Downstream Monitor - MEA Week 38

Issue 175 24September2014 Week 38

Turkeys pipeline planning Turkeys BOTAS has started the process to construct a gas import pipeline

from Iraq to Turkey despite no gas export agreement having been finalised with the government in Baghdad.

Weighing up the market NewsBase talks to EPConsult Energies about growth opportunities in Africa,

as the international engineering firm weighs up the industry.

Aramco looks at Asia acquisition Saudi Aramco is reported to be considering purchasing a 40% stake in a

greenfield refining and petrochemicals complex being developed by Thailands PTT in the south central coast region of Vietnam.

COMMENTARY 3

Turkey moves to establish Iraq-Turkey gas pipeline 3

Downstream momentum develops for Africa 4

Egypt on the rise 5

POLICY 7

UFG may drop Egyptian lawsuit 7

REFINING 8

Aramco linked with Vietnam mega-refinery 8

Bahrain pushes on with Sitra refinery expansion 8

FUELS 9

UAE, IDB to help ease Egyptian fuel shortage 9

PETROCHEMICALS 10

KNPC plots Al-Zour petchems integration 10

Industries Qatar shelves Al-Sejeel 11

KBR wins Algerian fertiliser design deal 11

Iran plans to boost petchem feedstock 12

PIPELINES 12

Oxy eyes part-sale of Dolphin stake 12

Poor security in Iraq delays delivery of Irans pipeline gas 13

IS uses diverse smuggling tactics 13

TERMINALS & SHIPPING 14

Egypt secures financing for Suez Canal expansion 14

TENDERS 14

Aramco retenders for Ras Tanura upgrade 14

NEWS IN BRIEF 15

Downstream Monitor MEA 24 September 2014, Week 38 page 3

Copyright 2014 NewsBase Ltd.

www.newsbase.com Edited by Ian Simm

All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All

reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Turkeys state gas importer and transit

pipeline operator BOTAS has begun the

bureaucratic process for the development

of a gas transit conduit through the

countrys south eastern Mardin and

Sirnak provinces. With the line set to

terminate at the countrys border with

Iraq, it has clearly been designed as an

import pipeline. The process involves the

preparation of a 272-page environmental

impact assessment (EIA), which has been

submitted to Ministry for Environment

and Urban Affairs, which in turn has

made the report available for public

scrutiny ahead of a public consultation

meeting to be held in the region on

October 1.

According to investment plans

published previously by BOTAS, the

Mardin-Sirnak line should be nothing

more than an extension of the transit

branch line currently being constructed

from Diyarbakir to Mardin, designed to

link Turkeys far south eastern provinces

to the countrys expanding gas

transmission infrastructure and allowing

for the establishment of urban gas

distribution and gas fired power plant.

This is borne out by the detailed plans

in the EIA which indicates the

construction of a 185-km line with five

take-off points at major urban

conurbations and a branch line running

from the town of Cizre, to the regional

capital of Sirnak.

However, a line designed purely for

regional gas transmission has no need to

continue to the Turkey-Iraq border along

a route with minimal population, running

for the final few hundred metres to the

border, through a cordon sanitaire

which already carries the existing

Kirkuk-Ceyhan oil line.

Nor would it need to cross the border

at the KRG controlled town of

Fishkabour, the site of the junction

between the KRGs main crude pipeline

and the Kirkuk-Ceyhan line, and the

KRGs metering crude oil station.

More significantly still, a line designed

purely for regional transmission could be

expected to be constructed using 10 inch

(254 mm) pipe exactly what is being

used for the Cizre-Sirnak branch.

Pipeline progress

As with the Diyarbakir Mardin line,

which BOTAS says will be completed in

early 2015, the Mardin-Sirnak gas line

will be constructed using 40-inch (1,016

mm) pipe, giving it a maximum capacity

of up to 20 billion cubic metres per year.

This figure depends on a number of

factors, such as the wells supplying the

line and the number and capacity of

compressor stations installed, but as a

ball-park maximum serves to indicate

both the lines potential maximum

capacity, and its likely use.

With Turkeys total gas consumption,

most of which is accounted for by the gas

and power demands of the main cities

west of Ankara, set this year to reach

only 49 bcm it does not take much to

understand that 20 bcm per year is far in

excess of whatever demand could be

expected in two of Turkeys most

impoverished regions whose combined

population barely tops 1 million.

The line is clearly designed for

importation of gas from Iraq, and given

the potential volume of gas involved

which is far in excess of what Turkey

requires for its own needs well into the

next decade, also offers the potential for

significant exports to Europe.

Squaring the triangle

In a week in which Turkey and

Azerbaijan were more than happy to

trumpet the breaking of ground for an

expansion of the South Caucasus gas

pipeline, which will feed the planned 31

bcm Trans-Anatolian gas pipeline

(TANAP) line, of which around 25 bcm

per year can be exported to Europe, it

could be considered unusual that a

planned import line from Iraq which

could supply close on 20 bcm per year to

Europe has attracted almost zero

publicity.

Especially as Iraqi gas could help fill

the 15 bcm of capacity in the TANAP

which has yet to be allocated.

COMMENTARY

Turkey moves to establish

Iraq-Turkey gas pipeline

Turkeys BOTAS has started the process to construct a gas import pipeline from Iraq to

Turkey despite no gas export agreement having been finalised with the Iraqi central

government

By David OByrne

BOTAS has submitted an environmental impact assessment (EIA) for the 185-km project The Mardin-Sirnak line will have a maximum capacity of up to 20 bcm per year Despite being designated for transmission within Turkey, it was likely designed with imports in mind

The Mardin-Sirnak gas

line will be constructed

using 40-inch (1,016 mm)

pipe, giving it a maximum

capacity of up to 20 billion

cubic metres per year






Given the current parlous situation in

Iraq however, Turkeys reticence in

publicising this latest planned addition to

its gas import portfolio is perhaps

understandable.

Turkish plans for importing gas from

Iraq and for transiting Iraqi gas to

Europe, began in 2008 with talks with

the central government in Baghdad over

the possible importation of gas from

Iraqs southern Basra region.

However, in 2012, relations with the

Baghdad government of Nouri al-Maliki

had all but collapsed, while those with

the Kurdistan Regional Government

(KRG) had prospered.

In early 2013, then Turkish Prime

Minister Tayyip Erdogan announced that

Turkey had formed a joint venture with

ExxonMobil to extract gas from fields in

the Kurdistan Region for export to

Turkey while later in the year Turkey and

the KRG signed an agreement to allow a

Turkish state company to develop other

exploration blocks thought to hold gas.

More recently Anglo-Turkish upstream

operator Genel Energy has announced

that the Miran and Bina Bawi gas fields

to which it holds rights could be

developed to supply 4 bcm per year for

export by late 2017, rising to 20 bcm per

year by 2020.

Although such a timetable could be

viewed as optimistic given how little

exploratory work has been done on the

fields, it would fit neatly with the

possible development of the Mardin-

Sirnak line which can reasonably be

expected to be completed within the next

three years.

All that remains then is for Turkey, the

KRG and the new government in

Baghdad to reach an agreement on the

export of hydrocarbons from the

Kurdistan Region. An eventuality

difficult enough without the insurgency

of Islamic State (IS) militants in the

northwest of the country against whom

an international US-led coalition has

already begun taking action.

The irony being that the one country

missing from the coalition, is that which

appears most likely to benefit from the

expulsion of IS, Turkey.

In an exclusive interview with

NewsBase, Martin Larsen, managing

director of EPConsult Energies, talked of

difficulties posed by instability in the

Middle East and the opportunities for

growth in Africa. The Middle East is

important in terms of reserves and the

provision of hydrocarbons to the world

but politically it is unstable at the

moment with volatility in Iraq, Syria and

Yemen, he said. There is plenty of

planning and development work for new

projects but less implementation.

The challenge for the region is to

balance production while maintaining the

price of oil, he added, noting his

companys role in trying to bring

stability to projects.

Our role is to optimise the potential of

a project in its implementation we use

cost-benefit analysis in everything we do

to keep cost to a minimum while seeking

to maximise outcome, said Larsen.

In respect to the fourth gas train project

at the Mina Al-Ahmadi Refinery for the

Kuwait National Petroleum Corp. (KPC),

EPConsult Energies was commissioned

to identify improved ways for the

implementation activities of engineering,

procurement and construction (EPC).

Once in production, the new gas plant

train will have a capacity of 805 million

cubic feet (22.8 million cubic metres) per

day in addition to 106,000 barrels per

day of condensates. On this project,

Value Engineering was geared to identify

[the] optimum way for implementation

considering that it was a fast-track

project, Larsen said.

One area in the Middle East that is

implementing new projects is Saudi

Arabia as it sets out to expand production

from its gas sector. It is not an area

where EPConsult Energies is currently

very active, although the firm recently

completed Value Engineering study for

Al Khafji Joint Operations (KJO) and has

also supported Saudi Aramco with study

work to prepare them for increased gas

production from their offshore fields.

The work involves optimising the

offshore support fleet, looking to reduce

operating expenditure (OPEX) without

compromising HSE risks.

EPConsult Energies is more

established in Oman, which wants to

develop its offshore industry.

COMMENTARY

Downstream momentum

develops for Africa

EPConsult Energies talks to NewsBase about growth opportunities in Africa, as the

international engineering firm weighs up the industry

By Jon Stibbs

While there is frustration about the present instability in the Middle East, Oman is a focus for growth The firm has bid for the Kenya-Uganda oil pipeline project, which could release East Africas oil potential De-risking projects is defined as essential to the complete project undertaken by EPConsult Energies






The company has prepared a

Quantitative Risk Assessment (QRA) for

Occidental Petroleum (Oxy) and worked

in the sultanate for Oman Oil Refineries

and Petroleum Industries Co. (ORPIC),

conducting hazard and operability

(HAZOP) study. Although we have

nothing immediate lined up, we have

good contacts in Oman I love it there

and we plan to go ahead with new

projects, said Larsen.

Omans government has asked

Petroleum Development Oman (PDO) to

increase production to 600,000 bpd from

its long-term plateau of 500,000-550,000

bpd, which is has held for the three years.

The country also plans to double the

number of fields at which enhanced oil

recovery (EOR) techniques are used to

30% over the next 10 years, although the

move to EOR will bring significant cost

increases. Larsen highlighted that

because Omans fields are smaller than

Saudis, Oman can expect its unit

technical costs (UTC) per barrel will be

significantly higher than its neighbour.

For the oil, gas and petroleum industry

the African continent is expected to be

important in the foreseeable future. We

have worked in all the Middle East

countries, as well as all of North Africa

and in East and West Africa, he said,

noting that assessing and identifying risk

is an essential component of EPConsult

Energies work.

What clients always want is for us to

de-risk a project by selecting the best

design or selecting the optimum

production operations approach. This

typically involves studying ways to

minimise CAPEX and OPEX while at

the same time reducing the risk to

personnel, environment, asset and

reputation. Larsen said. Where risks are

high, the company suggests ways of

mitigating the issues and assessing

whether they can be made acceptable.

Looking forward

Looking forward, Larsen predicted that

EPConsult Energies would maintain its

role in Europe including the North Sea

the Middle East, south-east Asia, where

Indonesia and Malaysia will be

important; he also singled out India.

However, he said: We think Africa will

be most important in terms of growth.

EPConsult Energies worked on the

West African Gas Pipeline (WAGP)

project in Nigeria and Benin, which

Larsen described as, very interesting,

politically and technically, after they

were pulled in at a late stage to perform a

QRA. Given the timing, the project was

mainly focused on the implementation of

risk-reduction measures through changes

in procedure. The project infrastructure

had been damaged by a third party

interaction, which is a challenge in

several parts of the world where the oil

and gas industry operates. Sabotage is

something we need to live with because

it is a simple way for terrorists to get

attention and pipelines make easy

targets, he said. It is costly but possible

to engineer around this challenge.

EPConsult Energies has bid to

participate in the Kenya-Uganda crude

oil pipeline project, which could be

extended into Rwanda and Sudan, and

has the potential to open up East Africas

oil exporting potential. The project is

complicated by the various political and

national interests involved, as well as the

risk of pipeline attacks. Its an exciting

project, said Larsen but the technical

challenges are not the most difficult

aspect. There are also social and cultural

aspects associated with the pipeline that

need to be tackled. EPConsult Energies

said it would contract local companies

for their support in the engagement with

communities along the route to the coast

of Kenya to ensure the smooth running of

the project.

The firm sees its best prospects for

growth from its existing references in

West Africa and the East African gas

bonanza from Mozambique through

Tanzania, Kenya and Ethiopia, and also

the waxy crude of Uganda. The opening

up of these markets promises huge

changes to the region and could reshape

the hydrocarbon-producing world. The

issue for Africa will be to locate the

finance to pay for the downstream

projects required to make their industries

develop and flourish.

Few have benefited from the incursion of

Islamic State (IS) militants into Iraq and

Syria, but the situation may have its

advantages for Egypts new President

Abdel Fattah al-Sisi.

Not only has his draconian crackdown

on the moderate Islamists of the Muslim

Brotherhood been given a spurious

legitimacy, but both Western and

regional powers are now queuing up to

offer financial support to Cairo.

Bilaterally, and through various

financial institutions, they hope such

funds will buttress the political stability

of the regions most populous country

and ensure Al-Sisis acquiescence in

military moves against the militants.

COMMENTARY

Egypt on the rise

Despite lenders and donors queuing up to help Egypt, and investors tentatively returning,

the region needs more long-term stability as considerable challenges remain

By Clare Dunkley

Foreign oil firms are bidding for and winning new oil licences, despite government payment problems Domestic investors have responded positively to the Suez Canal project share sale






Domestically, a population weary after

three years of political upheaval have

accepted sweeping fuel subsidy cuts

imposed by the new government

relatively quietly compared to the

reaction to its Islamist predecessors

attempt to do the same.

Meanwhile, the sale of investment

certificates launched in early September,

restricted to Egyptian nationals and

institutions, appears to have signalled a

degree of confidence in the new regime.

The newly announced national project to

expand the Suez Canal openly billed by

Central Bank of Egypt governor Hesham

Ramez as a patriotic duty reached its

60 billion Egyptian pound (US$8.4

billion) target, aided somewhat by its

generous rate of return. All in all, it

seems Al-Sisi is being given the benefit

of the doubt. The five-year, non-tradable

Suez Canal investment certificates

formally part of the Long Live Egypt

Fund went on sale on September 4.

Sales hit target eleven days later, a clear

success for the government in its

determination to eschew further foreign

debt. While the proportion of retail rather

than institutional investors is unknown,

the 12% return was far higher than that

obtainable on ordinary savings deposits.

There are also concerns surrounding

the sapping of local liquidity and the

management of the Suez Canal project.

The scheme calls for the construction of

a 72-km parallel channel allowing north

and southbound vessels to pass each

other, thus enabling uninterrupted

passage, reducing costs and security

worries for traders. Cairo predicts an

almost doubling of throughput and

almost trebling of annual revenues, to a

projected US$13 billion, over the coming

decade. Casting doubt on the

thoroughness of the planning process,

Al-Sisi called in August for the

implementation timeframe to be

shortened to one year from three. The

onshore work which accounts for about

US$4.5 billion of the investment has

also been announced by successive

governments, with no palpable progress.

However, with international demand for

new capacity present, and with the

government sorely needing to boost state

revenue sources in the face of a widening

budget deficit, the Suez capital-raising

can be considered an important success.

Call to alms

In spite of Al-Sisis determination to deal

with the countrys economic woes, three

years of domestic unrest investment and

falling tourism have taken a downturn,

necessitating a wide search for

international financial assistance, and

calls for foreign firms to continue or

resume investing. Both appear to be

being heeded, with a slew of institutions

lining up in August and September to

extend monetary help, and with other

firms hydrocarbon investment activities

bearing fruit. Since the ousting of former

president Mohamed Morsi, the Gulf

monarchies of Kuwait, Saudi Arabia and

the UAE fearful of domestic Islamist

threats have been eager to prop up the

new regime.

On September 1, a US$9 billion deal to

finance the import of oil products came

into effect between Egyptian General

Petroleum Co. (EGPC) and Abu Dhabi

National Oil Co. (ADNOC), reportedly

repayable at 2-3% over four years. Two

weeks later, an agreement was reached

for ADNOC to supply the fuel. A

shortage of gas is posing a huge problem

for the government from various angles.

The diversion of national gas output

away from exports and towards domestic

demand has reduced foreign currency

income, leaving the government indebted

to the tune of some US$5.9 billion to

international oil companies (IOCs) and,

as a consequence, deterred both existing

and future investors in the sector.

However, the alternative of permitting

fuel shortages to occur would be

politically suicidal at a time when the

public is just reluctantly adapting to

the higher fuel prices brought in by the

strict 2014/15 budget effected on July 1.

This years financial plan cut fuel price

subsidies by one third, to 100 billion

Egyptian pounds (US$14 billion), in an

attempt to rein in the budget deficit to

10% of GDP, from 12% the previous

year. On September 16, Finance Minister

Hany Kadry told a conference in Cairo

that the government intended to cut the

overall subsidy bill by 90% over the next

four years, while promising careful

targeting to ease the burden on the

poorest.

On top of the direct budgetary rewards

of the new regimes fiscal austerity, such

reforms are also a condition for the IMF

releasing a proposed US$4.8 billion loan

package which has been under

negotiation since 2011. An agreement is

therefore expected soon again likely to

have both direct and indirect benefits for

the countrys perceived creditworthiness

in foreign investors eyes. As a harbinger

of its improved relationship with the

fund, Cairo has requested that its delayed

Article IV economic assessment be

conducted as soon as possible, ahead of a

planned investment conference in

February.

We hope that the [IMF] report comes

in favour of Egypt and contributes to the

return of foreign flows, either directly as

investments in the real economy or

indirectly by improving the stock

market, the finance ministry stated on

September 13. International institutions

are also playing their part in funding

specific fuel-related projects to ease Al-

Sisis economic woes. On September 11,

the international co-operation ministry

announced that the World Bank had

extended a US$500 million, 30-year loan

to fund a project to connect 850,000

Egyptian homes to the natural gas grid.

The ministry added that the EU was

planning 700 million euros (US$900

million) in financial assistance by the end

of the year, as part of the European

Neighbourhood and Partnership

Instrument scheme.

COMMENTARY






Meanwhile, the finance ministry

announced on September 14 that the

Jeddah-based Islamic Development Bank

had approved a US$198 million, 15-year

loan towards the delayed upgrade of the

Assiut refinery, to convert low-grade fuel

oil to more useful products.

New growth

While the willingness on the part of the

international community to ease the path

of the new government is undoubtedly

welcome, it is the return of investors and

tourists that will be crucial to more

sustainable economic health.

The urgent need for both the proceeds

and the products of the oil and gas

industry make the call to this sector

particularly pressing, but the recent

history of debt and export diversion, as

well as fears of physical and political

security, has made both new and existing

partners wary. Major investors, such as

the UKs BG, have been explicit in their

anger and frustration, the company

warning the government in July that debt

repayment was a prerequisite for any

further investment. As operator of one of

the countrys two LNG projects BGs

stance is understandable, having been

pushed to declare force majeure to

customers and sustain losses as a result

of Cairos requisitioning of gas supplies.

In July super-major BP, also owed over a

billion dollars by the government,

publicly refuted a claim by Oil Minister

Sherif Ismail that its US$10 billion

development of the West Nile

Delta/North Alexandria concession had

resumed, indicating that further

discussions were required to regain trust.

However, several investment green

shoots appeared in late August and early

September. The results of last years

December bid round were announced,

resulting in seven deals worth a total

US$187 million. Signatories included

Germanys RWE Dea, Tunisias HBSI

and Italys Edison Canadas TransGlobe,

for blocks in the Gulf of Suez and the

Western Desert, though full licence

details have not yet been released.

Shortly beforehand, South Africas

Sacoil even risked investment in an

exploration asset the Lagia licence in

Egypts dangerous Sinai region, where a

home-grown Islamist militant group is

based. More immediately important

given the severe fuel shortage, was

RWEs late August start-up of gas

production from the Disouq development

in the West Nile Delta, and BPs work

with Eni on the Denise-Karawan project

in the East Nile Delta. Egypt is

undoubtedly still suffering severe

economic challenges, but the past

months string of financial and

investment achievements suggest that

Cairo is confident of attaining the IMFs

provisional seal of approval, should it

consent to return. It seems that in the

midst of a turbulent region, the

comparable stability provided by the Al-

Sisi administration may be enough to

stoke renewed interest in the country.

Union Fenosa Gas (UFG) may drop a

multi-billion dollar lawsuit against

Egypt, if the government allows the

company to import Israeli gas to its idle

liquefied natural gas (LNG) export plant

in Egypt. The arbitration has not been

suspended but UFG would be ready to

talk about it under certain circumstances

In a September 16 filing Reuters

reported that UFG, a joint venture largely

owned by Spains Gas Natural and

Italys Eni, may negotiate its position.

The arbitration has not been suspended

but UFG would be ready to talk about it

under certain circumstances... its on the

negotiation table, said an anonymous

source who spoke with the news agency.

UFG launched the lawsuit for breach

of contract in the International Chamber

of Commerce last year, after gas

shortages led the Egyptian government to

divert supplies towards growing

domestic needs, forcing the company to

suspend exports from its plant at

Damietta in 2012. While Egypts oil

ministry did not respond to a Reuters

request for comment, UFGs willingness

to drop the lawsuit may help unlock the

Israeli import deal after Egyptian

authorities in May said that approvals

could not otherwise be granted. In May

2014, Houston-based Noble Energy,

which owns a 36% stake in the Tamar

gas field offshore Israel, announced the

execution of a non-binding letter of

intent (LOI) between the Tamar partners

and UFG for the sale of 70.8 billion

cubic metres of gas over 15 years.

Turning the letter into a viable contract,

however, ultimately requires the

Egyptian governments approval. Egypt,

which is facing its worst energy crisis in

years, owes around US$5.9 billion to

foreign oil and gas firms operating in the

country, including UFG, after it diverted

energy supplies earmarked for export.

They [UFG] are confident that the

Egyptian government will not block this

project because it makes economic sense

and it has some compelling long-term

benefits for Egypt and its people, by

restoring investor trust and freeing up

more gas for domestic use, Reuters

source added. As with the negotiations

between Israel and Jordan which have

yielded three letters of intent for the

export of natural gas so far this year the

US is also understood to be involved in

discussions with Egypt. Indeed, as US

State Department Acting Special Envoy

and Coordinator for International Energy

Affairs, Amos Hochstein tweeted two

weeks ago: Good day of mtgs in #Egypt

on energy challenges & opportunities.

constructive atmosphere. optimistic &

hopeful w/ministry ldrshp #EastMed.

COMMENTARY

POLICY

UFG may drop Egyptian lawsuit






Saudi Aramco is reported to be

considering the acquisition of a 40%

stake in a greenfield refining and

petrochemicals complex being developed

by Thailands PTT in the south central

coast region of Vietnam.

The move would be consistent with the

Saudi behemoths strategy of

downstream investment in major,

primarily Asian, markets that has already

born fruit in China and South Korea.

However, some doubts have been cast

over the projected cost of the joint

venture (JV), which would require a far

higher financial commitment than

Aramcos previous refining investments

in the region. Furthermore, Vietnam is

not a major importer of the kingdoms

crude.

While reports of the Saudi firms

proposed involvement are new, PTT has

been planning the integrated Nhon Hoi

refinery complex in Binh Dinh province

for some time. A feasibility study

recently submitted to the Industry &

Trade Ministry scales back the refinerys

capacity from the 660,000 barrels per day

earlier mooted to 400,000 bpd and

correspondingly lowers the projected

cost to US$22 billion from US$28.7

billion. An integrated petrochemicals

complex would add a 1.4 million-tonne

per year ethane cracker and downstream

units. Construction is seen as beginning

in 2016, with completion scheduled for

2021.

Under the latest plan submitted to the

government, PTT and Aramco would

each take 40% stakes, with local

investors sought for the remainder.

Chairman of the Binh Dinh provincial

committee Le Huu Loc was quoted in the

local press as saying that bringing

Aramco on board would secure crude

supply, as is the norm and aim in the

companys global refining JVs.

However, the key difference is that

while Vietnam lacks refining capacity, it

is a net exporter of crude. The implied

investment of US$8.8 billion is also very

large compared with earlier foreign

investments, such as that for a 25% stake

in Chinas US$5 billion Fujian Refining

& Petrochemical Co. JV with

ExxonMobil and Chinas Sinopec, and

most recently the US$2 billion paid by

Aramco for an additional 28.4% stake in

South Korean refiner S-Oil, which

operates a refining capacity of 670,000

bpd.

Nonetheless, Vietnam is clearly an

attractive downstream proposition for

major oil producers. The countrys only

existing refinery, Dung Quat in the

central Quang Ngai province, is a JV

between state-owned PetroVietnam and

Russias Gazprom while the second

Nghi So in the north central Vung Ro

province, on which ground is due to be

broken in October is being developed

as a partnership involving Kuwait

Petroleum International (KPI) alongside

PetroVietnam and Japans Idemitsu

Kosan and Mitsui Chemicals.

The planned integration with

petrochemicals also mirrors Aramcos

wider strategy. Even as other companies

are retrenching, we will be investing to

build a vertically and horizontally

integrated, top-tier refining, marketing,

petrochemicals, lubes and power

business with much of that expansion

coming in the form of joint ventures with

other leading global firms at home and

abroad, President and CEO Khalid al-

Falih pledged in late August.

In 2013, Aramcos overseas venture

produced 2.4 million bpd of refined

products, only slightly less than the 2.5

million bpd produced at home. The

company is also considering investing in

a second Chinese refinery at Yunnan and

signed a memorandum of understanding

(MoU) in 2012 for a JV refinery and

petrochemicals plant in Indonesia with

state-owned PT Pertamina.

A subsidiary of Technip has been

awarded a contract to develop front-end

engineering design (FEED) services for

four main work packages as part of a

planned expansion and upgrade of the

Bahrain Petroleum Co.s (BAPCO)

267,000 barrels per day refinery at Sitra,

on Bahrains eastern coast. Under the

contract, Technip Italy will carry out

FEED work on units designed to process

bottom-of-the-barrel components into

high-value petroleum products, as well as

all associated offsites and utilities

necessary to integrate the proposed units

with existing installations at the refinery,

Technip said in a September 16 release.

The overall project aims to enhance the

refinerys configuration and profitability

by increasing its crude processing

capacity to 360,000 bpd and improving

its yield of products. According to

Technip, it will execute the reimbursable

contract through a co-ordinated effort of

its operating centres in Rome and Abu

Dhabi. It said the FEED contract is

scheduled to be completed at the end of

2015.

REFINING

Aramco linked with

Vietnam mega-refinery

Bahrain pushes on with Sitra

refinery expansion






A notice from the Bahraini government

said the contract was awarded in June

2014 with a value of around US$56

million. Bahrains refinery modernisation

programme will take around six years to

complete in a series of phases. It is a key

structural project within the

governments plan to develop the

countrys oil and gas sector and generate

increased financial returns for the

national economy.

The project has three major elements,

consisting of boosting refining capacity,

concentrating on production of middle

distillates, and reducing or eliminating

fuel oil by adding residual conversion

units, according to a 2014 presentation

from BAPCO.

The modernisation will include the

staged implementation of at least five

units, including a residue hydrocracker,

vacuum gas oil hydrocracker, diesel

hydrotreater, sulphur recovery unit, and a

delayed coker, BAPCO said.

In June, BAPCO let a contract worth in

excess of US$82 million to Chevron

Lummus Global, a joint venture between

CB&I and Chevron, to prepare an

engineering design package for a residue

hydrocracking unit at the refinery.

A flurry of financial and economic good

news for Egypt emerged in mid-

September, as the UAE followed a deal

in August to lend US$9 billion to Cairo

for the purchase of desperately-needed

oil products with an agreement to supply

the bulk of these products for the next

year, while the board of the Jeddah-based

Islamic Development Bank (IDB)

approved a loan to kick-start the

expansion of the Asyut refinery which

had been delayed owing to funding

problems.

Buoyed by the positive sentiment,

Cairo called on the IMF to return to the

country to carry out a postponed Article

IV economic assessment ahead of a

planned investment conference in

February 2015, evidently foreseeing a

favourable report.

The fuel supply deal approved by the

Egyptian cabinet on September 17 entails

Abu Dhabi National Oil Co. (ADNOC)

covering around 65% of the countrys oil

products needs including diesel,

gasoline, heavy fuel and LPG for one

year. While the cabinet statement said

only that the sales price was

appropriate, reports of the oil products

financing deal in late August between

ADNOC and state-owned Egyptian

General Petroleum Co. (EGPC) valued it

at US$9 billion and quoted petroleum

ministry officials indicating that

repayment would be at a concessionary

2-3% rate spread over four years.

Central Bank of Egypt (CBE) figures

put the spending on fuel product imports

in 2012/13 at US$9.4 billion, costing the

government crippling sums in subsidies,

and prompting the swingeing cuts to

price support enacted with the 2014/15

budget on September 1, which aims to

reduce the cost of subsidies to 100 billion

Egyptian pounds (US$14 billion) from

143 billion pounds (US$20 billion).

In spite of having Africas largest

refining capacity, Egypts ability to meet

its own oil product demand is hampered

by dilapidated facilities running well

below capacity coupled with delayed

upgrade and expansion projects.

The estimated US$890 million

addition of a hydrocracking unit at the

47,000 barrel per day Asyut refinery, to

convert low-quality heavy fuels to higher

quality products such as gasoline and

LPG, is one such scheme on hold since

2011, partly as a result of financing

difficulties and the Jeddah-based IDBs

approval at its latest meeting of a

US$198-million, 15-year loan to the

scheme will be welcome.

In late 2013, the government publicly

reaffirmed its backing for the more

critical project to construct a new US$3.7

billion, 82,000 bpd refinery at Mostorod,

on the outskirts of Cairo, due on stream

in 2016 and designed to more than halve

required the countrys diesel imports.

Along with Kuwait and Saudi Arabia,

the wealthy Gulf states have extended

financial aid totalling around US$30

billion since the accession of President

Abdel Fattah al-Sisi in 2013 in an

attempt to cement the defeat of the

Islamists of the Muslim Brotherhood and

buttress the regime of the former general

as a bulwark against regional Islamic

militancy.

REFINING

FUELS

UAE, IDB to help ease

Egyptian fuel shortage






However, the new government is eager

to tap sources other than Gulf largesse,

and the subsidy reform was imposed

partly to satisfy the IMFs conditions for

extending a US$4.8 billion loan package

under negotiation since 2011. As a sign

of Cairos growing confidence in its

economic policy, a finance ministry

statement on September 13 called on the

fund to conduct an Article IV

consultation and publish the results

before a planned investment conference

in February. We hope that the report

comes in favour of Egypt and contributes

to the return of foreign flows, either

directly as investments in the real

economy or indirectly by improving the

stock market, it said.

State-owned downstream operator

Kuwait National Petroleum Co. (KNPC)

has appointed the UKs KBC Advanced

Technologies as technical consultant on

the proposed integration of the New

Refinery Project (NRP) at Al-Zour with

the two long-planned petrochemicals

plants on the project slate of its sister

firm, Petrochemical Industries Co. (PIC).

While the major new olefins and

aromatics projects have been on the

drawing board for many years, expansion

of the sector has been constrained by lack

of progress on the expansion and upgrade

of the refining sector as well as the

perennial problem of scarce gas

feedstock.

However, with the NRP enjoying a

new lease of life over the past year, and

bids for the main construction contracts

due in November and January, PICs

plans are back on the agenda.

Fluor of the US was selected in 2013

to conduct a pre-feasibility and market

study for the countrys third cracker

project, called Olefins III, which would

comprise a 1.4 million tonne per year

(tpy) mixed-feedstock cracker fed by

naphtha and LPG from Al-Zour and

returning hydrogen and pygas for use in

the refinery.

Project costs have been estimated at

US$7-10 billion, with start-up targeted

for 2019/20 and a tentative product slate

comprising linear low-density

polyethylene (LLDPE), high-density

polyethylene (HDPE), monoethylene

glycol (MEG), polypropylene (PP),

ethanolamine, polyols and emulsion

styrene butadiene rubber (E-SBR). Also,

in late 2013, Foster Wheeler of the US

was awarded a similar contract covering

a proposed US$5 billion aromatics plant

to produce paraxylene (PX) and benzene.

The existing hub of Kuwaits

petrochemicals industry is Shuaiba,

where the existing refinery is to be shut

down as part of the ongoing Clean Fuels

Project (CFP) for the upgrade and

expansion of the Mina al-Ahmadi and

Mina Abdullah plant.

The countrys first cracker, brought on

stream in 1997, was built as a joint

venture between PIC and the US Dow

Chemical Co., called Equate, which went

on to manage the Olefins II project, as

well as the first aromatics project

commissioned in 2009 to produce PX

and benzene and a 450,000 tpy styrene

plant.

A complex shareholding structure

divides equity interests in the various

project companies between Dow, PIC

and local private sector firms Qurain

Petrochemical Industries Co. (QPIC) and

Boubyan Petrochemical Co.

Equates total current stated capacity

stands at 1.8 million tpy of ethylene,

825,000 tpy of polyethylene (PE), 1.2

million tpy of ethylene glycol (EG),

830,000 tpy of PX, 450,000 tpy of

styrene monomer, 140,000 tpy of PP and

393,000 tpy of benzene.

One problem confronting PIC in

implementing the two new projects

would be the choice of foreign partner.

Relations with Dow soured badly in 2008

when PIC was forced by parliamentary

opposition to withdraw from a planned

US$17.4 billion joint venture with the

US giant, for which Kuwait was forced

to pay US$2.2 billion in compensation in

2013.

Implementation is also obviously

contingent on the estimated US$14

billion NRP finally going ahead: bids are

due for two of the five engineering,

procurement and construction (EPC)

packages on November 9 and for the

remaining three on January 13, but the

scheme has reached the award stage

before only to be returned to the drawing

board.

The second KNPC refining flagship

the US$16-18 billion CFP covering

expansion of the combined capacity of

Mina Abdullah and Mina al-Ahmadi to

800,000 barrels per day from 730,000

bpd and an upgrade of the product slates

is more advanced, with construction

due to start in October following the

award of the main EPC contracts in

April. The much-delayed scheme took a

further step forward in mid-September

with the award of a financial advisory

mandate to National Bank of Kuwait

(NBK), which will be responsible for

evaluating the funding requirements,

determining the optimal financing

structure and raising the required

funds.

FUELS

PETROCHEMICALS

KNPC plots Al-Zour

petchems integration






State-controlled Industries Qatar has put

its plans to build the multibillion dollar

Al Sejeel petrochemical complex project

on hold as it looks for alternative

investments. The company announced

last week that it was evaluating a new

petrochemical project that will yield

better economic returns, in a statement

posted on the Qatar Exchange.

Al Sejeel was to be one of the worlds

largest mixed-feed steam crackers and it

was scheduled for completion in 2018 as

part of Qatars large-scale expansion of

its petrochemicals sector. The project

was valued at US$5.5-6 billion, Hamad

Rashid Al Mohannadi, chairman of Qatar

Petrochemical Co. (QAPCO), a unit of

Industries Qatar, said in late 2013.

Al Sejeel was also part of Qatars two

planned petrochemical plants expected to

be built before the end of the decade, the

second being Al Karaana, to be built by

Qatar Petroleum (QP) in partnership with

Royal Dutch Shell. Before the end of this

year, QP was planning to raise US$13

billion for the plants, and the Royal Bank

of Scotland Group had already been

hired in 2013 to arrange financing for Al

Karaana, which is valued at US$6.5

billion.

QP and QAPCO signed an agreement

in February 2012 to jointly develop the

Al Sajeel mega-complex in Ras Laffan.

QP holds a 80% stake while QAPCO

owns the remaining 20%, and Industries

Qatar owns 20% of QAPCO.

Qatar is focusing on the petrochemical

market to diversify away from exports of

LNG into using gas for industrial

enterprises and domestic power

generation. The country plans to double

petrochemical output to around 23

million tonnes per year (tpy) by 2020,

Energy Minister Mohammed Al-Sada

said in January.

US firm KBR has been awarded a

contract by the Spanish-local joint

venture (JV) Fertial for the expansion of

the companys ammonia plants at Arzew

and Annaba.

The engineering giant had already been

selected to carry out preliminary studies

on the project in late 2013 and progress

towards the plans implementation

follows Fertials agreement in April with

the government resolving the thorny

issue of gas prices.

Omans Suhail Bahwan Group (SBG)

and Egypts Orascom Construction

Industries (OCI), the foreign partners on

two recently completed greenfield

fertiliser schemes in the country, reached

similar deals in early September and late

2013 respectively.

KBRs latest contract covers

technology licensing and basic

engineering design on the upgrade of

Fertials ageing facilities, described in a

KBR statement as 1970s vintage

plants. Capacity, which currently stands

at around 1 million tonnes per year (tpy),

will be expanded in phases by around

50%.

The Arzew plant, in the Oran industrial

hub, produces nitrogenous fertilisers and

that at Annaba, on the east coast, supplies

phosphate-based products including

ammonium phosphate (AP), sulphuric

acid, phosphoric acid, diammonium

phosphate (DAP) and sodium

tripolyphosphate (STP), the last supplied

mainly to the local Socit Nationale des

Industries Chimiques (SNIC) for

detergent manufacture.

Fertial, which has been majority-

owned by Spains Grupo Villar Mier

since 2005 with the remainder held by

the local Asmidor, faced a period of

dispute with Algiers in 2013 over state-

owned Sontarachs gas supply to the

plant and other issues related to shipping

permits that led the firm to declare force-

majeure on ammonia exports normally

accounting for around 80% of output in

October.

However, an improvement in relations

was signalled in April in an opaque

announcement that Fertial and Sonatrach

had reached an agreement to amend the

terms of their 2005 deal, reportedly

settling on an internationally determined

price for gas destined for export.

The rocky period in relations between

Algiers and foreign investors in local

fertiliser production was not confined to

those with Fertial.

OCI and SBG also saw the

commissioning of greenfield JV facilities

at Arzew delayed.

OCI owns 51% alongside Sonatrach in

the Sofert JV created in 2008 to develop

an 800,000 tpy ammonia and 1.4 million

tpy urea plant, which was finally

commissioned late last year after a

revised partnership deal was signed. Also

in 2008, a 51:49 JV was formed between

SBG and the state oil company called

Algerian Omani Fertiliser Co. for a 1.5

million tpy ammonia plant and a 2.6

million tpy urea plant, and on September

8, a deal to amend the terms was

announced by Sonatrach through the

states Algerian Press Service.

PETROCHEMICALS

Industries Qatar shelves Al-Sejeel

KBR wins Algerian

fertiliser design deal






The new deal was said to rebalance

the economic and operational interests of

both parties [and to ensure the plant

would] ultimately satisfy the demand of

the domestic agricultural sector for

fertiliser at competitive prices. Both

ventures were geared mainly towards the

export market, taking advantage of

Algerias favourable geographic location

and plentiful natural gas to serve

European demand.

A senior official with Irans National

Petrochemical Co. (NIPC) has said that

the country is planning to use more than

20% of its total natural production as

petrochemical feedstock by 2025.

Marzieh Shahdaei, the companys

project manager, told the Shana news

agency that the move forms part of

NIPCs plan to become the biggest

producer of petrochemicals in the world.

Efforts are under way to be able to get

the top spot in terms of value of

petrochemical production by 2025, she

said. Moreover, we intend to be using

21% of the countrys total natural gas

production, or 86 billion cubic metres,

for feeding this industry, she added.

According to Fars, the Iran

Petrochemical Commercial Co. (IPCC)

the NIPCs sales division exported

US$838 million of petrochemicals during

the first four months of the current

calendar year, which started on March

21. During the previous year, Iran

produced 40 million tones per year (tpy)

of petrochemicals, with around US$9

billion exported.

The country has said that it plans to

increase its petrochemical exports to

US$12 billion this year.

However, on September 21, Irans oil

minister Bijan Namdar Zangeneh said

that the countrys annual exports of

petrochemical products could reach

US$25 billion.

In 1997, he added, this stood at just

US$1 billion.

This followed comments earlier this

month from NIPC head Abbas Sheri-

Moqaddam, who said in an interview

with the semi-official Fars news agency

that sanctions against Iran were

continuing to hold back the sector,

despite being temporarily eased earlier

this year.

What is important in exports is the

transfer of revenues from selling

products. Unfortunately, sanctions

continue to cause obstacles, he added.

The sanctions on the petrochemical

industry have apparently been lifted, but

in practice, this industry remains under

sanctions [owing] to the difficulty of

transfer of money into the country.

The Abu Dhabi-owned Mubadala

Development is in talks to buy at least

one fifth of Occidental Petroleums

(Oxy) 24.5% stake in Dolphin Energy.

Mubadala is quite keen to do the deal ...

they even want to buy Oxys entire stake

[in Dolphin] but Qatar is unlikely to

accept that because of the political

situation with the United Arab Emirates,

said one person close to the talks, quoted

on September 17 by the Wall Street

Journal.

The report cited another person close

to the discussions who said that Oxy,

which bought its stake in Dolphin Energy

for US$310 million in 2002, might

conclude the sale before the end of 2014.

Mubadala owns 51% of the gas

pipeline project, which is valued at

US$3.5 billion. Frances Total holds a

24.5% stake. Qatar has to give its

approval to any deal because Dolphin

Energys assets are in the emirate.

The two parties are hopeful a smaller

stake would get Qatar to eventually agree

on the deal, the person said. Dolphins

assets include upstream gas projects and

a pipeline with the capacity to transport

up to 3.2 billion cubic feet (90.6 million

cubic metres) per day of gas from Qatar

to the UAE and Oman.

A previous plan by the Houston-based

Oxy to sell 40% of its Middle East assets

to a consortium of Gulf-based firms was

held back by political tension.

The proposal involved the Oman Oil

Co. (OOC), Qatar Petroleum

International (QPI) and Mubadala linking

up to buy a share of Oxys regional

assets, but fell through because of a

political rift between Qatar and other

Gulf countries over Dohas support for

the Muslim Brotherhood in Egypt.

NewsBase understands that Oxy is also

involved in discussions to sell as much as

a 30% stake in the US$10 billion Shah

natural gas project in the UAE to

Mubadala.

PETROCHEMICALS

Iran plans to boost

petchem feedstock

PIPELINES

Oxy eyes part-sale of Dolphin stake






Poor security in Iraq brought about by

the military advance of the Islamic State

(IS) militant group will delay the start-up

of a natural gas pipeline connecting Iran

with Iraqi power generation

infrastructure, Iranian media reported last

week.

The first section of the pipeline, 97 km

in length with a diameter of 48 inches

(1,220 mm), cannot be tested because of

security concerns, officials at Iranian

companies said.

Operations for the construction of

Iran-Iraq gas pipeline are complete and

we are now in the pre-start-up testing

phase, after which the pipeline will be

ready to initiate test-run gas injection by

early October, said Alireza Gharibi,

managing director of the Iranian Gas

Engineering and Development Co.

(IGEDC). But he added: Based on

negotiations between Iran and Iraq,

Irans gas cannot be exported to Iraq

under the current insecure conditions.

Hence it will be exported to Iraq early

next year. The final decision in this

regard will be made by senior officials.

The Iranian New Year begins in March

2015. Meanwhile, the head of the

National Iranian Gas Export Co.

(NIGEC), Alireza Kameli, said Iran will

be ready to export gas to Iraq as of next

year but the start of gas export operations

definitely depends on establishment of

normal conditions in the country.

Iraq and Iran in July 2013 reached a

gas supply agreement whereby Iraq will

receive an initial 4 million cubic metres

per day, with volumes eventually rising

to 25 mcm per day and ultimately 45

mcm per day through the pipeline.

The gas is to be used to feed one power

station in Sadr and another near

Baghdad. The gas supply will originate

in Irans offshore South Pars gas field.

The Islamic State (IS) militant group is

using diverse methods to get oil from

captured Syrian fields to markets in

Turkey, a recent report in the Wall Street

Journal has said.

IS, known also as ISIS or ISIL, and

other rebel groups have since the start of

the civil war in Syria been reported as

smuggling oil in order to finance their

wars. The WSJ report maps out how the

smuggling operations work.

The group has captured a number of

oilfields in northeast and central Syria

that were once contracted to international

oil companies (IOCs), including Total

and Royal Dutch Shell.

Crude produced at those fields or

stolen from pipelines is taken by truck to

rudimentary refineries located primarily

in Syrias Raqqa Province and the

products are then transported to the

Turkish border by trucks, horses or

mules, the daily reported.

Some of the products are hauled to

Iraq. The report said that fuel had also

been floated across rivers on rafts or

pumped through underground

pipelines and had wound up in the

markets of southeastern Turkey.

Crude oil and products have long been

smuggled from Syria and Iraq to the

Turkish border and over the years

Ankara has done little to halt the trade.

But since the start of the Syrian war,

smuggling activity has increased.

With the gains made by the IS creating

widespread concern, Turkey has come

under international pressure to do more

to stop the trade.

Ankara has been reluctant to do so, or

to take any action against IS, out of fear

for the lives of 46 diplomats who were

captured in Mosul in June, when the

jihadists took the city. However, the

Turkish diplomats were released on

September 20, and returned to Turkey

under circumstances that Ankara has not

yet fully explained.

According to the WSJ report, IS is

becoming increasingly reliant on

smuggling. The daily said that the fields

it controls produced around 100,000

barrels per day and that most of that was

refined and smuggled out of Syria. The

revenue is estimated at US$2 million per

day. The report said that during the early

weeks of September, Turkish forces

confiscated more than 3,540 gallons

(16,093 litres) of fuel, more than 2,300

metres of pipe used to smuggle the fuel

and other equipment at the Turkey-Syria

border. Most of this was confiscated

along the Orontes River near Turkeys

Hatay Province. Some 450,000 litres of

fuel and 80 persons were arrested in the

border town of Hacipasa in July, the

report said. IS main refinery is located

near the town of Akrish.

The products refined there are taken by

truck to the Turkish border, and some

goes into parts of Iraq controlled by IS.

Other media reports have said that IS is

earning more than US$3 million per day

from fuel smuggling, human trafficking,

theft and extortion.

PIPELINES

Poor security in Iraq delays

delivery of Irans pipeline gas

IS uses diverse smuggling tactics






Egypt has raised a total of 64 billion

Egyptian pounds (US$8.79 billion)

through the sale of certificates to

Egyptian buyers that will be used to

finance the expansion of the Suez Canal.

In announcing the results of the

certificate issue, Central Bank Governor

Hisham Ramez said the sale had

surpassed the original target of 60 billion

pounds (US$8.4 billion) and that 82% of

the buyers were private individuals.

The certificates were sold exclusively

to Egyptians at the insistence of

President Abdel Fattah al-Sisi in

denominations of 10 pounds (US$1.4),

100 pounds (US$14) and 1,000 pounds

(US$140) at a rate of 12%, the highest

rate ever offered by Egyptian banks for

such instruments.

The certificates were sold at Bank

Misr, the National Bank of Egypt,

Banque du Caire and Suez Canal Bank.

The issue is now closed.

Ramez said the certificates attracted 27

billion pounds (US$3.8 billion) in fresh

cash to Egyptian banks.

He said a total of US$1.5 billion was

converted into Egyptian pounds inside

the banking system to buy the certificates

and Egyptian expatriates bought 350

million pounds (US$49 million) worth.

Al-Sisi is pushing the expansion

project as a means to stimulate the

economy and restore national pride, and

had insisted that the project be financed

by the Egyptian public in Egyptian

currency.

A new 72-km waterway will run

parallel with a section of the existing

161-km canal. Work began in August

and will cost around US$4 billion for the

canal alone, with a further US$4.4 billion

invested in the entire Suez Canal area

with the addition of three new ports, an

industrial zone and a technology area

near Ismailia.

The new channel will reduce a vessels

waiting time from 11 hours to three. It

will enable 97 vessels per day to pass

through the canal compared to the

current 49.

Sections of the existing waterway will

be widened and deepened, allowing

larger, modern vessels to transit. The

plan includes six road and rail tunnels

that will pass beneath the canal.

Egypt earns US$5 billion per year

from the canal. The expansion project is

expected to boost earnings to US$13

billion by 2023.

Government-owned Saudi Aramco has

released the revised tenders for the main

contracts on the Ran Tanura refinery

clean fuels and aromatics project to

upgrade the kingdoms largest refinery,

supplier of nearly 33% of domestic fuel

requirements.

The estimated US$2-3 billion scheme

is designed to reduce the sulphur content

of output and widen the product range,

with a view to feeding new downstream

industries: future connection with a

petrochemicals facility is also envisaged,

as part of Aramcos wider plans to

pursue such integration. The projects

scope was revised and scaled back after

initial offers submitted late in 2013 came

in significantly over budget a problem

of which even the wealthy state

behemoth has become increasingly aware

over the past year as construction prices

rise throughout the region.

Prequalifiers are now being invited to

bid on two rather than three engineering,

procurement and construction (EPC)

packages with a proposed paraxylene

(PX) unit abandoned, leaving the naphtha

and toluene plant and offsites and

utilities (O&U). The former will include

a 140,000 barrel per day naphtha

hydrotreater, a 90,000 bpd catalytic

cracking reformer, a 70,000 bpd toluene

unit and a 65,000 bpd isomerisation unit.

Technical and commercial bids for

both contracts are due by December, with

an award scheduled by the end of the

first quarter of 2015 followed by a 36-

month construction period. The 10-strong

shortlist comprises Daelim Industrial, GS

Engineering & Construction, Hanwha

Engineering & Construction, Hyundai

Engineering & Construction and

Samsung Engineering, all of South

Korea, Foster Wheeler of the US,

Japanese firm JGC Corp., Saipem and

Tecnimont, both of Italy, and Spains

Tecnicas Reunidas. A site visit took

place on September 17-18.

During the previous tendering, Aramco

was negotiating with Daewoo and JGC

for the process packages and with JGC

alone as the sole bidder for the O&U:

the client will be hoping to attract greater

interest in the latter during the rebid.

TERMINALS & SHIPPING

Egypt secures financing

for Suez Canal expansion

TENDERS

Aramco retenders for

Ras Tanura upgrade






Jacobs Engineering of the US carried

out the original front-end engineering

and design (FEED) and the

reconfiguration.

Ras Tanuras current capacity totals

550,000 bpd, and facilities include a

325,000 bpd crude distillation unit and a

225,000 bpd gas condensate distillation

unit, as well as a 50,000 bpd hydrotreater

and a 107,000 bpd catalytic refining unit.

Over-budget bids for major projects

also posed a problem for Aramcos

integrated combined-cycle gas turbine

(CCGT) power plant planned at Jizan, on

which initial prices totalled more than

US$10 billion for a scheme allocated

around US$5 billion. As with Ras

Tanura, firms were obliged to retender

the project with a reduced scope in this

case a smaller power generation capacity

in a process only just nearing

completion, with a formal award

expected imminently to Germanys

Linde for the fifth and final package, for

oxygen supply.

Aramco President and CEO Khalid al-

Falih laid out the cost escalation

problems faced at all stages of the

companys myriad projects, both up- and

downstream, in a speech in late August.

Rising costs and cost overruns are

dragging many projects, he said. These

project challenges are driven in part by

shortages and bottlenecks in our supply

chain, including drilling contractors,

shipyards, EPC firms, and materials and

equipment suppliers, which have led to

growing quality, schedule and cost

pressures.

The following news items are sourced

from local and international news

sources. NewsBase is not responsible for

the contents of the stories and gives no

warranty for their factual accuracy.

POLICY

Iran to comply with

terms of nuclear deal

Iran is taking further action to comply

with the terms of an extended interim

agreement with six world powers over its

disputed atomic activities, a U.N. nuclear

watchdog report obtained by Reuters

Friday showed. The findings in a

monthly update by the International

Atomic Energy Agency though no

major surprise may be seen as positive

by the West as negotiations resumed in

New York this week on ending the

decade-old nuclear standoff. The IAEA

document made clear that Iran is

continuing to meet its commitments

under the preliminary accord that it

reached with the United States, France,

Germany, Britain, China and Russia late

last year and that took effect in January.

In addition, as agreed when the deal was

extended by four months in July, it is

using some of its higher-grade enriched

uranium in oxide form to produce fuel

a step that experts say would make it

more difficult to use the material for

bombs. The IAEA is tasked with

checking that Iran is living up to its part

of the temporary agreement, which was

designed to buy time for current talks on

a comprehensive settlement of the

dispute.

DAILY STAR, September 20,

2014

REFINING

SATORP hits

capacity as Total,

Vitol see EU slump

The newest oil refinery in Saudi Arabia

reached full capacity last month,

increasing the international competition

that Vitol SA and Total SA said will

force the closing of more European

plants.

The SATORP refinery, a venture

between Total and Saudi Arabian Oil

Co., processed crude at a rate of 400,000

barrels a day on Aug. 1, Patrick

Pouyanne, Totals president of refining

and chemicals, said at a conference in

Brussels yesterday. Europes refineries

are too small and not sophisticated

enough to compete with new plants,

Chris Bake, executive director at Vitol,

the worlds largest oil trader, said at a

separate conference in Fujairah, in the

United Arab Emirates yesterday.

Rationalisation is a necessity for

Europe, Pouyanne said at the Platts

European Refining Summit. We are

facing a global overcapacity and

companies in Europe should close about

10 percent of refining capacity by 2020

because of falling domestic demand and

rising competition.

European refineries are shutting or

converting to storage depots at the fastest

pace since the 1980s after demand for oil

products dropped for seven years and

competition from other regions

intensified. Seventeen plants closed in

the past six years, according to the

International Energy Agency, the Paris-

based adviser to 29 nations. Another 10

refineries need to close, equating to 1.5

million to 2 million barrels of daily

capacity, Pouyanne said.

Reduce Surplus

Theres quite a need to cut refinery

capacity further beyond what is

happening today, Toril Bosoni, an IEA

analyst, said at the Brussels conference

yesterday. The outlook for margins is

not looking so good next year.

Another 4.8 million barrels of daily

capacity would have to be cut worldwide

by 2019 to increase the average refinery-

utilisation rate to the levels last seen

before the 2008 financial crisis, Bosoni

said. This may be done by closing

existing plants or delaying or cancelling

new projects, she said.

TENDERS

NEWS IN BRIEF






European refiners are at risk of closing

because theyve been under-investing

for too long and are too small to compete

with the biggest refineries in the Middle

East and India, said Vitols Bake.

SATORP is the first of three new Saudi

refineries. Saudi Arabian Oil Co., known

as Aramco, is constructing another

400,000 barrel-a-day plant at Yanbu on

the Red Sea coast with Chinas Sinopec

Group. The project is in the

precommissioning stage, Aramco

Chief Executive Officer Khalid Al-Falih

said on Sept. 10. The Jazan refinery

project in the kingdoms southwest will

also process 400,000 barrels a day of

crude and is planned to begin operations

in 2016, according to Aramcos website.

In the Middle East, 27 new refineries or

expansions to existing plants will be

completed through 2020, adding 5.4

million barrels a day to capacity,

according to a presentation by Amrita

Sen, chief oil analyst at consultant

Energy Aspects, at the Brussels

conference yesterday.

BLOOMBERG, September 24,

2014

El Sharara field

operating, but

Zawiya still closed

Libyas El Sharara oilfield is operating,

but the Zawiya refinery it connects to is

still closed after storage tanks there were

damaged during fighting between armed

groups, a Libyan oil official said on

Wednesday. Libyas oil output has

recovered to 800,000 barrels per day

(bpd) after the restart of production at El

Sharara. It had risen as high as 870,000

bpd before El Sharara was closed last

week. On Tuesday, the National Oil

Corporation had said Zawiya may restart

within a couple of days. There were no

immediate details on the state of repairs

at the refinery.

REUTERS, September 24, 2014

Dangote orders

refinery equipment

The quest by Africas richest man, Aliko

Dangote to make an intervention in

Nigerias long standing fuel supply

hiccups is being pursued vigorously with

advance orders believed to have been

made for equipment that will be used to

build his proposed US$8 billion refinery

and petrochemical plant in Lekki, Lagos.

BusinessDay learnt yesterday that the

orders for these equipment were made

ahead of government granting a Licence-

To-Establish (LTE) a refinery which

Dangote received only a few days ago.

The equipment ordered include Long

Lead Items and a power plant, which

ordinarily would take between 18 and 21

months from time of order to time of

delivery. It is anticipated that these

advance orders may cut short the take-off

time of the project. The Dangote

Refinery and Petrochemical Plant, is

scheduled to become operational third

quarter of 2017 with capacity to process

400,000 barrels of petroleum per day.

BUSINESS DAY, September 24,

2014

Bahrain refinery

contract goes to

Technip

Technip was awarded by The Bahrain

Petroleum Company (BAPCO) a

significant contract on a reimbursable

basis to develop the Front-End

Engineering Design (FEED) of the

refinery located in the Kingdom of

Bahrain.

The FEED contract covers four main

work packages that include units aimed

at processing the bottom of the barrel

components to high value products, and

all associated offsites and utilities to

provide seamless integration with

existing refinery facilities earmarked for

retention post this major modernization.

The project aims at enhancing the

refinery configuration, by increasing the

throughput from 267,000 to 360,000

barrel per day as well as improving the

product slate and profitability.

Technips operating centre in Rome,

Italy, in cooperation with Technips

operating centre in Abu Dhabi, United

Arab Emirates, will execute the contract,

scheduled to be completed at the end of

2015.

Marco Villa, Technip Region B (2)

President said: We are proud to be

associated to BAPCO for this major

development of the refinery. The award

confirms Technips leading position as

partner of choice to provide high-end

services for strategic investments. This

reflects at the same time the importance

to follow the client and have keen

understanding of its needs, since the very

early stage of an initiative.

TECHNIP, September 19, 2014

Khartoum refinerys remarkable success

story

Khartoum Refinery deserves the social

responsibility award, for the total

commitment and services it has rendered

to the local community residing in the

nearby area,

Since it foundation as joint project

between the between government Sudan

represented by ministry of Petroleum and

China National Petroleum Corporation.

The Refinery has changed the life of the

people in a nearby villages and the area

of scrub land into one of the countrys

most industrialized areas. It provides

employment and stable living conditions

for the local people living in the area, and

who are far from the whole country. The

workforce is drawn from different parts

of Sudan. The Refinery also provides the

villages with primary health care

facilities and helps in primary education.

Most of the people in area are getting

benefits in one way or other from the

Refinery.

The Refinery also provides business

opportunities for various service

industries, restaurants, Banks in the area,

Moreover, the Khartoum Refinery

produces benefits for Sudan, both in

terms of employment and services and

valuable skill experience in addition to

many others valuable funds generated by

the refinery.

The Refinery helps Sudan to produce oil

and the end of shortage which used to be

in the past. The refinery can produce a

number products in the future.

SUDAN VISION, September 23,

2014

NEWS IN BRIEF






India ships in 50%

more Iranian oil

Indian imports of Iranian oil rose by

nearly half to 271,000 barrels per day

(bpd) in January-August from a year ago,

when refineries cut purchases due to

worries about insurance coverage for

processing crude from Tehran, data from

trade sources shows. India, the Islamic

states top client after China, had boosted

imports in the first quarter of this year to

make up for the cuts in 2013 and to hit its

target of importing 220,000 bpd from

Iran in the fiscal year to March 31. India

shipped in 273,500 bpd of Iranian oil in

August, up 30% from the previous month

and about 81-per cent higher than a year

ago, the data showed. Shipments in

August were bolstered as Indian Oil

Corp., the countrys biggest refiner,

bought Iranian oil after a two-month gap,

shipping in nearly 2 million barrels.

REUTERS, September 18, 2014

FUELS

Abuja residents call

for DPR intervention

Some residents of Abuja on Saturday

appealed to the Department of Petroleum

Resources (DPR) to monitor the

distribution of fuel in the metropolis. The

News Agency of Nigeria (NAN) reports

that many filling stations had long

queues on Saturday. A housewife, Mrs

Linda Candy, said she had been on the

queue for more than six hours with no

hope that she would access the product.

Candy, who said that she came out to buy

fuel in preparation for resumption of

schools on Monday, appealed to the DPR

to intervene. Duru Chibuzor, a journalist

who had been at the filing station since

Friday, told NAN that many residents

were tired of staying on the queue

with

Documents

Downstream Monitor - MEA Week 38