UPI Energy Watch

By ANDREA R. MIHAILESCU, Energy Correspondent  |  May 12, 2005 at 2:10 PM
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WASHINGTON, May 12 (UPI) -- Saudi Aramco will float $5 billion worth of shares for the new Yanbu oil refinery, according to Isam Al-Bayat, vice president of Aramco. A foreign partner will assist in the refinery which will have a processing capacity of 400,000 barrel of oil per day. Al-Bayat said Wednesday at the Saudi Mega Projects 2005 conference in Dammam: "The initial public offering will be offered from the shares of Aramco and the foreign partner." Al-Bayat added that Aramco was short-listing foreign companies to select the strategic partner to include several American, European and Asian companies, which have expressed an interest in this project. Aramco will select a partner by the end of the third quarter of this year. According to Al-Bayat, the new joint venture refinery will sell "high-quality products to Asia, Europe and the United States." Riyad Bank Chief Economist Khan H. Zahid emphasized: "Anything with an Aramco sticker on it will sell like crazy .... The time has come for more IPOs like this in lieu of huge liquidity available in the Kingdom."

The world's third largest mining company, Anglo American looks to purchase $150-million worth of stakes in Shenhua Energy, China's largest coal miner, according to company officials. The company will be privatized for approximately $3 billion. Company officials said Tuesday: "There is a very small part of the Shenhua share capital, less than 5 percent, which would be offered to industry shareholders or blue-chip Chinese corporates. Anglo American has a very good chance." The IPO became available Tuesday. Anglo American, BHP Billiton and Rio Tinto are fighting for a stake in the newly floated coal miner. Nick Hatch, mining analyst at Investec Securities in London: "I would see it more as Anglo positioning itself strategically for participation as that business grows rather than any great money spinner in the short term."

Shell Refining Co Federation of Malaysia Berhad subsidiary Royal/Dutch Shell Group will borrow $140 million from Japan's Bank of Tokio-Mitsubishi to mainly repay older debts as the company looks to lower finance costs. The company signed a five-year loan agreement today. Shell Refining, operator of an oil refinery at Port Dickson, has an outstanding debt of $152 million under an unsecured loan term as of December 2004, according to its latest annual report. Shell shares fell by more than 5 percent this year, underperforming the broader market's 1 percent fall.

After confirming that its first shipments will arrive three months ahead of schedule, BG Group has accelerated its Egyptian liquefied natural gas development. BG officials said Tuesday that the first $1.9 billion Idku LNG project pre-commissioning cargo is scheduled for this month; while the Idku's Train 1 commission is expected to be completed by July with a production capacity of 3.6 million, Train 2 will come online later this year. Under a 20-year agreement, Gaz de France purchased Train 1. BG reported a 30 percent increase in pre-tax profits with the LNG contribution for the first three months of 2005. While first-quarter profits did not include the $1.5 billion proceeds from BG's sale of its stake in the Kashagan oil field in the Caspian, the amount will be added to BG's balance sheet in the second quarter. Frank Chapman, CEO of BG, said: "BG has made an excellent start to the year. In addition, we have continued to make good progress on the delivery of key projects, including the Simian Sienna and Sapphire fields and Egyptian LNG."

ExxonMobil Monday said it developed a new technology that is designed to significantly reduce the cost and time of oil and gas extraction in deepwater wells. The Subsea Intervention Module (SIM) system has been designed to increase performance up to three times faster than a mobile offshore drilling unit. Cost is expected to be reduced by up to 50 percent. The SIM system was under development for several years and is specially designed as an intervention tool that is lowered to the ocean floor and latched onto the subsea well. The SIM tool can be functional in up to 6,500 feet of water and accommodate well depths of up to 13,000 feet below the ocean floor. Rex Tillerson, president of ExxonMobil, said: "The SIM system is another tangible example of ExxonMobil's world-class research and development capabilities, which is a cornerstone in building our reputation as the preferred partner for host nations around the globe. We envision the system will help to maximize production from subsea wells and aid the economics and potential development of deepwater offshore fields."

China's largest oil refiner and chemical products manufacturer, Sinopec, Tuesday said that it established marketing sales offices that will sell chemicals since it does not have a unified sales network for its products. Zhang Jianhua, senior vice president of Sinopec, Sinopec will establish three regional sales branches in Beijing, east China's Shanghai Municipality and Guangzhou, capital of south China's Guangdong province. Zhang said: "It will be helpful for Sinopec to form a unified sales network for its chemical products." The new sales offices will begin its trial operation in July.

Closing oil prices, May 11, 3 p.m. London

Brent crude oil: $49.44

West Texas intermediate crude oil: $49.83


(Please send comments to AMihailescu@upi.com)

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