April 12th, 2015:

Kuwait National Petroleum Company (KNPC) has decided to seek an additional sum of 871 million dinars ($3 billion) for its multi-billion-dollar Al-Zour oil refinery project after submitted bids exceeded budget, a newspaper reported on Sunday. "KNPC is going ahead and will start measures from today to request additional funds for this project," Kuwait's Arabic-language daily Al-Seyassah said, quoting KNPC CEO Mohammed Ghazi Al-Mutairi. Mutairi did not specify the additional amount, but Kuwaiti's Al-Rai newspaper quoted sources as saying the figure stood at about 871 million dinars. The Arabic daily said the final decision would be taken by the Supreme Petroleum Council.

Al-Seyassah quoted Mutairi as saying bids for all five packages for the project stood at least 20 percent above the 4 billion-dinar ($14 billion) budget allocated in 2006.  Company sources attributed the funding gap to a sharp increase in contracting and construction costs, the newspaper reported. The 615,000-barrels per day (bpd) Al Zour refinery in south Kuwait, one of the world's largest oil refineries, together with the mega clean-fuel project launched by the OPEC producer, will almost double its oil refining output capacity to 1.4 million bpd. Kuwaiti media had reported that Spain's TR (Técnicas Reunidas) group and the U.S. Fluor Corp have submitted the lowest bids for the two main contracts.

By Zawya 

April 7th, 2015:

The Yasref refinery in Saudi Arabia, a joint venture between Saudi Aramco and China's Sinopec has exported its first shipment of petroleum coke, the company said on Tuesday. The new 400,000 barrel per day refinery had previously started exports of diesel and gasoline. Yasref loaded 49,000 tonnes of petcoke from the port in Yanbu to an unknown destination, Yasref said. An industry source told Reuters the shipment went to India. Petroleum coke is produced by oil refiners from the heaviest, higher-sulphur crudes. It is a higher-energy, higher- sulphur fuel than most thermal coal. The refinery processes Arabian heavy crude.

By Reuters

February 1st, 2014:

There's still no word on whether or not a possible buyer may have been found for the Come by Chance oil refinery, despite rumours circulating about the future of the facility. VOCM's Linda Swain reports. 

The refinery was put on the block last fall after owner Harvest Energy's parent company, the Korean National Oil Company, announced that it was divesting itself of its Canadian assets. Since that time a number of rumours have circulated about possible buyers, including Irving Oil and British-based BP. Kari Sawatzky with Harvest Investor Relations in Calgary says they won't comment on speculation or rumour, but did say they continue to work through the process, and are looking at a number of different opportunities for the refinery. She says nothing has changed since the news first broke in September. In the meantime, it's business as usual at the refinery.

Source: VCOM

January 31st, 2014:

Safer practices and better steel could have prevented a deadly explosion at the Tesoro refinery in Anacortes, Wash., in 2010, according to a new report from the U.S. Chemical Safety Board. The blast killed seven workers. The federal investigators also said problems they found with cracked, corroded steel at refineries in Anacortes and elsewhere “strongly suggest an industry-wide problem.”

Four Years Later

On the first anniversary of the April 2010 blast, the Chemical Safety Board released preliminary findings: Microscopic cracks in the steel of a poorly maintained piece of equipment called a heat exchanger led to the explosion. Nearly four years after the blast, the board’s long-awaited inquiry said a variety of deficiencies led to the fireball that engulfed and killed seven workers. Root causes included unreliable inspections, weak regulations, and faulty industry standards that led Tesoro to operate equipment at unsafe temperatures and pressures, according to the long-delayed report. The report said the refinery had ineffective safeguards, hazard identification and control of hazards for 15 years before the blast. Leaks of hot, explosive fuels occurred frequently at the Tesoro plant, according to the Chemical Safety Board, and Tesoro did not always investigate what caused them. The report said Tesoro management was “complacent” about leaks. One of management’s responses to the frequent leaks was to have more workers on hand when restarting one of the refinery’s heat exchangers, an especially dangerous procedure. That practice contributed to the large number of deaths in the blast, according to the safety board.

Tesoro spokeswoman Tina Barbee declined to be interviewed. In a brief emailed statement, she acknowledged the efforts of the investigation teams and “the significant and successive turnover in the agency’s assigned personnel.” “We respectfully disagree with several findings in the draft report,” she wrote, “and, most importantly, take exception to CSB’s inaccurate depiction of our process safety culture.” Tesoro-Anacortes machinist and United Steelworkers Union Local 12-591 president Steve Garey said safety problems in the petroleum industry stretch far beyond Tesoro or Anacortes: The refining industry in general, they know what they’re supposed to do, and we believe that they don’t always do it. That’s why we lost seven at Tesoro. That’s why we lost 15 at Texas City eight years ago. It’s why we lost 11 people in the Gulf and polluted the entire Gulf of Mexico. It’s the reason Cherry Point burned a few years back, and it’s the reason Chevron Richmond plant burned and nearly killed 20 people and put thousands in the hospital. The report also said the understaffed Washington Department of Labor and Industries was unable to enforce workplace safety in complex facilities like oil refineries. Labor and Industries has only four specialists to regulate and inspect nearly 270 hazardous chemical facilities in the state, including five oil refineries. The safety board said Tesoro-Anacortes has improved some safety procedures since the blast and upgraded the steel in the equipment that failed. The Chemical Safety Board is taking public comment at a meeting in Anacortes Thursday night, and for the next 45 days, before finalizing its report.

An Hour’s Worth Of Revenue

In December, Tesoro reached a $39 million settlement with the families of the seven workers killed by the blast. The company is currently appealing its $2.4 million workplace-safety fine from the Washington Department of Labor and Industries. It is the biggest fine in state history for a workplace accident. It is also the equivalent of one hour’s worth of Tesoro’s revenue the year of the explosion. Last fall, in preliminary judgments that could be reversed when the Tesoro appeal has its formal trial before the the state’s Board of Industrial Insurance Appeals, Judge Mark Jaffe reduced the penalty by nearly two-thirds, to $859,000.

Source: OBP.org

January 31st, 2014:

Near the only four-way stoplight in Nixon, Texas, smoke rises off a pilot flare at the Blue Dolphin Energy Co. (BDCO) refinery that had sat cold for two decades. The employee parking lot is full, tanker trucks line up to unload crude and the silver distillation tower thrums. None of that was happening two years ago, when Blue Dolphin reopened the 10,000-barrel-a-day plant. Smaller refineries are known as “teapots” because of their size. The reason for the resurrection is illustrated across the street — the Screaming Eagle 1H Well. It’s one of thousands in South Texas, making the Eagle Ford shale formation among the world’s fastest-growing oil patches. Blue Dolphin, Valero Energy Corp. (VLO), Kinder Morgan (KMI) Inc. and others are trying to capitalize on the biggest boom in U.S. history by building new crude-processing equipment, reviving mothballed plants and opening new refineries. “We started this project in 2006, and I can’t tell you how many banks and other financing sources would ask us, ‘Where are you going to get your crude from?’” said Jonathan Carroll, Blue Dolphin’s chief executive officer. “We don’t get that question anymore.”

Directional drilling and hydraulic fracturing in shale formations such as the Eagle Ford and the Bakken in North Dakota helped U.S. oil production grow by a record 1.136 million barrels a day last year to 8.121 million, according to the Energy Information Administration.

Discounted Oil

That and restrictions on exporting crude have reduced the cost of American oil relative to the rest of the world. U.S. benchmark West Texas Intermediate was $97.76 a barrel today compared with $107.29 for European Brent. The discount has been a boon to U.S. refiners. The top three performers on the S&P 500 Energy Index since the beginning of 2012 are all refining companies: Valero, Marathon Petroleum Corp. (MPC) and Tesoro Corp. (TSO). It’s also crimped profit for producers such as ConocoPhillips (COP) and billionaire Harold Hamm’s Continental Resources Inc. (CLR), which have argued for easing export rules. U.S. refineries are better suited for heavier oil than the light, sweet crude that comes from shale deposits, they say. Companies will add 500,000 to 830,000 barrels a day of crude and condensate processing capacity to handle more light oil over the next five years, according to projections from Dallas-based Turner, Mason & Co. and Dallas-based Baker & O’Brien, Inc. It’s the largest gain in light-oil refining capacity “since the early days of U.S. oil production,” said Rick Thomas, a consultant with Baker & O’Brien.

Light Crudes

When that capacity comes online, it will absorb some of the excess light oil that producers want to ship abroad, said Andy Lipow, president of Houston-based Lipow Oil Associates LLC. The Nixon refinery was built in 1980, primarily to supply Air Force bases in the San Antonio area with jet fuel, Carroll said. It shut around 1990. Carroll began looking at the plant in 2006, a year after Hurricanes Katrina and Rita knocked more than 30 percent of U.S. refining capacity offline. The financial crisis delayed funding of the project, and by the time it started operating, the Eagle Ford was producing about 451,000 barrels of crude and condensate a day, according to EIA data.

Eagle Ford

“The Eagle Ford has created its own marketplace,” Carroll said. “It’s changed the course for others, and specifically for us, because we’re right in the middle of it, wells are literally across the street.” The refinery contracts with Genesis Energy LP (GEL) to purchase oil that it processes into jet fuel, diesel used by drillers and feedstock sold to nearby refineries. Blue Dolphin also has an option to purchase an idled 40,000-barrel-a-day refinery in Ingleside, Texas, near Corpus Christi. Small plants like the ones Blue Dolphin is targeting are simpler to reopen because they can get all their crude via tanker truck and have lower emissions than larger plants, making it easier to get environmental permits, Carroll said. Continental Refining Co. restarted in late 2012 a 5,500-barrel-a-day refinery in Somerset, Kentucky, that was idled in February 2010 when the previous owner couldn’t secure crude supplies. Continental runs mostly locally produced oil, and can also get Bakken crude by rail or barge, Missy Shorey, an outside spokeswoman for Continental based in Wichita Falls, Texas, said when the plant reopened.

New Refineries

In addition to reopening old plants, companies have announced or filed for permits to build at least three new refineries in North Dakota, one in Texas and one in Utah, all near oil fields. “Because of all the drilling activity, that’s created demand for fuel to support the drilling itself and transportation to and from the fields,” said John Auers, vice president of Turner, Mason, a firm of consulting engineers. “You get the benefit of having both discounted crude  and demand for product that’s in short supply.”MDU Resources Inc. and Calumet Specialty Products Partners LP (CLMT) are about 30 percent complete with building the 20,000-barrel-a-day Dakota Prairie plant near Dickinson, North Dakota, which will be the first new refinery in the U.S. since 2008. There hasn’t been a refinery built with more than 50,000 barrels a day of capacity since Marathon opened its Garyville plant in Louisiana in 1977.

North Dakota

MDU has drilled for oil and natural gas in North Dakota for 90 years, and operates electric utilities as well. When Calumet, which operates small refineries in four states that focus on specialty products such as lip balm and lube oil, approached MDU about building a new plant in 2011, the company immediately saw the value, said John Stumpf, MDU’s vice president of strategic planning. “Because of the Bakken, demand for diesel in North Dakota has gone from 40,000 barrels a day to upwards of 60,000,” he said. “We’re here purely due to the circumstances that exist because of the Bakken.” Bakken crude is even more discounted than U.S. benchmark prices. Oil at the wellhead in North Dakota was $19.32 a barrel less than WTI and $29.79 less than Brent yesterday, according to the marketing arm of Plains All American Pipeline LP. (PAA)

Easy Processing

The refinery will produce highway-grade diesel for sale to drillers, Stumpf said. It will send low-octane naphtha to Canada to be blended with bitumen for shipment. The heaviest residue will be sent to other Calumet refineries. The properties of shale oil such as its low density and sulfur content make it relatively easy to process. The Dakota Prairie refinery will consist of a crude distillation unit, a hydrotreater, a sulfur recovery plant, a hydrogen plant and an amine unit. “It’s not complex chemistry or sophisticated equipment designed to utilize every bit of the barrel,” Stumpf said. “We’re just heating crude up the distillation column, harvesting the distillate cut and converting all of that to diesel fuel.” The refinery cost will be about $300 million, or $15,000 per barrel of capacity. Motiva Resources LLC spent more than double that per-barrel cost in 2012 to refine an extra 325,000 barrels of high-density, high-sulfur crude at its refinery in Port Arthur, Texas.

Valero Investment

Larger energy firms are also investing in shale processing equipment. Valero is looking at spending about $790 million to add 175,000 barrels a day of crude capacity at refineries in Corpus Christi, Houston and Sunray, all in Texas. Kinder Morgan is spending $370 million on two 50,000-barrel-a-day condensate splitters, or simple crude units, on the Houston Ship Channel. At least three other companies have applied for permits in Corpus Christi for expansions or new equipment. The projects rely on an abundant supply of shale crude. Shale drilling is expensive and there is a risk that if oil prices plunge, so may production, Carroll said. A second risk is that the government eases restrictions on crude exports, which might also crimp supply. “These projects would be called into more question if we get increased exports of domestic crude,” said Bill Day, Valero’s San Antonio, Texas-based spokesman. “We would have to take another look at the economic prospects of the projects, whether they are still worth pursuing.”

Nixon Plant

For now, the Nixon refinery is focusing on expanding the amount of Eagle Ford crude it can process through its tower. Records indicate that the previous owner ran it at 17,000 barrels a  day at its peak and with some modifications that may rise to 20,000, Carroll said. The town around the refinery is booming. The school system, which got an infusion of property tax revenue when the refinery restarted, has built a new library and gymnasium for its high school. The company is talking to the city about buying the volunteer fire department new equipment. Signs advertise new motels and restaurants to come. “Before the oil boom came in, we were a depressed city,” said George Blanch, Nixon’s city manager. “The refinery has been able to get back on its feet, and they’re even talking about expansion. That’s good for us overall. Every little bit helps in small-town America.”

Source: Bloomberg