May 31, 2012 / 4:05 PM / 8 years ago

Motiva commissions $7bln Gulf Coast JV refinery

* Motiva eclipses Exxon Baytown as largest U.S. refinery
    * Refinery can process wide variety of crude slates
    * Gulf Coast refiners could get boost from Keystone XL

    By Kristen Hays and Erwin Seba	
    PORT ARTHUR, Texas, May 31 (Reuters) - Saudi Arabia's Motiva
Port Arthur, Texas joint-venture with Royal Dutch Shell 
was set to become the biggest U.S. refinery after top energy
officials inaugurated a $7 billion expansion on Thursday.	
    With the completion of its crude distillation unit (CDU),
the refinery's 600,000 bpd capacity eclipses Exxon Mobil Corp's
 560,640 bpd Baytown, Texas, refinery, as the largest
U.S. refinery. The refinery's pre-expansion capacity was 285,000
    Motiva Enterprises is a joint venture between Shell Oil, the
U.S. unit of Royal Dutch Shell and Saudi Aramco -- OPEC member
Saudi Arabia's state-owned oil company.	
    The expansion, launched in 2007 and suspended in 2009 for a
year to reign in costs, gives Motiva the flexibility to run
lower-cost heavy oil supplies from South America and potentially
from Canada, if the delayed Keystone XL pipeline is built.	
    Other Gulf Coast refiners like Marathon Petroleum Corp
 have completed similar expansions, while excess refining
capacity in the distressed East Coast market has shut down.	
    Profit margins at Gulf Coast refineries have lagged those in
the Midwest, which have benefited from cheap supplies of heavy
Canadian crude. But Gulf Coast refineries like Motiva could get
a boost if the Canada-to-Texas Keystone XL pipeline is built. 	
    The Motiva refinery had processed mostly medium-sour crude
to date, and the expansion allows it to process heavier crudes
as well as light-sweet domestic crude, including supply from
U.S. shale reservoirs like the Bakken where supply is booming.	
    "Whatever crude is out there, Motiva Port Arthur can manage
it, which gives us flexibility to choose feedstock based on
availability and economics, not on capacity limitations," Bob
Pease, Chief Executive Officer of Motiva Enterprises, said at a
commissioning ceremony.	
    Saudi Aramco Chief Executive Khalid Al-Falih and Royal Dutch
Shell Chief Executive Officer Peter Voser also attended.	
    "This expansion allows us to process heavy, sour acid crudes
from wherever they become available -- initially Saudi Arabia,
but also from other areas," Voser said. "We can also process
available light, sweet shale oil -- if it makes economic sense."	
    On the East Coast, Delta Air Lines has agreed to buy
Phillips 66's shut 185,000 bpd Trainer, Pennsylvania
refinery for $180 million, while talks are ongoing between
Sunoco Inc and Carlyle Group about a joint
venture of the two with Carlyle running Sunoco's 335,000 bpd
Philadelphia refinery.	
    "Some refineries are unsuitable for processing more
difficult crude on which supply increasingly depends," Voser
said. "They are in the wrong places making the wrong products."	
    However, Sunoco's 178,000 bpd Marcus Hook, Pennsylvania,
refinery is permanently shut, as is Hess Corp and
Venezuelan state oil company PDVSA's joint-venture 350,000 bpd
Hovensa refinery in the U.S. Virgin Islands.	
    It also comes more than a year after Marathon Petroleum Corp
 doubled capacity at its 464,000 bpd Garyville,
Louisiana, refinery, and after the U.S. in 2011 became a net
exporter for the first time since 1949, having shipped out
439,000 bpd more fuel than it imported.	
    Bill Klesse, CEO of independent refinery Valero Energy Corp,
 said at a refining conference in March that he didn't
expect Motiva's startup to cut into Gulf Coast exports because
it offsets Hovensa.	
    On the crude oil side, Klesse said Motiva's startup might
have affected heavy sour crude differentials, which already have
narrowed as U.S, onshore light-sweet crude production has ramped
up. However, Saudi Arabia has announced it would supply
incremental Saudi heavy crude to the market. Voser also told
Reuters in March that its partner would be a supplier for the
Motiva plant.	
    However, Valero shelved a $500 million new coker unit at its
292,000 bpd Port Arthur refinery because that heavy-light
differential has narrowed with more light-sweet crude coming
into the market. 	
    Klesse said differentials are adequate for existing coking
capacity along the Gulf Coast, the newest being a $2.5 billion
coker at Total's 232,000 bpd Port Arthur refinery. But
Valero didn't see differentials staying wide enough to justify
another new coker.	
    Gulf Coast refiners are expected to add primary and
conversion units over the next decade, though at a slower pace,
said Mark Routt, a senior consultant with KBC in Houston.	
    The advent of North American shale natural gas output, which
has kept prices hovering near $2.50 per million British thermal
units, gives the U.S. a strategic advantage over other potential
refined product exporters, such as those in Latin America and
Europe, Routt said.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below