March 2, 2008 at 3:30 pm #3765
Lima Refinery gets boost for funding heavy crude production
– Feb. 29th, 2008
LIMA – Husky Energy’s recent deal to take over half of BP’s Toledo refinery makes it much more likely Lima will soon be home to refine heavy oil, the Lima plant’s manager said this morning.
Roy Warnock, general manager of Husky’s Lima refinery, said the company’s investment in the Toledo refinery – which will likely be retooled to process the heavier bitumen crude oil – means chances are good the Lima’s plant will focus on heavy crude in the future.
“The Toledo plant has already been partially retooled to run some heavy crude so they will in all likelihood be more money directed there toward bitumen (refining),” Warnock said. “So we will probably direct money at the Lima plant toward heavy crude processing.”
Husky purchased the Lima refinery from Valero last year with the goal of retooling the plant to refine either heavy or bitumen crude drawn from the company-owned oil sands of Canada.
In December, Husky announced a deal with BP that would give the Canadian company 50 percent control of the Toledo refinery in exchange for BP’s gaining half of Husky’s Sunrise Canadian oil sands. Many at the local plant feared the deal would mean less work for Lima. But Warnock said it actually gives the company a boost of capital needed to retool the Lima refinery.
“We are actually receiving half the cash flow from the Toledo refinery. That is going to help us a great deal to complete our capital campaign,” Warnock said.
March 2, 2008 at 3:35 pm #7004
This comes under the “Wishful thinking” title, the gap between processing heavy crude and very heavy bitumen crude is much less than the gap between sweet crude and heavy crude (which is why Husky opted for Toledo vs. retooling Lima).
It is also wishful to think the additional cash flow from Toledo JV will boost Lima chances for capital to do heavy crude.
Incremental heavy crude capacity boost will always be cheaper for the Toledo refinery than Lima. The only bright spot is that it will continue to point out that Lima must upgrade or shutdown – which is where it was with previous 2 owners (Bp & Valero) were…..and they chose shutdown or sell the sweet crude refinery. Lima also lacks Toledo’s ability to make asphalt as alternate to coker charge.
Given the extreme high price outlook for conventional sweet crude plus its large volatility due to mutual fund trading – it will become imperative for Husky to upgrade Lima.
Upgrading to run heavy conventional crude doesn’t make a lot of sense since the additional cost to go to heavy bitumen crude is only slightly more.
Think refrigerators – the bulk of the cost is for a basic unit & comparatively the much larger ones are very cheap compared to the initial cost, the only reason to limit the size would be based on the space available to put it! Cokers follow much the same path on incremental cost size – until they bump limitations of downstream processing units (ie FCC / Alky / Reformer / HDS).
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