MIDDLE East refiners are in the midst of a major programme which will upgrade facilities to meet new demands. Much of the region's existing capacity is designed to produce a slate of products for which demand is in decline. There is no shortage of fuel oil available but not enough cracking capacity to produce the lighter fuels that are now required. Although the pace of change and scale of investment vary sharply from country to country, the requirement is the same - to retire the old hydroskimming capacity and replace it with hydrocrackers.

With a few exceptions the region is coming late to a process that has already transformed refineries in the US, Europe and much of the Far East. And, a shortage of funds is still delaying several major projects. Below, MEED writers detail refinery developments in the main markets of the Middle East and North Africa:

ALGERIA No significant capacity expansion has been undertaken since the early 1980s, when the Skikda refinery and the tiny plant at In Amenas started up. The 320,000-barrel-a-day (b/d) Skikda complex produces diesel, fuel oil and naphtha. Work being carried out at the complex is concentrated on upgrading and maintenance. The local Entreprise des Grands Travaux Petroliers is carrying out a project to be completed by the end of this year.

Total refining capacity is 475,000 b/d from five facilities which includes two refineries, the 6,000-b/d In Amenas and 27,000-b/d Hassi Messaoud facilities. The refinery complex at Arzew is the largest after Skikda. In addition to the original 60,000-b/d unit mainly producing diesel, a 120,000-b/d unit started producing lubricants in 1984.

BAHRAIN The Sitra refinery, run by Bahrain Petroleum Company (Bapco), has the distinction of being the oldest in the Gulf. It is also in urgent need of modernisation. Plans to revamp the 260,000-b/d refinery at an estimated cost of about $800 million have been under consideration for about 10 years. These now centre on a first phase proposal, costing between $200 million-300 million, to install a single crude unit to replace the four existing units. The scheme promises to boost efficiency and reduce maintenance while raising the quality of petrol produced. This phase of the project is being devised by Bapco's own design team. The government, which has a 60 per cent stake in Bapco, is committed to finding funds for the modernisation and minority shareholder Caltex of the US is keen to proceed with the scheme. Contractors should be approached this year and the first phase work is due for completion by 1997.

EGYPT Six oil refineries process about 500,000 b/d of crude oil and meet most domestic needs. Refined product demand has remained stable because most extra energy demand has been met by increased gas use. However, the government wants to increase output of lighter products that are now imported, such as diesel, and two major new refinery projects are under way.

The more ambitious of the two is the construction of a new 100,000-b/d refinery in Alexandria by a venture majority owned by private local and Israeli interests. The state-owned Egyptian General Petroleum Corporation (EGPC) has a 20 per cent stake and will supply 30 per cent of the crude feedstock. The remaining equity in the venture, Midor (Egypt), is held by Middle East Oil Refineries (Midor), a Dublin-registered company half- owned by local businessman Hussain Salem and half by Israel's Merhav Group. The basic designs have been completed by Fluor Daniel of the US, and bids have been invited for the engineering, procurement and construction contract. The total cost of the project, which includes a 25,000-b/d hydrocracker, is estimated at about $1,000 million. Finance includes funds from the US Agency for International Development and the European Investment Bank.

At the same time, EGPC affiliate Nasr Petroleum Company is working on a plan to build a 35,000-b/d hydrocracker at its Suez refinery. Bids for licences and designs have been invited from UOP of the US - the main licensor for the Midor scheme - IFP of France and a US partnership of Chevron Corporation and ABB Lummus Crest. Construction bids should be invited by September.

Smaller projects planned to go ahead in the next few months include upgrading Asyut oil refinery, installing an isomerisation unit in Cairo's Mostorod refinery and supplying a desulphurisation unit to the Suez Oil Refinery Company.

GAZA The most advanced project is the estimated $40 million, 20,000- b/d Gaza refinery. A feasibility study was completed at the end 1994 by the US' KHI and proposals for the refinery have been submitted to the Palestinian National Authority by the Utah-based Palestinian Fuels Company (PFC).

The refinery will service the domestic market for bottled gas (LPG), gasoline, diesel, kerosene and jet fuel, home heating oil, residual fuel and asphalt. Egypt is the most likely supplier of crude oil.

Half the capital for the project is expected to come from shareholders equity, with the balance coming from loans guaranteed by the US' Overseas Private Investment Corporation. Gulf-based shareholders will include partners in the Dubai-based TRIZAC.

IRAN Plans to boost refining capacity to meet domestic demand have been pared down in recent years and now consist of two new facilities in the south and the conversion of existing facilities. The total cost of the programme over the next three to four years is likely to be about $1,500 million.

The new refineries are at Bandar Abbas and Bandar Asaluyeh. The latter facility may cost about $700 million and will process 70,000 b/d of condensate from gas treatment plants at Nar-Kangan and Agar-Dalan. Bid invitations have gone out on several occasions, only to be postponed because of financing problems; the last round started in 1994 and potential bidders are still waiting for details of the scheme which is likely to be financed on a buy-back basis.

The Bandar Abbas refinery will process 260,000 b/d of crude to be shipped or piped in from the main fields in the southeast. Started in the early 1990s as a turnkey project by JGC Corporation and Snamprogetti, it was taken over by local firms after the foreign companies encountered financing problems. Work is nearing completion, although a $150 million finance line is still needed. At least half of the output is to be exported.

When the Bandar Abbas refinery is ready in 1996 or 1997, it will push national capacity to more than 1.3 million b/d. Domestic consumption is rising rapidly and Iran will still have to import about 100,000 b/d of products.

Because of the financial constraints National Iranian Oil Company is considering the conversion of existing refineries. This would raise output more cheaply. Local experts say conversion of six of the country's seven refineries would cost nearly $40 million each. A thorough modernisation would cost another $150 million for each refinery. The Abadan and Tabriz refineries are the prime candidates for upgrading in this way.

Abdul Wahab Galadari & Sons of Dubai was in early 1992 given approval to build a 1 million tonne-a-year facility at Bandar Khomeini; this was later shelved, but may now be revived.

IRAQ The Oil Ministry claims the country can produce about 2 million b/d. However, it is estimated that it will take three to five years after the lifting of sanctions before production can be returned to the pre- August 1990 level of about 3 million b/d.

War damage and lack of maintenance during the past five years has badly affected pumping installations and storage facilities, at the fields and along the export pipelines. The only deep-sea export terminal at Mina al-Bakr is considered capable of handling only about 500,000 b/d in its present condition, compared with its original design capacity of 1.6 million b/d.

Iraq's prewar refining capacity of 600,000 b/d is badly depleted due to war damage, lack of spare parts and shortages of inputs. The three main refineries at Baiji, Basrah and Daura are all functioning within limits but certain units will need to be replaced when Iraq is able to import equipment again. The largest plant, the 300,000-b/d Baiji refinery, is reported to have several key units out of action. Some of the smaller refineries were stripped of components to use in the repair of the three larger plants. Much capacity is still in good enough shape to be repaired quite quickly when sanctions allow.

KUWAIT The state-owned Kuwait National Petroleum Company (KNPC) is embarking on major upgrading and expansion schemes in two of the three domestic refineries.

The most ambitious schemes are planned for the 400,000-b/d Mina al-Ahmadi refinery. The MAFP scheme has four main elements and is worth KD 30 million ($101.6 million). The work includes installation of a 1,300-b/d methyl tertiary butyl ether unit which will use gasses recovered from the refining process. It also involves installation of a 4,700-b/d alkylation unit, which will produce polymer-grade polypropylene, and a waste sulphuric acid regeneration unit. The fluid catalytic cracker will also be revamped to 40,000 b/d from 30,000 b/d. The contract was awarded in January to Japan's Mitsui Engineering and Shipbuilding Company, and is scheduled for completion in 1997.

The second major scheme at the refinery is the KD 40 million ($135.5 million) acid gas removal plant. The plant will sweeten associated gas and condensate from Kuwait Oil Company fields. The work includes modifying and revamping the gas plant and installing new sulphur handling facilities and a boiler. The low bidder for the scheme is South Korea's Sunkyong Engineering and Construction Company.

The smallest of KNPC's schemes is at the 245,000-b/d Mina Abdullah refinery. Mitsui is the low bidder for the KD 5 million ($16.9 million) scheme to revamp the refinery's steam system, involving installation of new boilers and upgrading the control system.

Also under consideration is a scheme to repair the pre-fractioning tower at the Shuaiba refinery, which was damaged during the Iraqi occupation. KNPC is deciding whether the tower needs repair or replacement. If the scheme goes ahead, it will increase the refinery's capacity to 195,000 b/d from the present 155,000 b/d.

LEBANON When the authorities started to pick up the pieces in 1991 after 16 years of civil war, studies were commissioned on the two oil refineries at Tripoli and Zahrani. The former was badly damaged, and could only produce about 15,000 b/d; the latter was a scrap heap. The studies carried out by Bechtel of the US suggested demolishing both installations. However, the government wants to preserve oil refining in Lebanon, and is now devising a revival scheme, involving substantial private sector funds.

The most advanced proposal entails creating a new venture to rebuild the two refineries under a 20-year franchise to operate them. The company will be capitalised at $200 million, 25 per cent of which will be held by the state, 37.5 per cent by Pritchard Corporation of the US and the remainder raised by public subscription. However, the venture cannot take shape until a new law has been passed to permit joint ventures between the state and private interests. The proposals call for the Tripoli refinery to be repaired to allow start up at 25,000 b/d, to be doubled in a second phase. A new 100,000-b/d refinery will be built at Zahrani.

LIBYA Refinery construction and expansion plans have had to be shelved because UN sanctions do not allow the shipment of essential materials. Compressors, catalysts and pumps are all embargoed. No significant refinery construction work can start until the sanctions are lifted. National Oil Company (NOC) has halted a project for a new facility at Sebha and declared the bids invalid. The project called for a distillation unit with a capacity of 20,000 b/d, a 6,200-b/d hydrotreater and a 4,500-b/d catalytic reformer. Smaller maintenance and revamping contracts are being undertaken by North African and Italian firms.

MOROCCO The two refineries, Societe Marocaine de l'Industrie de Raffinage (SAMIR) and Societe Cherifienne des Petroles (SCP) joined the privatisation list in January and their sale is expected to go ahead in 1996. The companies have to be audited and the manner of their privatisation decided.

The SAMIR refinery in Mohammedia is to undergo an expansion before being sold. CTIP of Italy won a contract in early March to boost the capacity of the crude distillation unit to 6 million tonnes a year (t/y) from the present 4 million t/y. The refinery has already been working above design capacity, producing more than 5 million t/y. SCP's refinery in Sidi Kacem produces some 1.2 million t/y. The two companies together satisfy 80 per cent of local demand.

OMAN The country is served by a single 80,000-b/d refinery at Mina al- Fahal operated by the state-owned Oman Refinery Company. The refinery was upgraded in 1993 with the addition of a continuous catalytic regeneration system. Throughput runs at about 70,000 b/d and is mostly sold in the domestic market; a small surplus of fuel oil is sold on the spot market.

PAKISTAN Private sector schemes could soon transform Pakistan's refining capacity which has been overwhelmed by a surge in demand. Existing refinery capacity consists of four units with a combined throughput of 165,000 b/d compared with product demand of 360,000 b/d in 1994. There are several private joint-venture projects involving Middle East investors which are being promoted at present. They include a proposal by Kuwait Petroleum Company to build a 120,000-b/d coastal plant with Pakistan State Oil Company. This scheme, which could cost at least $1,200 million, is due to come on stream by 1999. Abu Dhabi has a 40 per cent stake in the proposed 100,000- b/d Parco refinery which is to be built at Multan. National Iranian Oil Company has another scheme to build a 108,000-b/d refinery at Port Qasim but is unlikely to be able to secure finance for the project or a second proposal to build a crude oil pipeline to Pakistan. Yet another proposal, backed by private Pakistani investors, calls for the purchase of a used 30,000-b/d refinery which will be shipped from the US and reassembled near Karachi.

QATAR State refiner National Oil Distribution Company (Nodco) is planning a major upgrade of its existing 60,000-b/d refinery at Umm Said. International contractors submitted bids for an estimated $400 million expansion project last October but contractors have heard little from the client since then. It entailed a 20,000-b/d fluid catalytic cracker (FCC); expanding the design capacity of the 50,000-b/d number two refinery unit by 25 per cent; and installing a 30,000-b/d condensate refinery to handle supplies from the first phase development of the North Field.

Reports that The MW Kellogg Company had been awarded a front-end engineering and design (FEED) contract have been denied by the US engineering firm. The delay in implementing the ambitious scheme is attributed to the complexity of the bid packages which will take time to evaluate. Contractors are confident the project will proceed because the company needs to shift away from fuel oil which accounts for more than 30 per cent of production but sells for less than a barrel of crude oil. More uncertainty surrounds the condensate refinery plans. Nodco's parent company, Qatar General Petroleum Corporation (QGPC) has proposed the phased construction of a larger refining facility at Ras Laffan with a capacity of up to 200,000 b/d, which would make the Umm Said scheme redundant. The Ras Laffan scheme is planned to process the 45,000 b/d of condensate from the North Field phase one development, 65,000 b/d from the Qatar Liquefied Gas Company (Qatargas) project, and 65,000 b/d from the planned Ras Laffan LNG Company scheme.

A third condensate refining project linked to the Qatargas development is the subject of a study by Mobil Corporation of the US and France's Total. The proliferation of condensate proposals has overshadowed the debate in Qatar over whether the state requires a processing capability at all. At present, North Field condensate is shipped untreated to the Far East at a large discount because of its high sulphur content. Local refining would enable Qatar to produce liquefied petroleum gas (LPG), fuel gas and kerosene but would entail investment costs and the loss of tax revenue from refined product imports. Contractors hope that the refinery will be clarified this year; then the difficult question of finance can be addressed.

SAUDI ARABIA With the $1,000 million upgrade of Ras Tanura well under way, Saudi Aramco is focusing on extensive maintenance programmes at its joint venture and domestic refineries. Contracts totalling more than $600 million were awarded last summer for the first phase of the Ras Tanura upgrade and only two minor packages, for the power distribution and industrial wastewater unit, are still to be let. The project will raise output to 300,000 b/d from the existing 265,000 b/d.

Over the longer term, Saudi Aramco plans further development at Ras Tanura. A second phase calls for the doubling of capacity to 600,000 b/d, while phase three will focus on lightening the product mix. Both proposals are subject to approval by the Aramco board.

At two other export refineries, Saudi Aramco and its joint-venture partners are carrying out substantial maintenance work. A 40-day shutdown programme was launched in mid-March at the 300,000-b/d Yanbu refinery, owned by Aramco and Mobil Corporation. This will be followed in May by a similar maintenance programme at the 320,000-b/d refinery in Jubail, which will halve throughput. The refinery is owned by Aramco and Shell.

The kingdom's fourth export refinery, the 325,000-b/d Rabigh plant, is not slated for a full turnaround until late 1997. The facility has been running at 200,000 b/d this year due to production difficulties. A major investment programme at the site is subject to agreement between Aramco and its Greek partner, Petrola.

Activity at the kingdom's three domestic refineries is also expected to be limited to maintenance, until Aramco decides how to proceed with Kingdom Refinery Upgrading Programme (KRUP), first drawn up by the former Saudi Arabian Marketing & Refining Company (Samarec). Following its takeover of Samarec in 1993, Aramco appointed Brown & Root of the US to review the programme, which in its first phase alone, called for investments in the three domestic refineries of $3,000 million.

SYRIA The two refineries at Homs and Banias, which process about 240,000 b/d in total, are both in urgent need of revamping. The government aims to overhaul the two refineries and build a third in the northeastern oil town of Deir al-Zor. A bid by private investor Bourhan Suraqebi to build a fourth refinery, probably at Latakia, has also been given preliminary approval.

Bids for the supply of equipment for the Homs and Banias revamps are due to be invited in the summer. France's BEICIP has been awarded the consultancy contract. The revamp will include the installation of new units to increase output of light products, replacing fuel oil. The scheme is estimated to cost about $800 million, but it is not clear how it will be financed.

Financing is also an issue for the Deir al-Zor project, a 60,000-b/d grassroots refinery that will cost some $200 million. Twenty-seven international companies have been prequalified to build the refinery. Contractors say Romania's Industrialexport and the Czech Technoexport are regarded as favourites for the contract. The project has been strongly supported by Prime Minister Mahmoud Zuabi because it will bring investment to a remote region. But it has been criticised on economic grounds because it will be expensive to transport the refinery's output to the main cities of Syria.

The fourth refinery is expected to be mainly geared to export.

TUNISIA Plans to double the capacity of Bizerte refinery have been active for more than six years and a Spanish joint venture of Tecnicas Reunidas and Initec is understood to be negotiating for the contract. The scheme calls for an additional 1.5 million t/y distillation unit, a gasoline cracker and an LPG processing unit. It will be awarded on a lump sum turnkey basis and is estimated to cost $80 million. The contract was awarded to Italy's Snamprogetti in 1989 but retendered in 1991 when Snamprogetti was unable to arrange financing. In the meantime, Heurtey Petrochem Engineering, a subsidiary of France's Sofresid, should complete its engineering work for a debottlenecking project in mid-1995. The project will raise the catalytic reformer's capacity to 40 cubic metres an hour from 35 and boost output of LPG.

TURKEY Turkey's total refining capacity of about 700,000 b/d is dominated by the four refineries of state-owned Turkish Petroleum Refineries Corporation (TUPRAS) at Aliaga, Izmit, Kirikkale and Batman. Capacities vary. The largest at Izmit produces 256,400 b/d; Aliaga is about 200,000 b/d; Kirikkale is about 99,000 b/d and Batman can process 21,700 b/d. The only other refinery in Turkey is the 87,000-b/d ATAS installation operated jointly by Shell, Mobil and BP at Mersin.

TUPRAS has been installing hydrocrackers to switch output towards lighter products in a modernisation programme launched in the mid-1980s. Two hydrocrackers with a combined capacity of 31,000 b/d of heavy vacuum gasoil have been completed at Kirikkale and Izmir to produce white products - LPG, naptha, jet fuel, kerosene and gasoil. A third hydrocracker project at Izmit includes modernising a continuous catalytic regeneration (CCR) unit which will convert around 23,000 b/d of vacuum gasoil on completion in 1996.

Construction also started early in 1995 on two other TUPRAS projects. One is a $50 million scheme awarded to France's Litwin with the local Pakbas for the modernisation of two crude and two vacuum units at the Izmit refinery, and the other is a $70 million project awarded to France's Heurtey with Teknotes for an isomerisation plant at Kirikkale.

The hydrocracker programme will raise output of unleaded gasoline to 110,000 b/d in 2010 from the present 10,000 b/d. Output of LPG is also expected to increase considerably.

Further development by TUPRAS will depend on plans to privatise the Aliaga and Izmit refineries which could raise around $1,000 million. Their offer for sale may be tied in to the sale of state refined products distributor Petrol Ofisi (POAS). Kirikkale, near Ankara, will be retained by the state for strategic reasons; Batman is too old to offer for sale. Possible bidders include Exxon, Royal Dutch/Shell, Unocal and the local Koc and Sabanci corporations.

Potential foreign buyers may be deterred if TUPRAS retains its effective ex-refinery monopoly on prices which have been held below international levels. The government could retain a 20 per cent golden share and impose an indexed pricing system to protect consumers and encourage investors.

UAE After five years of planning and deliberation, Abu Dhabi's supreme petroleum council gave the go-ahead in early January for the expansion of the Ruwais refinery. At an estimated cost of $1,800 million, it is the largest refinery project in the Gulf.

The expansion project is needed to take up to 40,000 b/d of Upper Zakum crude and condensates from the onshore Bab field. It will increase the refinery's middle distillates capacity, introduce a condensate processing capability and expand the product range to include unleaded petrol.

Original studies for the scheme by Italy's Snamprogetti have been updated by at least two refinery consultants over the past three years. The main elements of the scheme, expected to run over five and a half years, are a new crude unit to double capacity to 270,000 b/d; a new condensate processing plant with a capacity of up to 200,000 b/d; the expansion of residual oil conversion facilities, including a new 40,000-b/d hydrocracker; and a 36,000-b/d visbreaker. Kerosene sweetening facilities, a hydrogen manufacturing plant, an acid gas removal plant and a sulphur recovery plant are all to be included in the scheme. In addition, isomerisation units, based on technology from the US' UOP, will be installed at Ruwais and Abu Dhabi's other refinery at Umm al-Nar. Crude and product storage tanks and the marine loading facilities will also have to be expanded to handle the refinery's higher output.

Seven international companies made technical presentations to ADNOC between mid-January and mid-February and international contractors are forming consortia to bid for the main lump sum turnkey contracts. These are not expected to be issued until early 1996 at the earliest. One element of the refinery expansion is well under way. Japan's Chiyoda Corporation is already at work on an estimated $90 million lump sum turnkey contract to upgrade the existing offsites and utilities at Ruwais.

Abu Dhabi looks set to remain the UAE's only oil refiner for the foreseeable future. Dubai has toyed with the idea of a 120,000-150,000-b/d refinery. The Jebel Ali Refinery Corporation was set up by decree in May 1991 to develop the scheme. A feasibility study was commissioned from Bechtel of the US and completed in 1993. The cost could be prohibitive - Bechtel estimated that a 150,000-b/d refinery would need an investment of over $2,000 million.

YEMEN Damage to the main refinery at Aden, sustained during the 1994 civil war, has been repaired. Two oil tapping units and five storage tanks have been restored, and the Athens-based Consolidated Contractors International Company has completed construction of sixteen new storage tanks begun before the outbreak of the conflict.

The Aden Refinery Company has now revived plans to rehabilitate and refurbish the 40-year old hydroskimming refinery to ensure its economic viability into the next century. The UK's AMEC Process & Energy has completed the basic engineering phase for the scheme. This includes installation of a new control system, refurbishment of the two crude distillation units and the platformer unit, installation of a sweetening unit, and construction of a new 30-MW power station. Bids are due to be invited soon from 11 international prequalifiers. Plans are also being drawn up for a new administrative office and hospital attached to the refinery.

The refinery is producing 95,000 b/d, up from 70,000 b/d in December. This is expected to increase to 150,000 b/d after the refurbishment work is completed. The feedstock is Yemen's own Marib blend, with Iranian light and Oman crude. The refinery's main customer is the Malaysian state oil company Petronas, which renewed a 30,000-b/d processing agreement in September 1994.