October 17, 2012:

Cape Town - MPs on Wednesday expressed concern about the proposed new Mthombo oil refinery to be built in the Eastern Cape. "My reservations are partly where they want to site it..." Lance Greyling of the Independent Democrats said after a presentation by PetroSA to Parliament's energy portfolio committee. The proposed site - the Coega Industrial Development Zone near Port Elizabeth - had no infrastructure in terms of pipelines to the inland part of the country. This would probably add an extra R40bn to R50bn to the investment. Greyling questioned where the money and energy requirements would be sourced from. "In PetroSA's mind it might be a foregone conclusion, but it really needs to make sense from a financial point of view, because the money is going to have to be raised somewhere; Treasury is going to have to be involved, we going to have to take loans. "We are going to have to make sure we don't overspend and aren't able to repay that, and in the end it pushes up prices for consumers in a way that they can't afford." Greyling said serious debate was needed in the country before a firm decision was made to go ahead with the project. PetroSA's plans also clashed with the National Development Plan, he said. The NDP stated no firm decision needed to be made immediately. It would be less risky and more cost-effective to continue importing a share of the refined product until the country reached a stage where it could absorb the costs associated with building a new refinery, Greyling said. PetroSA CEO Nosizwe Nokwe-Macamo said the refinery's location was unlikely to change from the planned site at the Coega IDZ. However, she was unclear about how the refined product would get from Coega to where it was needed inland. The pipeline from Durban could be used to get fuel to Gauteng, where demand was highest.

"The pipeline is there, it exists, we sweat (derive value from) an asset and you are going to have to find ways of shuttling the product." Nokwe-Macamo would not say whether the end product would be shipped from Port Elizabeth to Durban, insisting they would only be able to answer that question after she received the results of a feasibility study to be completed by year-end. "We don't know yet, let's wait to December because we don't want to say vessels will be running all over the show, then you've got the environmentalists saying where are your EIAs?" she said. The study, which was being done in collaboration with Chinese state-owned company Sinopec, would give PetroSA an indication of the market size they were dealing with, what size plant was needed, and other issues on configuration. The results would also include a proposal on what equity stake Sinopec would get in the refinery, she said. Experts have warned the costs of building a refinery at Coega, along with building other related infrastructure, such as a power station and a pipeline, could be excessive and could see costs passed on to South African fuel users.

By fin24

October 17, 2012:

Rebekah Rast — America hasn’t seen a new oil refinery built in 30 years. That is until this upcoming year, when North Dakota will begin construction on a $400 million refinery. Nine years ago, North Dakota’s Three Affiliated Tribes asked the Department of Interior to put land in a trust for the building of this refinery, which will be used to produce feed for the tribe’s buffalo herd. Department of Interior Secretary Ken Salazar announced Oct. 10 that the tribe will have control of the land and may begin constructing the refinery next spring. Given the timing of this announcement, weeks before the presidential election, it begs the question was this decision politically motivated on the part of Team Obama or just mere coincidence? Tribal Chairman Tex Hall told the Associated Press that the refinery will process about 20,000 barrels of oil daily into diesel fuel, gasoline, jet fuel, propane and naptha, as reported by Bloomberg Businessweek. The state of North Dakota is now the nation’s No. 2 oil producer; producing an average of more than 700,000 barrels of oil each day.  Salazar estimates that this new refinery will create 140 new jobs for the state. While it’s exciting for the state of North Dakota and even the nation to have a brand new oil refinery it seems a bit out of character for this administration to approve of this project. “This wouldn’t be the first time Obama has taken politically motivated actions,” says Bill Wilson, president of Americans for Limited Government (ALG).  “If history is any judge, it is unlikely that the EPA and other regulators in a second Obama term would ever let this refinery open its doors.” After all, it seems the desire of many elected legislators, government bureaucrats and radical environmental groups is to rid Americans of their oil-dependent lifestyles.

California illustrates this perfectly.  The state has some of the most stringent fuel regulations in the nation, thanks to its accommodation of radical environmental policies. Due to these regulations, when a couple of its refineries went down due to maintenance and pipeline misfortunes, the price of gasoline hit an all-time high, as no other market could ease the burden.  In fact, The Wall Street Journal reports that “over the last two decades four refineries in the state have shut down rather than invest in expensive upgrades to comply with fuel regulations.” However, this problem doesn’t just plague the Golden State.  The Environmental Protection Agency (EPA) hasn’t exactly rallied behind the oil industry either.  Restrictions on refinery upgrades and construction, constraints on moving crude oil to East Coast refineries, and other compliance costs all create further strain on refineries. In fact, three East Coast refineries have already closed, costing thousands of jobs and causing the Department of Energy to warn that pump prices are likely to soar even higher in Eastern states. Meanwhile rather than tackling the high prices of fuel, this current administration busily works on energy alternatives like biofuels and electric vehicles by way of the taxpayer dime.

There is a huge demand for this refinery in the oil-producing state of North Dakota.  And because the refinery is on tribal land, transportation costs of the refined diesel fuel will be lower as the state’s normal 23-cents-a-gallon tax will not apply. As the Department of Interior seems to be on board with this one refinery, imagine if this same door opened for other companies wanting to build refineries? With more American oil and gas going to market, prices will be lowered across the board and many more American jobs would come available. Even if politically motivated, allowing this refinery to be built is a step in the right direction.

By NetRightDaily.com

October 16, 2012:

LOS ANGELES—A Los Angeles County civil grand jury is investigating El Segundo's tax dealings with the Chevron Corp. refinery. The Daily Breeze (http://bit.ly/TtuGmr) says the investigation includes a 1994 utility-user taxes agreement and goes beyond the Chevron refinery to examine the city's overall financial health. Eight months ago, city manager Doug Willmore was fired after proposing a significant increase in the taxes paid by the 840-acre refinery. The coastal city didn't disclose the reason for letting Willmore go, but Willmore believes it was related to his proposal. Willmore told the Breeze he met with the grand jury last month and that they were interested in the 1994 agreement and the current tax structure. Former city attorney Leland Dolley also said he had spoken to the grand jury, whose proceedings are secret.

By MercuryNews

October 17, 2012:

LONDON, Diesel and heating oil users in Europe and the United States may wonder why they are paying near record prices when recession has cut fuel demand and the price of crude is well below record highs. But while the world has enough crude, shrinking refinery capacity in Europe and on the U.S. East Coast means consumers will need to get used to regular price spikes as increasing dependence on imports reduces supply security. Europe is currently suffering a supply crunch in gasoil for heating and diesel due to pre-winter refinery maintenance, underpinning refined product prices even when crude prices fall, putting an additional cost on Europe's struggling economies. The diesel price before taxes in the 27 European Union nations was at 0.795 euros per litre at Oct. 8th, compared to 0.704 euros for the same time last year according to figures from the European Commission. Jet fuel -- like gasoil and diesel a middle distillate refined product -- is also vulnerable. A hitch at a Scottish refinery led to fuel rationing for planes at Edinburgh airport on Tuesday. In the United States, a failure to build stocks of middle distillates ahead of the fourth quarter due to a catalogue of refining outages has already built one price spike and could lead to further jumps in heating bills for U.S. consumers this winter. This level of volatility has been relatively rare before now, but the changing structure of the oil market will mean it is likely to become a regular feature in coming years.  Europe, where ageing refineries have to schedule lengthy maintenance outage periods, looks particularly vulnerable.

"Europe is going to be in trouble, so it's Europe that needs to make up its mind about products and refineries," Maria van der Hoeven, executive director of the International Energy Agency (IEA) said recently.  In a report released last week, the IEA cited several challenges besetting the industry, including diminishing demand, challenging environmental standards, constraints in feedstock access and an ageing refining fleet. As a result, it faces continued capacity attrition. Sharply falling demand in many European countries this year due to high euro-denominated prices has done little to alleviate the supply crunch. Market backwardation LGO-1=R, where the prompt contract trades at a premium, blew out to around $20 a tonne as the October ICE gasoil contract approached expiry.  Backwardation describes a market structure where prices for more prompt delivery are higher than those for later delivery, meaning there is no incentive for storage. In Europe gasoil stocks independently held at the Amsterdam-Rotterdam-Antwerp hub fell almost 4 percent week-on-week to their lowest level since January. But some analysts see the U.S. situation as more critical, as Europe's refineries will start coming back from maintenance this month. Across the Atlantic unplanned outages due to fires, explosions and failed starts have tightened the market. "In the U.S. they won't be able to recover as much ground as in Europe where there will be a large amount of capacity coming back as maintenance comes to an end, with much less coming back across the Atlantic," said Harry Tchilingurian, head of commodity strategy at BNP Paribas.

ENERGY SECURITY

Over the medium term Europe's problems are likely to be more acute, as U.S. refiners will reap the benefits of using cheap shale oil for feedstock. Europe will become more dependent on imports as its ageing fleet is wrongly configured to meet demand, failing to keep pace with the growth of diesel as a larger proportion of the transport fuel mix as motorists switch from gasoline. Although total road demand for diesel and gasoline is expected to shrink by 81 million tonnes between 2005 and 2030, according to a study by industry body CONCAWE, diesel imports will still be required to make up the shortfall. A rise in cross-continental trading means that Europe will be increasingly dependent on independent trading companies, committed to their own margins and attuned to arbitrage plays that could distort domestic markets. Europe will see refining capacity fall to 19.3 million barrels per day (bpd) in 2015 from 19.7 million in 2010, while Asia's will rise to 32.8 million bpd from 29.3 million over the same time period, according to Wood Mackenzie. A price arbitrage allowing middle distillates to come from Asia to Europe has opened up for the first time in six months this week, a trader said, with cargoes coming from India and elsewhere in Asia. "As sustained demand growth for middle distillates runs ahead of supply, consumers at peak demand times grow increasingly dependent on imports and various remote markets increasingly compete for limited supply," the IEA said. "The implications for energy security ... may be significant." These longer supply chains will introduce more volatility, said Alan Gelder, head of oils research at Wood Mackenzie.

"At the moment we are having a big spike in diesel/gasoil when there is a relative degree of calm. If there is a serious conflict, with more global movements, we could see much higher spikes." He added that changes in domestic supply needs in Asia, and swings in freight prices could also have a big impact on the availability and price of products coming from overseas. The Fukushima nuclear disaster in Japan saw a big spike in the price of fuel oil in the region, and the implications of similar supply shifts will be magnified elsewhere if more is exported between regions.

By Reuters

Rio de Janeiro's state government moved Tuesday to seize lands belonging to small Brazilian oil refiner Refinaria de Petroleos de Manguinhos SA (RPMG4.BR), with plans to revitalize the area with a housing project that would help ease overcrowding in nearby slums. The official decree was published after comments Sunday by Rio de Janeiro's governor, Sergio Cabral, who said that the government would spend 200 million Brazilian reais ($99 million) to take over the refiner's land, clean it up and build public housing at the site. "The Manguinhos Refinery has not operated as a refinery for a very long time, but instead as a large distributor of fuels such as oil derivatives and ethanol," the governor's office said. Rio state also said it was seeking BRL406 million in tax payments from the company, as well as BRL130 million in fines. Manguinhos Chief Executive Paulo Henrique Menezes said that the company was evaluating its next step after reviewing Tuesday's decree. Manguinhos will only comment on the government's plans "after studying the content of the decree, consulting with [the company's] lawyers and deciding on any measures that may be taken," Mr. Menezes said. The refinery is one of the few in Brazil not controlled by state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), which dominates local refining capacity. Manguinhos has the capacity to process about 15,000 barrels of crude oil a day, primarily into gasoline and fuel oil. Manguinhos's land also holds a large farm of storage tanks.

Rio state wants to build a planned neighborhood on the land to ease overcrowding in nearby shantytowns, the governor's office said. The development was unveiled after local police occupied the slums Sunday, part of ongoing pacification efforts in Rio de Janeiro to improve safety and remove drug gangs ahead of the 2014 World Cup and 2016 Olympics. Tuesday's decree will allow state workers to start evaluating the land and potential cost of cleanup efforts, the governor's office said.  On Monday, Manguinhos asked local stock regulators to halt trading in the company's shares while it investigated the possible expropriation of its land. Manguinhos's shares, which remain frozen as of Tuesday afternoon, closed at 66 Brazilian centavos ($0.33) Friday on the Sao Paulo Stock Exchange.

By Dow Jones Newswires