July 12, 2018:

Petrobras and China National Petroleum Corp. (CNPC) are in talks on forming a strategic partnership that could see the Chinese company invest in the stalled Comperj refinery and Marlim cluster of fields in the Campos Basin in Brazil. A heads of agreement (HoA) signed by the two state-run companies “defines the assets that are part of the scope of the partnership, within the concept of an integrated project, which includes the completion of the Comperj refinery and a participation in the Marlim cluster,” Petrobras said in a statement. The structured agreement could see the Chinese firm be granted access to process output from the fields at Comperj. Reuters reported in April that the complex needs about US$3 billion in additional investment to reach an initial crude processing capacity of 165,000 bpd. The Chinese firm is likely to be granted access to enable it to process output from the fields at the refinery. Production from three of the fields in the Marlim cluster (Marlim, Marlim Sul and Marlim Leste) in the Campos Basin fell from 446,000 boepd in May 2017 to 369,000 boepd in the same month this year, though Petrobras intends to install two new production platforms in the area by 2021. The agreement with CNPC for a stake in Marlim Sul would also include the adjacent Voador field. The two companies initially discussed the broader plan in mid-2017, but terms could not be agreed. Planning for Comperj goes back even further, with the project being unveiled in 2004 with a view to increasing Brazil’s self-sufficiency in fuel production and reducing imports.

Work on the two-train refinery and petrochemicals production project started in 2006, at which point operations were scheduled to start in 2012 and the project had a price tag of US$6.5 billion. By 2014, however, development costs had ballooned to an estimated US$13.5 billion, with that amount having been spent on the partial construction of just one train at the refinery. The Chinese investment, if finalised, will be used to complete this part of the plant.

Enter the dragon

CNPC is a logical partner for Petrobras as it looks to reinvigorate Comperj. The integrated Chinese giant owns a string of oil refineries in its domestic market, and is also a major actor overseas. Its foreign interests include the Shymkent refinery in Kazakhstan, as well as stakes in plants in Japan, Singapore and other locations, most notably in Africa. The company owns stakes in the N’djamena oil refinery in Chad, the Soralchin plant in Algeria and the Khartoum refinery in Sudan. These projects have given CNPC extensive experience of project-managing new refining capacity in overseas markets that it will look to transfer to Comperj. The deal would also give China its first refining capacity in the Americas. CNPC already has an upstream presence in Brazil via its 10% stake in the Libra pre-salt field in the Santos Basin. The company is developing the field with Petrobras alongside fellow Chinese investor CNOOC and European oil majors Total and Royal Dutch Shell. Its subsidiary CNOPC also has 20 per cent of the Peroba pre-salt block with Petrobras and BP. Linking up its offshore footprint with investment in the Comperj refinery would afford the Chinese firm a more integrated presence in Brazil, which could serve as a blueprint for other international oil companies (IOCs). That said, Petrobras’ plans to open the door to broader private participation in Brazil’s refining sector were dealt a blow last week. In April, the company said it would divide four refineries and associated logistics into two parcels – one in the northeast of Brazil and one in the south – and sell a 60% stake in each. But on July 3 the company suspended this plan after a decision by a Supreme Court judge ruled that Congress’ approval and a tender were needed before a change in the shareholder structure of assets owned by public companies could take place. Petrobras also suspended the sales of a fertiliser factory and a gas distributor following the decision by Supreme Court Justice Ricardo Lewandowski. Should this decision be overturned and the sales programme get back on track, Petrobras’ plan could have a transformative effect on the downstream sector in Brazil. But this depends on whether the company can retain control over its fuel pricing, a subject that is being hotly debated following government intervention to resolve a nationwide truckers’ strike in May.

Potential investors could be drawn to the huge potential in the country’s downstream market. And like CNPC they might look to structure deals so that they take stakes in offshore fields to ensure a steady supply of crude oil feedstock for the refineries in which they invest. This could see upcoming bid rounds in Brazil take on greater strategic importance, as IOCs take advantage of a unique opportunity to buy an integrated position in the country off the shelf.

By NewsBase-ChinaOil publication

July 11, 2018:

A refinery in Saudi Arabia has shipped its RBOB gasoline to the United States for the first time, a potential precursor for more deliveries to a region where prices are currently at seasonal three-year highs.  The 400,000 barrels-per-day Jubail Satorp refinery, a joint venture between Saudi Aramco and French company Total, said in its verified Twitter account that it sent the shipment of reformulated blendstock gasoline - commonly called RBOB - to the United States. It did not say whether those barrels had arrived yet, and its exact destination was unclear.  The shipment is unusual because when Satorp was founded in 2008, it was not expected to send RBOB to the United States, as Saudi gasoline demand remained strong, said Robert Campbell, head of oil products research at Energy Aspects in New York. 

Satorp was not immediately available for comment.  Motor gasoline inventories in the United States fell to about 239 million barrels in the week to July 6, according to U.S. Energy Department data. Stockpiles were up from the same time last year, when inventories totaled 235.7 million barrels.  Market participants expect the additional supply could slow U.S. inventory drawdowns.  RBOB RBOB-DIFF-NYH prices have been trading at seasonal three-year highs as crude has rallied in the midst of the busy U.S. summer driving season.  Cash prices for the product in New York Harbor were at 2.00 cents per gallon above the futures benchmark on the New York Mercantile Exchange on Tuesday, the highest seasonally since 2015. The RBOB futures contract on NYMEX settled at $2.1603 a gallon on Tuesday. 

Energy trading companies often route vessels based on favorable spreads for crude oil and products, and right now moving gasoline to the United States is more profitable. But this shipment also could mean demand in Saudi Arabia is weakening, Campbell said.  The shipment suggests that the Americas has become one of the best destinations for surplus gasoline, he added. “It’s tough because that means Asia really is quite significantly oversupplied,” Campbell said.  Demand in Saudi Arabia has waned as the government has undertaken reforms that have reduced fuel consumption across several sectors, Campbell said.

By Reuters

July 11, 2018:

 Iraq’s oil ministry said Tuesday investors interested in bidding for the construction of the Kut oil refinery will have until Oct. 4 to submit their bids, Kallanish Energy reports.  The planned refinery, to be built in the Kut Province, south of Baghada, will have 100,000 barrels per day (BPD) of capacity. The project can be done under two investment models – build-own-operate (BOO) and build-operate-transfer (BOOT), the ministry statement said.  The information package for the project is available to companies at a price of $30,000. This is one of the several downstream investment opportunities in Iraq, as part of the country’s ambition to become self-sufficient in oil products.  Promoting the opportunity, the ministry noted under Iraqi investment laws, an investing company will be tax-exempt and the discount rate on the price of crude oil on the ship is 8%, but not less than $5 and not more than $10 from the global price.

By Reuters

July 11, 2018

The sale of the Come By Chance oil refinery is running into snags over the price according to news agency Reuters.  The owners of the plant, Neal Shear and Kaushik Amin, were attempting to sell the refinery to Irving Oil, but the deal has reportedly fallen apart in recent months.  The refinery was sold for $1.6-billion in 2006, but following a collapse in the global oil market, it sold for only $97-million in 2014, less than 10 years later.  According to Reuters, anonymous sources claim Shear was ready to sell the refinery for $250-million but Amin was pushing for $400-million.  The discrepancy put an end to talks with Irving, and the news agency reports that there are no longer any plans to sell the plant.

By Reuters

June 7th, 2018:

Following a ceremony of Duqm Refinery, held at its project site on 26 April, officials have formally issued a ‘notice to proceed’ (NTP) to the contractors of the three engineering, procurement and construction (EPC) packages worth US$5.75 billion. The issue of the NTP signifies start of the project schedule of the construction work of the 230 000 bpd Refinery project. The project is expected to complete and be ready for startup 42 months from the issue of NTP.Initially, contractors will allocate resources to complete detailed engineering design work at their home offices where they will be joined by staff from Duqm Refinery. Jacobus Nieuwenhuijze, Project Director of Duqm Refinery, commented: “This truly is an exciting and important milestone for all of us, since it not only signifies start of construction work but also culminates the efforts put in by stakeholders to have the project reach this stage.” He further added: “the contractors and the project team have prepared themselves thoroughly to ensure a solid start of the project activities.” The commencement of the construction work of this key project will also trigger other direct and indirect benefits to Duqm and the region. Duqm Refinery’s EPC scope of work is divided into three separate packages. The scope of EPC 1 includes the process units of the Refinery, while EPC 2 consists of the utilities and offsite facilities. EPC 3 includes the product export terminal at Duqm Port, the Duqm Refinery dedicated crude storage tanks in Ras Markaz and the 80 km interconnecting pipeline from these crude tanks to Duqm Refinery.

The contractors for the three EPC packages are:

EPC Package 1 (process units): joint venture (JV) of Técnicas Reunidas S.A. and Daewoo Engineering & Construction Co. Ltd.

EPC Package 2 (utilities and offsites): JV of Petrofac International Ltd and Samsung Engineering Co Ltd.

EPC Package 3 (offsite facilities): JV of Saipem SpA and CB&I.

The Duqm Refinery project is a 50/50 JV between Oman Oil Co. and Kuwait Petroleum International. It is being established in the special economic zone of Duqm. It is a project that would synergize the area of Duqm and make it a viable and strategic energy hub in the region.

By Hydrocarbon Engineering