• 2012 June 20 15:25

    US Motiva refinery expansion could be idled for a year

    Motiva faces deepening woes at its Texas refinery with sources saying on Tuesday that a new crude unit at the heart of its $10 billion expansion project may be shut for up to a year because of extensive corrosion, more than twice as long as initially expected, Reuters reports.

    Estimates for the restart of the Port Arthur, Texas, refinery's crude distillation unit (CDU), which was idled just nine days after it was officially commissioned, have escalated from two months to five months to a full year since it was shuttered by a fire on June 9.

    While fire damage was negligible, extensive corrosion has been found in vessels and piping of the CDU, said sources familiar with the refinery. Corrosion can lead to the catastrophic failures of refinery units to contain hydrocarbon liquid and vapor under high pressure and heat.

    For Motiva, a joint venture of Royal Dutch Shell Plc and Saudi Aramco, the 325,000 barrel-per-day unit is the centerpiece of 5-year expansion that made the refinery the nation's largest at 600,000 bpd. The crude unit began refining crude oil in late April and stopped production after a leak developed in early June.

    The sources said Motiva has yet to make a final determination of the cause of the corrosion in the 325,000 bpd crude distillation unit and the scope of work needed to repair it. Motiva has declined to say if corrosion has been found in the unit.

    "At this point, we don't know how long the crude unit will be down," said Motiva spokeswoman Emily Oberton. "An investigation is continuing to determine the cause of the issue."

    The outage has not caused a shutdown of the entire refinery and another 285,000 bpd crude distillation unit (CDU), which performs the initial refining of crude oil coming into the refinery and provides feedstock for all other production, continues to operate.

    COSTLY PROBLEM

    The problems have been costly for the Motiva partners. Based on margins for running international benchmark Brent crude through a Gulf Coast refinery, the plant would have lost about $1.54 million per day, based on Reuters calculations. Losses could be even higher as the Motiva plant was designed to run cheaper, heavier sour crude, including oil from Saudi Arabia.

    Heavy, sour crude is more corrosive due to a higher sulfur content and refinery units designed to run those crude grades are supposed to withstand the corrosion for years.

    While it is not unusual for new refinery units to experience operational teething pains when they first begin operating, a shutdown lasting months would be a major embarrassment for Motiva and its owners after the landmark $10 billion upgrade.

    The outage may also complicate Saudi Arabia's drive to push more crude into the U.S. market, as the Port Arthur plant was one of the biggest new outlets for increased production.

    Oberton said some of the Saudi crude was being utilized at the refinery in the units that were still online, but declined to say which of the other new units run crude. In addition to the crude unit, a new delayed coking unit, which processes residual crude oil, was built.

    "Other units are operating, including some of the expansion units," she said.

    "We're working to optimize production without the crude unit," said Oberton, without giving details on how many barrels the refinery was currently processing.

    Other units built in the expansion were designed to receive intermediate feedstocks from the new crude unit.

    Saudi Arabia pushed oil production to the highest level in decades in May, in part to build up storage levels at the Motiva plant as well as to cushion the impact of Western sanctions against Iran's nuclear program, which have threatened Tehran's exports.

    U.S. imports from Saudi Arabia jumped to 1.45 million barrels during the first five months of 2012, according to Reuters calculations based on monthly and weekly data from the U.S. Energy Information Administration, the highest level for that period since 2008.


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