YEMEN - Little Aden Refinery.

The Aden plant, built between 1952 and 1954, needs upgrading. With its nameplate capacity having reached 170,000 b/d in the 1970s, it has long operated at less than 110,000 b/d. Now it operates at 95,000 b/d. It is run by state-owned Aden Refining Co. (ARC), under the control of the MOMR. ARC employs about 4,000 people. As a result, efforts to privatise the refinery since late 1998 have been frustrated by cool response from both ARC's management and the business community.

Proposals to upgrade the plant and restore it to its original 170,000 b/d capacity, in a $250m project, have been delayed for years. On May 13, 1998, the government decided to sell a majority share in the refinery in the expectation that foreign investors would provide the funds necessary to upgrade the plant. The government also authorised private investors to sell the refinery's products on the domestic market.

The $250m project was to involve construction of a power plant and a hydro-cracker, installation of a computerised control system, and debottlenecking work on the crude distillation and gasoline units.

In late 1997 the government said it intended to retain a consortium comprised of Tarmac of the UK and ABB Lummus Global of the US to carry out upgrading work worth $180m. But the contract award awaited a final outcome of the move to privatise the refinery.

The government later insisted on a re-tender because the consortium had proposed construction of a new 75,000 b/d crude distillation unit and a new 30 MW power plant, which the MOMR decided was outside the scope of the original project. The second tender was done in mid-1997 with the addition of a hydrocracker and a larger power plant and the project's cost then was estimated at $250m.

The upgrade in the first phase was to include sweetening units to treat kerosine, straight-run benzene and gasoline. The refinery was to process crude oils from Kuwait and from Yemen's Ma'rib oilfields.

The second and third phases were to involve the power plant and catalytic reformers to further sweeten the crudes. A basic engineering study for the project was done by AMEC Process & Energy of the UK.

The government cannot finance the project because, under the IMF structural adjustment programme, it is committed not to take on any new public debt. In November 1996, ARC had appointed Natwest Capital Markets as financial manager, but the company decided to withdraw from the project by July 1997.

The Aden refinery came on stream in 1954. It was built by Bechtel of the US and George Wimpey & Sons of the UK for BP, which operated it until nationalisation in May 1977. BP was retained to provide technical assistance for another five years. The refinery had 16 storage tanks, some of which were damaged during the 1994 north-south war.

Before the 1990 Iraqi invasion of Kuwait, ARC used to process crude oils from Iraq and Abu Dhabi. It was running at 100,000 b/d under contract for clients including Iraq, Kuwait, Iran, the former Soviet Union, Coastal Corp. of the US and Petronas of Malaysia. The refinery was damaged during the 1994 north-south war; one of its distillation units was virtually destroyed by fire.

At present the refinery processes crude oils from Iran and Oman, and an agreement with Petronas was revived after the war in 1994. Local crude oils processed at the refinery include Ma'rib Light and the government's share of production at Masila.