Start-up of Turkish new USD6B STAR oil refinery delayed to 2019

MOSCOW (MRC) -- The commercial start-up of Turkey’s new USD6.3 billion oil refinery has been delayed until early next year and the plant is not expected to reach full capacity until mid-2019, three sources familiar with the matter said, as tests revealed minor faults, as per Hydrocarbonprocessing.

The 200,000-barrel-per-day STAR refinery, built by Azerbaijan’s state oil firm SOCAR, is set to be a game changer for Mediterranean oil markets and will increase the country’s total refining capacity by just over a third.

The plant was officially opened by Turkish President Tayyip Erdogan in October but it is not expected to start processing crude commercially until January, one of the sources close to the refinery said, as tests are still being carried out.

"They plan to ramp up slowly through the first quarter and it is expected to reach full processing capacity in the second quarter of 2019," the source said, adding that the start-up has been delayed a few times as tests had revealed small faults.

A second source familiar with SOCAR’s plans said that reaching full capacity could slip even further, into the third quarter.

Commercial production at new refineries, particularly large ones, often falls behind schedule as testing of the various units reveals minor issues that need ironing out.

A SOCAR spokesman said full refining capacity would be reached next year.

"We’ve received two crude oil cargoes and refining is in progress on the plant," the spokesman said.

SOCAR said at the start of this year the refinery would start up in the third quarter of 2018 with commissioning, or testing, to be complete by the end of October.

STAR is the biggest new refinery to start up in Europe for decades, and Turkey’s first in 30 years. It will transform traditional Mediterranean crude flows once it reaches full capacity, traders said.

Erdogan said at last month’s opening ceremony that the plant’s output would cut Ankara’s fuel import bill by about USD1.5 billion per year.

SOCAR plans to supply the refinery with oil from different producers in Europe, the Black Sea region and the Gulf, the head of SOCAR’s trading arm said in an interview last week.

"It may absorb a significant volume of local sour grades and given an outage of Iranian barrels and Kirkuk flow in the market, it may become really tight on the sour side. But the question is how things will look when the actual start-up happens," a European trading source said.

In September, SOCAR signed a contract with Russia’s Rosneft to supply STAR with 1 million tonnes of Urals crude per year, or about 20,000 bpd.

Geneva-based SOCAR Trading has already delivered a 600,000 barrel cargo of Azeri Light and a 1 million barrel cargo of Russian Urals.

As MRC wrote before, in the first half of March 2018, Petkim (part of SOCAR) shut its cracher in Turkey owing to a technical glitch. Located at Aliaga in Turkey, the cracker has an ethylene production capacity of 585,000 mt/year and propylene production capacity of 240,000 mt/year.

SOCAR, which is keen on expanding operations in the retail oil products market abroad, is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan.

Petkim is the leading petrochemical company of Turkey. Specializing in petrochemical manufacturing, the company produces ethylene, polyethylene, polyvinyl chloride, polypropylene and other chemical building blocks for use in the manufacture of plastics, textiles, and other consumer and industrial products.

Fire shuts unit at Moscow oil refinery: officials

MOSCOW (MRC) -- A fire broke out in an oil refinery in Moscow on Saturday morning, shutting down a unit that Thomson Reuters data said produced more than half the plant’s gasoline output, reported Reuters.

Fire crews battled for more than three hours before extinguishing the blaze at the refinery in the capital’s Kapotnya district, the emergency ministry said.

The plant’s owner - Gazprom Neft, the oil arm of Russian gas giant Gazprom - said the refinery was back working as usual apart from a catalytic cracking unit which was offline.

The unit has a daily production capacity of 6,900 tonnes of gasoline that accounts more than a half of the gasoline produced by the plant, according to Thomson Reuters data. There was no immediate comment from the company on the impact of the unit’s shutdown.

Moscow mayor Sergei Sobyanin said on Twitter the fire would not lead to any fuel shortages in the city.

The fire was out by 11 a.m. local time (0800 GMT), the ministry said, and there were no reports of any casualties or injuries at the plant.

We remind that, as MRC wrote before, in October 2017, Russian oil producer Gazprom Neft, through its subsidiary Naftna Industrija Srbije (NIS), started construction of a new deep conversion complex (DCC) at its Pancevo Refinery in Serbia with an investment of over EUR300m.

ADNOC and Mubadala to jointly explore global investment and growth opportunities

MOSCOW (MRC) – The Abu Dhabi National Oil Company (ADNOC) and Mubadala Investment Company (Mubadala), today, signed a framework agreement to explore together potential global growth opportunities that build on Mubadala’s diverse portfolio of refining and petrochemicals assets and support ADNOC’s international Downstream investment ambitions, as per Hydrocarbonproceesing.

The agreement was signed by Abdulaziz Alhajri, Director of ADNOC’s Downstream Directorate, and Musabbeh Al Kaabi, CEO of Petroleum and Petrochemicals at Mubadala, during the Abu Dhabi International Petroleum Conference and Exhibition (ADIPEC) being held in Abu Dhabi. The signing was witnessed by H.E. Dr. Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, and Khaldoon Al Mubarak, Group CEO and Managing Director of Mubadala.

Alhajri said: "This agreement is a natural evolution of the close relationship between ADNOC and Mubadala. It will ensure that, in partnership, we continue to maximize value from our hydrocarbon resources, in line with the UAE Leadership’s wise directives of stretching the value of every barrel of oil we produce. We look forward to jointly identifying and securing mutually beneficial value enhancing opportunities and securing more effective market access for our products."

Al Kaabi said: "Mubadala has an extensive and successful refining and petrochemical portfolio, which already has a number of strong partnerships with ADNOC. With the same shareholder, it was a very natural conclusion to reach that we should extend our collaboration into the global arena by pooling our technology, market knowledge, access to feedstock and operating experience."

Mubadala has successfully developed a diverse portfolio of refining and petrochemicals assets, including CEPSA, OMV, Cosmo Oil, PARCO, NOVA Chemicals and Borealis. The refining operations, in this portfolio, are renowned for their technical and commercial excellence and are net buyers of crude, while the petrochemical operations include leading proprietary technologies for production of polyolefins and other products.

As part of the framework agreement, ADNOC and Mubadala will explore the potential for the processing of crude oil and other hydrocarbons supplied by ADNOC, as well as potentially utilizing technologies owned by Mubadala with product offtake by other ADNOC companies. This end-to-end investment model allows for the UAE to not only assure long-term security of its hydrocarbon resources but allows for margin capture along the value chain.

ADNOC and Mubadala have a growing record of successful partnership, working together to maximize value from Abu Dhabi’s oil and gas resources. Borealis, 67 percent owned by Mubadala, owns a 40 percent share in Borouge, which is ADNOC’s joint venture with Borealis. In February 2018, ADNOC awarded CEPSA, wholly-owned by Mubadala, a 20 percent stake in the SARB and Umm Lulu offshore concessions, and, in May, ADNOC and CEPSA signed a project development agreement for a new, world-scale Linear Alkyl Benzene facility in ADNOC’s refining and petrochemicals complex in Ruwais, UAE. Meanwhile, in April, ADNOC awarded OMV a 20 percent stake in Abu Dhabi’s SARB and Umm Lulu offshore concession. OMV, an Austrian integrated oil and gas company, is part-owned by Mubadala.

ADNOC has embarked on the execution of its Downstream strategy, which includes a AED 165 billion (US $45 billion) Downstream investment program that will see the Ruwais Industrial Complex upgraded to significantly increase its flexibility and integrated capabilities to produce greater volumes of higher-value refined and petrochemical products and significant expansion internationally through ADNOC International.

Chinese industrial heartland Shandong to overhaul energy intensive industries

MOSCOW (MRC) -- China's Shandong province, home to a fifth of China's oil refining capacity, is planning to consolidate dozens of small refineries and build mega-petrochemical complexes, as part of a new plan to overhaul energy intensive industries, reported Reuters.

The plan, published on Monday, is aimed at improving the efficiency and competitiveness in seven energy-intensive sectors, including steel, fertilizer, aluminum, coking coal and oil refining.

It comes amid an ongoing push by Beijing to tackle excess capacity in heavy industry and shift its economy to higher value-added sectors, and improve its dirty air.

"We will cap capacity of steel, petrochemicals, coking coal and aluminum and achieve a drop in energy intensity as well as total emissions from these sectors," the Shandong government said in the document published on its website.

The province, home to 90 percent of China's private refiners, wants to reduce total crude processing capacity from 130 million tons per year, or 2.6 million barrels of oil per day (bpd), to 90 million tons.

It will merge refiners with less than 3 million tons annual capacity by 2022, and later target those with up to 5 million tons, or about 100,000 bpd, before 2025.

It also wants to significantly reduce the output of diesel and gasoline by 2025.

The move is seen as positive for China's independent refining industry, currently facing fierce competition in local fuel markets and subject to frequent shutdowns due to environmental scrutiny.

The small private refiners known as "teapots" have a small share in domestic petrochemical markets, which are dominated by state companies such as Sinopec and foreign majors like Exxon Mobil.

"Shandong is being forced to reshuffle its oil industry under pressure from state-owned companies and foreign oil majors," said Zhong Jian, chief analyst with consultancy JLC.

Shandong said it will lobby for policy support from Beijing, including seeking approvals for new mega refining complexes and getting crude oil import quotas for new refineries. In the future, the province wants to build huge refining complexes with 30 million tons of yearly processing capacity and shift production to chemicals products.

The document also outlined plans for other sectors, such as capping annual fertilizer output at 8 million tons and reducing the number of coking coal producers from 56 to 40 in two years.

It also said 70 percent of steel mills built in polluted cities such as Jinan, Zibo and Binzhou will be forced to relocate to coastal areas.

The province said it would give incentives such as tax breaks and credit lines to help companies relocate and compensate workers made redundant during the relocation process.

Chevron in talks to buy Brazilian oil company's Texas refinery - sources

MOSCOW (MRC) - Chevron Corp has held talks to acquire Pasadena Refining System Inc (PRSI), a Texas oil refining unit of Brazilian state-run oil firm Petroleo Brasileiro SA (PETR4.SA), three people familiar with the matter said this week, as per Hydrocarbonprocessing.

U.S. oil companies are looking to expand refining operations to handle rising volumes of crude flowing from the country’s shale fields. A deal for PRSI would give Chevron an oil refinery that can process about 110,000 barrels-per-day of light crude.

Chevron is also discussing a gas liquids processing joint venture with Kinder Morgan Inc (KMI.N), largest energy infrastructure provider in North America, two of the sources said. Kinder Morgan operates a nearby plant that separates gas liquids into ethane, propane and other fuels.

The sources requested anonymity to discuss the confidential talks. They did not disclose the deal price. Petrobras did not respond to requests for comment. Chevron and Kinder Morgan declined to comment.

Petrobras, which is deeply in debt, has been seeking to divest USD21 billion in assets by year-end but has faced union resistance and legal obstacles. A presidential election on Sunday could raise obstacles for a sale with front-runner Jair Bolsonaro promising to install new managers at the company.

The PRSI refinery has been limited in the type of crude it can run since a 2011 fire, which left one of its processing units idle. A buyer would have to invest to upgrade the refinery, one of the people familiar with the matter said. But PRSI includes open land that could enable a future owner to easily expand the plant.

Petrobras put the plant, which is on the Houston Ship Channel leading to the U.S. Gulf of Mexico and has its own export docks, on the market earlier this year after sinking more than USD1.18 billion into the operation since 2006.

Garfield Miller, chief executive of energy investment bank Aegis Energy Advisors, said the U.S. shale-oil boom has given a second chance to U.S. plants designed to process lighter crudes. Several years ago Petrobras would not have been able to sell PRSI because of its age and inability to process heavy crudes, he said.

That has changed with the growth of the Permian Basin, the nation’s largest oilfield, which now produces 3.5 million barrels per day of oil, according to U.S. government figures. "Anyone with crude in the Permian might logically want to own it,” said Miller. “This refinery today has value, whereas eight or nine years ago it had none."

Pierre Breber, Chevron’s head of refining and chemicals, this month said the company wanted to build or buy a refinery along the U.S. Gulf Coast to process oil from its West Texas operations.

Chevron’s shale output from the region jumped 51 percent in the second quarter to 270,000 barrels of oil equivalent per day. By expanding its refining capacity to Houston, it would be able to process the crude closer to where it is produced.