Move comes as refineries continue to grapple with challenging market
Ronnie Lim Business Times 11 Nov 10;
OIL giants PetroChina and Chevron - equal joint owners of Singapore Refining Company (SRC) - have decided to defer their US$300-400 million upgrading investment to build a 'green' gasoline and in-house cogeneration plant at the Jurong Island refinery.
PetroChina secured a refining foothold here through its S$3.2 billion acquisition of Singapore Petroleum Company in 2009. And the two partners in the 290,000 barrels per day SRC refinery apparently made the decision to hold off on the project just weeks ago, after having earlier revived planning for it in January.
They started front-end engineering design (FEED) on the investment - already delayed by 12 months because of the 2009 global downturn - and were expected to make the final investment decision on the project once the FEED was completed at around this time.
'It's been deferred but not cancelled,' a source told BT, adding that the various parties involved, including contractors, have been informed.
No new timeframe has been set yet, the source added, saying 'it's up to the two SRC partners to decide'.
The ultra-low sulphur gasoline plant was intended to further treat the 25,000 bpd of gasoline currently produced by the SRC refinery's catalytic cracker into 'green' gasoline of up to Euro IV specification. This has a maximum sulphur content of 50 parts per million (ppm), compared to gasoline currently sold here of Euro II specification, where the maximum allowable sulphur content is 500 ppm.
The investment includes a 60-70 megawatt in-house cogen plant which would supply the refinery with its own utilities like steam, cooling water and electricity.
The deferment of the SRC project comes as Singapore refineries continue to grapple with a challenging market, as well as competition from new refineries including in China and India.
BP's Global Indicator Margin measure shows that while Singapore refinery margins have recovered from negative numbers like minus US$1.47 a barrel in Q4 last year, and from below US$1 levels in Q1 and Q2 this year, it remains relatively lacklustre at US$2.34 in Q3 and US$2.43 in Q4 to-date.
Chevron just a week or so ago reported a 1.6 per cent decline in third-quarter net profit to US$3.77 billion, due to growing expenses and a weak dollar.
Mike Wirth, Chevron's executive vice-president for global downstream, reportedly said: 'In the refining sector, we continue to see pretty tepid demand growth... Some parts of the world are certainly showing decent demand growth, others are not.'
He was confident about long-term prospects for Asia, where Chevron has major refining interests, but he said Asia was not uniform, with demand weak in Japan, the Philippines, Thailand and South Korea.
Also reporting at the same time, PetroChina, on the other hand, saw its Q3 net profit rising by 13 per cent to US$5.21 billion, buoyed largely by demand in China's strong economy.
