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September 7, 2006 at 8:45 am #4143
HOUSTON -(Dow Jones)- Frontier Oil Corp. (FTO) plans to grow by expanding its two refineries, not through acquisitions, Chief Executive James Gibbs told analysts Wednesday.
Four new expansion projects for its El Dorado, Kan. and Cheyenne, Wyo., refineries are awaiting board approval in November, Gibbs said at the Lehman Brothers CEO Energy Conference.
The newly announced projects include a Saturated Gas Plant proposed for the Cheyenne refinery, and three projects for El Dorado. If approved, the El Dorado refinery would see a coker and fluid catalytic cracker expansion and the revamp of a gofiner unit into a hydrocracker.
The refiner had previously announced three projects: a coker expansion and a crude unit expansion at the Cheyenne plant, and a crude and vacuum tower expansion at El Dorado.
The total cost of the seven projects will be $420 million, Gibbs said.
At a time when a high margin environment has caused a new wave of consolidation with even the smallest assets fetching prices unheard of five years ago, Gibbs said Frontier’s growth will come from this slate of projects, and other efforts from within.
“We’re going to take plants that we know a lot about, increase them when we have opportunities, increase their ability to run heavy crude oil, and increase their coking capacity,” Gibbs said.
Gibbs emphasized the importance of coking capacity – the ability to extract higher value products from the heaviest grades of crude oil – to refiners.
With the addition 4,500 barrels a day of coking capacity at its Cheyenne plant, slated to come online in 2007, Frontier will have the ability to run 21% of the crude oil it processes through coking units, Gibbs said. He characterized the slate of coming projects as “low risk,” though many refiners have seen cost-overruns owing to increased demand for refinery units in the past year. “You’re not going to see us come back with a 100% cost overrun,” he said.
-By Jessica Resnick-Ault, Dow Jones Newswires; 713-547-9208; firstname.lastname@example.org
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