MENA Downstream Launch Issue

13 April 2011

NewsBase Week 01

Issue 01
Downstream Monitor 
 News
Analysis

Intelligence

–– MENA –– 
NewsBase
Published by

COMMENTARY 2 NEWS THIS WEEK…

Wealth of opportunities

Advantage Middle East 2

Libyan refining sector mulls uncertain
future in wake of conflict 3
MARKET COMMENTARY 5
Despite swathes of civil unrest and current market

Strong crude, insurance challenge Middle
uncertainties, low production costs and strong state
East products market 5 support bode well for the Middle East’s
REFINING 6 downstream industries.

Algeria could move Tiaret refinery to the
coast 6
 last year has seen a resurgence in
The
downstream projects in the Gulf. (Page 2)
 holds talks to fund refining projects 7
Iran
 revives Fujairah plans
IPIC 7  region is expected to produce around 20% of
The
FUELS 8 the world’s total petrochemical output by 2015.(Page 2)

North African turmoil impacts jet fuel
prices 8

Increasing Asian demand for petrochemicals
presents a boon for Middle East producers. (Page 3)

Total’s Yemeni production ‘normal’ 8
PETROCHEMICALS

 may require US$55 billion investment
Gulf
9
North African questions
in petrochemicals 9 With major civil unrest in Libya, the country’s

Setback for Algerian methanol facility 9 refining output has taken an unprecedented hit.
PIPELINES 10 Downstream MENA outlines Libya’s importance
 plans new pipeline to Duqm
OGC 10 and the struggle it now faces.

Egyptian pipeline reopens; gas shipments
to Israel resumed 10  North African country has a refining capacity
The
TERMINALS & STORAGE 11 of around 380,000 bpd. (Page 3)


ADNOC stalls on Shah contract 11 
Libya has plans to build an export refinery with a

Aramco-Dow makes progress on Saudi capacity of 200,000 bpd at Misrata. (Page 5)
EPC contracts 11
NEWS IN BRIEF 12
Reviving Fujairah
TENDERS & CONTRACTS 19
Abu Dhabi’s IPIC has once again announced plans
CONFERENCES 21
to revive its planned Fujairah crude refinery. (Page 7)
For analysis and commentary on these and other stories, plus the latest downstream developments, see inside…
Copyright © 2011 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

Downstream Monitor MENA 13 April 2011, Week 01 page 2

COMMENTARY

Advantage Middle East
Low production costs and strong state support bode well for the region’s downstream
industries, despite current prevailing market uncertainties
By Martin Clark

Despite the current swell of civil unrest, the outlook for MENA downstream is reinforced by Asian demand

Downstream projects in the Gulf have seen a resurgence during the last year
 Gulf is expected to produce around 20% of global petrochemical output by 2015
The

The long-term outlook for MENA combination of an unsettled market, an projects compared with 637 projects at
downstream investment remains positive, oil price tumbling downwards, sky-high the beginning of 2010, reflecting
despite the current political disquiet construction costs and squeezed improved market sentiment.
sweeping across much of the region. financing. Collectively, these projects have a
Investments in new downstream price tag worth around US$717 billion.
refining and petrochemical capacity are Project rebound The bulk of this money will be spent in
also holding up against lingering Things have moved on a great deal since, Saudi Arabia, Qatar, Abu Dhabi and Iran,
economic uncertainties in Europe and with oil prices rebounding, demand in although here the focus will be
North America. Asia holding up, and other input costs principally upstream.
Central to this view is the bottom line levelling out. Kuwait, Oman and an emerging Iraq
economics: as the world’s richest source There is clear evidence to show that are the next biggest downstream
of oil and gas, the MENA region remains investment in new capacity, both spenders.
a natural choice to site new downstream upstream and downstream, has regained Significantly, Markaz suggests the
ventures. momentum. total value of cancelled or on hold
This has been reinforced by the rise of The number of planned major projects projects is declining – falling at the end
Asia, especially the high-growth markets over the next decade across the Gulf oil of 2010 into the early months of 2011.
of China and India, underpinning and gas sector – both upstream and It also highlights a greater robustness
demand during the post-2008 financial downstream – has significantly increased among the large petrochemical schemes,
crisis era. during the last year, the Kuwait Financial with the upstream segment most affected
At the height of this crisis, many high- Centre (Markaz) said in a February in terms of cancellations and delays, and
profile energy investments were held up, research note. not downstream and refining, which has
with developers spooked by a toxic The number has climbed to 680 seen the revival of a number of projects.

Global significance
This will in turn see a surge in new
production coming out of the MENA
region in the coming years.
Annual petrochemical production from
the Gulf countries is expected to jump by
46% to 155 million tonnes per year by
2015, up from the current level of 105
million tonnes, according to a recent
report by the Gulf Petrochemicals and
Chemicals Association (GPCA).
The Gulf, in particular, will emerge as
a world champion in key downstream
industries.
The region’s current production
represents roughly 16% of the total 700
million tonnes of petrochemicals
produced worldwide, the GPCA said.



COMMENTARY
By 2015, the Gulf will contribute contrasts with the malaise of the West. shifting dynamics.
closer to 20% of total global output. According to Fitch Ratings, the market “Over the past two decades,
Plastics are a good example where for new petrochemicals production will CHIMEA’s petrochemical industry,
production is on the march, with capacity remain subdued in certain key areas, still specifically in the Middle East and
set to rise to over 30 million tonnes per suffering the aftershocks of the 2008 China, has dramatically altered the
year by 2015, according to the GPCA. crisis. footprint and dynamics of the global
The region currently produces over 25 It has forecast weak demand for oil market,” said one of the report’s authors,
million tonnes of plastic resins per year, products and chemicals in Europe Dan Starta, managing director, AT
out of which nearly 3 million tonnes are throughout 2011 because of slow growth. Kearney Middle East.
converted into finished and semi-finished But it also highlights a subtle shift The report forecast that, with the
industrial and consumer plastic products. from restructuring in the downstream planned continued growth of ethylene
Investment is supported by the region’s segment, in the wake of the crisis, to one capacity, the CHIMEA region would
lower cost profile, where feedstock and of cautious expansion. account for around 45% of worldwide
input prices are dramatically less than in Across the Europe, Middle East, Africa ethylene capacity in 2020 – almost
the developed markets. (EMEA) zone it expects capital double its 23% share in 2007.
According to a 2010 Gulf expenditure in 2011 to return to 2008 The same is true for polymers, where
petrochemicals report by investment levels. the region is anticipated to grow from
bankers Alpen Capital, the Gulf Co- 20% of the global total in 2007 to about
operation Council (GCC) countries buy Asian growth 40% in 2020.
ethane at US$0.75-1.5 per million BTU, Not that developments in Europe will It illustrates a point: that amid all the
compared with a minimum US$3.20 per keep Gulf energy strategists awake at uncertainties of the Middle East at the
mBtu in Europe and the US. night, given the reshaping of the global present time – uprisings in Libya, regime
market towards Asia. change in Egypt, street demos in Bahrain
Market shifts A joint report by the GPCA and – this region remains a driving force in
Indeed, the ebullient forecasts for growth consultants AT Kearney on the potential the world’s energy markets, and
in the Middle East, and the continuing of the CHIMEA (China, India, Middle increasingly so in the downstream and
economic success story that is China, East, Africa) region flagged these petrochemicals industries.

Libyan refining sector mulls
uncertain future in wake of conflict
With major civil unrest in Libya, the country’s refining output has taken an unprecedented
hit. Downstream MENA outlines Libya’s importance and the struggle it now faces
By Nnamdi Anyadike

Libya has a refining capacity of around 380,000 bpd; however, recent events have disrupted output
 light, sweet crude that Libya produces is highly sought after
The
 a resolution is reached soon then the shipment of crude supplies to Europe could be resumed quickly
If

With the conflict in Libya heading badly affected Libya’s oil production were destroyed, when Ghaddafi’s
towards its second month and heavy sector would be. Initially, the rebels fighters retook the towns.
fighting continuing despite the made swift gains and captured the oil Most of Libya’s upstream crude oil
‘ceasefire’ negotiated by the African town of Brega; the key port and oil output has also been affected by the
Union (AU) team in Tripoli under the refinery of Ras Lanuf and the refinery at fighting. This includes production at the
leadership of South African president Zawiyah west of Tripoli. Hamada oilfield, which has ceased
Jacob Zuma, plans for a refurbishment of But it quickly became clear that production and the eastern fields of Sarir,
the country’s oil refining sector are nothing was off limits to Muammar Nafoora and Misla, which are yielding
definitely on the backburner. Ghaddafi’s forces. Both Ras Lanuf and around 33% of their normal capacity.
At the outset of the conflict on Zawiyah were damaged, as was the port
February 16, it was unclear just how town of Es Sider where storage tanks



COMMENTARY
Output at the Waha, Dahra, Samah and Libya’s importance to Europe’s oil opted instead to continue processing only
Gialo fields has also dropped to less than refined products sector lies not in the the lightest and sweetest crude oils
33% of its normal level, while the Al Jurf amount of crude oil it produces and its available on the market.
offshore oilfield and Mabruk field have proximity to Europe. With its pre- Analysts have said that it will be in the
stopped producing altogether. conflict crude oil production of 1.6 refined products sector, rather than crude
million bpd, equivalent to less than 2% oil market, where any prolonged
Capacity of the world’s daily usage, the country’s shutdown of access to Libyan crude oil
But analysts have said that damaged oil output is comparatively modest. will be felt.
oilfields are relatively easy to bring back Rather, its importance lies in the ‘type’ Some sources have even suggested that
on line. It is the damage done to Libya’s of crude that it produces, which is of the a cessation of Libyan oil production
oil refining sector that is more critical light and sweet variety that refineries are lasting “years” could result in world
and whose effects could be the more far able to turn into a greater number of refined product prices rising by 5% to
reaching and longer lasting. usable products. In simple terms, the levels higher than they would otherwise
According to the US Energy primary refining process consists of be with consumers in the US, where
Information Administration (EIA) and boiling crude oil in a big metal cylinder, taxes on petrol are very low by world
the global consulting partnership Citac, where the heat causes the crude to break standards, disproportionately hurt.
Libya has five domestic refineries, with a up into three parts.
combined nameplate capacity of roughly Uphill struggle
The lightest molecules, many of which
380,000 barrels per day. The fact that much of Libya’s domestic
are petrol, rise to the top of the tube. The
These include: the Ras Lanuf export refined oil production is effectively
medium-weight molecules go into jet
refinery, completed in 1984 and located within a war zone will render the
fuel, diesel fuel, home heating oil, while
on the Gulf of Sirte, with a crude oil country’s refinery upgrade plans tricky to
the heaviest molecules are used for
refining capacity of 220,000 bpd; the Az say the least.
industrial boiler fuel, ‘residual’ oil, tar
Zawiya refinery, completed in 1974 and and asphalt. Libya’s refining sector was badly
located in north-western Libya, with affected by UN sanctions, specifically
It is the top two parts, or fractions,
crude processing capacity of 120,000 UN Resolution 883 of November 11,
which contain most of the value. As an
bpd; the Tobruk refinery, with crude 1993, which banned Libya from
increasing proportion of the oil available
capacity of 20,000 bpd; the Brega importing refinery equipment. However,
for global refining is ‘heavy’ instead of
refinery, the oldest in Libya, located near in May 2006 the US removed Libya from
‘light’ and ‘sour’ instead of ‘sweet,’ i.e.,
Tobruk with a crude capacity of 10,000 its list of states that sponsor terrorism,
containing sulphur, light and sweet crude
bpd; and Sarir, a facility with 10,000 bpd thereby normalising its ties with the
of the sort Libya produces is especially
of capacity. sought after. North African country.
Libya also has operations in Europe, This cleared the road for multinational
where Oilinvest, the overseas arm of Premium oil companies to return to Libya and now
Libya’s National Oil Company (NOC), The Libyan premium is likely to widen the country is seeking a comprehensive
has a network of refineries with 300,000 even further, as the older generation oil upgrade to its entire refining system, with
bpd of capacity. refineries in Europe have turned away the aim of increasing its output of petrol
Libya directly produces and distributes from the multi-billion dollar, several year and other light products such as jet fuel.
refined products in Italy – where it refinery upgrades that will be necessary Even before the removal of sanctions,
controls around 7.5% of the country’s for them to process heavy oil and have upgrades were beginning to take place. In
retail market for oil products and 1995, new units came on line at Ras
lubricants – Germany and
Switzerland. Libya also has an
Libya’s five domestic refineries (bpd): Lanuf, including a 3,300and a 5,600
catalytic reforming unit
bpd

extensive network of pipelines, bpd naphtha hydro-treatment unit.
which connects its oilfields to Refinery Capacity Operator Tripoli has plans to build a new
Mediterranean terminals, 20,000 bpd refinery in Sebha to
including: Sarir-Marsa el Hariga Zawia Refinery 120,000 ZOC process crude from Murzuk.
(Tobruk); Messla-Ras Lanuf; The anticipated output will be
Waha-Es Sider; Hammada El
Ras Lanuf Refinery 220,000 Rasco 268,000 tonnes per year of gasoil,
Hamra-Az Zawiya; Amal-Ras El-Brega Refinery 10,000 SOC 184,000 tonnes per year of petrol
Lanuf; Intisar-Zueitina; Nasser , 84,000 tonnes per year of jet fuel
(Zelten)-Marsa El Brega. Tobruk Refinery 20,000 Agoco and 274,000 tonnes per year of fuel
Sarir Refinery 10,000 Agoco oil.

Importance



COMMENTARY
An export refinery with a capacity of Resolution But the outlook for Libya’s oil refining
200,000 bpd is planned for Misrata. Much now depends on whether the sector is darker, it will take considerably
Libya has a US$280 million contract military stalemate in Libya can be longer to repair the facilities and it is
with South Korea’s LG Petrochemicals resolved. The consensus is that if a unclear when, or indeed how many, of
to upgrade the Zawiya refinery. solution is soon reached then at least the the planned refinery upgrades will now
In Egypt, Libya purchased a 39% stake shipment of crude oil supplies to Europe come on line.
in the MIDOR refinery in Egypt for can be resumed at their pre-conflict
US$430 million. levels fairly rapidly.

MARKET COMMENTARY

Strong crude, insurance challenge
Middle East products market
While global crude oil prices have continued their upward trend, demand for products
from the Middle East has dwindled in recent weeks amid concerns over transport
By David Flanagan

Global crude oil prices moved higher Also, the weakness of the US dollar Africa is regulated.
again over the last few days, pushed up has impacted the oil price in recent days. In addition, high insurance premiums
by the ongoing political unrest in Libya, Following the move by the European for tankers loading at leading oil
strong Asian demand and a weaker US Central Bank (ECB) to raise interest rates products export terminals such as
dollar. last week, the US currency came under Fujairah mean that demand for exported
Libya’s ongoing volatility has caused a renewed pressure, and helped to propel Middle Eastern products, such as fuel oil,
shortfall in crude reaching the crude prices higher. has diminished in recent weeks. These
international market over recent weeks. premiums are being impacted by the
But, this is now turning into a long-term Margins perceived high risks attached to the
problem, because of the damage to its oil On the Dubai Mercantile Exchange transport of fuel in the Gulf.
production and export infrastructure. (DME), the Oman crude futures contract Accordingly, Middle East fuel oil
This will stop Libya from getting back to for June delivery started the week at prices, which are normally priced off a
a normal level of oil output for many US$114.40 per barrel on April 5, and Singapore fuel oil benchmark agreed
months, or indeed years, to come. settled at US$117.33 per barrel on April among market participants, have
12, down US$1.64 per barrel on the day. weakened. They have been sitting at
Drivers In the oil products sector, the rapidly relatively high discounts to Singapore
China saw high demand levels for crude rising crude price means that Middle fuel oil in recent weeks.
oil imports in March. Its import rate of Eastern refineries are seeing margins
over 5 million barrels per day suggests once again under pressure. If there is Demand
that a slowdown in Asian demand will healthy demand for crude oil in Asia and But, if Asian demand for oil products is
not be seen in the near future. an adverse direction for refining margins so buoyant, why are Mid-East refiners
Indeed, damage to nuclear power in the Middle East, it is clearly becoming seeing such low levels of demand?
infrastructure in Japan points to higher more economical to export crude rather The answer lies in the fact that demand
fuel oil and natural gas demand there. than to refine it into oil products for is being met by inflows of Western oil
Also, damage to Japan’s oil products export. product cargoes, which have been
export capability implies a greater In such a scenario, refining activity displacing Middle Eastern cargoes. These
demand for products from other becomes more naturally geared towards have been arriving during early April,
suppliers. Hence, Asian demand for domestic demand for fuels, which in under arbitrage trades from low-demand
crude and products is healthy. many cases in the Middle East and North areas of Europe and the US.



MARKET COMMENTARY
A similar story has been seen in the propane, trading around the US$875-890 downturn in the next weeks, which will
natural gas sector, where a glut of per tonne level. re-open the door for Middle Eastern
cargoes in the West has been addressed But, these prices are moving higher, exports.
by sending cargoes to the Asian market. and this may refocus demand back on the Since Asian demand remains buoyant,
The demand for Middle East oil products fuel oil market. it is likely that demand will creep back
has also been displaced by liquefied Also, the volume of European cargoes up again. So, the tide could be turning.
petroleum gas (LPG), butane and arriving in Asia appears likely to see a

Market projection for Week 16
First, in the Asian market, underlying demand for oil products is high and rising. Secondly, Japanese oil
product exports have been adversely impacted by the earthquake and hence the local fuels trading
market is seeing a shortfall in supplies. Balancing this, refinery outage or maintenance, for example in
Saudi Arabia and Bahrain, has meant that less Middle Eastern volume has been coming onto the market.
This will turn around soon, as refinery outages are ended, which will bring more Middle Eastern exports
to the market. However, the fact that there is no let-up in the volatility of the Libyan market points to
continued high insurance premiums, which may also discourage demand.
A complex picture, but the overwhelming impression is that fuel oil prices should move slightly higher
from their present weak position.

REFINING

Algeria could move Tiaret
refinery to the coast
The Algerian Oil Minister Youcef Yousfi Algerian state-owned oil and gas investment in the country, although it
stated that the North African country company Sonatrach decided that most of would present several challenges, such as
might have to change the location of the its output should be used locally to the lack of cooling water.
Tiaret refinery for logistical reasons as satisfy a rise in domestic demand. At the time, a source quoted by MEED
well as start importing heavy crude. The location of the refinery has also said: “The project is economically viable
Bloomberg quoted the minister as been an issue, and since its inauguration despite being away from the coast. Most
explaining that to satisfy the need for a it has been apparent that siting the project of the water will come from Tiraret’s
water source, the 15 million tonne closer to the coast would have proved water supply and a new water treatment
refinery should be relocated to the coast more suitable. An APS Review on plant is being built in the town. The rest
instead. Algeria stated, however, that the Algiers will come from desalination facilities on
“We believe it is better to sell our oil, government had insisted on Tiaret, the coast. As long as the refinery
which is one of the most expensive in the claiming it would stimulate regional optimises the recycling of water, there
world, and import heavy oil that is better will be enough”.
for the refining industry”, Yousfi added. According to Bloomberg, Algeria
The Tiaret refinery project has suffered plans to double its refining capacity to 50
several setbacks since 2007, when it million tonnes per year (1 million bpd)
started looking for an international by 2030, compared with the current 25
partner to develop the 300,000 barrel per million tonnes (500,000 bpd) it produces
day refinery. It was initially intended to at present, the Oil Minister explained
begin exporting in 2008. However, the further.



REFINING

Iran holds talks to
fund refining projects
The National Iranian Oil Refining and Countries’ (OPEC) second biggest crude billion worth of investment, US$600
Distribution Company (NIORDC) is oil producer after Saudi Arabia, years of million of which has also been met. In
reported to be holding talks with sanctions have crippled its refinery aggregate, US$7 billion worth of
unnamed foreign companies to speed up infrastructure and turned it into an investment is needed to upgrade both the
development plans for Iran’s oil importer of petrol. Abadan and Esfahan refineries. But in
refineries. Zeighani said that the development of total, plans for upgrades at 10 are under
Speaking to local media in Tehran, the Esfahan oil refinery alone would way, including: the Shahid Tondgouyan
NIORDC’s managing director Alireza require US$4 billion worth of refinery (Tehran); Esfahan; Lavan;
Zeighami said that the company had held investment, of which US$600 million Tabriz; Abadan; Bandar Abbas and Arak.
talks with foreign companies as well as had already been acquired. If these projects are successfully
domestic banks and oil companies to He said that the Esfahan oil refinery launched Iran’s production capacity of
upgrade the Abadan oil refinery. development plan needed to be speeded petrol, gasoil, kerosene and liquefied
The country is hoping to sign contracts up because fuel oil production at the natural gas (LNG) will rise by 40
to design, purchase, construct and refinery could reduce imports by 70,000 million, 18.2 million, 7 million and 5.5
finance a wave of upgrades. Iran’s oil barrels per day. The output of the high million litres per day respectively, said
refineries are badly in need of an upgrade value oil products, such as petrol and Zeighami. However, most analysts
and the sums quoted are many billions of gasoil, would also be raised. believe that many of these plans will fail
US dollars. Although the country is the Meanwhile, the Abadan oil refinery because of the country’s inability to
Organisation of Petroleum Exporting development plan requires US$3.3 access foreign capital.

IPIC revives Fujairah plans
After years of being put on the that came in the way of an FID being Corp., the Royal Dutch Shell Group,
backburner, Abu Dhabi-based taken. India’s IOC and Austria’s OMV to
International Petroleum Investment In July 2006, IPIC and ConocoPhillips partner on its proposed refinery. The
Company (IPIC) has once again started of the US signed an agreement to carry facility will process Abu Dhabi onshore
groundwork to revive its planned out a feasibility study for the facility that crude, with the feedstock being supplied
grassroots crude oil refinery at Fujairah would have a nameplate capacity of through an at least 325-km dedicated
on the east coast of the United Arab 500,000 bpd. However, with project pipeline, to be laid from Habshah to
Emirates (UAE). costs estimated to be in excess of US$10 Fujairah.
A Gulf-based source said IPIC was “in billion, the planned venture was shelved. “A decisive factor will be the
negotiations with the UK office of the ConocoPhillips has since pulled out of marketing of refined products. IPIC has
Shaw Group for the position of [project the scheme. to decide whether it will [target] Europe,
management consultant (PMC)]”. In mid-2008, IPIC started talks with the US or Asia. Product specifications
The source, who wished to remain the US’ Occidental Petroleum Corp., are tight in any of the consumer regions
anonymous, added: “Wood MacKenzie Total of France, Kuwait Petroleum and that will impact the final project cost.
of Edinburgh has prepared a feasibility Construction of a new refinery on the
study for the 200,000 [barrel per day] East Coast to take the pressure off Abu
facility and IPIC will now be working on Dhabi’s western region will also be
an FID [final investment decision]. The another factor,” the source added.
project is estimated to cost US$3.5 At present, IPIC is also planning its
billion, as per initial estimates.” participation in refineries in Oman and
Project cost had been a major factor Morocco.



FUELS

North African turmoil
impacts jet fuel prices
Air carriers around the world are facing (GBTA) published by The Economist, “The price of oil has had an unnerving
more pressure to increase fuel surcharges the spread or worsening of instability in ability to blow up the world economy”,
as the result of the rising cost of crude North Africa and the Middle East could the Economist reported, adding that the
oil, blamed on the continued political have a serious impact on jet fuel prices economic implications of a major oil
instability in the Middle East and North and the survival of airlines. price shock “should not be
African regions, as well as the recent It gave the example of the US travel underestimated.” It added: “The
crisis in Japan. market, which could suffer an extra cost economic health of the airlines could end
According to Eurasia Review, of US$9 billion with oil priced at up being the least of our worries.”
however, jet fuel has continued to show a US$200 per barrel. However, GTBA AMR CEO Gerard Arpey was quoted
strong position in the market, amidst assumed prices would return to normal by the International Business Times as
increased prices for crude and petroleum by 2013. saying: “The bad news is that we’re not
products because of emerging and newly faced with another fuel crisis. To the
industrialised economies such as China, extent that oil dampens economic
where air travel demand is growing An increase in jet fuel growth, we are all very worried about
rapidly. what is happening in oil markets.”
However, it recognises that recent
prices would have a This follows reports by market analysts
events in the Middle East and Japan significant knock-on effect saying that there is widespread
could have an impact on demand. scepticism that Libyan oil output will
According to a study by the Global
on airlines and travel rebound when fighting ends.
Business Travel Association Foundation operators

Total’s Yemeni production ‘normal’
Total’s Yemeni liquefied natural gas “For the time being, it has not hurt: we bombing of oil pipelines.
(LNG) facility – Yemen LNG – has not produce normally,” de Margerie said, However, the unrest has already had a
been affected by the mounting political before adding that the firm’s production significant impact on many other
unrest in the country, CEO Christophe de target for the coming year would remain overseas operators.
Margerie has said. unchanged despite the uncertainty On April 8, Kuwait Energy, a MENA
Speaking at an oil conference in Paris surrounding the region. focused oil and gas producer, said that it
on April 6, he confirmed that the plant, Total, which heads the consortium that might postpone the initial public offering
which is located in Balhaf area in the owns the plant – the only one of its type (IPO) of its shares on the London Stock
eastern province of Shabwa, had carried in Yemen – had previously stated on Exchange (LSE) as a result of the
on normal operations. March 28 that it would remain conflict, with its Yemen oil and gas
To date, the company has shipped two committed to its operations in the exploration projects also likely to be
cargoes of LNG every week since the country as long as the safety of its delayed.
protests began, with its 100th cargo workers and installations was not “We’ve always said our IPO will be
delivered in March. compromised. subject to market conditions and we
The company is scheduled to ship 104 This announcement came days after it know the market conditions aren’t ideal
cargoes in 2011. Yemen LNG is the warned customers of potential supply as far as the Middle East region is
world’s 16th largest seller of such gas, curtailments and a possible force- concerned,” said Paul Ditchburn, the
and has the capacity to supply up to 6.7 majeure on exports as a result of the company’s vice-president of planning
million tonnes per year. violence, which has seen the recent and portfolio management.



PETROCHEMICALS

Gulf may require US$55 billion
investment in petrochemicals
The Gulf region could require an 20% of the total global petrochemical Industries Corp. (SABIC), Abu Dhabi
investment of around US$55 billion over output,” he added. No details of potential Basic Industries Corp. (ADBIC), Abu
the next five years in order to increase projects or infrastructure developments Dhabi Polymer Company (Borouge),
annual petrochemical production by were given. Chemeyaat and the Chemical City in
46%, the Gulf Petrochemicals and A giant 75% increase in plastics Abu Dhabi could become the world’s
Chemicals Association (GPCA) has said. production is predicted to be a driving leading petrochemicals players.
Commenting on the association’s latest force behind this rise, with al-Sadoun In total, the global petrochemical
report, GPCA secretary-general Dr describing the Gulf region as having industry is worth more than US$600
Abdul Wahab al-Sadoun told Gulf News become “the centre of gravity with billion, with the Gulf’s current 11% stake
on April 6 that overall production was regard to producing and exporting valued at more than US$50 billion,
expected to climb from the current levels plastics raw material”. making it the second biggest source of
of 105 million tonnes per year to 155 He said: “By 2015, the production of income for Gulf nations. Currently, 55%
million tonnes by 2015. the polyethylene, polypropylene, PVC of the region’s petrochemicals are
“This could require potential and polystyrene in the region will double exported to China and the Far East, with
investments to the tune of 201.85 billion to reach more than 23.6 million tonnes demand from these markets expected to
dirham (US$55 billion) in the next five compared with [2010’s] figure of 13.5 climb rapidly in the coming years.
years,” he said. “By then, the Gulf’s million tonnes.”
petrochemicals industry will represent As a result, firms such as Saudi Basic

Setback for Algerian
methanol facility
Kuwait’s Qurain Petrochemical The source added: “Also, Sonatrach The front-end engineering and design
Industries Company (QPIC) has said that will control 51% of the project instead of (FEED) work was completed in early
a recent management restructuring at the initial 49% as agreed initially, owing 2009, with construction expected to take
partner Sonatrach has led to delays at its to changes in the law in Algeria.” 32 months after the final agreement has
Algerian methanol project. The contract for the US$900 million been reached. Once completed, the
Speaking at the company’s general facility, which is located in Arzew, 35 facility is expected to have a production
assembly, chairman Sheikh Mubarak al- km north-east of Oran, was originally capacity of 1 million tonnes of methanol
Mubarak al-Sabah reported that awarded in 2007 to a consortium per year.
Sonatrach had “requested radical changes consisting of QPIC, Sonatrach, Japan’s On March 22, Issa Al-Isaa, vice-board
of the agreement”, and that it was Mitsui and Germany’s Lurgi. chairman of QPIC, reaffirmed his
currently “re-studying” the project. No company’s commitment to the facility
timeline or deadline was given. despite its slow initial progress.
However, reports have since emerged “All agreements are in place and we
that Sonatrach’s requests are instead expect the final signing to happen any
related to gas pricing and ownership day now,” he said in an interview with
structure, which has prompted QPIC’s Petrochemicals Middle East magazine.
reassessment. “We are ready to award US$200
On April 3, Arabian Oil and Gas million EPC contracts for the project in
quoted an unnamed source as saying that the near future. We expect the
the Algerian government now wanted to commercial start-up in 2013,” he
sell gas at “international prices and not at added.
preferential prices as agreed initially”.



PIPELINES

OGC plans new pipeline to Duqm
Oman’s state-owned gas transport authorities. Company, the Oman Observer reported.
operator, the Oman Gas Company “This is a substantial project, centering The gas-fired plant is due to come into
(OGC), has confirmed plans to build a on the construction of a roughly 200-km operation in 2012 with a 445-MW
new 200-km gas pipeline to the Duqm pipeline with a capacity large enough to capacity.
area of the Wusta coast on the Arabian meet future demand growth in the Duqm The desalination plant will produce 15
Sea. area,” Ojaili said. million gallons (68.2 million litres) per
The new pipeline will supply power to OGC operates Oman’s 2,500-km day. Work is under way on a major
a new port and ship repair yard now national gas grid and has, since its compression station in Nimr that will
being developed there. establishment in 2000, expanded into sustain pressure for gas supplies to
“This project is still in the concept other sectors of the country’s Dhofar Power, Salalah IWPP, Raysut
phase and we hope to be able to define downstream industry, including gas Cement, Salalah Methanol and the
the scope of the venture before the year planning and engineering consultancy Raysut Industrial Estate.
end,” the company’s CEO Yousuf al- and project management services. The company will also build a loop gas
Ojaili was quoted as saying in the Oman It plans eventually to expand into the pipeline across the existing Salalah line
Observer. transportation of liquid hydrocarbons. that will guarantee supply to southern
He said it had yet to be decided where The company is presently nearing Oman.
in central Oman the pipeline’s source of completion of a gas supply station and OGC has been awarded the
gas would originate. related pipeline network that will supply operatorship of a gas supply station at
But he added that discussions on this a new independent water and power Sur that will regulate supply for a 2,000-
matter were being conducted with the project (IWPP) in Dhofar for the MW independent power project (IPP) to
Ministry of Oil and Gas and other Sembcorp Salalah Power and Water be built on the Sharqiya coast.

Egyptian pipeline reopens; gas
shipments to Israel resumed
Egyptian gas transportation company between the two countries, the LA Times Israel, with the aim of achieving a better
Gasco has announced that an explosive reported. return to Egypt.”
was removed from its El Arish-Ashkelon In fact, Egypt is also trying to amend According to Reuters, Egypt exports
pipeline, and this has now been gas export deals with other countries. gas to Israel through the EMG
reopened, according to the Ampal- MENA quoted Petroleum Minister consortium, owned by Egyptian
American Israel Corp., which holds a Abdullah Ghorab as saying: “there is businessman Hussain Salem, Egypt
12.5% interest in East Mediterranean Gas currently negotiation under way in full Natural Gas Co., Thailand’s PTT, US
(EMG). force to amend the gas agreements businessman Sam Zell, Ampal-American
Upstream reported that the pipeline signed with various countries, especially and Israel’s Merhav.
had been shut down as a precautionary The consortium had been accused of
measure. However, gas supply is now selling gas to Israel – which represents
back to normal in Egypt and Israel. 4% of its total production and 45% of
The Egypt-Israel gas export deal has Israel’s gas needs – at below market
suffered several setbacks since the fall of prices. However, Israel was still
former Egyptian president Hosni considering a contingency plan to cover
Mubarak and the North African nation possible shortfalls in the natural gas
has now resumed shipments of natural supply from Egypt as the Egyptian press
gas for the first time since the political published reports saying that Egypt
turmoil started. However, the long-term might try to reduce the amount of gas
feasibility of the US$2.5 billion gas exported to Israel because of its own
export deal is still a concern, as Egypt’s domestic energy needs.
new government could warm the dispute



TERMINALS & STORAGE

ADNOC stalls on Shah contract
The Abu Dhabi National Oil Company “We are waiting for the award to be development.
(ADNOC) has extended the bid bond for issued any time,” the source added. A Under the terms of the deal, ADNOC
contractors seeking the sulphur storage representative from a rival bidder, who holds a 60% interest in Al Hosn Gas,
and export facilities tender at its giant also wished to remain unnamed, went on which was formed in 2010 to manage
Shah sour gas field project. to say that the delay had not affected and operate the Shah project. In January,
Despite the two-week delay, which CCC’s position as frontrunner for the Occidental agreed to take over the
was attributed to “internal, administrative contract. remaining 40% from US rival
matters” by an unnamed source quoted “CCC is a strong contractor in the ConocoPhillips, which withdrew from
by MEED, the Athens-based Middle East. Without any big accident or the venture in April 2010.
Consolidated Contractors Company incident, they will get the project,” he So far, eight of 10 contracts for major
(CCC) is still expected to secure the said. development packages at the field have
US$500 million contract. Located deep beneath the desert, the been issued, with just the sulphur
Originally the deal, which includes the Shah sour gas field lies around 180 km operations and the construction of the
construction of sulphur granulation south-west of Abu Dhabi. On March 31, project’s power and water plants to be
facilities, liquid sulphur storage tanks a 37 billion dirham (US$10 billion) joint tendered. Despite the changes in
and solid sulphur granule storage venture agreement was signed between ownership and delays in the tendering
facilities, alongside conveying systems ADNOC and US group Occidental process, the scheme is still expected to
and a marine terminal, was expected to Petroleum that will see the two firms reach completion by the intended
be finalised by the end of March. share the cost of the project’s deadline of September 2014.

Aramco-Dow makes progress
on Saudi EPC contracts
A team of Saudi Aramco and Dow A tender is also scheduled to be issued Engineering.
Chemical Company of the US is making by early May for a major storage tank RTIP plans to build a mega
considerable progress with two major package to serve the planned facility. petrochemical complex that will include
engineering, procurement and Prequalification documents for the a 4 million tonne per year multi-feed
construction (EPC) contracts covering its estimated US$500 million EPC contract world-scale cracker and 35 downstream
long-delayed Ras Tanura integrated have been submitted by 11 companies. units, with the aim of producing over 250
project (RTIP) at Jubail in Saudi Arabia. The scope of works will entail the different products. The total project cost
The deadline for submission of fabrication and installation of 74 general is reckoned to be US$15 billion.
technical and commercial bids has been and two cryogenic tanks, inter- Over the next few weeks, Aramco-
extended to April 18 for the offsites and connecting pipelines and an export Dow is expected to issue three more EPC
utilities (O&U) package, worth at least pipeline. tenders to build the hydrogen, carbon
US$800 million. Six companies are Firms that submitted prequalified monoxide and ammonia plants at the
expected to participate in the tender. papers include: Larsen & Toubro and complex, polymeric methylene diphenyl
They are: WorleyParsons of Australia; Punj Lloyd, both of India; CB&I of the di-isocyanate (PMD) and toluene di-
Canada’s SNC Lavalin, and Foster US; Daelim Industrial Company, isocyanate (TDI) production facilities,
Wheeler Corp., Jacobs Engineering, Daewoo Engineering & Construction, GS and aniline-formalin and DNT-nitric
Fluor Corp. and Kellogg Brown and Root Engineering & Construction, Hyundai units.
(KBR), all of the US. Engineering & Construction and
Hyundai Heavy Industries, all of South
Korea; the UK’s Petrofac International;
Saipem of Italy and China’s Sinopec



NEWS IN BRIEF
Aramco for general engineering and previous shutdowns.
COMPANIES project management services (GES+). The work carried out during this latest
Officials did not disclose the contract shutdown at the refinery included the
Petrofac Saudi value; however, they noted that the work crude tower trays being upgraded to a
Arabia gets is expected to be executed by its office in new type of high-capacity stainless steel

independently
al-Khobar, Saudi Arabia. The duration of trays, as part of a total revamp to
the GES+ contract is five years and improve the diesel quality and allow a
certified covers all engineering, procurement and refinery throughput increase to 250,000
Petrofac has announced that its Saudi construction management services for barrels per day.
Arabian business, Petrofac Saudi Arabia, Saudi Aramco’s Capital Programme. Also as part of the TRS, the Continuous
has achieved independent certification to Saudi Aramco is offering the GES+ Catalyst Regeneration/platformer
international quality standard ISO 9001. contract to only a select number of reactors’ centre pipes and scallops were
The standard is for project management, companies for the execution of its upgraded to a more robust design to
engineering, design, procurement, general engineering and project improve the reactor’s integrity and
construction management, management services needs. Under the reliability.
commissioning and training and contract award, Jacobs is providing a Despite adverse weather and other issues,
associated activities for oil & gas variety of design and related services, as the shutdown was completed in the
production and processing facilities, well as the full range of project scheduled 38 days. Nearly 3,000 Saudi
petrochemical plants, refineries and management services. Aramco employees and contractors
related utilities. In making the announcement, Jacobs worked together to complete the task
Petrofac said that it has successfully Group Vice President Mike Coyle stated, safely and on time, Aramco said in a
implemented the quality management “Jacobs is delighted to have the statement.
system for the business in Saudi Arabia. opportunity to build upon our Safety and environmental issues were
In a statement, Petrofac said that the longstanding relationship with Saudi seamlessly integrated into the operation’s
“system is underpinned by a Aramco as one of its preferred providers scope, and the outstanding performance
comprehensive set of technical and on such a significant programme. When of employees – and contractors – proved
business documentation, which has been fully developed, the GES+ programme to be a testament to the success of this
created in line with best practice. Now not only increases our opportunities, but holistic approach, organisers said.
fully implemented, the team has also also enhances the stature of Saudi Young engineers and technicians were
demonstrated their approach to Arabian engineering and construction given major responsibilities, joining their
maintaining and continually improving throughout the world.” mentors in playing a major role, enabling
the system.” Jacobs is one of the world’s largest and knowledge-sharing as an added outcome.
Imad Shanan, senior vice president and most diverse providers of technical, ARABIANOILANDGAS.COM,
general manager for the Saudi operations professional, and construction services. April 7, 2011
JACOBS ENGINEERING GROUP,
commented: “Of our many achievements
to date, I am delighted to announce this April 5, 2011 NATO rejects
Ghaddafi’s refinery
milestone which demonstrates our
commitment to both quality and integrity
Yanbu refinery bombing claims
and to building an enduring business in shutdown completed
NATO on Thursday rejected claims by
the Kingdom. My sincere congratulations Employees at Saudi Aramco’s wholly the regime of Libyan leader Moamer
go to the team on achieving this goal.” owned Yanbu Refinery recently Ghaddafi that it had bombed an oil
ARABIANOILANDGAS.COM, completed a wide-ranging and complex refinery, and said it was looking into
April 6, 2011 Total Refinery Shutdown (TRS) on allegations that its airstrikes had killed
REFINING
schedule and without any safety more than 10 rebel fighters.
incidents. Taking out oil refineries – which are
The scope of the TRS covered 320 pieces currently meeting only domestic energy
Jacobs wins of equipment, 1,000 maintenance work needs as exports have been banned by
services contract orders and more than 30 projects. The United Nations sanctions – could
from Saudi Aramco refinery undergoes extensive
maintenance every five years to ensure
potentially increase the plight of
civilians, which NATO is striving to
Jacobs Engineering Group Inc. the safety, integrity and reliability of the protect.
announced on Tuesday that it was facility. However, the TRS that ended
awarded a major contract by Saudi March 10 was more extensive than


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