Huge Refinery Expansion Planned in Texas
♫ Saturday, September 22nd, 2007Royal Dutch Shell Plc and Saudi Arabia will spend $7 billion to more than double the size of their Texas oil refinery, the biggest U.S. expansion in fuel production in three decades.
The joint venture, Motiva Enterprises LLC, will boost capacity at the Port Arthur oil refinery by 325,000 barrels a day, making it the largest in the U.S., by 2010.
The facility will process 600,000 barrels a day of crude oil, Motiva said today in a statement. That would be enough fuel to fill about 1.5 million cars in one day.
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U.S. oil companies have been struggling to meet ever-rising gasoline demand because of local and environmental opposition to new refineries, which resulted in record pump prices above $3.20 a gallon this summer. The plant expansion will cost more than twice initial estimates, reflecting rising steel prices and escalating labour costs.
“We have had strong refining margins in recent years,” said Ivor Pether, who helps oversee about $17 billion at Royal London Asset Management, including around 30 million Shell shares. “It’s probably very sensible for Shell to raise its capacity in America.”
Oil prices have surged to a record above $82 a barrel, even after the Organization of Petroleum Exporting Countries pledged last week to pump more crude. Saudi Arabian Oil Minister Ali al- Naimi and other group officials have frequently blamed higher prices on a shortage of refining capacity.
Crude oil for November delivery traded at $81.48 a barrel in New York on Friday.
Both Shell and Saudi Arabia will supply heavy-grade crude oil to the refinery to be processed when the additional capacity is in place, Rob Routs, head of refining at Shell, said Friday on a conference call with reporters.
