June 15, 2012:

London — Landmark investment led by Citadel Capital, top Egyptian, Gulf and international investors, global export credit agencies and development finance institutions will reduce present-day diesel import needs by 50%, improve air quality in the Greater Cairo Area, help reduce Egypt's annual subsidy bill, result in more than US$ 300 million in additional direct benefits to the state annually, and spur job creation The Egyptian Refining Company (ERC) has achieved financial close on a US$ 3.7 billion package to construct a greenfield petroleum refining upgrade project in the Greater Cairo Area. The ERC project is a public-private partnership with the private sector investing alongside the government to address a critical national requirement for infrastructure.

Developed by Citadel Capital (CCAP.CA on the Egyptian Exchange), the leading private equity firm in the Middle East and Africa with US$ 9.5 billion in investments under control, ERC is an import substitution project to address Egypt's growing demand for products such as diesel that are currently imported in rising quantities. The state-of-the-art facility will produce over 4.1 million tons of refined products and high-quality oil derivatives per year, including more than 2.3 million tons of Euro V diesel (the cleanest-burning diesel fuel in the world). ERC will enable Egypt to reduce its current level of diesel imports by approximately 50%.

"ERC is more than one of Africa's largest-ever project finance deals, it is also a transformative development for the Egyptian economy. The financial close of ERC confirms to international investors and the global community that Egypt is open for business. The signal this sends is huge," said Citadel Capital Founder and Chairman Ahmed Heikal, adding, "ERC is a key component of Egypt's energy security going forward." ERC will deliver diesel and other high-value products to the Egyptian General Petroleum Corporation (EGPC) at the heart of the consumption market in the Greater Cairo Area.

"We would like to thank everyone who has made this project possible, from our equity investors to the providers of ERC's debt facilities, from the Government of Egypt to the people of Mostorod, where the refinery will be located," Heikal noted. Financing for the project includes US$ 2.6 billion in debt and a further US$ 1.1 billion in equity.

Structure of the Equity Component

ERC is supported by US$ 1.1 billion in equity provided by a broad spectrum of investors including EGPC (which has invested US$ 270 million for a 23.8% interest), Qatar Petroleum International (QPI, which has committed over US$ 362 million for an effective 27.9% interest) and Citadel Capital (which has directly and indirectly invested over US$ 155 million and holds an effective equity stake of 11.7%). Other participants in the funding include investors from Egypt and the Gulf Cooperation Council countries as well as development finance institutions, including the International Finance Corporation (US$ 85 million, 6.4% ownership), the Dutch development bank FMO (US$ 29 million, 2.2% ownership) and Germany's DEG (US$ 26 million, 2.0% ownership). The InfraMed Fund, the largest investment vehicle dedicated to infrastructure in the Mediterranean area, is also an investor with an effective ownership of 7.5% on an investment of US$ 100 million.

EFG Hermes Investment Banking acted as placement manager for the equity component, raising approximately US$ 462 million of the required equity funding for ERC.

Structure of the Debt Component

ERC is also backed by a US$ 2.6 billion debt package announced in August 2010 which was arranged by ERC's financial advisor Société Générale and supported by ERC's legal advisors, Shearman & Sterling and Arab Legal Consultants. The package includes US$ 2.35 billion of senior debt and US$ 225 million of subordinated debt. With the Bank of Tokyo-Mitsubishi serving as the global coordinator, institutions participating in the senior debt package include the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI), the Export-Import Bank of Korea (KEXIM), the European Investment Bank (EIB) and the African Development Bank (AfDB).

Mitsui & Co. (which is part the contractor consortium building the refinery) and the African Development Bank are providing the subordinated debt financing.

The ERC Project

Today, the Cairo Oil Refining Company (CORC) -- ERC's neighbor in the Mostorod district of Greater Cairo -- is Egypt's largest refinery, accounting for some 20% of total national refining capacity. CORC's first units were installed in 1969 and it has a refining capacity of 160,000 barrels of crude oil per day (BPD). "Approximately 67% of CORC's output is fuel oil and this will be purchased by ERC at international prices and used as feedstock to be further refined to produce more than 4.1 million tons of refined products and high-quality oil derivatives per year," said ERC Chairman Abdelfattah Abu Zeid. "We are proud to be employing the most advanced and environmentally stringent technologies from Conoco Philips / Bechtel, Axens and KTI."

The facility's entire liquid fuels production will be sold to the state-owned EGPC under a 25-year offtake agreement at international prices.

Benefits to Egypt and the Local Communities

EGPC estimates that in addition to decreasing the country's subsidies bill for imported fuel, ERC will result in more than US$ 300 million in direct annual benefits through avoided transportation and insurance costs, the elimination of product shipment losses, and revenues generated from storage and processing fees. ERC will use proven, latest-generation technologies to meet the environmental standards of the International Finance Corporation (World Bank) and the European Union, as well as Egyptian environmental laws, to ensure that operations do not result in any form of environmental degradation. ERC's refining process will, in fact, result in substantial environmental benefits to Egypt by annually preventing the release of 186,000 tons of SO2 (sulfur dioxide) that are currently emitted into the atmosphere. This represents a 29.1% reduction in Egypt's present-day SO2 emissions (from the burning of sulfur-containing diesel and fuel-oil) and will result in much-needed improvement in air quality in the Greater Cairo Area.

"We will also deliver a number of projects with positive social impacts on the Mostorod area," said Abu Zeid. "Our contractors will require 10,000 employees at the peak of construction work. During the operations phase, ERC's operations and maintenance contractor will create permanent jobs for more than 700 staff. Although activity on the project has not started, more than 500 welders, pipefitters, mechanics and electricians have already received vocational training to prepare people in the nearby communities to obtain jobs." ERC is being engineered and constructed by GS Engineering & Construction of Korea and Mitsui & Co. of Japan. WorleyParsons is ERC's project manager and the operations and maintenance of the refinery will be performed by the Egyptian Projects Operation & Maintenance Company (EPROM), an EGPC-affiliated company.

Path Forward

"The ERC Project has been in development for more than five years, during which time it weathered the 2008 global financial crisis, the January 25, 2011 Egyptian Revolution, and now the ongoing Eurozone banking challenges. To keep the lender group and all other stakeholders engaged during this period is a testament to the economic strength of the project, its importance in addressing Egypt's increasing demand for refined products, and the stakeholders' long-term commitment to support Egypt's economic and political development," said ERC Chief Executive Officer Thomas Thomason. Engineering is underway and is expected to be completed in late 2013, at which time construction activity will begin at the site. Operations are scheduled to start in 2016.

By AllAfrica

June 15, 2012:

HOUSTON- The operator of the largest U.S. oil refinery said on Friday it did not know how long a newly commissioned giant crude distillation unit, a center piece at the Port Arthur, Texas facility, would be shut down. Motiva Enterprises said that there was no schedule for the crude distillation unit's return to production at the 600,000 barrel per day (bpd) Texas, refinery. Sources familiar with refinery have said the unit would be down five months for repairs. The 325,000 bpd crude distillation unit (CDU), which was the keystone of a recently completed five-year, $10-billion expansion project more than doubling the refinery's capacity, was shut after a restart attempt failed Saturday, the sources had said.

"The timeline for the full ramp-up of the expansion is not known at this time," Motiva spokeswoman Emily Oberton said on Friday. Previously, Motiva had said a unit at the refinery had been shutdown due to a mechanical issue while the expansion units were being brought to full production. When the crude unit was shut, it was within three weeks of reaching full production, according to a timeline previously laid out by Motiva. The 285,000 bpd pre-expansion CDU continues in the production at the refinery. A crude distillation unit does the initial refining of crude oil coming into a refinery and provides feedstock for all other production units.

The lengthy shutdown is likely due to a heavily damaged furnace on the new CDU, which began production in late April, according to experts. Oberton declined to discuss the status of individual units at the refinery when asked about the CDU's furnace. In a notice filed Saturday with the Texas Commission on Environmental Quality, the Motiva Port Arthur refinery said "uncontrolled combustion occurred within crude distillation unit furnace" during Saturday's restart attempt. "The implication is something pretty bad happened," said David Hackett, president of Stillwater Associates of Irvine, California, an energy consulting firm. "It's possible they could have burned the furnace up," Hackett said.

The furnace raises the temperature of crude oil just before it enters the atmospheric section of the CDU to between 625 and 700 Fahrenheit (329-371 Celsius). In the CDU, light end products like naphtha rise as vapor in the atmospheric section while heavier products like asphalt remain liquid in the bottom of the vessel. The light ends are removed from the atmospheric section, while some heavier products go to the vacuum section for further refining in a vacuum or to other units.

The phrase "uncontrolled combustion" could also include an explosion within the furnace, said a safety expert, who asked not be identified so he can have future dealings with Motiva or its owners Royal Dutch Shell Plc and Saudi Aramco "Something like that can do a lot of damage," he said.

By Reuters

June 15, 2012:

RODEO, Calif.—Contra Costa County officials are warning residents and motorists about gas that leaked from a ruptured tank at a ConocoPhillips refinery next to Interstate 80. The company says a tank containing hydrogen sulfide ruptured around 7 a.m. Friday. It's still trying to determine what caused the leak. County health officials say hydrogen sulfide concentrations near the refinery were at levels considered safe. But the gas has an offensive rotten-egg smell that can cause dizziness and nausea. Officials warned people with asthma or other respiratory sensitivity to avoid the area. Refinery workers pumped diesel into the tank to prevent more odors from escaping.

Hercules resident Marie Shalz told the Contra Costa Times (http://bit.ly/LrxW0C) that people at a pool near the refinery suffered burning eyes, dizziness and nausea after noticing the smell.

By MercuryNews.com

June 14, 2012:

Sinopec Corp, Asia's largest refiner, and South Korea's S-Oil Corp will process less crude in June to trim high oil products inventories and as refining margins weaken, industry sources said on Thursday. The cuts in refining output could depress crude prices further as the global market struggles with economic slowdown and ample oil supply from higher OPEC and North American output. Sinopec Corp will reduce its crude throughput by more than one million tonnes, or 243,000 barrels per day this month, versus an earlier output target, to trim high domestic inventories as demand slows, the sources said.

The cuts represent roughly 5-6 percent of Sinopec's average daily output target for this year at 4.5 million bpd. "The run level will be reduced quite deeply for this month. Almost every plant is taking some cuts, because demand, especially of diesel, is weak," said one Sinopec refinery source. "The diesel stocks are brimming," said another. Chinese refiners normally set their monthly production targets the previous month, but they sometimes make last-minute adjustments based on domestic supply and demand situations. The sources did not provide a total throughput rate for June, or a level of May operations, but one said on average Sinopec processes 18-19 million tonnes of crude a month.

Diesel sales in some areas posted negative year-on-year growth in April and May, a Sinopec fuel marketing official told Reuters last week, as demand from industries slowed. Implied oil demand in China, the world's second-largest fuel market, inched up 0.4 percent in May year-on-year, and rose marginally from April, when the figure fell for the first time in more than three years.

S-OIL

In South Korea, S-Oil reduced the operating rate at its refinery to 93 percent in June from full capacity in the previous month after refining margins weakened, industry sources said. The third largest South Korean refiner was reacting to a slump in Asia's naphtha crack to a 3-1/2 year low on poor petrochemical demand in China, they said. Asia's naphtha margins have lost almost 95 percent of the value in three months to $8.20 a tonne premium on Thursday versus $162.60 a tonne on March 14. SK Energy, South Korea's largest refiner, is keeping its crude throughput steady at a comparatively lower rate of 80 percent on support from firm fuel oil margins, a trader said. The company has a total refining capacity of 1.115 million bpd at two complexes in Ulsan and Incheon.

Oil prices have tumbled over the last month with many traders viewing the market as over-supplied given the poor economic outlook for the eurozone, slowdowns in the United States and China, and declines in demand for oil products. Almost a quarter of Europe's refinery capacity was offline in May, figures from industry monitor Euroilstock showed, as refiners cut runs to unseasonally low levels in response to declining demand for gasoline and diesel. OPEC is prepared to keep oil output limits on hold on Thursday, leaving swing producer Saudi Arabia to uilaterally decide whether it needs to scale back supplies to stem a price slide.

By Reuters

June 14, 2012:

Workers fighting to save their jobs at the bankrupt Coryton refinery in Britain took their fight to Prime Minister David Cameron on Thursday, marching to a court where he was giving evidence and chanting "we got sold out". Angered over what they say are plans involving Royal Dutch Shell to turn the refinery into a storage terminal, which would put most of the 900 employees and contractors out of a job - demonstrators shouted: "Shell, Shell, go to hell!" Shell declined to comment on the protest and on whether it had any plans for Coryton.

Coryton, in eastern England near London, was one of several refineries owned by Petroplus, Europe's largest independent refiner before it declared insolvency. There had been hopes it could be kept going but its joint administrator said two weeks ago it would start shutting down. A trade union official said on Wednesday that oil major Shell, fuel distribution firm Greenergy and storage company Vopak were preparing a joint bid to buy Coryton as a storage terminal. Shell and Greenergy declined to comment on Wednesday. Around 100 protesters marched from the Department of Energy and Climate Change in the government district of Whitehall in central London to the Royal Courts of Justice where Cameron was giving evidence about his links to media baron Rupert Murdoch.

"We asked for the government to talk to us face-face, as to why it's not in the national interest to keep plant open, and they said no one was available," said Jason Williams, 43, a process controller who has worked at the Coryton plant for 26 years. "So we said: 'If they won't come to us, we'll go to them'." Previously workers held a demonstration outside Shell's headquarters and, on Monday, protesters disrupted the supply of fuel heading to some petrol stations in the southeast of England.

The Coryton refinery has a capacity to process about 175,000 barrels of crude oil per day and an additional 65,000 barrels per day of feedstock. It is being wound down as its crude oil supplies run out and redundancies are expected next week. There will be little disruption to fuel supply as a result of Coryton's closure, as a glut of refining capacity in the UK and elsewhere in Europe means petrol pumps will not run dry. Among other Petroplus refineries, Ingolstadt in Germany was bought in May by Swiss-based trader Gunvor and Cressier in Switzerland was sold to Vitol and Petroplus founder Marcel van Poecke.

By Reuters