MENA Downstream Launch Issue

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Launch issue of our MENA Downstream Monitor

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MENA Downstream Launch Issue

  1. 1. 13 April 2011 NewsBase Week 01 Issue 01 Downstream Monitor   News Analysis  Intelligence –– MENA ––  NewsBase Published byCOMMENTARY 2 NEWS THIS WEEK… Wealth of opportunities Advantage Middle East 2 Libyan refining sector mulls uncertain future in wake of conflict 3MARKET 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’sREFINING 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 TheFUELS 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’ 8PETROCHEMICALS 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 TheTERMINALS & 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 11NEWS IN BRIEF 12 Reviving FujairahTENDERS & CONTRACTS 19 Abu Dhabi’s IPIC has once again announced plansCONFERENCES 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
  2. 2. Downstream Monitor MENA 13 April 2011, Week 01 page 2 COMMENTARYAdvantage Middle EastLow production costs and strong state support bode well for the region’s downstreamindustries, despite current prevailing market uncertaintiesBy 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 TheThe long-term outlook for MENA combination of an unsettled market, an projects compared with 637 projects atdownstream investment remains positive, oil price tumbling downwards, sky-high the beginning of 2010, reflectingdespite 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 inalso 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 beNorth 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 Iraqeconomics: as the world’s richest source There is clear evidence to show that are the next biggest downstreamof 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 theventures. 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 endAsia, 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 robustnessdemand 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, andprofile energy investments were held up, research note. not downstream and refining, which haswith 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. 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
  3. 3. Downstream Monitor MENA 13 April 2011, Week 01 page 3 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 andset to rise to over 30 million tonnes per suffering the aftershocks of the 2008 China, has dramatically altered theyear 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, ATout 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 theindustrial 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 wouldlower cost profile, where feedstock and of cautious expansion. account for around 45% of worldwideinput prices are dramatically less than in Across the Europe, Middle East, Africa ethylene capacity in 2020 – almostthe 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, wherepetrochemicals report by investment levels. the region is anticipated to grow frombankers Alpen Capital, the Gulf Co- 20% of the global total in 2007 to aboutoperation 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 thecompared with a minimum US$3.20 per keep Gulf energy strategists awake at uncertainties of the Middle East at themBtu 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 BahrainMarket shifts A joint report by the GPCA and – this region remains a driving force inIndeed, the ebullient forecasts for growth consultants AT Kearney on the potential the world’s energy markets, andin the Middle East, and the continuing of the CHIMEA (China, India, Middle increasingly so in the downstream andeconomic success story that is China, East, Africa) region flagged these petrochemicals industries.Libyan refining sector mullsuncertain future in wake of conflictWith major civil unrest in Libya, the country’s refining output has taken an unprecedentedhit. Downstream MENA outlines Libya’s importance and the struggle it now facesBy 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 IfWith the conflict in Libya heading badly affected Libya’s oil production were destroyed, when Ghaddafi’stowards 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 theUnion (AU) team in Tripoli under the refinery of Ras Lanuf and the refinery at fighting. This includes production at theleadership of South African president Zawiyah west of Tripoli. Hamada oilfield, which has ceasedJacob 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 yieldingdefinitely 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 portFebruary 16, it was unclear just how town of Es Sider where storage tanks 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
  4. 4. Downstream Monitor MENA 13 April 2011, Week 01 page 4 COMMENTARY Output at the Waha, Dahra, Samah and Libya’s importance to Europe’s oil opted instead to continue processing onlyGialo fields has also dropped to less than refined products sector lies not in the the lightest and sweetest crude oils33% 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 thestopped 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 prolongedCapacity of the world’s daily usage, the country’s shutdown of access to Libyan crude oilBut 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 thaton line. It is the damage done to Libya’s of crude that it produces, which is of the a cessation of Libyan oil productionoil refining sector that is more critical light and sweet variety that refineries are lasting “years” could result in worldand whose effects could be the more far able to turn into a greater number of refined product prices rising by 5% toreaching 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, whereInformation Administration (EIA) and boiling crude oil in a big metal cylinder, taxes on petrol are very low by worldthe 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 which380,000 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 jetrefinery, completed in 1984 and located within a war zone will render the fuel, diesel fuel, home heating oil, whileon the Gulf of Sirte, with a crude oil country’s refinery upgrade plans tricky to the heaviest molecules are used forrefining capacity of 220,000 bpd; the Az say the least. industrial boiler fuel, ‘residual’ oil, tarZawiya refinery, completed in 1974 and and asphalt. Libya’s refining sector was badlylocated 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 anbpd; the Tobruk refinery, with crude 1993, which banned Libya from increasing proportion of the oil availablecapacity of 20,000 bpd; the Brega importing refinery equipment. However, for global refining is ‘heavy’ instead ofrefinery, 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 crudebpd; and Sarir, a facility with 10,000 bpd thereby normalising its ties with the of the sort Libya produces is especiallyof capacity. sought after. North African country. Libya also has operations in Europe, This cleared the road for multinationalwhere Oilinvest, the overseas arm of Premium oil companies to return to Libya and nowLibya’s National Oil Company (NOC), The Libyan premium is likely to widen the country is seeking a comprehensivehas a network of refineries with 300,000 even further, as the older generation oil upgrade to its entire refining system, withbpd 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. Inretail market for oil products and 1995, new units came on line at Raslubricants – Germany andSwitzerland. Libya also has an Libya’s five domestic refineries (bpd): Lanuf, including a 3,300and a 5,600 catalytic reforming unit bpdextensive network of pipelines, bpd naphtha hydro-treatment unit.which connects its oilfields to Refinery Capacity Operator Tripoli has plans to build a newMediterranean terminals, 20,000 bpd refinery in Sebha toincluding: Sarir-Marsa el Hariga Zawia Refinery 120,000 ZOC process crude from Murzuk.(Tobruk); Messla-Ras Lanuf; The anticipated output will beWaha-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 petrolLanuf; 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 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
  5. 5. Downstream Monitor MENA 13 April 2011, Week 01 page 5 COMMENTARY An export refinery with a capacity of Resolution But the outlook for Libya’s oil refining200,000 bpd is planned for Misrata. Much now depends on whether the sector is darker, it will take considerablyLibya has a US$280 million contract military stalemate in Libya can be longer to repair the facilities and it iswith South Korea’s LG Petrochemicals resolved. The consensus is that if a unclear when, or indeed how many, ofto 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-conflictUS$430 million. levels fairly rapidly. MARKET COMMENTARYStrong crude, insurance challengeMiddle East products marketWhile global crude oil prices have continued their upward trend, demand for productsfrom the Middle East has dwindled in recent weeks amid concerns over transportBy David FlanaganGlobal 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 premiumsby the ongoing political unrest in Libya, Following the move by the European for tankers loading at leading oilstrong Asian demand and a weaker US Central Bank (ECB) to raise interest rates products export terminals such asdollar. 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. Theseinternational market over recent weeks. premiums are being impacted by theBut, this is now turning into a long-term Margins perceived high risks attached to theproblem, 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 oilThis will stop Libya from getting back to for June delivery started the week at prices, which are normally priced off aa normal level of oil output for many US$114.40 per barrel on April 5, and Singapore fuel oil benchmark agreedmonths, 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 atDrivers In the oil products sector, the rapidly relatively high discounts to SingaporeChina 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 marginsover 5 million barrels per day suggests once again under pressure. If there is Demandthat a slowdown in Asian demand will healthy demand for crude oil in Asia and But, if Asian demand for oil products isnot 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 demandfuel oil and natural gas demand there. than to refine it into oil products for is being met by inflows of Western oilAlso, damage to Japan’s oil products export. product cargoes, which have beenexport capability implies a greater In such a scenario, refining activity displacing Middle Eastern cargoes. Thesedemand 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-demandcrude and products is healthy. many cases in the Middle East and North areas of Europe and the US. 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
  6. 6. Downstream Monitor MENA 13 April 2011, Week 01 page 6 MARKET COMMENTARY A similar story has been seen in the propane, trading around the US$875-890 downturn in the next weeks, which willnatural gas sector, where a glut of per tonne level. re-open the door for Middle Easterncargoes 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 backhas 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. REFININGAlgeria could move Tiaretrefinery to the coastThe Algerian Oil Minister Youcef Yousfi Algerian state-owned oil and gas investment in the country, although itstated that the North African country company Sonatrach decided that most of would present several challenges, such asmight 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 MEEDwell 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. Mostexplaining that to satisfy the need for a it has been apparent that siting the project of the water will come from Tiraret’swater source, the 15 million tonne closer to the coast would have proved water supply and a new water treatmentrefinery should be relocated to the coast more suitable. An APS Review on plant is being built in the town. The restinstead. 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 refinerywhich is one of the most expensive in the claiming it would stimulate regional optimises the recycling of water, thereworld, 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 50several setbacks since 2007, when it million tonnes per year (1 million bpd)started looking for an international by 2030, compared with the current 25partner to develop the 300,000 barrel per million tonnes (500,000 bpd) it producesday refinery. It was initially intended to at present, the Oil Minister explainedbegin exporting in 2008. However, the further. 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
  7. 7. Downstream Monitor MENA 13 April 2011, Week 01 page 7 REFININGIran holds talks tofund refining projectsThe National Iranian Oil Refining and Countries’ (OPEC) second biggest crude billion worth of investment, US$600Distribution Company (NIORDC) is oil producer after Saudi Arabia, years of million of which has also been met. Inreported to be holding talks with sanctions have crippled its refinery aggregate, US$7 billion worth ofunnamed foreign companies to speed up infrastructure and turned it into an investment is needed to upgrade both thedevelopment plans for Iran’s oil importer of petrol. Abadan and Esfahan refineries. But inrefineries. 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 TondgouyanNIORDC’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 successfullydomestic banks and oil companies to He said that the Esfahan oil refinery launched Iran’s production capacity ofupgrade 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 40to design, purchase, construct and refinery could reduce imports by 70,000 million, 18.2 million, 7 million and 5.5finance a wave of upgrades. Iran’s oil barrels per day. The output of the high million litres per day respectively, saidrefineries are badly in need of an upgrade value oil products, such as petrol and Zeighami. However, most analystsand the sums quoted are many billions of gasoil, would also be raised. believe that many of these plans will failUS dollars. Although the country is the Meanwhile, the Abadan oil refinery because of the country’s inability toOrganisation of Petroleum Exporting development plan requires US$3.3 access foreign capital.IPIC revives Fujairah plansAfter 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 toInternational Petroleum Investment In July 2006, IPIC and ConocoPhillips partner on its proposed refinery. TheCompany (IPIC) has once again started of the US signed an agreement to carry facility will process Abu Dhabi onshoregroundwork to revive its planned out a feasibility study for the facility that crude, with the feedstock being suppliedgrassroots crude oil refinery at Fujairah would have a nameplate capacity of through an at least 325-km dedicatedon the east coast of the United Arab 500,000 bpd. However, with project pipeline, to be laid from Habshah toEmirates (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 thenegotiations with the UK office of the ConocoPhillips has since pulled out of marketing of refined products. IPIC hasShaw 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 regionsanonymous, 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 thestudy for the 200,000 [barrel per day] East Coast to take the pressure off Abufacility and IPIC will now be working on Dhabi’s western region will also bean FID [final investment decision]. The another factor,” the source added.project is estimated to cost US$3.5 At present, IPIC is also planning itsbillion, as per initial estimates.” participation in refineries in Oman and Project cost had been a major factor Morocco. 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
  8. 8. Downstream Monitor MENA 13 April 2011, Week 01 page 8 FUELSNorth African turmoilimpacts jet fuel pricesAir carriers around the world are facing (GBTA) published by The Economist, “The price of oil has had an unnervingmore 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 theoil, blamed on the continued political have a serious impact on jet fuel prices economic implications of a major oilinstability in the Middle East and North and the survival of airlines. price shock “should not beAfrican regions, as well as the recent It gave the example of the US travel underestimated.” It added: “Thecrisis 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 quotedstrong position in the market, amidst assumed prices would return to normal by the International Business Times asincreased prices for crude and petroleum by 2013. saying: “The bad news is that we’re notproducts because of emerging and newly faced with another fuel crisis. To theindustrialised economies such as China, extent that oil dampens economicwhere air travel demand is growing An increase in jet fuel growth, we are all very worried aboutrapidly. what is happening in oil markets.” However, it recognises that recent prices would have a This follows reports by market analystsevents in the Middle East and Japan significant knock-on effect saying that there is widespreadcould 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 operatorsTotal’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 abeen affected by the mounting political before adding that the firm’s production significant impact on many otherunrest 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 iton April 6, he confirmed that the plant, Total, which heads the consortium that might postpone the initial public offeringwhich is located in Balhaf area in the owns the plant – the only one of its type (IPO) of its shares on the London Stockeastern province of Shabwa, had carried in Yemen – had previously stated on Exchange (LSE) as a result of theon 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 becargoes 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 bedelivered 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 idealcargoes in 2011. Yemen LNG is the warned customers of potential supply as far as the Middle East region isworld’s 16th largest seller of such gas, curtailments and a possible force- concerned,” said Paul Ditchburn, theand has the capacity to supply up to 6.7 majeure on exports as a result of the company’s vice-president of planningmillion tonnes per year. violence, which has seen the recent and portfolio management. 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
  9. 9. Downstream Monitor MENA 13 April 2011, Week 01 page 9 PETROCHEMICALSGulf may require US$55 billioninvestment in petrochemicalsThe Gulf region could require an 20% of the total global petrochemical Industries Corp. (SABIC), Abu Dhabiinvestment of around US$55 billion over output,” he added. No details of potential Basic Industries Corp. (ADBIC), Abuthe 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 in46%, the Gulf Petrochemicals and A giant 75% increase in plastics Abu Dhabi could become the world’sChemicals 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 petrochemicalreport, GPCA secretary-general Dr describing the Gulf region as having industry is worth more than US$600Abdul Wahab al-Sadoun told Gulf News become “the centre of gravity with billion, with the Gulf’s current 11% stakeon 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 ofof 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, withinvestments to the tune of 201.85 billion to reach more than 23.6 million tonnes demand from these markets expected todirham (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 BasicSetback for Algerianmethanol facilityKuwait’s Qurain Petrochemical The source added: “Also, Sonatrach The front-end engineering and designIndustries Company (QPIC) has said that will control 51% of the project instead of (FEED) work was completed in earlya recent management restructuring at the initial 49% as agreed initially, owing 2009, with construction expected to takepartner Sonatrach has led to delays at its to changes in the law in Algeria.” 32 months after the final agreement hasAlgerian 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 productionassembly, chairman Sheikh Mubarak al- km north-east of Oran, was originally capacity of 1 million tonnes of methanolMubarak 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-boardof the agreement”, and that it was Mitsui and Germany’s Lurgi. chairman of QPIC, reaffirmed hiscurrently “re-studying” the project. No company’s commitment to the facilitytimeline or deadline was given. despite its slow initial progress. However, reports have since emerged “All agreements are in place and wethat Sonatrach’s requests are instead expect the final signing to happen anyrelated to gas pricing and ownership day now,” he said in an interview withstructure, 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 inquoted an unnamed source as saying that the near future. We expect thethe Algerian government now wanted to commercial start-up in 2013,” hesell gas at “international prices and not at added.preferential prices as agreed initially”. 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
  10. 10. Downstream Monitor MENA 13 April 2011, Week 01 page 10 PIPELINESOGC plans new pipeline to DuqmOman’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-MWnew 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 15Sea. 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 majora new port and ship repair yard now national gas grid and has, since its compression station in Nimr that willbeing 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, Raysutphase and we hope to be able to define downstream industry, including gas Cement, Salalah Methanol and thethe 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 gasOjaili was quoted as saying in the Oman It plans eventually to expand into the pipeline across the existing Salalah lineObserver. 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 thegas 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) toMinistry of Oil and Gas and other Sembcorp Salalah Power and Water be built on the Sharqiya coast.Egyptian pipeline reopens; gasshipments to Israel resumedEgyptian gas transportation company between the two countries, the LA Times Israel, with the aim of achieving a betterGasco 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 exportspipeline, and this has now been gas export deals with other countries. gas to Israel through the EMGreopened, according to the Ampal- MENA quoted Petroleum Minister consortium, owned by EgyptianAmerican Israel Corp., which holds a Abdullah Ghorab as saying: “there is businessman Hussain Salem, Egypt12.5% 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 ofmeasure. However, gas supply is now selling gas to Israel – which representsback 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 marketsuffered several setbacks since the fall of prices. However, Israel was stillformer Egyptian president Hosni considering a contingency plan to coverMubarak and the North African nation possible shortfalls in the natural gashas now resumed shipments of natural supply from Egypt as the Egyptian pressgas for the first time since the political published reports saying that Egyptturmoil started. However, the long-term might try to reduce the amount of gasfeasibility of the US$2.5 billion gas exported to Israel because of its ownexport deal is still a concern, as Egypt’s domestic energy needs.new government could warm the dispute 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
  11. 11. Downstream Monitor MENA 13 April 2011, Week 01 page 11 TERMINALS & STORAGEADNOC stalls on Shah contractThe 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, ADNOCcontractors 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 manageShah 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 thewas attributed to “internal, administrative contract. remaining 40% from US rivalmatters” by an unnamed source quoted “CCC is a strong contractor in the ConocoPhillips, which withdrew fromby 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 haveUS$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 theconstruction of sulphur granulation south-west of Abu Dhabi. On March 31, project’s power and water plants to befacilities, liquid sulphur storage tanks a 37 billion dirham (US$10 billion) joint tendered. Despite the changes inand solid sulphur granule storage venture agreement was signed between ownership and delays in the tenderingfacilities, alongside conveying systems ADNOC and US group Occidental process, the scheme is still expected toand a marine terminal, was expected to Petroleum that will see the two firms reach completion by the intendedbe finalised by the end of March. share the cost of the project’s deadline of September 2014.Aramco-Dow makes progresson Saudi EPC contractsA 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 megaconsiderable progress with two major package to serve the planned facility. petrochemical complex that will includeengineering, procurement and Prequalification documents for the a 4 million tonne per year multi-feedconstruction (EPC) contracts covering its estimated US$500 million EPC contract world-scale cracker and 35 downstreamlong-delayed Ras Tanura integrated have been submitted by 11 companies. units, with the aim of producing over 250project (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 EPCutilities (O&U) package, worth at least pipeline. tenders to build the hydrogen, carbonUS$800 million. Six companies are Firms that submitted prequalified monoxide and ammonia plants at theexpected to participate in the tender. papers include: Larsen & Toubro and complex, polymeric methylene diphenylThey 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-nitricFluor 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 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
  12. 12. Downstream Monitor MENA 13 April 2011, Week 01 page 12 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 thePetrofac Saudi value; however, they noted that the work crude tower trays being upgraded to aArabia gets is expected to be executed by its office in new type of high-capacity stainless steelindependently 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 acertified covers all engineering, procurement and refinery throughput increase to 250,000Petrofac 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 Continuoushas achieved independent certification to Saudi Aramco is offering the GES+ Catalyst Regeneration/platformerinternational quality standard ISO 9001. contract to only a select number of reactors’ centre pipes and scallops wereThe standard is for project management, companies for the execution of its upgraded to a more robust design toengineering, design, procurement, general engineering and project improve the reactor’s integrity andconstruction 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 theproduction and processing facilities, well as the full range of project scheduled 38 days. Nearly 3,000 Saudipetrochemical plants, refineries and management services. Aramco employees and contractorsrelated utilities. In making the announcement, Jacobs worked together to complete the taskPetrofac said that it has successfully Group Vice President Mike Coyle stated, safely and on time, Aramco said in aimplemented 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 wereIn 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 performancecomprehensive set of technical and on such a significant programme. When of employees – and contractors – provedbusiness documentation, which has been fully developed, the GES+ programme to be a testament to the success of thiscreated 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 weredemonstrated their approach to Arabian engineering and construction given major responsibilities, joining theirmaintaining and continually improving throughout the world.” mentors in playing a major role, enablingthe 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 achievementsto date, I am delighted to announce this April 5, 2011 NATO rejects Ghaddafi’s refinerymilestone which demonstrates ourcommitment to both quality and integrity Yanbu refinery bombing claimsand to building an enduring business in shutdown completed NATO on Thursday rejected claims bythe Kingdom. My sincere congratulations Employees at Saudi Aramco’s wholly the regime of Libyan leader Moamergo 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 killedREFINING 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 energyJacobs wins of equipment, 1,000 maintenance work needs as exports have been banned byservices contract orders and more than 30 projects. The United Nations sanctions – couldfrom Saudi Aramco refinery undergoes extensive maintenance every five years to ensure potentially increase the plight of civilians, which NATO is striving toJacobs Engineering Group Inc. the safety, integrity and reliability of the protect.announced on Tuesday that it was facility. However, the TRS that endedawarded a major contract by Saudi March 10 was more extensive than 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

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