June 22, 2015:

The refinery, which started operating in 1967, serves much of the country's western region State oil giant Saudi Aramco is considering whether to close its 90,000 barrel per day crude oil refinery in Jeddah after several years because of age and environmental concerns, industry sources said.  The refinery, which started operating in 1967, serves much of the country’s western region and its closure would increase demand at other Saudi facilities.   It produces liquefied petroleum gas, gasoline, diesel, asphalt and jet fuel, and exports naphtha. 

Aramco was originally considering whether to close it in 2018 but now looks likely to postpone the closure to as late as 2022 because of growing domestic demand for oil products and since construction of a new refinery at Jizan, also on the Red Sea coast, has been delayed, said one source.  Another said Jeddah’s growth had left the refinery in the middle of the city, which created environmental issues that contributed to a likely decision to close it.  The sources declined to be named because they were not authorized to talk to media.   In response to questions by Reuters, Aramco said on Sunday that it had no information to release at this time.  Aramco has said it plans to bring the Jizan refinery online by 2018.   However, industry sources said this was now expected to be delayed by at least two years for several reasons, including technical problems with building infrastructure in the sea.  A Singapore-based trader said Saudi Arabia’s new Jubail and Yanbu refineries, operated by Aramco, France’s Total and China’s Sinopec, would likely supply gasoline output lost by the eventual closure of the Jeddah facility.  He said the impact on the international naphtha market would not be big as the refinery exported only about 40,000 tonnes per month.

 The United Arab Emirates’ Ruwais refinery is to raise yearly naphtha exports to over 10 million tonnes from the current 7.  5 million tonnes, traders have said.  IMPACT ON LUBEREFThe Jeddah refinery is next to, and supplies feedstock and power to, a base oil refinery run by Luberef, a joint venture between Aramco and Jadwa Industrial Investment Group.   Luberef makes a total of around 550,000 tonnes per year of oil lubricants from its two refineries at Jeddah and Yanbu.  Luberef said it was now considering whether to shut the Jeddah facility eventually and expand Yanbu.  “This is now in the planning phase and Luberef will be ready if Aramco’s Jeddah refinery closes, Luberef said in an emailed statement.  One source familiar with the matter said the Luberef shutdown could happen in 2020. 

Companies based in Saudi Arabia have received a request from Luberef to express their interest for front-end engineering and design work, industry sources said.  “They want to build a new vacuum distillation unit with a capacity of 26,000 bpd — they want to move some parts from the old plant,” said one.  Luberef is already expanding its Yanbu plant by doubling capacity to produce a new, high-quality base oil.  The company originally said it planned to start commercial production of this oil in the fourth quarter of 2015, but its statement to Reuters last week indicated the date would be later.  “Production of the G-II expansion will commence by the second quarter of 2016 of which high quality G-II base oil will be introduced in (the) local and export market,” it said.  

By Reuters

June 22, 2015:

Minnesota’s oldest oil refinery sees a bigger future with Bakken crude.    The refinery on the banks of the Mississippi River in St. Paul Park plans $100 million in upgrades that by next year will boost its refining capability to more than 100,000 barrels of crude oil per day.    With that upgrade, on top of significant investment since 2011, the refinery will be able to refine 29 percent more crude than it did when Marathon Oil Corp. sold it in 2010 to new owners.    Today, 58 percent of the refinery’s crude oil comes from North Dakota — a level that’s expected to grow. Five years ago, 51 percent of its crude arrived from Canada.    “It was effectively a Canadian crude refinery,” said Paul Anderson, vice president of investor relations and business development for current owner Northern Tier Energy. “Five years ago, Bakken was barely known — it was a very small stream, a very small part of our business strategy when we bought the refinery from Marathon.”   

The tilt toward North Dakota crude seems like a logical step for refineries in the U.S. midcontinent, especially as direct-to-refinery pipelines become available.  Yet it’s not possible for refiners to just flip a switch and go from processing heavy crude from Canada to light crude from the Bakken. Differing grades of oil usually are processed separately, using specially configured ­equipment.    “Most of the Midwest refineries are configured to process heavy oil,” said Sandy Fielden, an analyst with RBN Energy, a consulting firm in Houston. “A lot of the investment for Bakken has come late to the party.”    North Dakota oil production stood at 1.17 million barrels per day in April, a slight drop from the peak in December, but still more than three times greater than in 2008, when the shale oil boom arrived. Much of that oil has been shipped to coastal refineries. They are set up to process lighter oil, but mostly rely on deliveries via oil trains. Minnesota’s two refineries have been entirely served by less-expensive pipelines for decades.   

The state’s other, significantly larger refiner, Flint Hills Resources’ Pine Bend refinery in Rosemount, gets nearly 80 percent of its crude from Canada. In recent years, other Midwest refineries, including Marathon Petroleum’s refinery in Detroit and BP’s in Whiting, Ind., have invested billions of dollars to process crude from Alberta’s oil sands.    Now, midcontinent refiners are starting to focus on Bakken crude. In April, ­Calumet Specialty Products Partners and WBI Energy opened the $400 million Dakota Prairie Refinery near Dickinson, in western North Dakota, the first new U.S. refinery in nearly 40 years. It will turn Bakken crude into diesel fuel and other ­products.    Marathon Petroleum recently spent $250 million so that refineries in Canton, Ohio, and Catlettsburg, Ky., can handle more Bakken crude. And Marathon’s ­Robinson, Ill., refinery will boost light crude output by 30,000 barrels per day after a $140 million upgrade next year. Marathon also is an investor in the Sandpiper crude oil pipeline that will deliver North Dakota oil. It is projected to be in service in 2017.    Upgrading St. Paul Park    Northern Tier Energy, which also owns the SuperAmerica retail business, is planning a slate of upgrades to the St. Paul Park Refinery, and expects rapid payback.  One project estimated to cost $30 million will replace 1950s-era desalting equipment, which cleans crude before refining. The refinery also is making a $19 million upgrade that will boost output by up to 4,000 barrels per day of its No. 2 crude processing unit, which handles light crude from the Bakken.    “We will have the capacity of running over 100,000 barrels per day next year,” said St. Paul Park Refinery manager Rick Hastings.    The refinery’s current capacity is 97,800 barrels per day. In 2011, its daily stream capacity was 77,452 barrels.    Further out, the refinery is planning a roughly $10 million upgrade of the No. 1 heavy crude unit, and about $40 million in improvements to equipment that helps turn poor-quality refining residuals into gasoline, Anderson said.    Separately, a $60 million project is underway at a Clearbrook, Minn., oil terminal to construct four large storage tanks — two each for Northern Tier and Flint Hills. Company officials said they are the first refiner storage tanks built since the 1970s at the terminal, which is a waypoint for nearly all the crude flowing to the two metro refineries.    Seeking out specific oils   

Despite the shift toward Bakken supplies, Canadian crude is not exactly in decline. In early June, the Canadian Association of Petroleum Producers forecast their production will increase 43 percent to 5.3 million barrels per day by 2030. But the outlook is less optimistic than a year ago, when the trade group predicted 2030 production at 6.4 million barrels.    Both of Minnesota’s refineries are positioned to buy the lowest-priced and most-useful grades from U.S. or Canadian producers. Canadian crude, for example, is better than Bakken oil for making the petroleum base for asphalt used to pave roads, refinery manager Hastings said.    For Northern Tier Energy, some of the most interesting crude-purchasing opportunities are in the Bakken. Since late 2012, the company has operated a cost-saving trucking venture in North Dakota to collect crude oil at wellheads.    From that business, Northern Tier has discovered that some North Dakota wells produce crude whose distinct qualities make it optimal for the St. Paul Park refinery.

Now, the company is working to identify wells with the best-suited crude. The strategy is to collect that oil with Northern Tier’s trucking fleet, and later possibly build gathering pipelines to move it from well to refinery.    Northern Tier CEO Dave Lamp calls the concept “quality arbitrage” — a way to increase refinery margins by picking a subtly different grade of crude oil. “If you can pick those barrels … there is a significant upgrade in margin,” Lamp said at an investor conference in May.    

By StarTribune

June 22, 2015:

The start-up of Kuwait's al-Zour crude oil refinery is expected to be delayed after rising construction costs forced state refiner Kuwait National Petroleum Co (KNPC) to seek more money to finance the plant, a KNPC spokesman said on Monday. 

Officials had previously said start-up would occur by late 2018 or early 2019 and pegged the cost of the facility at 4 billion dinars ($13.3 billion).  But KNPC spokesman told Reuters by telephone: "We are seeking additional funds to start awarding (contracts). We are already two months behind and we don't know when we will get the funds."  KNPC said in a statement that a request for the new government money would be submitted to the Supreme Petroleum Council, a top oil policy body. The company did not say when the request might be approved or how much extra money KNPC needed, but Kuwaiti daily al-Seyassah quoted the company's chief executive Mohammed Ghazi al-Mutairi as saying the amount was estimated at 800 million dinars. 

The 615,000 barrel per day oil refinery, originally planned more than a decade ago, would be the biggest in the Middle East, but the project has been repeatedly delayed by bureaucratic and political issues, including tensions between Kuwait's parliament and the cabinet.  KNPC said it had asked companies which had bid for work on the project to extend the validity dates of their bids until it obtained the new funds.  Bids for one of the contracts, related to the tank farm, did not meet specifications so the company is inviting fresh bids and set July 7 as the date for them to be submitted.  The refinery will make diesel, kerosene and naphtha for export and low-sulphur fuel oil for domestic power stations.  

By Reuters

June 22, 2015:

Kuwait has approved an additional 800 million dinars ($2.6 billion dollars) for the budget of the planned Al-Zour oil refinery following a sharp rise in the value of submitted bids, according to a Kuwaiti oil official.    “We have obtained final approval from the board for the additional funds in the budget of Al-Zour project,” Mohammed Ghazi Al Mutairi, CEO of the state-owned Kuwait National Petroleum Company (KNPC), told Kuwait’s Arabic language daily ‘Al Seyassah’.   

He said the increase pushed up the refining project’s total investment to between 4.6-4.8 billion dinars (14.95-15.5 billion dollars).    He said the remaining packages of the project, involving one of the world’s largest refineries, would be awarded after funds are approved by the Supreme Petroleum Council.    Al Mutairi said seven companies in the world have the resources to “execute and operate” such giant refining projects, adding that all those firms have bidden for projects in Kuwait, including Al-Zour refinery in South Kuwait.    Early this year, KNPC said it set the budget of four billion dinars (14 billion US dollars) for Al-Zour in 2006 and attributed the surge in costs to a sharp increase in building material prices, as well as contracting and construction costs.  

In a recent report, Kuwait’s Arabic language daily ‘Al Anba’ said Spain’s TR group and the US Fluor Corp have submitted the lowest bids for Al-Zour’s two main contracts.    It said TR (Técnicas Reunidas) submitted a bid of 1.7 billion dinars (5.85 billion US dollars) for package 1 while Fluor made a bid of 1.2 billion dinars (4.14 billion US dollars) for packages two and three involving main construction work.    It did not mention the remaining packages but said bidding for most of the contract’s packages had been extended over the past months because of the price rise.    The 615,000-bpd state-of-the-art Al Zour refinery, one of the world’s largest oil refining unit, and the development of the existing two main refineries will double Kuwait’s refining output to nearly 1.4 million bpd within four years.    

By AFP

June 22, 2015:

Energy giant Total has signed an agreement to sell its 16.67 percent interest in the Schwedt refinery in northeastern Germany (Brandenburg) to Rosneft, which already holds indirectly an 18.75 percent stake in the facility.

The transaction is valued at $300 million excluding working capital and remains subject to customary approvals.     “The sale of our minority interest in the Schwedt Refinery is in line with our 2017 target to reduce Total’s European refining and petrochemical capacity by 20 percent, as announced in 2012. Monetising this non-core asset also contributes to the Group’s accelerated disposal program in 2015 and demonstrates Total’s commitment to actively manage its portfolio across all segments,” said Philippe Sauquet, president of Total Refining & Chemicals.     

Located in northeastern Germany, the Schwedt Refinery has a capacity of 12 million tonnes per annum (mtpa). The refinery is owned by Shell (37.5 percent) and indirectly by Rosneft (18.75 percent), BP (18.75 percent), Total (16.67 percent) and ENI (8.33 percent). 

Located in northeastern Germany, the Schwedt Refinery has a capacity of 12 million tonnes per annum (mtpa).    

By Business Standard