October 18, 2012:

NIAMEY - Niger's Chinese-operated Soraz oil refinery is currently operating at half its 20,000 barrel capacity due to an inability to compete with regional price levels, the West African country's oil minister said on Sunday. The refinery, 60 percent owned by Chinese state oil company CNPC and 40 percent by Niger, was inaugurated in November 2011 amid hopes it would make Niger fuel self-sufficient and bring down prices. A third of fuel production is destined for domestic consumption and the rest for export. However, the project has been plagued by problems including violent demonstrations by protesters complaining that fuel remains unaffordable. "Today Soraz produces 10,000 barrels per day, and it's saying that it is due to a shortfall in the export level," Foumakoye Gado said during a meeting with the refinery's managers. Niger's state oil company, Sonidep, has officially set the price of its exported gasoline at 360 CFA francs per litre, however there have been few takers among the country's neighbours. "The countries of the sub-region - Mali, Burkina Faso, Nigeria - want to come buy in Niger, but on the condition that they gain something ... They have to earn something, even if it's one franc per litre," Gado said. The minister said the government planned to put in place a panel charged with fixing more competitive price levels for 2013. Niger said last month it would reduce the cost of fuel at the pumps by about 7 percent next year after China cut the interest rate on the loan that funded the plant. But taxi drivers said the plan was not enough and earlier this month announced a 50 percent increase in fares.

A five-day strike by fuel truck drivers complaining of lengthy loading delays at the Soraz refinery ended over the weekend.

By Reuters

October 17, 2012:

Indonesia's OSO Group plans to build a $4.8 billion oil refinery in a joint venture with the State Oil Company of the Azerbaijani Republic (SOCAR), a partnership it hopes to formalise in November, a top OSO official said on Wednesday. The target for the refinery is to process 600,000 bpd when it opens in 2017. It would be located on part of OSO's concession in a free trade zone next to Batam island from where it could take advantage of busy east Asian shipping lanes. "We are going to refine all the group oil from Azerbaijan. The purpose is to trade or sell the processed oil to Indonesia or any other Asia-Pacific country," Mariano Asril, CEO of the OSO Group, told Reuters. "It would be funding from both (sides) but mostly from the Azerbaijan side but we will provide them with all the facilities, the permit, the land and everything," Asril said, adding that OSO hoped to sign a memorandum of understanding with Socar in November. The refinery would be a departure for OSO, a non-listed holding company whose diversified portfolio includes mining, palm oil, hotels, airline ground services and fisheries. OSO trades as PT Citra Putra Mandiri, according to the group's website. SOCAR has joint ventures with other international partners but this would be its first project in Indonesia.

By Reuters

October 17, 2012:

Saudi Arabia appears to be keeping its pledge to ensure global markets are well supplied with oil, barely letting up in shipments to the United States even after two of its biggest refining customers suffered crippling glitches. A Reuters analysis of U.S. import data shows sales to the world's top oil consumer have dipped less than 10 percent from a four-year high hit earlier this year. That decline was far less than expected given a six-month outage at a joint venture refinery in Texas and a devastating fire at a Chevron Corp. plant in California. The robust supplies came at a time when U.S. and European sanctions have slashed Iranian crude shipments to the world oil market. Some estimates show Iranian crude supplies down 60 percent in September from 2011 levels. U.S. crude imports from Saudi Arabia hit a four-year high of 1.425 million barrels per day in the first seven months of 2012, and have dipped only 130,000 bpd since then, according to preliminary weekly data through September from the U.S. Energy Information Administration. The reduction is about a third as much as Saudi Arabia was selling to the Port Arthur and Richmond refineries from January to July, according to separate monthly data from the EIA that show detailed imports by company and location. The two plants consumed nearly a third of all Saudi crude shipments to the United States in 2012. Throughout the year, Saudi Arabia has sought to calm markets on edge about potential supply disruptions. The OPEC nation hiked U.S. oil shipments by 20 percent in 2012 from year-ago levels -- the biggest increase since the Gulf War. The surprise surge was initially believed to be tied to the a major new joint-venture refinery expansion and customer demand.

Analysts say the data show that the increased Saudi exports had a deeper motive than simple customer supply: soothing markets worried by Western oil sanctions put in place to curb Tehran's nuclear ambitions. "Their relationship with the United States has grown more important, not less important," said Amy Jaffe, Executive Director for Energy and Sustainability at University of California, Davis. Jaffe cited Riyadh's potential desire to tighten ties with Washington due to tensions around Iran, civil war in Syria, and unrest in countries in the region that have been traditional allies. "One of the cornerstones of ensuring that the American public thinks of you as an ally is being the number one or two supplier of oil to the United States." The boost in shipments this year gave Saudi Arabia a commanding lead over Mexico as the No. 2 supplier of imported oil to the United States, even as overall U.S. imports decline on weaker demand and rising domestic output, the data show. Average supplies of Saudi crude to the United States through the first nine months of 2012 were 1.39 million bpd, according to Reuters calculations using preliminary weekly data and final monthly data from the EIA. That's up from 1.165 million bpd in 2011. The increased purchases by U.S. buyers came despite a lack of indications Saudi Aramco was offering deeper discounts. Now, with both Port Arthur and Richmond looking to restart late this year or early next, the question is whether Saudi Arabia will pump up exports again. Tanker fixtures by Saudi Arabia's state oil tanker company, Vela, to the U.S. Gulf Coast this year peaked in May at 18 in the run up to the Motiva Port Arthur expansion launch, and since then have been averaging about 7 per month, according to data from Poten and Partners.

Globally, supplies from Saudi Arabia are looking robust as well. A Reuters survey showed Saudi Arabia's output rose in September to 10 million barrels per day (bpd) from 9.95 million bpd in August. RISING

IMPORTS

Motiva -- a joint venture between Saudi Aramco and Royal Dutch Shell (RDSa.L) -- built up stocks at the Port Arthur refinery as it prepared open an expansion increasing throughput to 600,000 bpd from 325,000 bpd. The plant imported an average of 240,000 bpd of Saudi crude in the first seven months of the year, up from 160,000 bpd in 2011, according to a Reuters analysis of EIA data. During the March-to-June period, the plant took nearly 100,000 bpd more than it did on average in the previous year, before cracks discovered in pipes throughout the $10 billion upgrade forced it offline. Sources say the expansion could be back online by December, earlier than previous estimates for an early 2013 restart. Shipments for July, which would have been arranged before the problems were discovered, showed the plant took 260,000 bpd for the month. Detailed import data covering later months are not yet available. Since the pipe problems were discovered, Aramco and Shell have been working to rebalance Port Arthur's inventory needs and distribute the extra Saudi barrels in the older, 275,000 bpd section of the plant and throughout its refining system. "We had more crude coming our way that we were expecting to run, most of that coming from Aramco," Chief Executive Bob Pease told Reuters last month.

He indicated that Motiva's 235,000 bpd Convent, Louisiana, was able to take some of the excess supply, and that while Aramco and Shell's trading organization managed the flows smoothly, Pease said: "Not to say it wasn't challenging, it's a lot of oil when you're planning on it." "A portion of our crude was run on the other crude unit at Port Arthur, and Convent runs Arabian crude," he said. "They're always optimizing between those two." In addition to the problems at Motiva, Chevron's Richmond 245,000 bpd refinery, which was the third largest U.S. taker of Saudi oil in the first six months of 2012, shut its crude distillation unit after an early August fire. The plant took 175,000 bpd of Saudi crude in the first seven months of the year, up 34,000 bpd from average 2011 levels. While Port Arthur saw the biggest rise in Saudi supplies, other U.S. refiners have seen large gains this year. Marathon's 490,000 bpd Garyville, Louisiana refinery took just over 200,000 bpd of crude from the Kingdom in the first seven months of 2012, up 50,000 bpd from the previous year. The refinery, which completed a $3.9 billion expansion in 2010, added the Saudi crude as part of an overall jump in imports, which totaled 355,000 bpd in January to July 2012, up from 305,000 bpd in 2011. Valero's 225,000 bpd Texas City, Texas refinery took just under 100,000 bpd of Saudi crude period from January to July, up 45,000 bpd from 2011. Total imports averaged 190,000 bpd during the January to July period, up from 180,000 bpd on average for 2011, while the plant's imports from Mexico fell by 27,000 bpd. Mexico's imports have slipped this year as production drops.

"I think part of the deal is: 'We will keep your inventory tanks full, which will help in the event of an incident,'" said Sarah Emerson, director of Energy Security Analysis Inc. "This implicitly helps consuming countries manage the sanctions against Iran."

By Reuters

October 17, 2012:

India's state-run Bharat Petroleum Corp plans to shut half its 240,000 barrels per day (bpd) Mumbai refinery for about a month in March-April to improve yields, its refining head B. K. Dutta said on Wednesday. "There will be some improvement (in distillates yield)... we will be shutting one train," Dutta told Reuters. He said BPCL will be shutting a 120,000 bpd crude unit and associated vacuum distillation unit, and a hydrocracker among other units at the Mumbai refinery in western India. BPCL also operates a 190,000 bpd Kochi refinery in southern India. It plans to shut a 90,000 bpd crude unit and a fluid catalytic cracking unit at the Kochi refinery for maintenance for a month from mid-November, Dutta said.

By Reuters

October 17, 2012:

Sudan is in talks with various global companies including U.K.-listed Essar Energy PLC (ESSR.LN) to upgrade two oil refineries in the African country, its oil minister, Awad Ahmed Al-Jaz, said Wednesday. The minister said Sudan aims to double the capacity of one of the refineries from its present 25,000 barrels per day and increase the capacity of the other refinery to 50,000 BPD from 15,000 BPD. He didn't give any timeline for finalising the contracts. The minister was speaking on the sidelines of an energy conference.

By Dow Jones Newswires