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Manila Standard Today: Shell plans P15-b upgrade

By Alena Mae S. Flores

Royal Dutch Shell Group, the parent company of Pilipinas Shell Petroleum Corp., plans to pursue a P15-billion upgrading of its oil refinery in Tabangao, Batangas province to comply with the Clean Air Act, an industry source said over the weekend.

“It is not in the same scale with that of an expanded refinery that it was looking at before. But it will have to upgrade the refinery. It will be a multi-billion peso investment or around P15 billion, because it needs to meet the sulfur and aromatic content requirements prescribed in the Clean Air Act,” the source said.

Shell, the source said, has commissioned a new study for the refinery upgrade.

“The study it commissioned… will be available by the end of the third quarter of this year,” the source said.

Ed Chua, Pilipinas Shell country chairman, earlier said the company was “revisiting” the previous study. He has said the company will look at “new options” to meet the CAA requirement by 2010 to 2011.

“The costs for upgrade are still being reviewed right now. There’s already a team that is looking at that… initial estimates show that it will cost about $100 million to $200 million, but that’s very sensitive,” the Shell executive earlier said.

Chua had said that Shell would not be able to push through with the expansion of its 110,000 barrels of oil per day Tabangao refinery due to cost constraints.

Shell’s refinery expansion plan was earlier estimated to cost between $1 billion and $3 billion.

Actual cost of the expansion, according to officials, had gone up by 40 percent due to the huge demand in services and raw materials worldwide.

Energy Secretary Raphael Lotilla had echoed Chua’s sentiment, noting the sharp increase in expansion cost and forecasts of overcapacity in refineries and oil and gas production had discouraged companies to expand their refinery operations.

“These are the things, the countries and companies will have to consider whether to forge ahead with expansion plans or not,” Lotilla said.

“Their [Shell] commitment is really to stay, and it really is just a matter of timing. Before the issue was if they leave or stay… it’s really a timing issue given international developments,” he added.

Shell started its refining operations in the country in 1962 with a single 30,000 BOPD process train (distiller and platformer).

A second process train added in 1967 boosted the capacity to 60,000 BOPD. The subsequent revamping of the facility in 1988 contributed to better energy efficiency and raised total primary distilling capacity to around 70,000 BOPD.

The refinery’s integrated utilities complex consisted of water treatment, steam-raising and power generation facilities. It has two crude distillation units and equipment for hydrotreating, platforming, hydrodsulphurizing, as well as LPG (liquefied petroleum gas) and hydrocarbon solvents production.

By the early 1990s, demand for refined products exceeded refining capacity. Growing environmental concerns further strained the refinery’s capabilities. In 1992, construction of Shell’s 110,000 BOPD refinery commenced. It began operating in 1995.

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