro Rabigh) is set to start a two-month scheduled maintenance for its integrated complex located in Rabigh, on the western coast of Saudi Arabia, the company said in a statement. “The maintenance work will start from the 21st April, and will last 60 days,” the company statement said. “We will start the operation gradually after 45 days.” The company also revealed that it has inventories to last it for 30 days. “We expect a reduction of our sales during the second half due to this maintenance period, as our inventories covers only 30 days,” it added in the statement published on the Saudi Stock Exchange (Tadawul). The company has also announced the stopping of production from its two polyethylene units on April 5 due to a technical issue. “We decide to start the maintenance at the units due to this technical issue, and we don’t expect this to affect the company’s financial revenues,” the company statement read.


Egypt naphtha sale Egypt sold 25,000 tons of light naphtha for April 17-19 loading from Suez to Noble at about US$6 a ton above Middle East quotes on a free-on-board basis and the cargo is likely to go West. Asian naphtha prices stayed at a 32-month high on Monday due to high Brent crude prices, with cracks easing slightly, although the inter-month spread remained firm on strong sentiment.


Iran to expand bitumen capacity Iran is expected to add another 700,000-1.0m tons/year to its bitumen capacity once the expansion of four refineries is completed in 2013, M T Fathi,

commercial director of Fara Shimi Rooz, said on Monday. Four new bitumen refineries are being built to increase Iran’s capacity, with the projects’ development split evenly between the state government and privately owned companies, Fathi said.

ICIS, April 11, 2011

Saudi Petrochemical exports rise Saudi Arabia, holder of the world’s largest oil reserves, boosted petrochemical exports in the first two months of the year on rising demand from Asia and increased local production of ethane, a feedstock. The country shipped 4.65 million metric tons of petrochemicals from its ports in January and February, up 6.8 percent from 4.35 million a year earlier, Saudi Ports Authority said yesterday on its website.

BLOOMBERG, April 11, 2011

Gulf petrochemicals jump Annual petrochemicals production of the Gulf States is expected to jump around 46 per cent to 155 million tons per annum by 2015, up from 105 million now, according to a latest report by the Gulf Petrochemicals and Chemicals Association (GPCA). The region’s current production represents about 16 per cent of the total 700 million tons worldwide petrochemicals output. By 2015, the Gulf States will contribute a fifth (20 per cent) of the global output, industry reports say.

GULF NEWS, April 6, 2011

New BASF polyurethane system house in Dubai BASF opened its new Polyurethane (PU) Solutions System House in Dubai with an official ceremony. About 150 guests from business, government, customers and neighbours alike joined the event at the just recently completed BASF site in Dubai Industrial City (DIC), a member of TECOM Investments’ Manufacturing and Logistics Cluster. BASF which has

global network of 38 System Houses, was launched in the presence of His Excellency Abdulla Sultan Al Fan Al Shamsi, Counsellor of Industrial Affairs at the UAE Ministry of Economy. Wayne Smith, president BASF Polyurethanes, said: “This investment further emphasises the significance of this region for BASF and demonstrates that we are prepared to accompany our customers’ growth in all regions of the world and desire to be their preferred partner of choice. In Dubai, we will strengthen existing customer relationships and implement our proven worldwide strategy of locally operated, customer-oriented System Houses.This step once again shows that we are continuously expanding our leading position in the polyurethane market.” Abdulla Belhoul, managing director of Manufacturing and Logistics Cluster, TECOM Investments, said: “We are delighted to welcome BASF, one of the leading global chemicals brand, to Dubai Industrial City. Our logistically strategic location adds enormous value to any company that sets up operations and we are keen to provide all required services and facilities to ensure smooth operations. BASF’s new Polyurethane Solutions System House will develop, serve and manufacture innovative PU systems for a wide range of industries. The new facility occupies 2.8 hectares of land in the chemical business zone of Dubai Industrial City, which has a logistically strategic location between growing industrial areas of Dubai and Abu Dhabi.


Iran’s Petchem exports approach 13mtpa The Iranian Petrochemical Commercial Company (PCC) said Iran has exported about 12.920 million tonnes of petrochemical and polymer products worth roughly US$8.6 billion over the last Iranian year (March 21, 2010-March 20, 2011), PANA reported.

NEWS IN BRIEF





Liquefied gases (propane, ethane), methanol and heavy cut were among major Iranian petrochemical products exported to various countries during the above mentioned period. Liquefied Petroleum Gas (LPG) was the main item of petrochemical exports with 2.39 million tonnes and over 20% of the total figure. Heavy cut exports increased considerably during the last Iranian year and ranked the second largest petrochemical products export in terms of weight. The product’s exports hit 1.9 million tonnes worth US$1.3 billion during this period. Methanol export with over 1.7 million tonnes worth US$462 million was the third main item after Liquefied Petroleum Gas and heavy cuts. The products have been sold in 7,361 shipments to 650 Asian, European and African companies. Petrochemical Commercial Company, with 20 years of experience, is the largest supplier of Iran’s Petrochemical products to the international markets. It is also one of the major Middle-Eastern companies, which is involved in marketing and sales of petrochemical products to the domestic and overseas markets.

TREND NEWS AGENCY, April 7, 2011

Petrochem open to facilities integration with SIIG The board of directors of Saudi Arabia’s National Petrochemicals Company (Petrochem) have decided to approach the SIIG board of directors, to propose a study to merge both Petrochem and Saudi Industrial Investment Group (SIIG). During the board meeting, which took place on April 10, the Petrochem board reviewed the progress of its petrochemical project in Jubail industrial city. The complex is set to start operation by the end of this year, and will produce ethylene, polyolefins and aromatics. SIIG has three nearby operational downstream projects in joint venture with Chevron. It has been reported that

Petrochem management wish to integrate elements of its production with the SIIG facilities, with a view to a potenital merger in the future. “If SIIG’s board agrees to proceeding, the process of evaluating such a merger will start, including evaluating the assets of each company, and proceed on getting the necessary approvals from authorities and relevant shareholders,” the company said in a statement published on Saudi stock exchange “Tadawul”. The company said that SIIG’s board is due to meet this month. SIIG already holds 50% of Petrochem shares. Saudi Insurance holds 16.2% and General Retirement Authority holds 16.2%, the rest of the shares are listed on the Tadawul.


Sabic-Albemarle JV selects Samsung for Jubail Plant Saudi Basic Industries Corp., or Sabic, the Middle East’s largest listed company, said on Monday that its joint venture with Albemarle Netherlands has selected Samsung Engineering Co. Ltd. to construct an aluminium alkyls manufacturing facility in Jubail. Samsung will provide engineering, procurement and construction services for the plant owned by Saudi Organometallic Chemicals Co., or SOCC, a joint venture between Sabic affiliate Saudi Specialty Chemical Co. and Albemarle, Sabic said in an emailed statement. The South Korean firm will immediately begin the detailed engineering in Seoul and is expected to mechanically complete the project in the third quarter of next year. The SOCC facility will initially manufacture 6,000 tonnes a year of triethyl aluminum, the key co-catalyst used in polyolefin production. Triethyl aluminum is currently supplied to the region from Albemarle’s facilities in Europe, Asia and North America and will be supplied from the SOCC plant to

regional customers upon plant startup. ZAWYA, April 11, 2011

PIPELINES

Sonatrach signs gas deal with European firms Algeria’s state-owned energy company Sonatrach has signed a contract to supply 8 billion-cubic-metres-per-year of natural gas through the new Medgaz pipeline with Spanish and French companies. The 20-year contracts with Spanish companies Cepsa, Endesa and Iberdrola plus GDF Suez of France formalised preliminary agreements before the final investment decisions on the construction of the pipeline were made in 2006. All of the companies own stakes in the consortium which built the 1,050-kilometre (650-mile) pipeline linking Algeria to Spain at a cost of US$1.3 billion. The Medgaz pipeline, the third pipeline linking North Africa and Europe started operations on April 1. It has a total capacity of 11.4 billion cubic feet per year.


Terrorist groups carried out gas pipeline explosion Sarvari told Mehr news agency that the ministry of intelligence and the police must beef up security at energy pipelines.He said terrorist groups are trying to create insecurity by disrupting the country’s energy transportation system. He added that parliament’s National Security and Foreign Policy Commission is reviewing pipeline security in conjunction with oil and intelligence ministries as well as security forces. Three gas pipelines exploded in Qom province on Friday. A similar explosion occurred in Qom on February 11.

NEWS IN BRIEF





Another Iranian MP, Alireza Salimi, has raised the possibility that the two explosions were linked and perhaps carried out by the same group. So far no organization has taken responsibility for the explosions.

PAYVAND NEWS, April 10, 2011

Iran pipeline explosion A member of the Iranian parliament has blamed Western “enemies” for a blast on Friday that hit a major gas pipeline near the holy city of Qom. The head of the parliament’s national security committee, Parviz Sorouri told reporters on Sunday that Western-backed “terrorists” were aiming to bring insecurity to Iran’s national energy transfer routes.

NYT, April 11, 2011

Crescent denies Iran agreement The general manager of the Crescent Petroleum Company in Tehran denied reports about reaching an agreement with Iran on exporting natural gas to the United Arab Emirates. IRNA quoted Hamid Zaheri as saying that no new agreement has been reached. The UAE-based Crescent National Gas Corp. signed a MoU with the National Iranian Oil Company in 2001 to import natural gas from Iran’s Salman field through a pipeline jointly built by Iran and Crescent.

TT, April 12, 2011

TERMINALS AND STORAGE

Oil tanker with Libyan crude enters Suez Canal Reuters reported that an oil tanker

carrying 80,000 tonnes of crude from rebel held east Libya entered Egypt’s Suez Canal heading towards the Red Sea. As per report, the Liberia registered tanker Equator left the rebel held east Libyan port of Marsa el Hariga. Oil traders said that the cargo which rebels need to finance their uprising against Muammar Ghaddafi is headed for China. The cargo is equivalent to around 550,000 barrels of oil. The seven week civil war has cut output from the major supplier by 80% and both sides have traded accusations over attacks on oilfields.

STEELGURU, April 12, 2011

Mideast crude tanker rates fall, bunker costs bite Crude oil tanker earnings on the key Middle East route fell on Monday as growing vessel availability and slower cargo fixing weighed on rates. Brokers said higher bunker fuel costs were also eating into earnings. The world’s benchmark Very Large Crude Carrier (VLCC) export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP fell to W54.53 in the Worldscale measure of freight rates, or US$7,235 a day, from W54.86 or US$8,049 a day on Friday. “The high vessel availability in the MEG will continue to limit the upside earnings potential for the large crude tankers, following a slow end to last week,” broker Lorentzen & Stemoco said on Monday. VLCC rates have been volatile in recent months due to a supply overhang caused in part by the end of a trading play, which led to storage of millions of barrels of crude oil on tankers at sea. “While spot rates have more than doubled over the past week, a quoted rate of $8,000/day is not a pretty sight for

owners,” said Arctic Securities. Average earnings fell earlier this month to their lowest in over five months, below the operating cost level of a VLCC, which is estimated at around US$10,000 a day. “New cargoes have only entered the market at a leisurely pace and at a tempo firmly controlled by the charterers,” broker P.F. Bassoe said. “Owners are struggling to cover operational costs, and it doesn’t look like the market will become much better in the coming weeks. The tonnage list is still long and seems to continue in charterers’ favour.” Cross-Mediterranean Aframax tanker rates fell to W91.04 or $792 a day in average earnings on Monday from W91.98 or US$1,592 a day on Friday and W100.00 or US$6,473 a day last Monday and were at their lowest since January 24. Aframax vessels on the Mediterranean route, which transport the majority of Libya’s crude oil, normally carry up to 600,000 barrels. Last month Aframax rates jumped to their highest this year as buyers scrambled to get cargoes from Libya. But a subsequent drop in activity has added to tanker availability and put pressure on rates. “Aframaxes could not escape the weaker activity in the Mediterranean,” Pareto Securities said. Rates for Suezmax tankers on the Black Sea to Mediterranean route were at W81.08 from W83.08 on Friday and W93.85 last Monday. “Suezmax vessel earnings were considerably lower on Friday with ample vessel supply in the Atlantic and Mediterranean,” said Lorentzen & Stemoco. “With bunker costs reaching 12-month highs, owners are making renewed efforts to counteract the increased costs by slow-steaming when possible.


NEWS IN BRIEF





PROJECT Iran Bulk Polymers Development

Project Sector Downstream Location Middle East, Iran, Lurestan Area Project Holder/Operator Mahabad Petrochemical Co / Bakhtar Petrochemical Co. / NPC – National

Petrochemical Co. / Luristan Petrochemical Co. Scope of work EPC – Engineering, Procurement & Construction Contracts

Current /Past Phase The project had been on a completion phase Contract Value Estimate Over US$330 million Start up Timing From 2010 Development Stage Operational Project Brief The project is associated with the development of Khorramabad HDPE /

LLDPE complex Future & Potent ial Sales Prospects

FC - Framework Contracts LSTK - Lump Sum Turnkey Contracts MC - Multi Contracts PMC - Project Management Contracts TC - Term Contracts

TENDERS & CONTRACTS

PROJECT Qatar Chemical Plant Design

Project Sector Downstream Location Middle East, Qatar, Musay’id Area Project Holder/Operator QP – Qatar Petroleum / S tatoilHydro ASA / Total / QVC – Qatar Vinyl Company /

Qapco - Qatar Petrochemical Company Scope of work FEED – Front-End Engineering, Design Contracts

Current / Past Phase Working contracts had been won Contract Value Estimate Over US$305 million Start up Timing From 2010 Development Stage Operational Project Brief The project is associated with the expansion of EDC / VCM Mesaieed facility Future & Potential Sales Prospects

EPC – Engineering, Procurement & Construction Contracts EPCC - Engineering, Procurement, Construction & Commissioning Contracts EPMC – Engineering, Procurement, Construction & Management Contracts EPIC – Engineering, Procurement, Installation & Commissioning Contracts

PROJECT Oman Chemical Plant Project

Project Sector Downstream Location Mid dle East, Oman, Al Batinah Area Project Holder/Operator Omzest / Oman Formaldehyde Chemical Co / Manso Group Scope of work EPC – Engineering, Procurement & Construction Contracts

Current /Past Phase The project had been on a completion basis Contract V alue Estimate Over US$20 million Start up Timing From 2010 Development Stage Operational Project Brief The project is associated with the development of Oman Formaldehyde Plant

Future & Potential Sales Prospects

FC – Framework Contracts LSTK – Lump Sum Turnkey Contracts MC - Multi Contracts PMC – Project Management Contracts TC - Term Contracts





PRO J E C T Alg e ri a H DS Construction

Pr o jec t Sector Down stre amLoca t i o n Afric a, A lgeria, Skikda AreaPr o jec t H o l d er / Op e rator S on a trach Sc o p e of w o rk E PC - E ngineering, Procurement & Construction Contr acts Curr e nt / P ast P h ase Job cont r acts had been on the tendering & bidding sta g e Contrac t Va l u e Est im ate

Over U S$ 235 million

Start u p Tim i n g Fro m 201 1Deve l o p m e nt Sta g e Opera t ional ProjectBrief The project is associated with the construction of Skikd a gas oi l h ydro -

d esulphurisation factoryFutu r e & Pot e nti a l S a les P r o s pects

MC - Mu l ti ContractsO & M - O perations and Maintenance ContractsP MC - Pr oject Management ContractsL S TK - L ump Sum Turnkey ContractsFC - Fr a mework Contracts

PRO J E C T Eg y pt Tu rnkey Project

Pr o jec t Sector Down stre amLoca t i o n Afric a , E gypt, Al Iskandariyah AreaPr o jec t H o l d er / Op e rator Hyundai Oilbank Co LtdSc o p e of w o rk LS TK - L ump Sum Turnkey Contracts

Curr e nt / P ast P h ase Proje c t h ad been on a completion stage

Contrac t Va l u e Est im ate

Over U S$ 175 million

Start u p Tim i n g Fro m 201 1Deve l o p m e nt Sta g e Opera t ional ProjectBrief The project is associated with the development of ACI D gas t r e a t m en t

unit Futu r e & Pot e nti a l S a les P r o s pects

MC - Mu l ti ContractsO & M - O perations and Maintenance ContractsP MC - Pr oject Management ContractsFC - Fr a mework ContractsCC - C o nsultancy Contracts

TENDERS & CONTRACTS

PROJECT United Arab Emirates Ammonia Expansion

Project Sector Downstream Location Middle East, UAE, Abu Dhabi Area Project Holder/Operator Ruwais Fertiliser Industries. Scope of work EPC – Engineering, Procurement & Construction Contracts

Current /Past Phase The project had been on a tendering & bidding phase Contract Value Estimate Over US$1.4 billion Start up Timing From 2010 - 2011 Development Stage Operational Project Brief The project is associated with the expansion of Ruwais fertiliser facilities

Future & Pot ential Sales Prospects

FC - Framework Contracts LSTK - Lump Sum Turnkey Contracts MC - Multi Contracts PMC - Project Management Contracts TC - Term Contracts





CONFERENCES

Downstream Monitor MENA 13 April 2011, Week 01 Back Page

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HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK

Oil and Gas Sector

AfrOil The payment of bribes in Nigeria has cost the members of the TSKJ consortium US$1.5 billion in penalties.

AsianOil Petronas is considering potential joint venture partners for its Kepodang gas field offshore Indonesia.

ChinaOil China has raised retail fuel prices for the second time this year.

EurOil Statoil has made the first commercially viable discovery in the Arctic waters of the Barents Sea.

FSU OGM Rosneft may cut investment in Vankorskoye as a result of the loss of its export duty exemption.

GLNG Golar LNG Partners is to list on the Nasdaq in a bid to raise US$303 million

MEOG Oil production from Iraq's Kurdistan region has now reached 115,000 bpd.

NorthAmOil Marathon has agreed to sell a 30% stake in its Niobrara shale to Marubeni for US$270 million.

Unconventional OGM Beach Energy has completed the drilling and evaluation of its Holdfast-1 shale gas well in the Cooper Basin.

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