June 14, 2012:

Sinopec Corp, Asia's largest refiner, 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, industry sources said. "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. 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.

By Reuters

June 14, 2012:

Hindustan Petroleum Corp. (500104.BY) and Oil & Natural Gas Corp. (500312.BY) are considering a plan to build Rajasthan's first-ever refinery in partnership with the state government. The proposed refinery at Barmer, about 500 kilometers west of Jaipur, could have an initial capacity of 120,000 barrels a day, former federal oil secretary S.C. Tripathi said Thursday. Its completion would allow HPCL, the state-run refiner and fuel retailer, to meet demand for fuel products in the northwestern desert state.

Cairn India Ltd. (532792.BY), which operates the RJ-ON-90/1 block in Barmer basin, will be able to significantly cut transportation costs for its heavy, waxy crude if the refinery project proceeds. Cairn currently produces 175,000 barrels a day of crude from the block, transporting it to refiners through pipelines. Cairn holds 70% of the block, while ONGC holds the remainder. "We are studying the detailed feasibility report on the project, which was prepared by ONGC," K. Murali, director for refineries at HPCL, told Dow Jones Newswires recently. "Based on the techno-economic parameters, we will take a final decision."

ONGC and the Rajasthan government have been mulling the project since Cairn started producing crude at Barmer in August 2009, but it wasn't found to be financially viable without tax incentives and interest-free loans from the Rajasthan government. The state government, which faces local elections next year, is negotiation with the other partners on financial incentives, and a final decision by the stakeholders is expected in next few months, said an ONGC executive, who didn't want to be named. The Rajasthan government's petroleum directorate couldn't be reached for comment.

"The refinery is an aspiration of the Rajasthan government," said Mr. Tripathi, who headed a committee in 2010 that recommended construction of a refinery in Barmer with a first-phase capacity of 120,000 barrels a day. "Considering infrastructure constraints, it will be a difficult proposal but can be made possible with the government assistance." The capacity would need to be expanded to up to 240,000 barrels a day later to make it feasible, he said. HPCL currently has two refineries--a 130,000-barrel-a-day unit in Mumbai and a 166,000-barrel-a-day refinery on the east coast, in Visakhapatnam.

In April, it commercially launched a 180,000-barrel-a-day refinery in partnership with billionaire Lakshmi Niwas Mittal in the northern state of Punjab. HPCL's Murali declined to discuss the capacity of the proposed refinery or the likely size of HPCL's stake in the project. The ONGC executive said HPCL may take a 51% stake, while ONGC and Rajasthan government are willing to take up to 26% each.

State-run Engineers India Ltd., which may be given the contract to build the refinery, has proposed taking a 5% stake in the project, Chairman A.K. Purwaha said. The Rajasthan government is in talks with potential founders and oil marketing companies to finalize the project, according to the website of Rajasthan's petroleum directorate.

By Dow Jones Newswires

June 14, 2012:

Financial sponsor Carlyle Group is closing in on a deal to purchase a large Sunoco oil refinery in Philadelphia, according to three people familiar with the matter, in a transaction that could be completed in a matter of days, one of these people said.  Carlyle [CG  21.85    0.055  (+0.25%)], the Washington-based private-equity firm that recently went public, has been in exclusive talks with Sunoco since mid-April to purchase the 330,000-barrel-per-day refinery. Nicknamed SunPhilly, the plant was set to be idled in August if Sunoco couldn’t find a buyer, a move that would put 800 people out of work.

The exclusivity deal Sunoco [SUN  47.77    0.42  (+0.89%)] and Carlyle inked in April is set to expire Friday, June 15, if a deal can’t be reached, said one of the people familiar with the matter. It is unclear whether the two companies will be able to finalize a transaction before then. Carlyle executives spent Wednesday holed up in meetings at Sunoco’s Philadelphia headquarters, two of the people familiar with the matter said, hoping to come to final terms. (Extending the exclusivity agreement is also an option, added one of these people.).  Carlyle’s potential deal would come a month and a half after Delta Air Lines [DAL  11.04    -0.19  (-1.69%)] — marking a first for an airline looking to save money on jet fuel — bought a smaller refinery in Trainer, Penn., for $180 million. As part of that deal, the state of Pennsylvania kicked in $30 million in subsidies in an effort to preserve local jobs.

If Carlyle does buy SunPhilly, the plant will likely come on the cheap, said one of the people familiar with the matter. Carlyle said in an April statement that it would contribute cash to the refinery as part of a joint-venture arrangement in which Sunoco would retain a minority, non-operating stake in the facility. Carlyle would oversee day-to-day operations, and would be responsible for finding parties to secure crude oil from overseas, ship it to the East Coast, and manage the refining process.

By CNBC

June 14, 2012:

South Korea's third largest refiner, S-Oil, reduced the operating rate at its refinery to 93 percent in June after margins weakened, industry sources said on Thursday. The company was operating its 669,000 barrels per day (bpd) refinery at Onsan at full capacity in the previous month, they said.

By Reuters

June 13, 2012:

HOUSTON - Output at the biggest U.S. refinery could be cut by more than half for up to five months after Motiva Enterprise's MOTIV.UL failed to restart a major new crude unit at the Port Arthur, Texas, plant over the weekend, sources familiar with operations said on Monday. Just two weeks after partners Saudi Arabia and Royal Dutch Shell (RDSa.L) cut the ribbon on the new 325,000 barrel per day crude distillation unit that pushed the plant's capacity to 600,000 bpd, jointly owned Motiva shut the unit to fix what was thought to be a leaking valve impairing production. After the CDU twice failed to restart over the weekend, the refinery found major issues that will take at least two months and potentially up to five months to repair, the two sources who have knowledge of the refinery's operations said.

Motiva said that an unspecified unit had been shut down due to a mechanical issue as the plant was moving toward full operations, adding an investigation was under way to understand the cause of the problem. "This unplanned unit shutdown is unfortunate, but we will resume normal operations as soon as it is appropriate to do so," the company said in a statement released late Monday.

The news pushed up cash fuel prices and lent support to gasoline futures, traders said. It weighed on oil prices in expectations that other buyers in the United States -- which saw a spike in imports from Saudi Arabia this year -- would have to absorb additional supplies the kingdom had already booked into the market. "The Saudi loadings to the U.S. had risen massively a few months ago, as they wanted to show they could put barrels in the market when requested -- and they were very vocal about it -- as well as starting to supply Motiva," said Katherine Spector, commodity strategist at the Canadian Imperial Bank of Commerce (CIBC) in New York.

"The question now will be how much storage space at Motiva was already filled, and will they need to divert barrels to other customers." The entire refinery has not been shut by the outage because the pre-expansion 285,000 bpd crude distillation unit, continues to operate. CDU units perform the initial refining of crude oil coming into the refinery and provide feedstock for all other production units. While it is not unusual for new refinery units to experience operational teething pains when they are first commissioned, a shutdown lasting months would be a major embarrassment for Motiva and its owners after a landmark $10 billion upgrade.

IMPORTS SURGE

The outage may also complicate Saudi Arabia's drive to push more crude into the market, as the Port Arthur plant was one of the biggest new outlets for increased production. U.S. imports from the kingdom jumped to 1.45 million barrels during the first five months of 2012, according to Reuters calculations based on monthly and weekly data from the U.S. Energy Information Administration, the highest level for that period since 2008. Saudi Arabia pushed oil production to the highest level in decades in May, hitting 10.10 million barrels per day on average for the month according to a Reuters survey, helping to cushion the impact of Western sanctions against Iran's nuclear program, which have threatened Tehran's exports.

Speaking ahead of an OPEC meeting this week, Saudi Oil Minister Ali al-Naimi on Monday said the producer group should increase its oil output target, despite a recent slide in crude prices and comments by other members that high production had created a surplus in the market. Gasoline prices in the Gulf Coast spot markets jumped more than 5 cents on the news, while RBOB gasoline traded slightly higher even. Oil prices dropped nearly $2 per barrel. The CDU is the centerpiece of a $10 billion, five-year expansion project that more than doubled the refinery's capacity, and the shutdown comes after the unit's official startup at a May 31 ceremony attended by the chief executives of Royal Dutch Shell Plc and Saudi Aramco. SDABO.UL At the ceremony, Motiva Vice President Tom Purves, who oversaw the expansion project, said the refinery was near its 600,000 bpd capacity and would reach full production by the end of the second quarter, advancing the date the refinery would reach that milestone by a full three months.

By Reuters