Kuwait plans $35bn upgrades

DUBAI: Kuwait will embark on oil projects valued at almost $35 billion as part of its four-year development plan for the industry, Kuwait’s oil minister said.

The investments will include a fourth oil refinery in Kuwait and an upgrade at the state’s three existing refineries, which will boost capacity and enable them to produce lighter fuel as part of The Clean Fuels Project for Kuwait, Sheikh Ahmad Al-Abdullah Al-Sabah said. The project will boost capacity of two of the three existing refineries from 730,000 bpd to 800,000 bpd.

CNPC to start Iraq drilling

AMARA: China’s CNPC and its partners plan to start drilling new wells next month in Iraq’s Halfaya oilfield as part of a plan to boost output to 70,000 barrels per day in 2011, a CNPC executive said.

Iraq signed a contract to develop Halfaya with China National Petroleum Company (CNPC), French oil major Total and Malaysian state firm Petronas, for a fee of $1.40 per barrel.

No evidence of spill: PTTEP

BANGKOK: Thailand’s PTT Exploration and Production (PTTEP) said there was not enough evidence to justify paying compensation claims proposed by Indonesia for an oil spill in the Timor Sea.

“We have gathered all evidence from the site. I believe there’s not enough (evidence),” chief executive Anon Sirisaengtaksin told Reuters.

His comments come after an Indonesian government source said Indonesia planned to seek at least 20 trillion rupiah ($2.23 billion) from PTTEP as compensation for the spill.

KBR wins refinery work

HOUSTON: KBR, a US engineering and construction firm, said it won contracts from the Iraqi government for work on two refining projects.

KBR will provide licensing and basic engineering services for the construction of fluid catalytic cracking (FCC) and Solvent Deasphalting (SDA) units at the planned Maissan Refinery in Maissan, Iraq.

A deasphalter removes residual oil that cannot be refined into motor fuels. An FCC makes gasoline.

Work on the projects is expected to begin immediately, the Houston-based company said.

PTT’s key gas plant safe

BANGKOK: A gas separation plant owned by Thailand’s top energy firm PTT at the Map Ta Phut industrial estate is not on a list of harmful industries to be announced by the government this week, a senior official said.

“No, it’s not on the list. But we have to wait for the government to make the official announcement,” permanent secretary of the Energy Ministry, Pornchai Rujiprapa, told Reuters. Earlier, Thai Prime Minister Abhisit Vejjajiva said the government would announce a list of 14  types of industrial projects deemed harmful to the community and environment in the next one or two days.

First Solar to start building plant

SHANGHAI: First Solar expects construction of a solar power plant in Inner Mongolia to begin next year, the China Business News reported, citing a person from the US company. First Solar had earlier expected to start building the plant, which will be the world’s largest, in June this year, the newspaper said.

The company is still awaiting approval from the authorities before it can start construction work, it added. Under a memorandum of understanding with the Chinese government, First Solar will build a 2-gigawatt power plant, enough to power about 3 million Chinese households, at Ordos City, in Inner Mongolia.

JX shuts hydrocracker

TOKYO: JX Nippon Oil & Energy Corp, Japan’s top refiner and a unit of JX Holdings, said it shut the 45,000 barrels per day mild hydrocracker at its Muroran refinery earlier in the day after a fire hit the unit. A company spokesman did not give a schedule for the restart of the facility. There were no injuries or impact to other refining units, including a sole 180,000 bpd crude distillation unit, at the refinery, he added.

Kunlun in bid for LNG terminal

HONG KONG: Kunlun Energy said it would bid up to 2.21 billion yuan ($325 million) in an open tender for a 75 per cent stake in Dalian LNG terminal operator PetroChina Dalian LNG Company Ltd.

In a filing to the Hong Kong bourse, the oil and natural gas explorer and producer said it would bid for the stake from controlling shareholder PetroChina and fund the deal via internal resources.

Shell Martinez plant shut

HOUSTON: A compressor malfunction triggered flaring at Shell Oil’s 156,400-barrel-per-day (bpd) San Francisco Bay-area refinery in Martinez, California, according to a notice filed with California pollution regulators.

The malfunction caused the release of sulphur dioxide, according to the notice.

The refinery also reported a malfunction.

Arcan posts narrower loss

OTTAWA: Canadian petroleum and natural gas company Arcan Resources posted a narrower second-quarter loss on higher production, but output at its Swan Hills Beaverhill project, Alberta fell short of initial test results, sending its shares down as much as 11 per cent.

“The first-month averages on the last six wells are much lower than the test rates that the company achieved for these wells,” PI Financial analyst Alistair Toward told Reuters.

The company, which has eight of the 12 wells in production at Swan Hills Beaverhill, said current production at two recently tested wells there were 440 barrels of oil equivalent per day (boepd) and 300 boepd, compared with initial test results of 600 boepd and 500 boepd.

Cairn India shares up

MUMBAI: Shares in explorer Cairn India, which is a target of a takeover by Vedanta Resources, rallied more than 3 per cent boosted by expectations for a counter-bid by Indian state firms.

Last week, India focused miner Vedanta said it had agreed to spend up to $9.6 billion to buy a majority stake in Cairn India from its UK-based parent Cairn Energy.

An oil ministry source said all options were open for Indian state energy firms to make a counter bid.

Colonial stake sale planned

NEW YORK: Chevron said it was pursuing the sale of its 23.4 per cent stake in the Colonial Pipeline, the largest US oil products pipeline.

“We believe there is significant market interest in this asset given Colonial’s size, market access, steady cash flows and expansion potential,” said Mickey Driver, a spokesman for the company.

Driver said Chevron expected the sale would be completed this year and that it would not disrupt the supply of refined products provided by the pipeline, which runs from Texas to the New York Harbor terminus in Linden, New Jersey.

Frontier to resume output

HOUSTON: Frontier Oil said repairs on the fire-damaged crude unit at its 52,000 barrel-per-day Cheyenne, Wyoming, refinery have ended and production is expected to resume this week.

The company also said accelerated maintenance on the refinery’s naphtha reformer and diesel hydrotreater have also been completed.

“These units will resume normal operations along with the crude unit,” the company said in a statement.

A fire broke out at the refinery on July 28. Frontier said it would provide an update on repair costs and estimated quarterly throughput rates later this week.

IOC, Oil India eye stake

BANGALORE: State-run firms Indian Oil Corp and Oil India Ltd are in talks to buy 20 per cent each in Essar group’s gas block in Myanmar, the Economic Times reported, citing a consultant advising the two companies and an unnamed oil ministry official.

It did not give a value for a possible deal.

Essar’s shallow water gas block has an estimated 13 trillion cubic feet of gas reserve, larger than the gas reserve in Reliance Industries Ltd’s KG-D6 fields off India’s east coast, the newspaper said.

An Essar spokesman declined to comment while queries sent to IOC and Oil India remained unanswered, it said.

KazMunaiGas EP H1 falls

ALMATY: KazMunaiGas Exploration and Production said net income fell 22 per cent in the first six months of 2010 as a foreign exchange gain in the corresponding period of last year was not repeated.

KazMunaiGas E&P oil said it made a profit of 100.0 billion tenge ($679 million) in the first six months of 2010, down from 128.8 billion tenge in the same period of 2009, when the devaluation of the tenge currency yielded a large forex gain.

The Kazakh oil producer said operating profit in the first six months of 2010 rose 81 per cent to 103.5 billion tenge ($703 million), due mainly to a 50 per cent increase in the average price of Brent crude.

Motiva to shut FCC unit

NEW YORK: Motiva Enterprises is going to shut down the sole 90,000 barrel per day gasoline-making fluid catalytic cracking unit at its 285,000 barrel per day refinery in Port Arthur, Texas, a source familiar with refinery operations said.

The repairs are scheduled to start on August 30 and last for an unspecified period of time. The shutdown time will be determined after an analysis of the ongoing problem with exchangers and plugged catalyst is evaluated.

Rasgas sends first LNG

DOHA: Qatar’s Rasgas said it had sent its first spot cargo of liquefied natural gas to Portugal’s Sines LNG Terminal. The cargo was delivered to an affiliate of Galp Energia at the Sines LNG Terminal from the LNG tanker Al Deebel, the company said in an emailed statement.

It did not specify the amount of LNG delivered or the value of the sale. Rasgas, a joint venture between Qatar Petroleum and ExxonMobil, is one of two LNG producers in Qatar, the world’s largest LNG exporter and holder of the world’s third-largest gas reserves.

Iraq hopes to fix pipeline

BAGHDAD: Iraq’s Oil Ministry hopes to resume pumping through the pipeline to the Turkish port of Ceyhan after a rupture halted the flow of crude, a spokesman said.

Pumping on the key Kirkuk to Ceyhan energy corridor was halted. The cause of the rupture was not immediately clear but an official at Iraq’s North Oil Co said that it was caused by technical problems, not sabotage.

“The stoppage of oil exports to Ceyhan was caused by a leakage caused by a rupture in the 46 inch pipeline,” Oil Ministry spokesman Asim Jihad said.

“Repair crews are working to replace the damaged part and hopefully we’ll be able to resume exports.”

Pertamina, KPI sign deal

JAKARTA: Indonesia’s Pertamina said it has signed a preliminary agreement with Kuwait Petroleum International (KPI) to build a new refinery in Indonesia with capacity of 200,000 to 300,000 barrels per day (bpd). The move would help reduce fuel shipments into Asia’s biggest gasoline and diesel importer. Existing refineries cannot meet demand in Southeast Asia’s biggest economy, where no new refinery has been built since 1995.

New technology has enabled companies to extract gas from previously uneconomic shale plays, triggering a boom in production that has driven down prices in the giant US energy market and triggering a spate of takeovers by oil majors eager to get in on the action.

The less publicised success story has been booming oil production from shale plays like the Bakken formation in North Dakota. In the course of three years, oil production in the state’s Bakken formation has jumped more than 20 fold to 135,000 barrels per day in 2009 from recoverable reserves now estimated at nearly 4 billion barrels.

As things stand, the Bakken play is the only proven and successful source of oil from a shale formation, but independent producers are fanning out to other shale formations in search of similar gains.

The true yield from these deposits will become clearer by the end of the year, with a number of companies, including EOG Resources and Noble Energy, poised to begin drilling wells in new territories.

The breakthrough in hydraulic fracturing technology caused a surge in US gas production that drove US gas prices 55.3 per cent lower, from an average of $8.93 per million British thermal units (mmBtu) in 2008 to $4 mmBtu in 2009 and 2010.

Now, independent oil companies are hoping to replicate the Bakken boom in shale deposits like the Niobrara area in Colorado, and the Barnett and Eagle Ford plays in Texas.

Analysts estimate the breakeven price for shale oil at around $50 a barrel, making it an attractive investment at current prices, which have held between $70-80 a barrel for much of this year.

“There’s been a bit of a land rush in places like the Niobrara. There have been rumors which were later confirmed that a few companies have had success with their test horizontal wells there.

So companies are scrambling to add more acreage,” said Kenneth Carroll, analyst at Johnson Rice & Company.

The imposition of space rationing, or apportionment, for oil volumes set for shipment in September further complicates affairs for heavy oil producers in Western Canada and refiners in the US upper Midwest and southern Ontario, which have struggled with the situation for four weeks.

Enbridge, whose pipelines ship the bulk of Canada’s oil exports to the United States, is cutting back shippers’ nominations on Line 5, a 490,000 barrel a day pipeline to Sarnia, Ontario, from Superior, Wisconsin, by 26 per cent.

It is also apportioning Southern Access, a 400,000 bpd line to Flanagan, Illinois, from Superior, that is also known as Line 61, by 23 per cent, spokeswoman Gina Jordan said.

Enbridge reduced overall volumes on Line 5 by 8 per cent earlier in August, but did not impose apportionment. The rationing for September does not mean further overall reductions in oil flows on the two lines. The squeeze on nominations represents the latest headache stemming from the July 26 rupture of Line 6B near Marshall, Michigan, which spilled 19,500 barrels of heavy Canadian crude into the Kalamazoo River system.

Enbridge is still awaiting approval from an arm of the US Department of Transportation so it can perform pressure testing on locations.

The company also said it was not selling fuel products to Iran at present, in light of US and EU sanctions designed to put pressure on Iran over its nuclear programme. Net income was 222 million lira ($147 million), compared with an estimate of 281 million lira in a Reuters poll of eight analysts. It earned 371 million lira in the same period of 2009.

Sales in the second quarter were 6.63 billion lira, above a forecast of 6.5 billion lira and the 4.58 billion lira it posted in the year-ago period, according to an income statement. The lira fell against the dollar during the second quarter, so Tupras paid more in dollars for its purchases of crude, while its sales are in lira.

EBITDA, or earnings before interest, taxes, depreciation and amortisation, rose 13 per cent to 594 million lira in the first six months of the year, the statement showed. 

Tupras had a net refining margin of $5.68 per barrel at the end of June, it said. Its profit margin was 4.1 per cent higher in the first half.

Petroplus, Europe’s largest independent refiner, could end up contributing to worsening margins as it adds to industry capacity, making refineries less attractive. 

While margins could improve in 2011, analysts say they could be squeezed again by a growing supply surplus in 2012.

With more refinery capacity coming on line, companies may look to cut run rates to support margins, though analysts say they will be unwilling to reduce overall supply by closing plants as they are costly to dismantle.

“It’s a catch 22 of the industry — more capacity needs to be shut, but companies are reluctant to shut down ineffective capacity,” said Deutsche Bank analyst Gergely Varkonyi.

Petroplus raised $146 million via a share sale earlier this year, most of it earmarked for acquisitions. But O’Malley, who bought Valero Energy’s Delaware refinery in April and is also looking to buy its Paulsboro, US, plant and Lindsey, UK, from Total, may for once have misjudged the market after predicting in May that margins would improve.

Analysts say crack spreads, or the difference between the prices of crude oil and of products derived from it, have deteriorated since being buoyed by restricted refining capacity in the second quarter, and may not improve any time soon.

“A lot of maintenance work at refineries in the early part of the year took some supply out of the equation temporarily, boosting margins,” said Helvea analyst Martin Flueckinger.

“But U.S refineries have increased throughput rates in the last few months, so the markets are becoming oversupplied.”

Petroplus’s shuttered 210,000 barrel-per-day Delaware plant, currently undergoing maintenance, is due to restart production in April 2011, adding to industry oversupply worries.

In the past O’Malley, a New York City native whose working class background was solid preparation for the tough world of refining, has bought refineries at low cost and sold them on when at a profit.