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Reuters: UPDATE 2-Shell to begin $7 bln Port Arthur refinery expansion

Fri Sep 21, 2007 11:45 AM BST

NEW YORK, Sept 21 (Reuters) – Royal Dutch Shell will go ahead with a 325,000 barrel-per-day capacity expansion of its Motiva refinery in Port Arthur, Texas, at a cost of $7 billion, the Anglo-Dutch oil group said on Friday.

The 285,000 bpd refinery is owned by Motiva Enterprises LLC, Shell’s joint venture with Saudi Refining Co.

“The expansion project will increase the refinery’s crude oil throughput capacity to 600,000 bpd, making it the largest refinery in the U.S. and one of the largest in the world,” Shell, the world’s second-biggest non-government controlled oil group, said in a statement.

A spokesman for the group said the refinery expansion would cost $7 billion.

Motiva said in a separate statement it has got the go ahead to begin construction from both its owners and has awarded the main constuction contract to a Bechtel/Jacobs (JEC.N: Quote, Profile , Research) joint venture.

Shell Oil Co, the U.S. unit of Royal Dutch Shell Plc (RDSa.L: Quote, Profile , Research) (RDSb.L: Quote, Profile , Research), said the expansion is equivalent to building the first new U.S. refinery in more than 30 years.

Shares in the group were 0.2 percent down in London at 20.87 pounds.

There are no approvals for new refineries in the United States, leaving expansion as the main option to increase capacity.

U.S. refiners have grown flush on a tight balance between expanding demand for oil products and only a slow growth in supply in recent years that has made the U.S. market more dependent on imports.

Strains in U.S. refining capacity following hurricanes, maintenance and accidents have contributed to the spike in the oil price over $84 a barrel. U.S. WTI crude hit a record high of $84.10 on Thursday.

(Additional reporting by Alexandra Hudson in Amsterdam)

© Reuters 2007. All Rights Reserved.

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