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U.S. refinery expansion delayed by poor market
March 18, 2009, Houston-based refiner Motiva Enterprises is delaying the planned completion of the expansion of its Port Arthur refinery due to poor market conditions, the company’s spokesman said Tuesday.
Motiva, a joint venture between Shell Oil and Saudi Refining Inc., had planned to complete the 7-billion-U.S.-dollar project by late 2010, but now has to postpone it until the first quarter of 2012, local media quoted Motiva spokesman Stan Mays as saying.
After the expansion, the facility’s crude oil processing capacity will be doubled to 600,000 barrels a day, making the refinery the largest in the United States and among the biggest in the world.
The delay came after Motiva announced in January that it would perform a cost review of the project.
Mays said the company remains committed to the expansion despite the gloom market conditions, adding that all major equipment for the project has been purchased.
“Demand for gasoline, diesel, and aviation fuels is expected to rise over the coming decades and be an important part of the energy mix,” he said.
Other major U.S. refiners, including Valero Energy, Marathon Oil and Conoco Phillips, also have recently announced plans to delay or suspend expansion or upgrade of refineries.
Motiva broke ground on the Port Arthur expansion in December 2007. The delay means slower work and fewer workers on site, Mays said.
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This seems like a stupid move to me – delaying an expansion completion nearly 2 years away based on current poor economics?? Do these Refinery strategist have some sort leming pills that they add to koolaid so they can follow the herd? Since Valero has canceled most of their project at Pt Arthur and Total always had longer completion time (4Q 2011/1Q 2012)for their project – this was chance for Motiva to get position and earnings advantage in the market.
Since Motiva’s equipment is already purchased (note both Motiva & Total coke drums already at plants) there is only a smaller savings on labor available, plus if the economy is near a bottom and expected to start recover in 2010 at latest; it sets up potential for Motiva to miss the best of recovery demand market by not being onstream for it just like its two Pt Arthur sister companies. Also it would be shoving more work into a time frame that would again have compete with other “delayed” projects for materials & labor??
Making long term strategy decision based on short term/current market conditions – is same as not having a strategy in my viewpoint.
Regards
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