Utah group starts on what could be first crude upgrader in U.S.

HOUSTON, June 5 Thu Jun 5, 2014 12:58pm EDT

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HOUSTON, June 5 (Reuters) - FUELogistics, a privately-held company in Utah, said on Thursday it broke ground on what could be the first crude oil upgrader to open in the United States, and it hopes to turn cheap waxy crudes from the Uintah basin into more lucrative ones.

FUELogistics, founded by a group of oil engineers, said that when completed in 2015 the plant, a Low Profile-Fuel Catalytic Cracker (LP-FCC), could encourage operators in the basin to ramp up production.

Utah crudes currently trade at deep discounts relative to the benchmark West Texas Intermediate, which is currently around $102 a barrel.

Waxy black and yellow crudes from the Uintah basin are especially sticky. Treating the crudes in the 36,000 barrels per day (bpd) LP-FCC will allow them to pour more easily and be moved by pipeline, rail or truck without the costs and trouble of heating them.

"Our goal is to remove the discount for this oil and get as close to WTI as possible to turn this into a premium crude," James Redmond of FUELogistics said.

FUELogistics said its plant in Duchesne, Utah, would offer producers a less expensive way to have their crudes treated. It expects the facility to generate revenue of $130 million a year.

Utah's crude output was 34.9 million barrels last year, according to the state's department of natural resources. Though production rose 15.7 percent in 2013, output from U.S. shale plays such as the Bakken or Eagle Ford that produce lighter crudes has grown faster.

Separately, Uintah Resources said it is in the beginning stages of building a 44,000 bpd upgrading and blending facility in Vernal, Utah that is expected to be done at the end of 2016.

Also, Rock River Resources has said it will build a crude processing plant in Emery County, Utah with capacity of about 10,000 bpd.

While crude upgraders do not exist in the United States, they have been deployed in Canada and Venezuela to treat bitumen and extra-heavy crudes. (Reporting By Terry Wade; Additional reporting by Marianna Parraga and Kristen Hays; Editing by David Gregorio)

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