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March 2, 2007 at 5:01 pm #4044
NEW YORK, Feb 27 (Reuters) – Frontier Oil Corp. (FTO.N: Quote, Profile , Research) said Tuesday it would move ahead with over $200 million in new refinery expansion projects despite cost overruns and delays at existing expansion projects throughout the refining industry.
The company’s board of directors was expected to approve at its Feb. 28 meeting three new capital projects at its 110,000 barrels per day (bpd) El Dorado, Kansas refinery that would cost $213 million, Frontier executives said.
“It is a tough environment for project execution but we are getting it done,” said Frontier CFO Michael Jennings on the company’s quarterly earnings call.
Frontier plans to spend $155 million to expand the 40,000 bpd fluid catalytic cracker at El Dorado, as well as to revamp a hydrotreater used to remove sulfur from the FCC feed by 2009. Another $58 million has been budgeted to expand the refinery’s delayed coker by 2,500 bpd.
Frontier told analysts in September that the three projects would cost $162 million.
Rising raw materials prices and intense competition for labor have driven up the cost of capital projects at U.S. refineries in recent months. Sunoco Inc. (SUN.N: Quote, Profile , Research) disclosed this month that one project at its Philadelphia refinery was now expected to cost $200 million more than the $300 million originally budgeted.
Four existing projects underway at Frontier’s two refineries are now expected to exceed budgeted costs by over $15 million, Frontier executive vice president Paul Eisman said.
The rise in costs is mainly due to delays in completing a planned expansion of the delayed coker at Frontier’s Cheyenne, Wyoming refinery. Frontier now expects to shut down the Cheyenne plant in mid-May to complete the coker project, a month and a half later than originally planned.
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