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2006-11-28 Home Front Economy
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Texas Refinery Repaired, Working to Double Capacity
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PORT ARTHUR - A year ago at this time, Motiva's sprawling refinery here was still cleaning up an epic mess left by Hurricane Rita. The storm downed 500 power poles, destroyed two water-cooling towers, and dented rows of storage tanks like soda cans. Winds whipped one building so hard they peeled off a Motiva sign. Underneath was a tile mosaic bearing the name of a well-known past owner, which got its start near this marshy site more than 100 years ago after the discovery of the legendary Spindletop oil field. "We called it the ghost of Texaco," said Darrell Segura, a human resources consultant with Motiva, during a recent tour.
Today, this facility has more than patched things up. It is girding for an expansion that will double its capacity to 600,000 barrels per day and could make it the largest refinery in the nation by 2010.
"It really doesn't make sense to build anywhere but the Gulf," said Forrest Lauher, Motiva's venture manager on the Port Arthur refinery expansion by the joint venture between Shell Oil Co. and Saudi Refining, an affiliate of Saudi Aramco.
This $3.5 billion project also shows why refiners are choosing to expand existing facilities rather than start from scratch. As huge and complicated as the project is, it will still be less expensive than building a new facility at a new site. But the rising costs of everything from steel to construction labor on projects like this may give some refiners pause about pushing forward with expansion plans. And winning public approval for additions of any kind is harder than ever to secure.
Refiners have announced plans to boost capacity by almost 2 million barrels by 2010, or about 11 percent above the current rate. This month alone, Marathon Oil announced that its board approved a $3.2 billion expansion of its Garyville, La., refinery; Chevron Corp. said it is seeking a permit to increase gasoline output by 15 percent in Pascagoula, Miss.; and a news report said Valero Energy Corp. is considering a $1 billion expansion at its Port Arthur refinery.
The flurry of activity has been fueled by high crude prices, rising energy demands and strong refining profit margins. This confluence of favorable trends led one Wall Street analyst to dub the 2004-to-2006 period the "Golden Age of Refining." A provision in the 2005 Energy Bill, which allows refiners to reduce their tax bills by deducting equipment costs over a shorter period, has also spurred expansions.
But that may change next year. The Democrats, who recently won control of Congress, have said they plan to eliminate those tax breaks. They describe them as a sweetheart deal for Big Oil during a time of high profits.
If refining margins weaken in 2007, as some analysts have predicted, oil companies could become less bullish about refinery expansions. But Tom Kloza, senior analyst at the Oil Price Information Service, said a small fraction of projects are likely to fall by the wayside, regardless of the economics surrounding them. In a period of intense competition, he suggests some refiners announce expansion projects they never intend to build simply to shoo away competitors who may have similar plans. "There can be a lot of posturing around feasibility studies," he said.
Motiva's project in Port Arthur is not one of those likely to fall off the table. Tractors are already moving dirt and preparing the grounds for incoming equipment, including a new crude-processing unit, coker, reformer, sulfur recovery unit and a new high-tech control center. And a planning team of more than 40 people at Motiva is nearly done with an engineering and design study of the expansion.
The project's leaders are so confident Motiva will give final approval to the project by next summer, they are in the process of ordering the equipment to be installed at the site. The massive project will add roughly 300 jobs at the refinery, one reason public officials have embraced the expansion. Other refinery add-ons in the region could also help lift the area. Port Arthur Mayor Oscar Ortiz has described it a "great" project that will create thousands of construction jobs. He has noted that the city has given Motiva a $45 million incentive package and a 20-year tax abatement.
But that doesn't mean everyone is happy about Motiva's expansion plans. Hilton Kelley, a community activist in Port Arthur, has pushed the company to reduce its emissions, threatening his nonprofit would take legal action to block public permits needed for the project. Under a deal reached with Kelley's group this month, Motiva agreed to pledge $2 million to a foundation dedicated to improving the quality of housing in the neighborhoods adjacent to the refinery, support commercial development in impoverished areas of Port Arthur and establish community programs. It also agreed to install some but not all of the equipment requested by Kelley and his group to reduce and monitor harmful emissions from the plant. 
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Posted by trailing wife 2006-11-28 09:09||
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Posted by Mike Kozlowski 2006-11-28 09:48||
2006-11-28 09:48||
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Posted by Anguper Hupomosing9418 2006-11-28 19:41||
2006-11-28 19:41||
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