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Houston Chronicle: Expansion ‘makes sense’

Energy chief Bodman and others hail Motiva’s $7 billion project at groundbreaking in Port Arthur

Dec. 11, 2007, 12:30AM

Copyright 2007 Houston Chronicle

PORT ARTHUR — U.S. Energy Secretary Samuel Bodman said Monday that a $7 billion expansion of Motiva Enterprises’ Port Arthur refinery will be needed to meet the nation’s rising energy needs even if federal lawmakers pass an energy bill that curbs U.S. gasoline usage in coming years.

“It’s clear we’re going to use a lot of oil and gas in this country over the next several decades. That’s why this investment makes sense,” Bodman told reporters after a groundbreaking ceremony for the Motiva expansion.

U.S. energy demand will increase by 23 percent between 2005 and 2030, with a 19 percent increase in the demand for oil and other liquid fuels, he said.

At the same time, however, the country needs to “do everything we can do to develop alternatives to oil and gas,” he said.

Oil companies have been eager to expand refineries to take advantage of record industry profits, yet they have been unsure how to proceed amid proposals to strengthen auto fuel economy rules and boost output of biofuels like ethanol, which could curb gasoline consumption. Rising labor and materials costs have also made some expansion projects unfeasible.

Yet in September, Motiva — a joint venture between Royal Dutch Shell and Saudi Aramco — announced it would go forward with a project to double the size of its Port Arthur refinery to 600,000 barrels per day. The project, expected to be completed by 2010, will make the facility the largest oil refinery in the U.S.

On Monday, Motiva, Shell and Saudi Aramco executives praised the decision as good not only for company shareholders, but for America, too.

“Without question, our refinery will strengthen our nation’s ability to meet demand for gasoline, diesel, aviation fuels and heating oil,” said William Welte, president of Motiva.

The expansion will also help reduce bottlenecks that have contributed to higher gasoline prices, said Abdulaziz Al-Khayyal, senior vice president for industrial relations at Saudi Aramco.

Though U.S. attitudes are “hardening” toward foreign investment in the domestic oil and gas sector, Al-Khayyal said the project is in the best interest of the country.

The executives and government officials gathered Monday under a white tent on the refinery’s sprawling and dusty campus for the project’s symbolic groundbreaking, complete with golden shovels and lots of photos. Many speakers called the event a milestone, a reference to the nearly three years of discussion it took to get to this point.

Long-lasting debate

While Motiva had been preparing the site for more than a year and had already ordered much of the equipment, the project was never a done deal, said Forrest Lauher, venture manager of the project for Motiva.

“There was debate right up until the final decision,” he said.

In the end, however, the companies saw more growth in U.S. fuel demand and a way to make money even in down cycles by designing the plant to accept cheaper crude oils, officials said.

Less expensive crudes

With the expansion, the Port Arthur plant will be able to run heavy, sour crudes found in South America and thick tar sands from Canada, which can be produced at roughly $20 a barrel less than lighter crudes that are pushing $100 a barrel today, officials said.

In addition, Motiva said after the expansion is complete, the facility will have lower emissions per barrel of oil put through the system.

The project will create 4,500 construction jobs and 300 permanent jobs, for which Motiva has already begun hiring.

At $7 billion, the Motiva expansion is the largest capital project ever in Texas, said Secretary of State Phil Wilson, speaking at the event Monday.

And the ripples of the project are already being felt in Port Arthur.

“If you drive down the street today, you’ll see license plates from all over the country,” said Jefferson County Commissioner Eddie Arnold, referring to the high number of construction workers who have streamed into the area to work on the Motiva plant.

“We were happy when it was a $4.5 billion project,” he said, speaking of earlier cost estimates for the project. “Now it’s a $7 billion investment.”

Deloris Prince, mayor of Port Arthur, said the project has brought a transformation she could not have foreseen.

“We are witnessing the rebirth of our city,” she said.

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