The two reactors are scheduled for delivery to the Eni refinery in first quarter 2011, with commercial operation expected in 2012.

Eni mulls over downstream asset divestitures

Italy's Eni SPA has said its capital spending on refining and marketing will be slashed by 30% to euro2.8 billion under its strategic plan because of the weak global economic oudook. It also will reduce its workforce in this area by 6% in Italy.

Therefore, the company is pondering selling some of its downstream assets in Italy, including its 84,000 b/d Livorno refinery on the Tuscan coast in nordiern Italy.

Angelo Caridi, head of refining and marketing at Eni, said at a briefing in London that falling global demand, increasing energy efficiency, and the growth of biofuels were behind the poor outlook.

The amount of high value middle distillates, such as diesel fuel, will rise to 45% of refining output in 2012 compared with 40% in 2008.

"In refining, Eni plans to increase the complexity and the yield in medium distillates, exploiting proprietary technologies," it said.

This year, Eni plans to start up diree hydrocracking units and in 2012, a new plant at its Sannazzaro refinery, which would account for the majority of investments in this area under the plan.

The company saved more than euro1 billion at the end of 2008 through its efficiency program. This figure is expected to be doubled by 2012, both in real terms and versus the 2005 baseline.

Indonesia outlines refinery, upgrade plans

Indonesia's state-owned PT Pertamina, aiming to reduce fuel imports by boosting domestic supply, plans to construct two new refineries and upgrade an existing facility.

"We still import fuels in a large volume," said Indonesian President Bambang Susilo Yudhoyono, adding that, as a matter of economic efficiency, Pertamina "will build three refineries within 3- 5 years."

Pertamina Corp. Sec. Toharso said two of the planned refineries would be new: one in Bojonegara, Banten, and another inTuban, East Java. The third project, meanwhile, will be an expansion of the existing refinery at Balongan in West Java.

The total capacity of the three planned refineries will be 400 ,000 b/d, Toharso said, adding that Pertamina is looking for partners for oil supplies as well as for financing of the new facilities.

"We're considering an Iranian company to become our crude oil supplier," Toharso said. "But the process is progressing slowly and we're trying to expedite this."

The decision to construct new refineries comes as Indonesia's domestic demand has far outstripped Pertamina's production.

In 2008, Pertamina produced 227.2 million bbl of fuels and imported 142.1 million bbl. In 2007, Pertamina produced 226.1 million bbl of fuels and imported 138.7 million bbl.

However, despite the need for new refining capacity, officials earlier this week said that Pertamina has no plan to import diesel oil and kerosine this year under the firm's public service obligation (PSO) as production by its own refineries would be sufficient.

On Feb. 11, the director general of oil and gas of the ministry of energy and mineral resources, Evita Legowo, told a meeting of the Energy Commission of the House of Representatives that Pertamina would import only premium gasoline this year.

She said that premium gasoline consumption under the PSO this year had been set at 123.856 million bbl, while the refineries could produce only 68.35 million bbl, leaving Pertamina to import 55.506 million bbl.

Transportation -Quick Takes

Japan welcomes LNG supplies from Sakhalin-2

Japanese Prime Minister Taro Aso and Russian President Dmitry Medvedev are scheduled to attend a ceremony Feb. 18 on Sakhalin Island to mark the onset of operations at the Sakhalin-2 LNG liquefaction plant at Prigorodnoye.

Under the Sakhalin-2 project, natural gas will be transported from offshore fields to the Prigorodnoye liquefaction plant for the production of 9.6 million tonnes /year (tpy) of LNG, with 60% of it bound for Japan.

Under contracts of as long as 20 years, Russian LNG will account for 7% of Japan's total LNG imports, allowing the Asian nation to diversify its sources of energy supply.

At their Feb. 18 meeting, the Russian and Japanese leaders also will discuss possible funding for future LNG projects, such as Sakhalin- 3, according to Eiichi Sasaki, energy representative for the Japan Bank for International Cooperation (JBIC) . In fact, Sasaki told delegates at the Russian Shelf 2009 conference that JBIC "is prepared to support Sakhalin- 3 if Japanese companies are involved." He added that JBIC is primarily interested in projects in the Far East and Sakhalin that are focused on energy supply to Japan.

The Sakhalin-3 project includes the Veninsky block being developed by Russia's state-owned OAO Rosneft and China's Sinopec, and the Kirinsky, East Odoptinsky, and Ayashsky blocks, which have yet to be assigned.

Sakhalin- 3 is expected to come on stream in 2017-20, according to Russia's draft Gas Industry Development Strategy, with peak production reaching as much as 28.6 billion cu m/year of gas.

The onset of supplies of LNG from Sakhalin-2 coincided with reports that a consortium of Japanese utility firms has agreed to a drastic cut in supplies from Indonesia, falling to 2-3 million tpy from 12 million tpy.

Raden Priyono, chairman of Indonesia's upstream oil and gas regulating body BPMigas, said that under the new agreement, the Japanese consortium will buy 3 million tpy of LNG during 2011-15, and 2 million tpy during 2016-20.

The consortium, comprised of Kansai Electric Power Co., Osaka Gas Co., Chubu Electric Power Co., Kyushu Electric Power Co.,Toho Gas Co., and Nippon Steel Corp., will buy a total of 25 million tonnes of gas from B on tang LNG plants in East Kalimantan.

Priyono, who said that Japanese buyers have agreed to waive any penalties for undelivered LNG, added that the new contract price will be "much higher" than the price under previous contracts.

Libya takes delivery of two oil tankers

Libya's state-owned General National Maritime Transport Co. (GNMTC) has taken delivery of two 115,000-dwt oil tankers, the Al- Qadisiyah and Al-JaIa, from Cido Shipping of Japan.

The Al-Qadisiyah, built in 2008 and formerly called the Pacific Fantasy, holds 835,000 bbl of oil, while the Al-JaIa, built in 2007 and formerly called the Pacific Light, holds 825,000 bbl of oil.

The two deliveries are part of a six-ship deal GNMTC brokered last December which also included four Aframaxes of around 115,000 dwt each, which the Libyan firm bought from Turkey's Geden Lines.

The complete six-ship purchase, with a total transport capacity of some 5 million bbl, enabled Libya to expand its oil shipping capacity to 11.8 million bbl, according to state media.

State news agency Jana quoted GNMTC's development department chief Tarek Youssef as saying the recent purchases bring GNMTC's total fleet to 18 tankers. Of these, 13 are crude carriers, 3 are oil products carriers, and 2 are LPG carriers.

In making the purchases, Jana said, "The company took advantage of the current global crisis to acquire the tankers at prices 20% lower than in normal circumstances."

Jana credited Libyan leader Muammar Gadhafi's son Hannibal Gadhafi, who is the manager of GNMTC, for the business strategy of buying ships during a global economic downturn, which had adversely affected the shipping industry.

Jana quoted the younger Qadhafi as saying the price paid for each ship was $67-68 million, which compared favorably with an earlier asking price of $85-90 million.

Copyright PennWell Corporation Feb 23, 2009

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