CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

Desulphurization/Dearomatization Unit. Preemraff Lysekil has a highly sophisticated dieseldesulphurization/dearomatization unit that was completed in 1994. This unit enables Preemraff Lysekil toproduce virtually sulphur-free (10 parts per million) diesel fuel with an aromatic content of 5%. This gradeis sold with a premium as Swedish Environment Class 1 diesel (“MK-1”).Tailgas Treatment Sulphur Recovery Unit. Preemraff Lysekil has a sulphur recovery unit combined with atailgas-treating unit, which removes hydrogen sulphide and nitrogen oxides from refining gases.Prefractionater. Preemraff Lysekil added a prefractionater to its platformer unit in 1999, which reducesbenzene formation in the platformer.Propylene Recovery Unit. Preemraff Lysekil has a propylene recovery unit, which removes and recoverspropylene from the fraction of liquefied petroleum gas produced by the fluid catalytic cracker.Petrol Gas Recovery Unit. Preemraff Lysekil installed a petrol gas recovery unit in 2003, which recoverspetrol gas in connection with the loading of products onto tankers.Hydrocracker Unit. Preemraff Lysekil commissioned a hydrocracker unit in 2006, which converts vacuumgas oil to lighter, higher-value products.After processing, Preemraff Lysekil pumps the various refined products to the refinery’s 49 intermediate andfinished product tanks and six additional refined product storage caverns with an aggregate capacity of approximately6.3 million barrels. From the intermediate tanks, Preemraff Lysekil pumps components to one of four blending stationsfor final product mix, one station for gasoline, two for diesel, and one for fuel oil. Preemraff Lysekil stores the finalproducts in product tanks. To the extent practicable, intermediate products are blended “online,” as required, and loadeddirectly onto product tanker vessels, thus reducing the need for blended product storage. Preemraff Lysekil has twoseparate product jetties with a total of five berths at which tankers dock as many as 1,500 times per year for loading ofrefined products. Preemraff Lysekil distributes almost all of its products by sea for domestic and international use.Given the sheltered position of Preemraff Lysekil’s berths, weather conditions over the last seven years have not causedany significant delay or disruption in either unloading crude oil or loading refined products.Historically, every four years, Preemraff Lysekil has been completely shut down for turnaround maintenance,which includes inspection of all processing units. The total shut-down period typically lasts six to seven weeks, whichincludes two weeks for shut-down and start-up activities. The last major maintenance was performed in the third quarterof 2007. From September 3, 2007 through November 5, 2007, Preemraff Lysekil was shut down for the plannedturnaround. In addition to the planned maintenance and inspections, certain key improvement projects were carried outto further enhance the performance of the refinery. This included modernization of the desulphurization/ dearomatizationunit and of the fluid catalytic cracker for improved capacity and yields. From September 2, 2010 to November 4, 2010,certain units at Preemraff Lysekil were shut down for catalyst replacements and minor repairs, plus required repairs to thePlatformer due to damage detected during the planned maintenance process. From November 10, 2010 to December 22,2010, two units underwent a second planned maintenance period for catalyst replacement and regulatory inspections. OnMarch 28, 2011, we announced that the Fluid Catalytic Cracker unit would be shut down on March 29, 2011 and that theMild Hydrocracker unit (which converts heavy gasoil to primarily diesel) would be shut down on April 3, 2011. TheFluid Catalytic Cracker unit was back on line on April 27, 2011 and the Mild Hydrocracker unit was back on line onApril 21, 2011. The Fluid Catalytic Cracker unit was shut down in order to do mandatory inspection of certain pressurevessels. The standard inspection interval for pressure vessels is four years. In the past, we have been able to extend thisinterval to six years by producing risk based analyses for each vessel. We applied for a delay of the next inspection on theFluid Catalytic Cracker unit in line with past practice. Following discussions with the Swedish Work EnvironmentAuthority, it was decided to proceed with the inspection no later than May 2011. The Mild Hydrocracker unit was shutdown for catalyst replacement. A new catalyst was loaded during the autumn shut down in late 2010. The performanceof the catalyst was below expectations and the capacity of the unit eroded more quickly than expected. As a result, thecatalyst required replacement before summer 2011. The next major turnaround maintenance is scheduled for the thirdquarter of 2013. Both operating income and refining margins have been and will be negatively impacted by each of theplanned and unplanned maintenance shut downs described above.The following table shows Preemraff Lysekil’s feedstocks and production for the periods indicated below, alongwith the relevant percentage of total feedstock and production.Thousandbbls %38For the year ended December 31,2008 2009 2010Thousandbbls %Thousandbbls %FeedstocksSweet Crude Oil...................................................................... 16,439 23 15,326 21 3,447 5Sour Crude Oil........................................................................ 53,943 75 54,908 74 64,880 91