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For analysis and commentary on these and other stories, plus the latest downstream developments, see inside…
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of i ts contents
30 April 2014
Week 17
Issue 154
News Analysis
Intelligence
Published by
NewsBase
COMMENTARY 2
Iraqi Kurds put crude up for sale 2
East Africa to be an export hub by 2020 3
POLICY 5
Manama to increase gas supplies 5
Egypt promises to pay energy firms 5
COMPANIES 6
Orca threatens gas shut-off in
Tanzania over unpaid bill 6
UAE power firm expands East African
presence 7
REFINING 7
China Sonangol’s Dubai plans clouded
by more uncertainty 7
Nigeria’s Aiteo announces
refinery plans 8
Mombasa refinery sale terms finalised 8
PIPELINES 9
EPC tendering nears on Bahrain-Saudi
pipeline 9
TERMINALS & SHIPPING 10
Iraqi crude output rises but faces
storage constraints 10
Ghana lines up LNG supplies
via Benin 10
VTT Vassilikos storage hub on
schedule for mid-July 11
NEWS IN BRIEF 11
CONFERENCES 17
SPECIAL REPORT 19
NEWS THIS WEEK…
Kurdish crude for sale!
Turkey and Kurdistan signal that in May they will start sales of crude from the region arriving at Ceyhan by pipeline, with or without Baghdad‘s approval.
Erbil announced that exports would begin on May
2, but whether this is possible or not remains to be
seen. (Page 2)
The timing of the statement is key, being made the
day before Iraqis went to the polls. (Page 2)
Barzani’s government now appears keen to make
its move and negotiate with Baghdad later. (Page 3)
East Africa: hitting targets
Mozambique could win the race to become an export hub by 2020 with a more stable outlook on projects and a set of clients already in tow.
Mozambique is set to become the first gas
exporter in the region. (Page 3)
Tanzania continues to face a string of setbacks to
its gas ambitions. (Page 4)
Kenya’s plans are still at a standstill, but the
country will be essential for development. (Page 4)
NewsBase Downstream Monitor
–– MEA ––
Downstream Monitor MEA 30 April 2014, Week 17 page 2
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
With Iraq going to the polls on April 30
in a general election in which the issues
of regional sovereignty and the control of
the country‘s sizeable hydrocarbon
reserves are set to play a significant role,
the Kurdistan Regional Government
(KRG) has upped the ante, announcing
that it plans to start sales of crude from
the region on May 2 – before the newly
elected government will have had time to
formally start work.
The announcement by regional Prime
Minister Nechirvan Barzani in an
interview with the Rudaw Kurdish media
network comes a full four months after
oil started flowing from the region
through one half of the Kirkuk-Ceyhan
pipeline and two weeks after Turkish
energy minister Taner Yildiz announced
that storage space at Ceyhan was limited
followed by a comment that Turkey
would soon need to allow some crude to
be sold. However, it is still far from clear
whether sales can actually start on May 2
or whether Barzani‘s announcement is
aimed at influencing the outcome of the
Iraqi elections.
Turkish officials have played down the
chances of sales starting on May 2,
saying that while they are now scheduled
to begin ―sometime in May‖ they are not
yet prepared to confirm an exact date.
They did however confirm that the
flow of crude from the region has been
restarted at 100,000 barrels per day,
having earlier been halted in line with the
start of serious talks between the KRG
and the Baghdad government in March.
Critical mass
With flow from Iraq‘s Kirkuk field
suspended since early March the
Kurdistan crude will now be able to flow
to Ceyhan unhindered, whereas
previously it was restricted to periods
when Iraqi Kirkuk flow was halted to
prevent the two crudes becoming mixed.
And with the Ceyhan tanks empty,
there should be plenty of storage space
free to hold the newly flowing crude.
In theory that should mean that there is
no particular rush to start selling the
crude. However Turkish energy minister
Taner Yildiz confirmed on April 29 that
tank farm operator Botas has allocated
only 2.5 million barrels of storage for the
Kurdish crude and that when that has
been filled, Turkey will be obliged to
allow sales to begin.
With 1.5 million already in storage, at
a build-up rate of 100,000 bpd that would
indicate a maximum of 10 days before a
cargo would have to be lifted and a first
lifting sometime before May 7.
This leaves little time for whatever
administration emerges from the Iraqi
polls to conclude an agreement.
Time to act
However, if the tone set by Barzani in his
recent interview is anything to go by, it
may already be too late for more
negotiations, with the KRG apparently
set to first begin sales and to address any
need to negotiate later.
According to Barzani, while the KRG
and Baghdad have reached agreements
on most things, the talks have reached an
impasse on the issue of which body gets
to sell the crude, with Baghdad insisting
that sales must be made by Iraq‘s State
Oil Marketing Organization (SOMO).
The KRG for its part insists that there
is nothing in the Iraqi constitution which
stipulates that SOMO has to conduct
sales and maintains that the only issue
that needs to be addressed is
transparency. Barzani explained that the
crude flowing to Ceyhan is being
transparently monitored and measured
and that the KRG plans to sell it on the
global market, to keep the 17% of
revenues it is entitled to under the Iraqi
constitution and to remit the rest to
Baghdad. With current production
capacity able to send as much as 200,000
bpd to Ceyhan the potential earnings for
Baghdad are significant.
And with Barzani claiming that as
much as 500,000 bpd could be exported
through Turkey by the end of the year,
rising to 1 million bpd within two years,
those earnings are set to grow, assuming
the necessary pipeline capacity is
available.
Route to market
Currently the KRG is using only the
smaller of the two parallel pipes that
make up the Kirkuk-Ceyhan export line,
the 40-inch (1 metre) diameter pipe
which has a maximum capacity of
500,000 bpd, as the larger 46-inch (1.17
metres) line with a capacity of 1 million
bpd is reserved for crude from the
Baghdad-controlled Kirkuk fields.
COMMENTARY
Iraqi Kurds put crude up for sale
Turkey and Kurdistan signal that in May they will start sales of crude from the region
arriving at Ceyhan by pipeline, with or without Baghdad‘s approval
By David O’Byrne
Erbil announced that exports would begin on May 2, but whether this is possible or not remains to be seen
The timing of the statement is key, being made the day before Iraqis went to the polls
Barzani’s government now appears keen to make its move and negotiate with Baghdad later
With current KRG-
operated production
capacity able to send as
much as 200,000 bpd to
Ceyhan the potential
earnings are significant
Downstream Monitor MEA 30 April 2014, Week 17 page 3
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
This suggests that for the KRG to
realise its production potential, a new
export pipeline will be needed.
Plans for such a line exist with Ikideniz
Petrol, a subsidiary of Calik Holding
having last year applied to Turkey‘s
General Directorate of Petroleum Affairs
(PIGM) for a licence to construct a
pipeline from the Iraq-Turkey border to
Ceyhan. But since then, no further
announcements have been made
concerning the project.
In the shorter term though, the focus is
likely to remain firmly on the ongoing
disagreements between the KRG and
Baghdad. According to Barzani,
Baghdad has failed to pay the KRG its
share of the state budget for March and
only paid a fraction of monies due in
January and February, giving the KRG a
pressing need to sell oil to meet its own
needs, and raising questions over
whether it will repatriate 83% of sales
revenue to Baghdad as claimed.
And with Barzani claiming in the
recent interview that ―Baghdad would cut
our oxygen if they could‖, whatever
administration emerges from this week‘s
election may face an uphill struggle to
cut a deal that will satisfy both sides.
A new report by oil and gas information
provider Evaluate Energy has said that
East Africa could become the world‘s
next oil and gas hub by 2020 if even only
one of the three countries aiming for this
goal – Kenya, Mozambique and
Tanzania – reach their objective.
This could bring a major change to the
global energy map as, with the exception
of Angola, Africa has not seen major
evolution in its oil and gas sector over
the last two decades.
The West African country has gained
prominence in the market since its boom
in 2000 and now rubs shoulders with the
continent‘s four major producers –
Algeria, Nigeria, Libya and Egypt – as
the second-largest oil exporter on the
continent – the country exports 1.7
million oil barrels per day more than it
imports) and with an LNG export
terminal capable of exporting 5.2 million
tonnes per year.
Taking the example of Angola, it is
easy to see just how quickly situations
can turn around in developing countries
with vast natural resources that are
targeted by major investors.
However, while Kenya, Mozambique
and Tanzania try to follow Angola‘s
footsteps, they have encountered some
setbacks that could lead to further
delays.
COMMENTARY
East Africa to be an export
hub by 2020
Mozambique could win the race to become an export hub by 2020 with a more stable
outlook on projects and a set of clients already in tow
By Nádia Morais
Mozambique is set to become the first gas exporter in the region
Tanzania continues to face a string of setbacks to its gas ambitions
Kenya’s plans are still at a standstill, but the country will be essential for regional development
Downstream Monitor MEA 30 April 2014, Week 17 page 4
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Kenya lags behind
In Kenya, the US$25.5 billion Lamu
Port, South Sudan, Ethiopia Transport
(LAPSSET) Corridor that is to link Lamu
on Kenya‘s coast to Juba in South Sudan
has seen little progress in efforts to
combine the development of a new port,
an oil pipeline, road and railway links
and an oil refinery.
Although Kenya and Ethiopia have
already formally initiated a Joint
Transport Corridor Commission of
ministers to speed up the project, the
construction of the port, the railway, the
pipeline and the refinery have all been
delayed. The tender for the pipeline is
now expected to be issued by the end of
this year.
Some of the reasons for the delays
include pending decisions by the
government of South Sudan. The
executive commissioned a US$3 million
feasibility study to review a possible
route and although the results have not
been made public, the study found that
both the options of merged pipelines
from the oilfields in Unity State and
Upper Nile State and the option of taking
these to Djibouti or Lamu, were
technically viable. However, no decision
has yet been announced.
The refinery has also been at a
standstill with several options on the
table and without an agreement. Another
issue is funding, with costs budgeted at
up to US$30 billion and expected to rise
further. But this remains a crucial project
for the region, as it is expected to relieve
Mombasa, one of the most congested
ports on the continent, and will also
benefit Uganda, South Sudan and
Ethiopia.
Mozambique
In Mozambique, a string of deepwater
gas discoveries made by international oil
companies (IOCs) has made LNG
exports look like a real possibility. Here,
progress has been a bit more agile, with
Italian major Eni‘s recent announcement
regarding the construction of a floating
LNG plant (FLNG) off the coast of
Mozambique‘s northern Cabo Delgado
province. With this development, Eni is
trying hard to speed up and win the LNG
race towards East Asian markets and to
take advantage of Mozambique‘s
positioning as a potential exporter to
Asia.
But although the FLNG facility can
present a major opportunity, it also
presents major technical hurdles involved
in the construction of large structures,
and political barriers in the country can
also represent a setback.
Still, the amount of gas available in
Mozambique is such that there are
several alternatives in its monetisation.
The main obstacle is competition from
the US and Canada as their LNG export
potential is on the rise and is also likely
to target Asia.
Tanzania
In Tanzania, major gas discoveries have
been found by IOCs with LNG export
ambitions, and there are plans for a
separate Chinese-backed mega-port at
Bagamayo. However, Tanzania‘s dream
to beat Mozambique in the race to
become East Africa‘s first exporter of
LNG faces with several stumbling
blocks.
There is little clarity on the country‘s
new regulations for the natural gas
sector, which means IOCs acting in
Tanzania are likely to delay their final
investment decisions (FIDs) until general
elections are held in 2015.
Clare Allenson, Africa analyst at
Eurasia Group, told Zawya: ―The
constitutional review is forcing interest
groups to take a stand on all the most
divisive political issues at once … In this
climate, introducing new terms to govern
the nascent natural gas sector will be
politically difficult, making passage of a
new bill unlikely this year‖.
According to Allensen, as a result of
the uncertainty caused by the lack of
clear terms, ―first production is unlikely
until 2022 at the earliest – a date at which
the global gas market will probably face
significant supply increases‖.
Consequently, she believes the bid round
scheduled to be concluded this month is
likely to be extended.
Certain success
Although progress is being made in
Mozambique and most of its plans are
likely to materialise, competition from
the US and Canada, technical hurdles and
bureaucratic uncertainties are also likely
to hamper the East African country‘s aim
of leading the region in the race to export
gas to Asia.
As for Kenya and Tanzania, the former
must still overcome a plethora of
regulatory headaches for LAPSSET to
move ahead, although progress appears
to be gathering momentum, while
Tanzania‘s latest regulatory setback and
the magnitude of its plans could mean
that FIDs for its ambitious projects will
be postponed until after the general
elections, which could create an
advantage for other competing countries.
Overall, the Mozambican project is the
most advanced and most likely to reach
its full potential and with Kenya and
Tanzania heavily dependent on long-
awaited decisions, the security and
potential of Mozambique‘s projects give
it another obvious advantage. The
presence of state-backed Asian
companies is also of benefit to
Mozambique, as it is expected to create
synergies, higher profits and lower costs.
Whichever country ‗wins‘ the race,
progress in the region is set to change the
global gas landscape and give the
continent a much stronger position in the
market, reversing many of the existing
dynamics.
COMMENTARY
Downstream Monitor MEA 30 April 2014, Week 17 page 5
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Bahrain is moving forward with plans to
increase the availability of gas through
both imports and domestic development,
CEO of the government‘s National Oil &
Gas Authority (NOGA), Sheikh
Mohamad bin Khalifa al-Khalifa, told an
energy conference in Manama in mid-
April.
As a result, downstream expansion
projects at Bahrain Natural Gas Co.
(Banagas) and Gulf Petrochemicals
Industry Co. (GPIC) are returning to the
agenda.
In 2012, Manama said it would invest
US$20 billion over 20 years alongside
foreign firms in upstream and
downstream development.
A request for proposals will be issued
imminently for the construction and
operation of a long-awaited LNG
terminal, following the submission of
expressions of interest during the first
quarter.
Such plans have been on the table for
years, with a developer shortlist drawn
up in 2010, but regional and local
political ructions put the scheme on hold.
However, with domestic calm largely
restored by 2012, the search resumed for
an international firm to develop the
facility, to include construction of
floating storage facilities, a regasification
and send-out system, marine works and a
jetty, on a 20-year build-own-operate-
transfer (BOOT) basis, with capacity
starting at around 500 million cubic feet
(14 million cubic metres) per day,
increasable to 800 mmcf (22.7 mcm). A
deal was reported at around the same
time with Russia‘s Gazprom for LNG
supply but Sheikh Mohamad denied the
conclusion of any firm supply
agreements. Commissioning is now due
by the end of 2016.
However, the NOGA chief was clear
that Bahrain could not afford to depend
on LNG imports and that the project
would simply make these possible should
the need arise. ―Prices are not in the
range we are comfortable with at the
moment,‖ he said. ―We just want to build
the infrastructure and have it available.‖
Naturally more desirable would be
success in the ongoing and intensifying
drive to increase domestic gas
production, which currently stands at
around 2.3 billion cubic feet (65 mcm)
per day, chiefly through the Deep Gas
Initiative at the main producing Awali
(Bahrain) field, where the aim is to raise
output to around 2.7 bcf (76 mcm) per
day by 2024. Drilling at the 8,000-
10,000-foot (2,440-3,048-metre) deep
Khuff reservoir is due to be launched by
the end of the second quarter.
―Our geologists are very excited about
the field and, if we can get this gas at an
affordable price, it is something we
would be very interested in pursuing,‖
Sheikh Mohamad confirmed.
Lack of gas has long held back major
industrial diversification, with the
notable exception of the kingdom‘s
flagship Aluminium Bahrain venture.
Gas-based industrial development on the
scale pursued by better-endowed
neighbouring states remains unfeasible,
but on a smaller scale, Sheikh Mohamad
revealed plans for an expansion at
Banagas, which processes Awali gas into
butane, naphtha and propane.
―Tatweer Petroleum [the local/foreign
joint venture operator of the Awali field]
does have some extra gas and Banagas is
carrying out a feasibility study for a third
train,‖ he said, adding that a decision
would be taken in the coming months.
Finally, GPIC was reported to be close
to securing a long-awaited gas allocation
to allow a US$1.7 billion expansion of its
Sitra fertiliser plant to proceed, about
which Sheikh Mohamed noted that all
three partners – including Saudi Basic
Industries Corp. (SABIC) and Kuwait‘s
Petrochemical Industries Co. (KPIC) –
were enthusiastic.
The project would entail adding
production of 2,400 tonnes per day of
ammonia and 3,200 tpd of urea.
Egyptian Minister of Petroleum Sherif
Ismail said last week that over the next
two months Cairo would pay US$1
billion to the foreign companies
operating in Egypt.
Egypt owes the companies around
US$6.3 billion for oil and gas produced
and supplied to the state, which in turn
sells most of this on the domestic market
at highly subsidised prices. Delayed
payments prevent the companies from
making further investment in Egypt‘s
hydrocarbon section.
The government paid US$1.5 billion to
the companies in 2013 and has stated that
it intends to pay off the balance by 2017.
Energy demand, particularly for
natural gas, is growing in Egypt. Gas
shortages and power black outs are
expected during the summer as electricity
consumption increases with the heat.
Egypt is attempting to negotiate the
installation of a floating storage and
regasification unit (FSRU) to facilitate
the import of LNG. It has yet to find a
supplier for the infrastructure, although
talks have been held with Hoegh LNG,
and the gas. Egypt‘s own LNG export
plants at Damietta and Idku are facing
serious lack of gas resources. Damietta
has been forced to stop exports and BG-
operated Idku declared force majeure in
January. According to data recently
released by Egypt‘s Information and
Decision Support Center, natural gas
production was down 10% year-on-year
in January, causing a decline in export
revenues of more than 60%, Ahram
Online reported earlier this month.
POLICY
Manama to increase gas supplies
Egypt promises to pay energy firms
Downstream Monitor MEA 30 April 2014, Week 17 page 6
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Egypt has been receiving billions of
dollars of financial assistance from Saudi
Arabia, Kuwait and the United Arab
Emirates.
Those governments have supported the
military backed government that replaced
Mohammed Morsi. Morsi, a
representative of Egypt‘s Muslim
Brotherhood, had been backed by Qatar,
which had contributed towards easing
Egypt‘s energy problem by covering
some of the state‘s contracted LNG
exports.
Price pump
Reuters reported last week that a
government decree has been issued that
will raise the price of natural gas for
businesses and homes connected with the
distribution network. It said residential
and commercial users of less than 25
cubic metres per month would pay the
equivalent of US$0.06 per cubic metre as
of May. This is double the current price.
It said the price rise does not apply to the
power generation sector.
Consumption between 25-50 cubic
metres per month will rise to US$0.14
per cubic metre, and consumption above
50 cubic metres per month will rise to
US$0.21 per cubic metre, Ahram
reported.
The price rise is expected to increase
state revenues by as much as US$143
million per year, the Egyptian media
reported. Energy subsidies are expected
to cost the government around US$14
billion during the 2013-14 fiscal year.
Meanwhile, it is estimated that an
investment of US$5 billion is required in
order to fix the country‘s dilapidated
power transmission system.
Orca Exploration has sounded the alarm
over the situation in Tanzania, where it
sells gas for local consumption, warning
that unless the local utility pays its bill,
the company will need to seek extra
funds in the 2014 fiscal year.
The crunch time will come if Tanzania
Electric Supply Company (TANESCO)
cannot pay off the debt it has racked up
to Orca and is unable to pay for further
deliveries, the company said on April 24.
The amount in which TANESCO is in
arrears has increased, from US$51.5
million at the end of 2013, to US$60.2
million now.
The total current debt is US$64.9
million, Orca said.
Orca‘s results suffered in 2013, with
the company posting a post-tax loss of
US$5.9 million. It ended the year with
US$32.6 million in cash, and US$1.7
million of debt, but its accounts included
a note on its status as a going concern.
The company, the largest gas producer
in Tanzania, reclassified US$47 million
of TANESCO debt as a long-term
receivable at the end of last year, cutting
its working capital to US$27.8 million,
down 41%, as a result of the slow rate of
payment. Furthermore, Orca said, neither
the utility nor the Tanzanian government
have a plan to address the arrears or
ongoing payments.
Orca is pursuing legal options against
TANESCO, including the suspension of
gas deliveries.
Putting further pressure on the
company, the Tanzania Revenue
Authority (TRA) issued a number of
assessments and interest penalties against
Orca, for a total of US$18.4 million. The
company believes these to be without
merit and has filed objections.
Orca did see off a challenge over the
use of cost pools at the Songo Songo
production-sharing agreement (PSA)
from the Tanzania Petroleum
Development Corp. (TPDC). Orca has
tried to secure commercial terms for
incremental sales from Songo Songo but
has not reached a deal with TPDC.
Unless progress is made, the company
said, it intends to pursue other markets
for gas from this development.
Tanzania is in the process of building a
pipeline from gas fields in the south to
Dar es Salaam and Orca noted this was
72% complete, with facilities 58%
complete.
It is expected on stream in mid-2015,
the company continued, although in
November 2013, Orca had predicted it
would be ready by January 2015. The
pipe will carry gas from Mnazi Bay and
will tie into a new facility at Songo
Songo.
POLICY
COMPANIES
Orca threatens gas shut-off
in Tanzania over unpaid bill
Downstream Monitor MEA 30 April 2014, Week 17 page 7
Copyright © 2014 NewsBase Ltd.
www.newsbase.com Edited by Ian Simm
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
UAE-based Altaaqa Global CAT Rental
Power has expanded its operations in
East Africa, using Kenya as a conduit.
The company, which provides
temporary power solutions, will now
cater for several countries, including
Tanzania, Rwanda, Burundi, Uganda,
Kenya, Somalia, Ethiopia, Sudan, South
Sudan, Djibouti and Eritrea.
Peter den Boogert, General Manager of
Altaaqa Global, said: ―The business
activities in the East Africa region are
flourishing and the economy has been
thriving throughout recent years,
resulting in an increased demand for
power. We realise that our industry is
driven by emergency needs and hard
deadlines, but uses equipment that
requires substantial lead times to
acquire.‖
Altaaqa Global has around 1,400 MW
of rental power readily available and can
provide a diverse choice for the
petrochemical industry when rental
power solutions are required. ―We
provide temporary power for
manufacturers of olefins, ethylene,
propylene, butadiene, plastic products
and synthetic rubber production. We also
provide rental power stations for
aromatics petrochemical companies and
temporary power for manufacturers of
synthesis gas such as pesticides and
fertilizer companies,‖ said the firm.
It also has the capability to provide
power plants running on various fuel,
such as piped natural gas (PNG), LPG,
compressed natural gas (CNG), LNG,
flare gas, diesel, dual-fuel (70% gas and
30% diesel), and soon, heavy fuel oil
(HFO).
Majid Zahid, the Strategic Accounts
Director of Altaaqa Global said East
Africa had ―a promising economic
outlook within the energy, petrochemical
and engineering sectors.‖ The company
handles large-scale temporary power
projects of almost unlimited size, from
20 MW rental power plants to 250 MW
distributed power generation and more.
As the region‘s economy strengthens a
number of new plans are underway to
boost its refining and petrochemical
capacity.
Kenya plans to almost double the
35,000 barrels per day capacity of its
Mombasa refinery, currently the only
major crude oil refinery in East Africa,
meanwhile Uganda intends to add
another refinery to the region that will
handle 60,000 bpd. The latter is to be
constructed in collaboration with Kenya,
Rwanda and South Sudan.
Almost eight months to the day since the
government of Dubai announced that it
had signed a memorandum of
understanding (MoU) with China
Sonangol International (CSI) regarding
the construction of a refinery in the
emirate, there appears to be little reason
for confidence.
In November 2013, NewsBase blog
Drake published an article questioning
Dubai‘s decision to choose CSI, a firm
with no apparent previous refining
experience, for the project.
Announced on September 26, the MoU
– signed by Sheikh Ahmed bin Saeed al-
Maktoum, chairman of Dubai Supreme
Council of Energy, and China
Sonangol‘s chairman, Sam Pa – outlined
the building of Dubai‘s second refinery.
China Sonangol is backed by Hong
Kong-based New Bright International
Development and Angola‘s state-owned
oil firm Sonangol.
At the time, Drake speculated that the
news was little more than spin, and the
Wall Street Journal quoted a Gulf source
as saying it was part of a ―positive news
drive in the emirate as part of its bid to
host the 2020 World Expo.‖ Indeed,
there has been little since to suggest that
the plans will move forward any time
soon. If anything, the project‘s future has
been further complicated by recent news.
On April 17, the US Treasury‘s Office of
Foreign Assets Control (OFAC) added
Pa and Sino-Zimbabwean firm Sino Zim
Development to its sanctions register,
which lists designated nationals and
blocked persons, ―all of whom US
citizens and business must avoid when
conducting business transactions,‖
according to the organisation.
It cited a 2012 Global Witness report,
which ―encouraged the international
community to investigate Pa and Sino
Zim for undermining Zimbabwe‘s
democracy by subverting civilian control
over key organs of the state.
COMPANIES
UAE power firm expands
East African presence
REFINING
China Sonangol’s Dubai plans
clouded by more uncertainty
Downstream Monitor MEA 30 April 2014, Week 17 page 8
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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
Global Witness also alleged that Pa
provided funding and materials to
Zimbabwe‘s Central Intelligence
Organization (CIO) in return for access
to diamond, cotton and property sectors.‖
Pa is thought to have studied alongside
Angolan President Jose Eduardo dos
Santos in Baku, Azerbaijan during the
Cold War. As noted by Drake, the
UAE‘s need for another refinery at a time
when there are already US$10 billion
worth of major projects in progress
aimed at boosting the country‘s refining
capacity to around 800,000 barrels per
day appears negligible.
Irrespective of whether or not CSI plan
comes to fruition, Dubai won in its bid to
host World Expo 2020, and is predicted
to spend around US$18 billion on
hosting the event.
China Sonangol, with its experience in
construction, may be better placed to
carry out work for the event than the
downstream sector.
Nigerian firm Aiteo has announced plans
to diversify into the downstream sector
with the planned development of a
100,000 barrel per day greenfield
refinery in Warri, Delta State.
According to oil industry sources cited
by Nigerian daily Vanguard, the
company‘s refinery project is at the
conceptualisation stage, and is expected
to come on stream by 2017.
According to Aiteo, the refinery has
become crucial as 70% of Nigeria‘s
refined oil has to be imported despite the
West African country being a major oil
producer.
The company reported: ―Given the
long-term unsustainability of securing all
our petroleum products from imports, we
have set out on our most ambitious
project yet, which is the development of
a 100,000 bpd greenfield refinery.‖
It added: ―Our aspiration is to fast-
track the development and construction
of the refinery and that actual production
from the refinery will come on stream by
2017.‖
The company also acts in bulk
petroleum products‘ storage, marketing,
supply and trading; retail service station
networks; exploration and production;
oilfield services; power generation and
electricity distribution and gas
operations. Aiteo owns bulk petroleum
storage facilities in Port Harcourt and
Apapa, with a capacity of 110 million
litres and 210 million litres of petroleum
products respectively.
The indigenous company was part of a
list disclosed by Reuters, which showed
that Nigeria has awarded most of its
long-term oil contracts to local firms.
Global traders wanting to succeed in the
country, Reuters said, will thus need to
partner with these local companies to
access Nigerian crude.
Nigeria‘s policy is aimed at increasing
the role played by local firms, with the
official intention being to end decades of
control over the sector by foreign majors.
However, several industry sources said
the allocations favoured powerful
businessmen close to President Goodluck
Jonathan ahead of the elections in
February 2015.
The Kenyan government has sent to the
Attorney General‘s office for approval an
outline of the terms and conditions for
the exit of Essar Energy Overseas Ltd
from its 50% shareholding alongside the
state in Kenya Petroleum Refineries Ltd
(KPRL), owner of the country‘s – and
East Africa‘s – only refinery, at
Mombasa.
Approval of the deal, reported to entail
payment of US$3.3 million by Nairobi to
acquire the stake, would bring to a close
a long and acrimonious saga, centred
around Essar‘s failure to undertake the
expansion and upgrade envisaged when a
new strategic investor was brought on
board in 2007 and including allegations
of corruption by the previous government
in negotiating the deal.
Essar Energy overseas is a Mauritian-
registered subsidiary of India‘s Essar
Group Under. Nairobi will pay US$3.3
million for Essar‘s stake – deducting
roughly US$2 million for breach of
contract through cancellation of the
planned upgrade. The overarching
project would have entailed investment
of some US$1.2 billion to raise output
from 80,000 barrels per day to 200,000
bpd while improving the quality of the
refined fuel, most importantly lowering
the sulphur content. In October 2013,
Essar formally announced the decision to
cancel the plans, citing studies from
international consultants which found
that the project would not be
economically viable, while the following
month KPRL initiated a ―critical review
of the project‘s economics‖.
REFINING
Nigeria’s Aiteo announces
refinery plans
Mombasa refinery sale
terms finalised
Downstream Monitor MEA 30 April 2014, Week 17 page 9
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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
The refinery has been closed since
September when the government ceased
procuring crude, as the two parties failed
to convert an initial ―support agreement‖
to protect the prices received by KPRL
until the upgrade‘s implementation, into
a long-term offtake agreement.
Aside from the major upgrade project,
Essar is also accused of failing to install
modernised technology to enable the
production of cleaner fuels in the near
term – with the result that output was in
breach of harmonised standards agreed in
June by the East African Community‘s
Council of Ministers. Both developments
have forced marketers to depend on
costly imports, while the Mombasa
facility has been used merely for storage
– and the government has suggested this
may be its long-term destiny, either for
domestic production when it comes on
stream or for strategic stocks. A major
new refinery supplanting the aged and
dilapidated Mombasa plant is a key
component of the multi-billion-dollar
Lamu Port Southern Sudan-Ethiopia
Transport (LAPSSET) Corridor, which
would see the coastal site become a
hydrocarbons processing and export hub
for the whole region. Nairobi also
confirmed in February plans to acquire a
small stake in Uganda‘s planned
greenfield refinery at Hoima, close to the
Lake Albert area where most of the
country‘s oil lies. Essar entered an
agreement to acquire the 50% share in
KPRL from the UK‘s BP, the US‘
Chevron and the Anglo-Dutch Shell
Group in 2007, but the deal for the firm
to pay US$5 million plus a US$2 million
consideration for Nairobi‘s waiver of
pre-emptive rights was not finalised until
2009 and the first payment was only
disbursed in 2011. Questions have
subsequently been raised over why the
size of the deal – first mooted at being
worth around US$11 million – decreased
so sharply during discussions and,
relatedly, over the involvement of senior
figures in the government of former
president Mwai Kibaki as shareholders in
Essar Energy Overseas, which was
incorporated in Mauritius at around the
time of the asset‘s sale.
An engineering, procurement and
construction (EPC) tender is expected by
the end of the year for the planned new
oil pipeline from Saudi Arabia to
Bahrain, CEO of Bahrain‘s National Oil
& Gas Authority (NOGA), Sheikh
Mohamad bin Khalifa al-Khalifa, told a
conference in Manama in mid-April.
The scheme to replace the existing
pipeline, which runs close to residential
areas and is thus unsuitable for
expansion, has been on the table for
many years, held up by debates over
routes and pricing, but appeared to gain a
new lease of life in September when
Riyadh and Manama announced
conclusion of an agreement to go ahead
with a new 115-km link with capacity to
carry 350,000 barrels per day of crude
from Saudi Aramco‘s plant at Abqaiq in
the Eastern Province to Sitra, home to the
270,000 bpd refinery owned by NOGA
subsidiary Bahrain Petroleum Co.
(BAPCO). The existing pipeline‘s
capacity is 230,000 bpd.
Australia‘s Worley Parsons has
completed the front-end engineering and
design (FEED) contract on the estimated
US$350 million pipeline, which will run
overland for 74 km of the overall route.
Progress is essential to BAPCO‘s plans
for an upgrade and expansion of the
refinery at a cost of up to US$9 billion,
the most important element of which is a
new residue conversion unit to process
heavier crude types into lighter-grade
products.
Projections for the scale of the
expansion range from a minimum of
100,000 bpd to 400,000 bpd, with the
other proposed elements being a new
crude unit and associated facilities and a
hydrocracker and associated units, and
the main factor in question besides
feedstock being cost.
BNP Paribas and HSBC have been
appointed financial advisers while bids
for the project management consultancy
and FEED contracts are under
evaluation, Engineers India and the US‘
Bechtel being the respective low bidders
for the two deals.
A tender for technology provision is
expected in July.
While the kingdom will remain heavily
oil-dependent on Riyadh, determined
efforts are being made to raise domestic
production, which recovered to around
50,000 bpd in 2013 and which the
government aims to double by the end of
the decade.
Enhanced oil recovery (EOR) projects
are under way at the main Awali
(Bahrain) field, which covers roughly
80% of onshore territory, while offshore
blocks have been licensed to
international oil companies (IOCs) – the
US‘ Occidental Petroleum (Oxy) holding
the Block 1, 3 and 4 concessions and
Thailand‘s PTTEP responsible for Block
2. Oxy is also a shareholder alongside
NOGA and Abu Dhabi government-
owned Mubadala Development in
Tatweer Petroleum, which operates the
Awali field.
REFINING
PIPELINES
EPC tendering nears on
Bahrain-Saudi pipeline
Downstream Monitor MEA 30 April 2014, Week 17 page 10
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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
Crude oil production in Iraq hit a record
high of 3.6 million barrels per day in
February but declined to 3.26 million bpd
in March owing to export problems.
Despite the growing head of steam
behind Iraqi oil output, the country is
hamstrung by a lack of export
infrastructure, particularly storage. Any
complication that prevents loading – such
as bad weather –frequently backs up,
forcing operators to curtail production at
the field.
Iraq exported 2.8 million bpd in
February, but this declined to 2.39
million in March, following an attack on
the northern export pipeline between
Kirkuk and Turkey‘s Mediterranean port
of Ceyhan.
Shipments through the pipeline had
been averaging around 290,000 bpd in
February, but it has yet to be repaired.
The vast majority of Iraqi exports are
made through its southern Gulf port of
Basra, where shipments averaged 2.5
million bpd in February and 2.37 million
bpd in March.
Pipeline and storage infrastructure in
Iraq‘s south is inadequate to meet the
demands of the new production that is
coming on stream there, mainly from the
Majnoon, Gharraf and West Qurna-2
fields.
―The long-awaited full start-up of dual
SPMs is behind the higher exports but
work on storage tanks, pumping stations
and infrastructure is still needed to
ensure the crude‘s quality,‖ the
International Energy Agency (IEA) said
in its April Oil Market Report,
commenting on complaints of high water
content in Iraqi crude.
―The next phase of upgrading work at
the terminals is not expected to be
completed before year-end, which could
constrain growth,‖ the agency added.
The halt of shipments through the
ageing Kirkuk-Ceyhan pipeline – which
has suffered numerous acts of sabotage
over the last 20 years and is in serious
need of refurbishment – has forced a
reduction in crude production in northern
Iraq, where crude storage facilities are
now reported to be full.
During a recent press conference, Iraqi
Deputy Prime Minister Hussain al-
Shahristani said exports could have
reached 3.2 million bpd, had the northern
pipeline been open.
Iraq is looking to export an average of
3.4 million bpd during 2014, including
400,000 bpd from the Kurdistan
Regional Government (KRG) controlled
area. Meanwhile, Iraq‘s oil sector
continues to struggle with widespread
insurgency and political unrest, attacks
from Islamist groups caught up in Syria‘s
civil war, as well as the typical problems
of bureaucracy and corruption.
The parliamentary election scheduled
to take place on April 30 is expected to
be indecisive and it may take weeks for a
new government to be formed. Such
complications could create even further
obstructions to the sorely-needed
expansion of Iraq‘s export capacity.
Africa Power Generation (Afgen) has
finalised a joint venture agreement with
government-owned Ghana Gas for the
import of LNG, initially in regasified
form from Benin, via the West Africa
Gas Pipeline (WAGP), with a view to
accelerating an independent LNG import
project.
Afgen, a subsidiary of South Africa-
based Africa Gas Development Corp.
(Afgas), is in the process of being
acquired by Gasol, a London-listed firm
focused on supplying gas in West Africa
and in which Afgas is the largest
shareholder. Both companies are chaired
by Nigeria‘s former OPEC secretary
general, Rilwanu Lukman.
Gasol announced the Ghana deal on
April 22. The company said gas volumes
sold into Ghana, via the WAGP, would
begin at 2.83 million cubic metres per
day for five years, with gas sourced from
Benin‘s LNG import project. In 2012,
Gasol signed a joint venture, called
Cogaz, with Benin‘s state-owned Societe
Bengaz for the distribution and sales of
natural gas in the country, and elsewhere
in West Africa. This was followed by a
memorandum of understanding (MoU) to
supply gas to Communaute Electrique du
Benin, the power authority for both
Benin and Togo.
Gasol is working on a gas import
project, based on a floating storage and
regasification unit (FSRU), which would
be situated at Benin‘s Cotonou port. This
would be supplied with LNG under an
alliance agreement signed the same year
with the State Oil Company of the
Azerbaijan Republic (SOCAR).
Gasol‘s wider focus is offshore
Nigeria, where it has a co-operation
agreement with London-listed Afren for
first priority in gas supply from the
company‘s fields there. The 678-km
WAGP runs from Nigeria to Takoradi, in
Ghana, with landing points at Cotonou,
Lome and Tema.
TERMINALS & SHIPPING
Iraqi crude output rises but
faces storage constraints
Ghana lines up LNG
supplies via Benin
Downstream Monitor MEA 30 April 2014, Week 17 page 11
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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
The Afgen venture envisages an
independent LNG import project for
Ghana, which suffers from a severe local
gas deficit. ―The arrangements signal
progress on two fronts, both in delivering
a dedicated solution for Ghana and prior
to the implementation of that solution,
the sale and marketing of regasified LNG
in Ghana from our planned Benin LNG
Import project,‖ said Gasol‘s chief
operating officer, Alan Buxton.
The company added that the fast-
tracking of the independent option would
both diversify supply risk – inherent in a
regional scheme such as the WAGP and
already proven through a shut-down in
August 2012, as well as by volumes
consistently running well below capacity
– and complement Ghana‘s own gas
reserves. There is a much-delayed project
under way for associated gas from the
Jubilee field to be piped to a gas
processing plant at Atuabo, in Ghana‘s
west, and then onwards to fuel the 550-
MW Takoradi power plant.
Commissioning of the Atuabo project is
due in the third quarter.
VTTI‘s new 300 million euro (US$416
million) storage hub at Vassilikos in
Cyprus remains on schedule, with the
firm targeting a start-up date in mid-July
2014, George Papanastasiou, General
Manager at VTT Vassilikos (VTTV) told
NewsBase last week.
―We are in the pre-commissioning and
commission stage,‖ Papanastasiou said,
adding that the project is on track. ―We
had a slight delay with the jetty, but that
problem has been overcome. At least
450,000 cubic metres of storage will be
available in mid-July and the remaining
‗cubes‘ will be ready in September,‖ he
said.
The first phase of the project will
locate 28 tanks with a capacity of
543,000 cubic metres at the island‘s
Vassilikos Energy Center. Phase 2 is in
the planning stage and would add an
additional 13 tanks with capacity of
305,000 cubic metres.
Phase 1 will handle white products,
while Phase 2 will store and tranship fuel
oil. Work on the storage facility is being
carried out by Cypriot construction firm
Joannou and Paraskevaides (J&P).
―We have received approval for the
environmental impact assessment for
Phase 2, but internally we are making a
further evaluation because this involves
land reclamation,‖ Papanastasiou said.
―This is an expensive process and we
need to compare it with unit costs.‖
VTTI, a joint venture between Vitol
Holding and Malaysian shipping
company MISC Berhad, announced in
2010 that it would build a strategic oil
product storage and transhipment centre
in the Eastern Mediterranean. The VTTV
facility in Cyprus is the first of its kind in
the region.
Work on a 1,200-metre marine jetty
comprising four berths began last year
and is nearing completion.
Vassilikos is the site of the island‘s
main power generation facility as well as
the proposed location for a LNG export
facility that the Cyprus government
hopes to build for the purpose of
exporting the island‘s natural gas
resources.
The following news items are sourced
from local and international news
sources. NewsBase is not responsible for
the contents of the stories and gives no
warranty for their factual accuracy.
REFINING
Dangote’s refinery
raises LFTZ land
The prices of land in Ibeju-Lekki area of
Lagos State have risen considerably since
the Dangote Group indicated interest in
building a refinery in the area.
Although preliminary work, including
clearing of the site, has barely begun, the
prices of land in the areas surrounding
the Lekki Free Trade Zone have gone up
by over 900 per cent. The Chairman,
Dangote Group, Alhaji Aliko Dangote,
had in 2013 disclosed plans to build a
400,000-barrel-per-day crude oil
refinery, and subsequently awarded the
contract to an Indian company, Engineers
India Limited. Notwithstanding the
presence of other companies in the area,
such as Raffle Oil LFTZ, Obat Oil,
Progress Marine Limited, a shipping
company that has also bought hundreds
of hectares of land in the area for its tank
farm development, Eko Resort and a few
others, the proposed refinery is expected
to signal the commencement of the
multi-billion naira investment in the
zone. At the groundbreaking of the
refinery, Governor Babatunde Fashola
had said the LFTZ was beginning to take
shape with the coming of investors.
TERMINALS & SHIPPING
VTT Vassilikos storage hub on
schedule for mid-July
NEWS IN BRIEF
Downstream Monitor MEA 30 April 2014, Week 17 page 12
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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
―Tank farms and major refineries are
springing up to service the demands of
the country and make room for export.
The refineries create a major selling
point and release of the opportunities that
lie ahead in this zone, create
opportunities for the local people and the
potential for Lagos and the Nigerian
economy,‖ the governor had said.
According to findings by our
correspondent, the current opportunity
for the local people is coming in the form
of the soaring land prices.
Some of the residents said over 3,000
plots of land, stretching from the access
road towards the lagoon, were acquired
for the Dangote refinery.
An indigene of the area and a resident of
Okuraye, Mr. Daniel Adeyanju, who
spoke with our correspondent on the
development, said some plots of land that
were selling between N200,000 and
N300,000 before the advent of the
refinery, were now going for as much as
N3m. He said, ―Before the plan to build
the refinery, only a few people were
coming here to buy land; it was mostly
investors who wanted to build estates.
Then, a plot of land was sold between
N200,000 and N300,000; there was even
a time people sold land for between
N100,000 and N150,000 in this area.
―But now, you can‘t get a plot of land for
less than N1.5m in the remote areas, and
between N2.5m and N3m in areas facing
the Free Trade Zone. Imobido, for
instance, is more expensive and a plot
there sells for N3m and above, but some
areas around Eko Resort still sell for
N1.5m.‖ The residents said the
developments in the LFTZ had created a
boom in the property market for the
communities, including Akodo, Magbon
Alade, Orimedun, Orofun, Tiye,
Imobido, Elege, Idaso, Magbon Asegun,
Itoki, Idotun and Okuraye; Okuraye is
the host community of the Dangote
Refinery and Petrochemical Company.
―We are happy about the development
and excited that things are turning out
this way; Ibeju-Lekki is turning out to be
a global market,‖ an indigene of
Okuraye, Mr. Segun Adebayo, said.
He added that the area, which used to be
a coastal settlement on the outskirts of
the state, was gradually transforming into
a sprawling and modern settlement, one
of the fastest growing areas in the state.
Another indigene, Mr. Kehinde
Oyebanjo, said most of the indigenes that
left the area for ‗greener pastures‘ in
other parts of the state were now
returning home.
―All the indigenes that left here about 30
years ago because there was no
development in the area are now coming
back because they have heard of the new
developments,‖ he said.
According to findings, apart from the
rising prices of plots of land, the value of
residential buildings in more developed
parts of Ibeju-Lekki has also gone up.
The rental value of a three-bedroom flat
in the area, for instance, has increased
from N1.5m to N3m per annum, while a
duplex has risen from N15m to between
N30m and N45m per annum.
A block of flats is said to be selling for
between N40m and N65m, while rent on
a flat in the block is between N2.5m and
N3.5m per annum.
Real estate experts say the LFTZ has the
potential to be one of Africa‘s largest
commercial cities in the future.
According to an estate surveyor and
valuer and Principal Partner, Kola
Akomolede and Co, Chief Kola
Akomolede, the rise in property value in
the area is expected.
―In an area where an airport, a major
seaport and other developments are
expected, we expect that the land value
will rise and speculators will rush into
the area to buy land that they will later
sell for bigger profits,‖ he said.
The valuer noted that the development
would have a positive effect on the area
as indigenes would be expected to make
more money from the sale of their land.
Akomolede, however, warned that the
development could also pose danger to
the indigenes. He said, ―The danger is
that they may run out of land because it
is a coastal area. And in the future,
should the value of land grow to N20m
and above, they will have nothing to sell.
―Development is good for everyone, but
they should tread softly and reserve some
land for the future when the value will be
higher than what it is now.‖
For buyers, caution is the word, because
most of the LFTZ area has been acquired
by state government and compensation
paid to the original owners. In order not
to stifle the development of the
communities, the government has
excised some portions to the indigenes.
Therefore, buyers must exercise caution
and ensure that thorough searches are
conducted so as to ensure that
speculators do not sell acquired plots of
land to them, as doing so may result in
the loss of their money, experts warn.
PUNCH, April 28, 2014
Kuwait launches
plans to develop oil
refineries
The project is of a strategic and
developmental nature that stimulates the
economic wheel in Kuwait and is
expected to create numerous job
opportunities, especially for the local
workforce, as it will employ more than
35,000 people in the sectors of refinery
construction and development.
This project will give the oil sector the
opportunity to work with foreign
companies and experts from many
countries, specializing in almost all areas
related to the method of development of
major projects and the improvement and
development of performance and
production. Moreover, it will introduce
this sector into the various global
markets. This project is costing about 3.4
billion Kuwaiti dinars ($10 billion) and is
expected to be completed in 2018. The
upgrading of the refineries will increase
the benefits of Kuwaiti medium crude oil
so that it can compete with light crude oil
such as Brent, by producing oil
derivatives that have the light oil
characteristics.
The two Kuwaiti refineries will become
similar to the US refineries relying on oil
from Saudi Arabia, Kuwait, Iraq, Iran
and Venezuela, which is a medium to
heavy oil, but less expensive than light
oil. The total refining capacity of Mina
Abdulla and Mina Al Ahmadi refineries
will go up to 800,000 barrels per day
(bpd) with an increase of approximately
60,000 barrels per day.
NEWS IN BRIEF
Downstream Monitor MEA 30 April 2014, Week 17 page 13
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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
Kuwait‘s total refinery capacity will
increase to 1.4 million barrels per day
after the closure of the Shuaiba refinery
and the completion of the construction of
the fourth refinery, known as al-Zour.
On the other hand, Kuwait must keep
investing in the refining sector on the
local or international market since it can
compete with the largest producers of
crude oil in the Gulf region, such as
Saudi Arabia, Iraq and Iran, in terms of
the production rate relative to population
density. However, Kuwait cannot barter,
i.e., exchange oil in return for other
goods such as foodstuffs, construction
materials or equipment and vehicles, for
example. Therefore, the Kuwaiti oil
sector must follow the general inclination
mainly based on building refineries
abroad, such as the Vietnam refinery
which is under construction, especially in
major consuming countries such as
Indonesia, India and Pakistan.
Moreover, KNPC is expected to
announce the qualification of
international companies to build the al-
Zour refinery, which is the fourth
refinery of an estimated capacity of
600,000 barrels per day. This would
complete the [project of] construction of
refineries in Kuwait to meet local
requirements and increase the production
of electricity and water, instead of
importing natural gas during the summer
period that extends from April to
October.
The relevant cost [of the project] would
be about 4 billion Kuwaiti dinars ($14.2
billion), which means that Kuwait would
be simultaneously developing two mega
projects, which strongly stimulate the
economy and commercial sectors.
On a related note, workers, whose
number exceeds 75,000, are working in
the same area, which will be witness to
numerous activities carried out at the
same time.
Are the winds of economic activity
blowing again after a recession that
lasted for more than 20 years? Is this the
beginning of future projects that would
stimulate the static commercial activity?
It surely seems so.
AL-MONITOR, April 29, 2014
Abu Dhabi plant to
receive ‘smart’
valves for new coker
The valves will be installed in a carbon
black and delayed coker plant now under
construction. Once completed in
December 2015, the plant will process
30,000 bpd of crude oil and have an
annual production capacity of 40,000
tons of carbon black. The refining
complex is located in Ruwais, 240 km
west of Abu Dhabi City in the United
Arab Emirates.
The order includes hundreds of Metso‘s
Neles Globe control and on-off valves.
Most of the control valves will be
equipped with Neles ND9000 intelligent
valve controllers (FOUNDATION
Fieldbus) for performance follow up and
predictive maintenance, resulting
improved process efficiency and uptime.
South Korean Samsung Engineering,
which is providing project management
services and commissioning processes on
a turnkey basis, selected Metso‘s valve
technology for the demanding project.
―It is the largest project ever executed by
our company, and the total valve
quantities are huge,‖ says Mr. YunKi
Sung, Vice President, Procurement
Dept., Samsung Engineering. ―We chose
Metso as our valve partner because we
can rely on fast expediting; their valve
factory is conveniently located close us
to us in South Korea.‖
―Also, we have had good support from
Metso in our past projects. To ensure
smooth startups, Metso offers its wide
product knowledge and application
expertise, global manufacturing facilities
and sourcing, full expediting and
inspection support, a global service
network and comprehensive startup
support.‖
Metso has valve technology centers and
production facilities in Finland, the
United States, Germany, China, South
Korea, India and Brazil. Metso‘s
deliveries will take place in August 2014.
HYDROCARBON PROCESSING,
April 28, 2014
FUELS
Nigeria orders 1.85m
tonnes of gasoline
imports
Nigeria has granted licences to 40
companies to import around 1.85 million
tonnes of gasoline by the end of June,
Nigerian National Petroleum Corporation
(NNPC) and oil industry sources said, as
the country takes measures to avoid fuel
shortages.
Nigeria is Africa‘s top oil producer but
relies on fuel imports because its
refineries work at a fraction of their
capacity due to poor maintenance and old
age.
Africa‘s most populous nation suffered
fuel queues in February and March,
prompting state oil firm NNPC to release
stocks.
―The (oil) Minister has approved the
allocation of a total volume of 1,854,314
metric tonnes of premium motor spirit
known as petrol as supplementary
volumes for first quarters 2014 and
second quarter 2014 June only delivery,‖
NNPC said in a statement issued last
week and confirmed by importers.
Import allocations, typically done on a
quarterly basis, have been delayed due to
disputes between the government and
traders over a backlog of subsidy
payments.
Nigeria belatedly issued its first quarter
gasoline allocation at the end of
February. In an attempt to get the
calendar back on track, it has issued its
second quarter allocation in two parts.
Some 750,000 tonnes have been
allocated as ―supplementary volumes‖
for the first quarter, whilst another 1.1
million tonnes have been designated for
June-only delivery, the NNPC statement
said.
―The idea of June only is to revert back
to the normal quarterly sequence, ie July-
September and October-December,‖ said
Ohi Alegbe, a spokesman for the NNPC.
Alegbe said the first quarter supplement
was designed to cover ―any under-
delivery by marketers due to unforeseen
financial challenges‖.
NEWS IN BRIEF
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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
Industry sources said some of the
winners for the second quarter included
MRS Oil Nigeria, Conoil, Total, Oando,
Forte Oil, Mobil Oil, Masters Energy,
Techno Oil, Folawiyo Oil & Gas and
NIPCO.
Oando, Total‘s local unit, and Folawiyo,
in which global commodity house
Glencore is a minority stakeholder, also
won allocations in the first quarter.
The Petroleum Products Pricing
Regulatory Authority (PPPRA),
Nigeria‘s downstream regulator, has
inserted a provision in the allocation
document which allows volumes to be
deducted from a seller‘s subsequent
allocation in the event of any default or
slippage into July.
Traders welcomed the attempt to get the
issuance cycle back on track, but noted
that the total volumes allocated for the
second quarter were significantly down
on the 3.1 million tonnes that were
allocated for the first quarter.
―It‘s good to see us revert back to the old
sequence of April to June, July to
September and October to December and
not the February to May, June to August
we shifted to two to three years ago,‖ one
trader said. ―That helps with simplifying
the planning of imports.‖
He suggested that the lower volumes
could reflect the fact that the NNPC still
has a lot of fuel in storage but supply
chain issues are likely to be restricting
adequate supplies into the market.
―We also note the increase in the number
of importers from 27 in Q1 to 40 in Q2,‖
he added. ―This could again be due to the
view that marketers are likely to have
adequate capacity to deliver smaller
volumes as against sharing large chunks
to a few players.‖
REUTERS, April 28, 2014
Gasol expects Ghana
gas purchase deal
within a month
Energy company Gasol expects to sign a
gas purchase agreement with Ghana
National Gas Co within a month,
bringing Gasol‘s Benin liquefied natural
gas (LNG) project, which will provide
the fuel, a step closer.
―The talks with Ghana Gas are going
well, so we are confident that we will
make an announcement on an agreement
within the next month,‖ Gasol Chief
Operating Officer Alan Buxton told
Reuters.
The company, listed on London‘s
Alternative Investment Market, plans to
build a floating liquefied natural gas
(FLNG) terminal in the Port of Cotonou
in Benin, but the project‘s financing
depends on a gas purchase agreement
with Ghana Gas.
Buxton said agreements with Benin and
Togo to buy 60 million cubic feet of gas
per day (mmcf/d) were already in place.
Gasol also has an option to acquire
African Power Generation (AfGen), a
Ghana Gas joint venture partner for a
project potentially to build an FLNG
terminal in Ghana. AfGen will be
responsible for selling at least 100
mmcf/d of Gasol‘s gas in Ghana for five
years.
Buxton said Gasol‘s option to acquire
AfGen will depend on the agreement
with Ghana Gas and the approval of a
concession in the Port of Benin that will
house its FLNG facilities.
―If we can get the pieces in place then the
board can start to look at the value of
AfGen,‖ Buxton said.
Gasol‘s option expires on Aug. 24.
Ghana is counting on promising oil and
gas discoveries off its coast to help boost
its economy and replace some of its
reliance on expensive liquid fuels for
energy generation.
Its flagship Jubilee field, estimated to
contain 1.4 trillion cubic feet in gas
reserves, is expected to start processing
gas in September following long delays
due to financial and technical issues.
REUTERS, April 22, 2014
PIPELINES
One dead after blast
on Ghana refinery
pipeline
One person was killed in an explosion on
a pipeline linking Ghana‘s 45,000 barrel-
per-day Tema Oil Refinery in an
industrial hub near the capital Accra to a
nearby port, a spokeswoman for the
refinery said on Tuesday.
The 5 km (3 mile) stretch of pipeline was
transporting naphtha, primarily used as a
feedstock for producing gasoline, when it
began to leak around midday. Passersby
had begun collecting the highly
flammable liquid, when a sudden fire
broke out at 2 pm (1400 GMT),
spokeswoman Aba Lokko told
journalists.
The fire sent a column of dense black
smoke billowing hundreds of metres into
the sky above Tema, around 20 km (12
miles) east of Accra.
Witnesses told Reuters they had seen the
charred body of the victim of the
accident. Lokko said the person was not
an employee of the refinery.
The fire was brought under control in
around three hours and output from the
refinery would not be disrupted.
―Products supplies to the refinery will
not be affected in any way, shape or
form,‖ Lokko said.
The fire also damaged part of Cocoa
Processing Company‘s nearby factory
forcing it to shut down. The facility has
capacity to process 64,500 tonnes of
cocoa beans annually.
―Our engineers are on the ground doing
the initial assessment, but what we can
say immediately is that the fire has
damaged our packaging materials,‖ CPC
spokesman Ekow Rhule, told Reuters.
―The main power cable feeding the
factory is also affected so we are not
running the plant this evening,‖ he
added.
The refinery has been hobbled by
repeated shutdowns over the last few
years, but Ghanaian President John
Mahama said in February that Tema was
close to signing a joint venture
agreement with PetroSaudi International.
The refinery‘s managing director was in
London at the time of the accident as part
of a delegation meeting with PetroSaudi
to conclude the deal, Lokko said.
REUTERS, April 29, 2014
NEWS IN BRIEF
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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
Plans to diversify
Mideast oil pipeline
map
Jordan used to rely on an Egyptian gas
pipeline for the production of 80% of its
electric power. However, the frequent
interruptions caused by successive
bombings of this pipeline in Egypt, and
the reliance of the state-owned national
electric power company on imported
crude oil, have led to a debt exceeding $7
billion in the last three years, including
the cost of the subsidy policy and the
declining gas quantities coming from
Egypt. Every time the supply is halted as
a result of the frequent interruptions
caused by the bombing, it costs the
Jordanian treasury $1 million per day.
Jordan and Iraq signed an agreement in
April 2013 to build a pipeline to carry 1
million barrels of oil per day from the
Iraqi city of Basra to the Jordanian city
of Aqaba on the Red Sea. The 1,700-
kilometer [1,056-mile], $18-billion
pipeline will be completed in 2017. Iraq
will handle all the costs and the entire
project will be the property of the Iraqi
government. The two sides have held
meetings and both have carried out
discussions with qualified companies.
Jordanian Minister of Energy and
Mineral Resources Mohammad Hamed
expected the tender for the execution of
the project to be launched in the second
quarter of 2014 and prior to this coming
June. It is one of the mega projects that
will promote economic ties between the
two countries. For Iraq, the project will
help increase oil exports and diversify
outlets, with a new terminal on the Red
Sea. This comes as part of Iraq‘s massive
plan to produce 9 million barrels of oil
per day by 2017. For its part, Jordan will
meet its oil needs with an average
150,000 barrels per day. It will also be
able to use the Arab gas pipeline to carry
imported liquefied natural gas (LNG) by
sea, to fully meet its power plants‘ needs.
In addition, a passage tax might generate
an income ranging between $5 million
and $10 million per day. Implementation
stages will provide Jordanians with
nearly 3,000 job opportunities.
Egypt signed two agreements with both
countries on March 6, 2014. The first
stipulates that natural gas is transferred
via the Arab gas pipeline, while the
second is designed to connect the
pipeline to import LNG to the gas
pipeline that is between the Ministries of
Energy and Mineral Resources and the
national electric power company on the
one side, and the Jordanian Fajr
Company on the other.
Thus, the oil pipeline network gradually
finds its place back in the region, and the
importance of the Iraqi pipeline is
highlighted through the development of
strategic ties and the intersection of
common interests among beneficiary
countries.
However, the Israeli role in this field
cannot be ignored, especially in light of
the expected geopolitical developments
and its ambitions to share Arab wealth.
History bears witness to the repeated
attempts to exploit opportunities Israel
considers available, and to the security
developments of repeated wars and
aggressions.
In 1946, Britain built two oil pipelines
from Iraq to the port city of Haifa. The
first starts from Mosul and goes to the
Palestinian port, and the second passes
through Jordan to Palestine. In the same
year, Britain developed a project for an
oil pipeline stretching from Saudi Arabia
to Palestine (the Trans-Arabian Pipeline
or Tapline). The project was not
implemented until 1950, after altering its
path through the Syrian Golan Heights to
the Az-Zahrani terminal in southern
Lebanon, because the State of Israel was
established in 1948. For the same reason,
Arab oil was no longer pumped from Iraq
to the port of Haifa.
In 1967, after Israel occupied the Golan
Heights, the Tapline — which was an
outlet for the export of large quantities of
Saudi oil to global markets — was
closed. It remained closed for a while,
until it was allowed, with US approval, to
pump small amounts to the Lebanese Az-
Zahrani refinery. Israelis bitterly looked
on as this occurred until 1982, when their
forces destroyed the refinery during the
Israeli invasion of Lebanon.
Until the early 1980s, the small oil
pipeline stretching from Kirkuk to Syria
down to the Tripoli refinery in northern
Lebanon had continuously operated,
before halting its activity during the Iraq-
Iran war. It resumed its activity in 2002,
but it reached only to Syria.
Since Iraq was occupied in 2003, Israel‘s
oil dream has grown bigger, including
the revival of the Mosul-Haifa oil
pipeline that was closed in 1948. The
Israeli government has even planned to
control southern Iraq. Under the
agreements that were signed with Egypt,
Israel received quantities of oil and gas.
However, the pipelines were damaged by
the frequent attacks following the
overthrow of President Hosni Mubarak.
Thus, the flow of gas has stopped to
Israel, which is demanding that Egypt
provide compensation.
It should be noted that the gas agreement
signed between US Noble Energy and
Arab Potash Company to supply 2 billion
cubic meters [2.6 billion cubic yards] of
natural gas to Israel for 15 years is the
beginning of new Israeli plans that will
be implemented under the auspices of the
United States as part of the reconciliation
treaty the United States is seeking. The
plans include a comprehensive
geographic and economic review of the
region, including safe corridors and oil
pipelines as privileges of the four
concerned countries and beneficiaries –
namely Israel, Palestine, Egypt and
Jordan.
AL-MONITOR, April 27, 2014
Iran to complete
natural gas pipeline
to Iraq
Iran is on track to complete construction
work on a 100 km pipeline, which will
transport natural gas to Iraq, in the next
four months.
Alireza Gharibi, Managing Director of
Iranian Gas Engineering Development
Company, stated that the pipeline is now
75% complete, with 80 km already built.
Construction work on the Iraqi section
will be carried out on schedule.
NEWS IN BRIEF
Downstream Monitor MEA 30 April 2014, Week 17 page 16
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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
The new pipeline begins in Chahar
Meleh village in the Ilam Province,
western Iran, and runs to the city of
Naftshahr, which is located on the Iran-
Iraq border.
Gharibi noted that the pipeline would
carry 5 million m3/d of natural gas in the
first stage and 10 million m3/d in the
second stage.
Iran signed the first agreement with Iraq
for the delivery of natural gas on 21 July
2013 in Baghdad. Rostam Qassemi,
former Iranian Oil Minister, signed the
agreement for the delivery of 25 million
m3/d of gas from Assaluyeh, near the
offshore South Pars oil and gas field in
southern Iran, to power plants in Al-
Baghdad and Al-Mansouriyah. The 270
km pipeline is expected to achieve
revenues of approximately US$ 3.7
billion per year.
ENERGY GLOBAL, April 27, 2014
TERMINALS &
SHIPPING
Eversheds brings
Sierra Leone
development in to
port
Global law firm Eversheds has advised
Petrojetty Company Limited, an affiliate
of Oryx Energies, on a public private
partnership (PPP) concession for the
development and operation of a new
state-of-the-art petroleum jetty at Sierra
Leone‘s key import and export facility,
the Kissy Oil Terminal, Freetown.
The agreement grants Petrojetty the right
to design, construct and operate a jetty
for the import and export of petroleum
products, edible oils and biothanol. The
new jetty, which is expected to be
completed by early 2015, will increase
capacity, comply with international
standards and facilitate access with
international markets efficiently and
economically.
Petrojetty will develop and operate the
jetty for 21 years in a PPP with the
Government of Sierra Leone after which
the facilities will revert to Sierra Leone‘s
Port Authority.
Oryx Energies signed a concession
agreement with Sierra Leone‘s
authorities in October 2013 and the
agreement was ratified by the country‘s
parliament in February 2014.
The Eversheds team, led by Partner
Howard Barrie working principally with
Lucy Chadwick and Lynne Wells, and
local counsel Berthan Macaulay Jnr.
advised Petrojetty Ltd and Oryx
Energies, on all legal aspects of the
concession agreement and its
negotiations with the various government
stakeholders.
Howard Barrie said: ―The new jetty will
increase the amount of hydrocarbon
products that can be imported in a much
safer environmental way. It is
strategically important for the country‘s
growing energy needs. The Government,
through the National Commission for
Privatisation, decided on using a public
private partnership, an innovative
approach for Sierra Leone, with a private
sector entity being responsible for the
new jetty‘s development and operation.
―Africa offers a wealth of opportunities
for new infrastructure projects and we
are pleased to have played our part in
such a vital and novel development for
Sierra Leone.‖
EVERSHEDS, April 30, 2014
Angola LNG rig
salvage work to
finish by March 2015
Salvage work to remove a capsized rig
lying in shallow waters offshore from
Angola‘s new liquefied natural gas
(LNG) export plant should be completed
by March 2015, the company in charge
of the operation said.
The three-legged Perro Negro 6 drilling
rig overturned last summer as it was
being positioned to bore a tunnel for a
gas pipeline key to feeding the $10
billion plant. Italian oil services firm
Saipem chose South African company
Smit Salvage, a unit of Netherlands-
based dredging specialist Boskalis, to
remove its rig.
―Including the preparation phase
(engineering and outfitting), mobilization
and demobilization, the salvage operation
is expected to take around 10 months,‖ a
Boskalis spokesman said. ―The work is
expected to commence in this quarter.‖
The rig capsized as it prepared to bore a
tunnel below an underwater canyon,
killing at least one person and delaying
gas supplies from Chevron-operated
blocks 0 and 14, which were to be linked
to the plant this year via the tunnel.
It will take even longer for a new rig to
come into position and dig out a tunnel
for the pipeline, a source linked to the
liquefaction plant said.
Feedgas from the Chevron blocks is
essential to helping Angola LNG boost
production, which has only managed to
reach 50 percent of capacity despite
starting up nearly a year ago.
Fresh technical setbacks have recently
forced the plant to shutdown as engineers
investigate the cause of malfunctions.
Chevron has a 36.4 percent share in the
plant, while Angolan state oil firm
Sonangol has 22.8 percent. Other
stakeholders include Total, BP and ENI.
REUTERS, April 28, 2014
Kuwait signs LNG
import deal with
Qatargas
Kuwait has signed a contract to import
liquefied natural gas (LNG) from fellow
Gulf state Qatar to help meet its energy
needs to the end of 2014, state news
agency KUNA reported on Sunday.
The first shipment of LNG will arrive in
Kuwait on Monday under the contract
between Kuwait Petroleum Corporation
(KPC) and state-owned Qatargas, KUNA
said. There were no further details on the
terms of the deal with Qatar, which is the
world‘s largest LNG exporter.
Rising air conditioning demand in the hot
Middle Eastern summer and a lack of
domestic supply means OPEC member
Kuwait needs to import more gas each
year to run its power plants.
The contract paves the way for greater
cooperation between the two companies,
KUNA quoted a KPC official as saying.
It added that major oil producer Kuwait
was still looking at ways to supply its
LNG needs beyond 2019.
REUTERS, April 28, 2014
NEWS IN BRIEF
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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
CONFERENCES
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CONFERENCES
Downstream Monitor MEA 30 April 2014, Week 17 page 19
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HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK
Oil and Gas Sector
AfrOil Tullow has had a second disappointment in Mauritania,
leading it to pause exploration plans.
AsianOil PTTEP has agreed to pay US$1 billion for Hess’ Thai
assets.
ChinaOil PetroChina will spend US$1.2 billion on a 40% stake in
Canada’s Dover oil sands project.
FSU OGM Russia may become Total's largest source of oil and gas
by 2020.
GLNG Japan’s LNG imports rose 1% to a record 87.73 million
tonnes in 2013. The bill soared 18.2% to US$71.51 billion.
LatAmOil Pacific Rubiales’ share price has tumbled owing to
operational issues in Colombia.
MEOG Iraq has approved the award of two drilling contracts at
the three Missan fields, near the Iranian border.
NorthAmOil BP is selling stakes in four fields on Alaska’s North Slope
to Hilcorp for an undisclosed amount.
Unconventional OGM Cumulative production from the Bakken shale reached 1
billion barrels during the first quarter of 2014.
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