May 2008

Port Arthur embraces the nastiest crudes

How much of a $7 billion oil refinery is sensors, devices, networks, and automation controllers? One billion dollars? Three billion?

A new refinery has not gone online in the U.S. in three plus decades, but Saudi Aramco and Royal Dutch Shell are, in effect, doing just that in their expansion at the Motiva refinery in Port Arthur, Tex.

The opportunities this healthy expansion and the necessary services that will follow are a boon to Texas, the oil and gas industry, and the instruments and controls business.

The Wall Street Journal reported the two oil companies have begun plowing an expected $7 billion into the most ambitious U.S. refinery project in more than 30 years.

The addition will handle the increasingly gooey, acidic, or laced with sulfur oil that is now economically viable given the $100/bbl standard that now rules.

Doubling the size of the storied Motiva refinery, whose roots go back to the days of the famous Spindletop gusher of 1901, will turn the sprawling plant here on the Gulf Coast into the largest crude refiner in the U.S.

However, the bigger plan is to make the Port Arthur facility the best equipped in the country to digest the world's most challenging oil-the stickier, high-sulfur stuff that sells at a discount to the light, sweet crude that first put Texas on the map.

"This is all about handling the nastiest crudes," said Forrest Lauher, a Motiva engineer who is in charge of an expansion project that will drive 50,000 concrete piles into the swampy soil here and consume more than 27,000 tons of structural steel and 450 miles of pipe.

The refinery, now capable of handling around 275,000 barrels of oil a day, will grow to a capacity of 600,000 barrels a day by 2010.

From Asia to the U.S., refiners are bracing for increasing flows of heavier or more acidic crudes from the Middle East, Sudan, Brazil, Canada, and Venezuela.

Some of the logic is simple economics. The most easily refined light crudes, such as West Texas Intermediate, now sell for more than $105 a barrel. They yield the most high-value products, like gasoline. However, the heavier, more troublesome grades go for sharp discounts. In recent months, Canada's heavy crudes have sold for as much as $20 a barrel less than West Texas Intermediate.

The Port Arthur project also reflects a longer-term reality as oil producers, many of them boxed out of the richest oil regions, such as Iraq, move to tap some of the least desirable pockets of crude.

Heavier grades of oil now account for around a quarter of daily worldwide supplies, but some forecasters say that figure could jump to more than half by 2030.

Refiners must be ready to turn that crude into usable gallons of gasoline, diesel, and jet fuel.