Exclusive: Hurricane worries prompt refiner Motiva to shift expansion plans

HOUSTON (Reuters) - Motiva Enterprises has decided not to add processing capacity at its refinery in Port Arthur, Texas, according to a company spokeswoman, fallout from last summer’s Hurricane Harvey that knocked nearly a quarter of all U.S. crude capacity offline.

Slideshow ( 2 images )

The decision, which puts Motiva on a path to buy or build another refining plant in the United States, is a significant change in the refiner’s plans from just two months ago when the company’s chief executive, Brian Coffman, said Motiva was weighing adding up to 900,000 barrels per day (bpd) of processing capacity to the company’s sole U.S. refinery, the 603,000 bpd Port Arthur refinery.

The U.S. refining unit of Saudi Aramco remains committed to “investigating opportunities to return to a refining scale of 1 million to 1.5 million barrels per day, (but) we do not expect to achieve this increased refining scale through the Port Arthur Refinery,” company spokeswoman Angela Goodwin told Reuters.

“We are actively exploring a number of opportunities and locations as part of our growth strategy,” Goodwin said.

Motiva, like other refiners hard-hit by inundating rains from Harvey, also is adding more pumps to remove water from the Port Arthur refinery to deal with future storms, she said.

Goodwin cited “commercial sensitivity” in declining to discuss why the company shifted the expansion from Port Arthur, but people familiar with Motiva’s plans said the decision stems from the Port Arthur Refinery’s shutdown after Harvey flooded the area.

“They’re not going to do it in Port Arthur,” one of the sources said. “They don’t want all of their capacity shut like it was during Harvey. They still want to be making gasoline somewhere else while everyone is shut during a storm.”

Hurricane Harvey last year dropped more than 60 inches (1.5 m) of rain over southeastern Texas, halting refineries that account for a quarter of U.S. production of gasoline, jet fuel and diesel and most of its fuel exports. The storm caused hundreds of millions of dollars in damage to energy infrastructure and pushed up fuel prices for weeks.

Other Gulf Coast refiners, including Exxon Mobil Corp XOM.N and Total SA TOTF.PA, are bolstering their storm defenses, while an industry group is urging federal funding of an offshore dike that would protect the refining center from storm surges.

Total is adding generators and pumps at its 225,500 bpd refinery, also in Port Arthur, said spokeswoman Marie Maitre. It experienced a plant-wide power outage as Harvey drenched east Texas.

At Exxon’s refinery in Beaumont, Texas, 18 miles (29 km) north of Port Arthur, the company is raising an existing 10-foot flood wall by four feet, said people familiar with its operations.

The company is considering expanding the Beaumont refinery and two others along the Gulf Coast to double its ability to process growing U.S. shale oil, but has not reached a final decision.

Refiners and other industries are advocating for a storm surge barrier to prevent future storms from pushing water in nearby Galveston Bay and flood refining centers in Texas City, Texas, and Houston.

"We, along with a broad coalition of our industry peers, have asked federal officials to build a 'coastal spine,' a protective barrier," said Chevalier Gray, spokeswoman at LyondellBasell Industries LYB.N , which operates a Houston refinery.

Lyondell’s refinery, which sits on higher ground, remained in operation during Harvey.

Reporting by Erwin Seba; Editing by Nick Zieminski