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Daily Telegraph: Shell and Saudis invest in US refinery

Daily Telegraph/Bloomberg image

Port Arthur refinery will, by 2010, produce
enough fuel to fill 1.5m cars each day

By Russell Hotten Industry Editor
Last Updated: 2:19am BST 22/09/2007
 
Royal Dutch Shell and Saudi Arabia’s state-owned oil company are to spend at least $7bn (£3.5bn) to more than double the size of a refinery in Texas in what is the most significant investment in such facilities in the US for 30 years.

Motiva Enterprises, a 50-50 joint venture between Shell and Saudi Aramco, says its Port Arthur refinery will, by 2010, be the largest in the US – producing enough fuel to fill 1.5m cars each day.

The investment is being made against record oil prices and fuel costs, both of which have been blamed on a shortage of refining capacity. The US government has promised tax breaks to encourage spending on refineries and help ease America’s reliance on imported fuel.

Environmental objections have hindered refinery expansion, but Shell’s move is on an existing site, about 80 miles from Houston.

Shell’s head of refining, Rob Routs, said yesterday that the expansion was equivalent to building a new refinery, which has not been done in America for three decades.

Port Arthur will boost capacity by 325,000 barrels a day to 600,000. An Exxon Mobil refinery in Texas is currently the largest in the US, with a capacity of 562,500 barrels a day.

Analysts welcomed Shell’s move, which they said should earn it higher margins than if it expanded on an all-new greenfield site. The price difference between a barrel of crude and barrel of petrol rose to more than $37 in May, so Shell is banking on profits from refinery operations rising over the next few years.

But there was still surprise, given that Shell has sold a lot of refinery capacity in recent years. And when the expansion was first mooted 18 months ago, the estimated cost was put at around $3bn.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/22/cnshell122.xml

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