Category Archives: Refinery

New Refinery Project for Texas – Eagle Ford Shale

Worldwide Energy Consortium, Inc. (WEC) announced it will begin the initial Engineering/Permitting phase for its new refinery located near Gardendale in La Salle County Texas. The site was chosen to take advantage of the oil production from the Eagle Ford Shale play, considered to be one of the largest Oil and Gas fields in the world.

This is the first of several planned operations by WEC in the region. Working closely with local officials, producers, land owners, and state agencies, WEC has identified multiple production sites that will allow it to take advantage of the abundant resources being developed in the area.

This first project, The Whitetail Refinery, will begin immediately. The facility is expected to be operational by the last quarter of 2014.

“The rapid deployment of modern, cost efficient refining operations directly into the new production regions will positively impact the producers, consumers, and the investors in our projects.” – Dave Martinelli, CEO Worldwide Energy Consortium, Inc.

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Enbridge – Work on pipeline to begin later this year in Michigan

A portion of a large-diameter interstate crude oil pipeline that runs through Oxford and Addison townships (Michigan) is due to be replaced later this year by Canadian-based energy distribution company, Enbridge Inc.

Enbridge, Inc. will begin work on Oxford and Addison’s portions of what is known as Line 6B at some point between June 1 and Dec. 31, according to Jack Manshum, a spokesman for the company.

“That’s the plan as of right now,” he said. “We’re in the process of developing the construction timeline.”

Line 6B is a 285-mile crude oil pipeline that begins in Indiana, crosses southeastern Michigan and ends in Sarnia, Ontario, Canada. It serves refineries in Michigan, Ohio and eastern Canada.

This year, Enbridge plans to replace approximately 50 miles of Line 6B with new 30-inch diameter pipeline (the same size as the existing one) from Ortonville to the St. Clair River in Marysville. The portion that runs through Oxford is approximately 6.5 miles in length, while Addison’s portion is approximately 6 miles long, according to Manshum.

This is part of a much larger construction project that spans approximately 210 miles across Michigan and Indiana.

The Michigan Public Service Commission approved Enbridge’s application for this phase of the pipeline project on Jan. 31

“We’ve haven’t formally announced the details yet as to when we’ll be in each county or in each area,” Manshum said. “We’re in the middle of outlining that entire plan. So, I don’t know exactly when we’ll be in Oakland County.”

The old underground pipeline will not be removed to make way for the new one. It will be left in place.

“It will run parallel and adjacent to the existing line that’s in place now using the same right-of-way,” Manshum said. “When the new line is tied in and activated, the old line will be deactivated.”

Deactivation will involve purging all the oil from the old line and cleaning it thoroughly to remove any remaining crude, he explained. The old line will then be “taken apart in small segments” and capped.

“Each chunk of that pipe will have caps on it and then it’s filled with nitrogen,” Manshum said. “We will monitor the pressure inside that line as long as the line exists. The reason you fill it with the nitrogen and you monitor the pressure is to help make sure it doesn’t have any internal corrosion.”

With regard to the line’s exterior, he said Enbridge will maintain the cathodic protection that’s already on it to ensure there’s no external corrosion either.

Enbridge can’t simply walk away from the old pipeline.

“It’s a federal requirement,” Manshum said. “You have to maintain it as if you were using it.”

Manshum explained that leaving the old pipeline in place is “pretty standard in the energy transportation industry.”

“To completely take that line out of service, then replace it with a new one” is not practical for Enbridge’s customers, which are oil refineries.

“(The pipeline) would be out of service for six to 12 months – there would be no product flowing through (it),” Manshum said. “(The refineries) don’t have enough storage capacity to go that long.”

Once the new line is up and running, why can’t Enbridge come back and remove the old one? “That’s more of an inconvenience for landowners,” Manshum said. “We’re already there during one construction season, digging up their property, creating the trench.”

If Enbridge returns for another construction season, the workers will “basically redig everything that we just put back into place the year prior.”

Manshum noted it would involve the “same amount of time and process” to remove the old pipeline as it did to install the new one.

“It’s much less disruptive to landowners for us to only be in there once, instead of having to come back,” he said.


US East Coast Refineries Coming Back to Life

The shutdown of several refineries serving the Northeast and the possibility they would not reopen threatened to boost New England’s already­ high gasoline prices by as much as 15 cents a gallon was a reality 1 year ago.

But an influx of cheaper crude oil extracted from shale rock formations in the United States has helped save most of those facilities and stabilized gas ­prices.

The influx of domestic crude, known as “tight oil,” has allowed East Coast refineries to decrease their reliance on more expensive foreign oil, increase profit margins, and regain their economic competitiveness, refinery operators say. They estimate the domestic crude cuts oil costs by a few dollars per barrel, which can have a huge impact on their bottom line.

“A savings of $1 per barrel across our entire refining system is worth several hundred million dollars of net income to Phillips 66,” said Dennis Nuss, spokesman for the Houston company operating the Bayway refinery in New Jersey.

In Philadelphia, domestic supplies have helped resurrect a facility that accounts for nearly one-fourth of East Coast refining capacity. It was put up for sale in 2011 and expected to close for good last summer as high oil prices and slackening demand made it barely profitable. Today, it is refining up to 330,000 barrels of oil a day, getting about 10 percent of its crude from the Bakken shale formation in North Dakota.

Phil Rinaldi, chief executive of Philadelphia Energy Solutions, the company that now operates the refinery, said the domestic supplies are pressuring foreign producers to keep their prices competitive.

“It allows us for the first time in a very long time to have some genuine diversity of supply,” he said. “The shale plays are game-changers.”

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Last week, the average Massachusetts gas price was $3.68 a gallon, 12 cents higher than a year ago and up 25 cents in the last month alone, according to AAA Southern New England. If the refineries had stayed shuttered, however, prices would have been driven even higher, analysts believe.


Genesis Energy to construct new infrastructure for Baton Rouge Refinery

US-based midstream company Genesis Energy has announced its plans to invest $125m to expand its existing infrastructure and construct new assets to connect into Exxon Mobil’s Baton Rouge Refinery in Louisiana.

The refinery with a capacity of 500,000 barrels per day (bpd) is one of the largest refinery complexes in North America.

The company will improve its existing terminal at Port Hudson, Louisiana and build new 29km long 20in diameter crude oil pipeline to connect the port to the Maryland Terminal and to the Anchorage Tank Farm.

The new pipeline is expected to have a capacity of about 350,000bpd and will also have the potential to access other local refineries representing about 140,000bpd.

Genesis Energy chief executive officer Grant Sims said the company is planning to expand its operations in the state of Louisiana.

“This project positions Genesis as an efficient conduit for crude oil supply and logistics in the region,” Sims added.

Genesis Energy also has plans to build a new crude oil unit train facility at the Baton Rouge Maryland Terminal.

The company is also planning to build a storage capacity of 200,000 barrels to complement its 216,000 barrels of existing tank capacity, apart from improving the truck station and barge dock.

Project work is scheduled to begin early in 2013, while upgrade, expansion, and completion work at the Port Hudson and new crude oil pipeline is expected to be completed by the end of 2013.

The Maryland Terminal completion is scheduled for the second quarter of 2014.


Hess Exits Refining as Elliott Seeks Board Seats

Hess Corp. (HES) will sell its fuel storage terminal network and exit the refining business as Paul Singer’s Elliott Associates LP fund said it plans to buy more than $800 million shares and seek board seats.

Hess will close its Port ReadingNew Jersey, refinery by the end of February and seek a buyer for its 19 storage terminals, the New York-based company said in a statement today. Hess rose 5 percent to $61.84 at 10:24 a.m., the highest intraday gain on the Standard & Poor’s 500 Index.

Singer is the founder and president of Elliott Management Corp. which oversees two funds, Elliott Associates and Elliott International LP, that have $21.5 billion of assets under management. Elliott Associates notified Hess that it may seek board seats at the annual shareholder meeting this year, according to a separate release from Hess. Elliott last year added two new board members to BMC Software Inc. (BMC)after pushing BMC to consider a sale.

Peter Truell, a spokesman for Elliott, declined to comment when reached by phone today.

Hess’s terminals business may sell for as much as $1 billion, said Fadel Gheit, a New York analyst with Oppenheimer & Co. The moves also will free up about $1 billion in working capital “for future growth opportunities,” the company said. The Port Reading closure culminates a process that last year included shutting down another money-losing refinery Hess co- owned in the U.S. Virgin Islands known as Hovensa LLC

Gradual Transformation

“They’ve been doing this gradually,” Gheit said today in a telephone interview. “Hess has turned a corner and the company is executing the right strategy.” Gheit rates Hess the equivalent of a buy and doesn’t own shares.

Hess joins companies including ConocoPhillips (COP) and Marathon Oil Corp. (MRO) in exiting the refining business, which rallied in 2012 in areas where operators have had access to cheaper U.S. crude. East Coast refineries, which pay more for imported oil, have been shut as their profit margins narrowed.

“We have transformed Hess into a predominantly exploration and production company, which is part of a multi-year strategy to grow shareholder value,” Chairman and Chief Executive Officer John Hess said in the statement.

Hess has exploration and production assets around the world, from the Bakken and Utica plays in the U.S. to Equatorial Guinea and Norway. The company has tripled its revenue from exploration and production in the past decade, while continuing to generate 75 percent of sales from marketing and refining. Production in the third quarter climbed 17 percent from a year earlier to the equivalent of 402,330 barrels of oil a day, according to data compiled by Bloomberg.

Shale Emphasis

Of the $6.7 billion Hess plans to spend this year on exploration and production, 40 percent of it will go towards its unconventional shale resources in the U.S., the company said Jan. 9. Hess, which was founded by John Hess’s father, began as a fuel oil delivery business and expanded into retail, refining, and oil storage.

The company is retaining its gas station business, which includes more than 1,350 Hess-branded sites in 16 states along the East Coast, the statement said. The company is the leading gasoline convenience store retailer in the region, according to the company’s website.

Retail Exit?

“The next potential move for them could be to exit the retail side,” Brian Youngberg, an analyst with Edward Jones & Co. in St. Louis, said in a telephone interview today. “Retail is a lower-margin business, so exiting could potentially unlock further value.”

Valero Energy Corp. (VLO), the largest independent fuel processor in the world, is in the process of spinning off its convenience store business.

Founded in 1977, Singer’s Elliott Management is one of the oldest private investment firms of its kind under continuous management. The Elliott funds’ investors include large institutions, college and charitable endowments, family offices, and friends and employees of the firm.

Singer is among a group of creditors seeking payment from Argentina for bond defaults. Ghana detained an Argentine navy ship in October on the bondholders’ request and Argentine President Cristina Fernandez de Kirchner took a chartered flight to Indonesia this month to avoid creditors seizing the nation’s plane.

Hess has retained Goldman Sachs Group Inc. as its financial adviser on the terminal sales.


Motiva set to restart Port Arthur crude unit-sources

Motiva Enterprises plans to begin restarting a crude distillation unit at its 600,000 bpd Port Arthur, Texas, refinery next week after it was shut in June to repair massive corrosion from a chemical leak, sources familiar with the refinery said on Wednesday.

Motiva has wrapped up the repairs and is in the process of transferring control of the unit to operations staff this week, the sources said.

The company, a joint venture of Royal Dutch Shell and Saudi Aramco, was forced to shut the giant new 325,000-bpd crude distillation unit (CDU) at the refinery in June after discovering cracked piping on a massive scale in the cornerstone unit of a five-year, $10-billion expansion project.

Motiva plans to have the unit, VPS-5, in production by the end of December, the sources said.

Motiva had said repairs were expected to finish sometime between late November and early December, with VPS-5 back in production by the first quarter of 2013.

If VPS-5 remains in operation into the new year, Motiva also plans to take one of the old crude units and a coking unit down for planned overhauls about midway through the first quarter, the sources said.

A Motiva representative was not immediately available to discuss operations at the refinery.

Motiva has not disclosed the price tag for repairs, but analysts have estimated the cost at between $300 million and $1 billion.

The new CDU was the centerpiece of the expansion that pushed the plant’s overall capacity to 600,000 bpd, surpassing Exxon Mobil Corp’s 560,500-bpd Baytown, Texas, refinery as the country’s largest.

But an influx of a corrosive chemical, during what workers thought was a brief, routine shutdown of the newly built CDU, cracked and ruined thousands of feet of pipe and other critical parts.

After the extent of damage from a leak of caustic sodium hydroxide into VPS-5 was discovered, estimates of the length of time needed for repairs ranged from six months to a year. Sodium hydroxide is used in small amounts to prevent heavy, sour crude oil, which VPS-5 is made to refine, from fouling the unit.

Motiva and its co-owners moved quickly to assemble needed replacement piping and staff to undertake repairs, which affected the atmospheric distillation section of VPS-5.


Pipe corrosion caused explosion and fire at Regina refinery: investigators

REGINA – Fire inspectors say corrosion in a single pipe was behind an explosion and fire at the Co-op refinery in Regina last fall.

Their report says a tear measuring almost 18 centimetres long triggered the initial explosion and subsequent smaller ones.

They say the problem was in a diesel fuel processing area and had been getting worse since 2008 when practices at the plant changed.

Co-op officials say tests hadn’t shown any issues with the pipe.

Seven contract employees that were working on a $2-billion upgrade and expansion were sent to hospital and two more were treated for burns at the plant.

Another 1,400 people had to leave the refinery after the blast that triggered a huge fireball that could be seen all over the city.

Co-op says 80 per cent of the piping in the troubled area has been replaced since the fire and 19 other measures have been taken to increase testing.

The plant had another fire on a much smaller scale in May when an overheated crude oil pump ignited. There were no injuries.


Probe of Chevron fire focuses on corroded pipe

Federal investigators looking into last Monday’s fire at the Chevron oil refinery in Richmond want to know why the 8-inch carbon steel pipe that failed wasn’t replaced in November during a round of maintenance, officials said Sunday.

At that time, the refinery’s crude unit was taken offline, and a 12-inch pipe connected to the same distillation tower was replaced due to corrosion, said Daniel Horowitz, the managing director of the U.S. Chemical Safety Board.

Investigators do not yet know if corrosion in the 8-inch pipe caused a leak of hydrocarbon liquid that ignited. Horowitz said he believed the pipe was inspected last year, along with the 12-inch pipe, but that his agency had not yet reviewed the records.

Investigators are also looking into why the crude unit was kept running while workers tried to fix the leak. They said the workers narrowly escaped the vapor cloud that ignited.

The initial leak “had the effect of drawing people in,” Horowitz said. “We want to understand the decision-making around when you attempt to make a repair and when you shut the unit down.”

Chevron spokesman Justin Higgs said the company was cooperating with the probe and was “committed to better understanding the root cause of this incident.”


In hours, caustic vapors wreaked quiet ruin on biggest US refinery

In the end, all it took was a small chemical spill — perhaps less than a barrelful — to bring down the newest, mightiest oil refinery in the United States.

Three weeks ago, while workers repaired a minor leak at the Port Arthur, Texas plant owned by Motiva Enterprises, a few gallons a day of so-called “caustic” was inadvertently seeping into the newly built crude distillation unit (CDU), the 30-story-high network of interconnected cylinders and latticed pipelines at the heart of the refining process.

While harmless when mixed with crude, the undiluted caustic vaporized into an invisible but devastating agent of corrosion as the chamber heated up to 700 degrees Fahrenheit ( 370 Celsius); the chemical gas raced through key units, fouled huge heaters and corroded thousands of feet of stainless steel pipe.

Now, just weeks after they commissioned the biggest U.S. refinery project in a decade, two of the world’s biggest oil titans — Royal Dutch Shell and Saudi Aramco , which own Motiva — are rushing to repair the potentially billion-dollar glitch that has added an embarrassing and costly coda to a landmark $10 billion expansion.

After a five-year effort to double the plant’s capacity, making it the largest in the country, they must now reassemble many of the same people and parts for a blitzkrieg fix that may exceed the original $300 million cost of the unit: corrosion experts are flying in from across the world; hundreds of workers are being hired; bespoke 30-inch (75-cm) stainless steel pipelines and 30-story cranes may need to be obtained quickly, according to sources involved in the repairs.

Sources familiar with the effort provided Reuters with the most detailed account yet of what officials believe went wrong at the 325,000-barrels-per-day (bpd) unit known as vacuum pipestill-5 (VPS-5), showing how a series of seemingly minor glitches crippled the vast plant.


Motiva has said little about the incident. Late on Wednesday, 11 days after it occurred, the company confirmed for the first time that the unit might remain shut for “several months”. Sources say officials are telling workers that the unit could be idle for as long as a year.

On Friday, in response to Reuters questions, Motiva spokeswoman Kayla Macke confirmed the contamination: “The preliminary inspection indicates that parts of the new unit have been contaminated with elevated levels of caustic.”

The extent of the damage is still not known as portions of the crude unit are too hot to enter, according to the sources. Some areas may not be accessible for weeks.

Motiva has not reached a final conclusion as to the cause of the damage, but has developed a working theory on what experts said appeared to be a rare instance of “accelerated chemical corrosion”. The unit’s intense heat was critical: the rate of corrosion can double with every 10 degrees Celsius.

Even as it pitted the inside of the atmospheric section, a giant still that performs the initial and most basic stage of converting crude oil into fuel, the damage went undetected. Only when two fires broke out and a heater ruptured — once crude resumed flowing — did operators suspect something was amiss.

“They had the first fire and then they had the second one 20 feet away. They knew they had a problem,” one of the sources said.

Why caustic continued flowing into the unit while it was idled to repair an unrelated leak is unclear, and is a key part of the investigation to establish cause. It is thought a valve failed to shut completely, but why that happened is unknown.


While Motiva’s VPS-5 was idling, authorities believe a few gallons each day of caustic leaked into the unit. The caustics are a base meant to negate the acid in cheaper heavy, sour crude that the new CDU was made to consume. They prevent residue from blocking pipes and reducing crude intake.

Normally, the amount leaked in the CDU would have been harmless, diluted by the crude. But only a small amount of hydrocarbon was circulating through the still while it was out of production, the normal method to maintain so-called “warm circulation” during a brief shutdown.

By the following weekend, unaware of the caustic incursion, Motiva began reheating the unit to resume operations; as the temperature reached 300 to 400 Fahrenheit, the caustic vaporized.

Ground zero was the atmospheric section, one of the simplest but most important machines in a modern plant. Although vast in scale, today’s units are in many ways similar to the simple stills used to convert crude into kerosene for lamps at the start of the U.S. oil industry in the 1850s.

The core of any refinery, the main still boils crude at intense temperatures to split the hydrocarbon molecules into the initial components of fuels such as gasoline and diesel; the bulk of the output is an intermediate feedstock that requires further refining in a host of specialized secondary units.

Unlike a refinery blast, the misfortune unfolding at Motiva was relatively slow to materialize. The fires that erupted from small pipeline cracks that Saturday were small enough to be quickly extinguished by the workers on hand at the crude unit.

The extent of the damage was understood within two days.

“We have the worst-case scenario,” one of the sources said. “Extensive damage throughout the crude unit. All of it.”

Three engineering experts agreed that what one called “accelerated chemical corrosion” was rare, but not unheard of.

“The temperature issue could be a factor as well,” said Kevin Garrity, president of NACE International, a global organization for engineers studying corrosion, and a 38-year veteran of the industry. He compared the effect to pouring sugar into hot tea, which dissolves the crystals much more quickly than in a cup of cold tea.

Normally, corrosion problems can be prevented.

“From a general sense you would not expect this kind of deterioration and problems in such a short period of time. You might not even expect it in 30 years if you have the right combination of technology and inspection practices,” he said.


Motiva has yet to examine the fractionation towers — tall, thin, metal columns — as well as the main part of the atmospheric section, because they are still cooling from their operating temperatures, said sources recruited for the repair work.

The vacuum section of the VPS-5 — which takes the heaviest “residue” created in the atmospheric section and refines it in a vacuum, increasing the yield of feedstocks for other units — was not damaged, they said.

Operators have continued to run many of the unharmed secondary units, although without the crude tanks they must buy intermediate feedstock from other refiners or shut peripheral units, as Motiva did last week.

But stainless steel piping, some sections as large as 30 inches in diameter, was damaged. Such equipment, part of more than 700 miles of pipe used on the expansion project, is often built to order, and may be difficult and costly to replace.

“If someone has 30-inch stainless steel pipe for sale, I would guess they’re going to charge a premium price,” one of the sources said.

Instrumentation on the unit is also known to be damaged, according to the sources.

Up to 50 heat exchangers will need to be cleaned throughout portions of the new plant, according to IIR Energy, an industrial intelligence firm that gathers data on operations and project activity on thousands of assets globally.

Work on exchangers 300 feet (90 meters) above the ground will require large cranes, though likely not the giants needed for the original construction. The heat exchangers, which look like 30-foot-long cylinders collected in a metal frame, house lengths of tubing where feedstocks are warmed and refined products are cooled as they go to and from a refining unit.

IIR also told Reuters that all trays in the distillation column and components within the furnace would need to be replaced. It said no restart timeframe had been determined.

Soon the question of who is to blame will arise. The cost to complete repairs may be as much as replacing the whole unit, which was originally estimated to cost some $300 million when the project was launched in April 2005, according to IIR.

Without knowing exactly why the caustic leaked, it’s not possible to say who, if anyone, is at fault. The two main contractors for the project — Bechtel and Jacobs Engineering — declined to comment.

Meanwhile, the investigation continues, and oil traders await any word on when the plant will resume operations. Motiva will likely be “extra-cautious” in restarting, Auers of Turner, Mason and Co said.

“They’re really focused on the repairs,” one of the sources close to refinery operations said. “They don’t need to know the cause now. They’ve got 12 months to figure that out and fix it.”


Texas refinery unit shut down for ‘several months’ as it investigates major corrosion problem

Motiva Enterprises LLC has announced it is preparing to keep its new crude oil unit shut for “several months” as it investigates major corrosion problems that have crippled the country’s biggest refinery weeks after a massive expansion.

In the first public acknowledgment of a potentially long-term outage at the Port Arthur, Texas, plant, Motiva co-owner Royal Dutch Shell Plc confirmed the 325,000-barrel-per- day (bpd) unit was shut due to “corrosion problems,” as posted on earlier this week.

“The outage of the new crude unit may continue for several months, while the causes of the issue are established and rectified,” Shell said in a statement late Wednesday.

Sources said earlier this week the outage, initially estimated at two to five months, could now extend to a year.

Shell, which runs the Motiva joint venture with state oil firm Saudi Aramco, said all secondary units built as part of the five-year, $10 billion project were fully operational, although some were running at reduced throughput.

Separately, sources familiar with operations said one of the new units — a catalytic feed hydrotreater that removes sulfur from feedstock going to the refinery’s gasoline-producing fluidic catalytic cracking unit — was being shut down this week because of a lack of feedstock from the idled crude unit.

The sources also said Motiva was shutting an older catalytic reformer, which creates gasoline additives.

Motiva officials were not immediately available to comment on details of the secondary unit operations.

In the statement, Shell said the refinery’s original 275,000 bpd complex was operating “as per plan.”

Motiva’s Port Arthur refinery is not shutting the refinery’s FCC, but will emphasize production of diesel, which is yielding higher returns for U.S. refiners as an export, the sources said.

The new crude distillation unit, which began production in April and was shut following a June 9 fire, may be idle for up to a year to repair extensive corrosion found in the unit.