Refineries upgrade fuel, security, plan expansion

Local plans call for up to $700 million in improvements; EPA pushes to reduce sulfur

February 1, 2003
By Quincy C. Collins
Caller-Times

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Like refineries across the nation, area refineries are upgrading to respond to the nation’s continuing demand for fuel, including upgraded fuel required to meet the latest or upcoming regulatory standards.

With the war on terrorism continuing, plant security issues also came to the forefront in 2002.

Local refineries have announced expansion plans for as much as $700 million or more on needed capital improvements to meet the nation’s increasing fuel demands, according to some estimates.

Steady improvement projects are a necessary investment, refinery industry leaders say.

"If refineries do not make incremental technical improvements, they will price themselves out of the market," said Bill Hickman, an American Petroleum Institute spokesman.

Bob Slaughter, National Petrochemical and Refiners Association president, said refineries are reacting to Environmental Protection Agency efforts to reduce sulfur content in gasoline and diesel for vehicles. The shift to produce cleaner fuel is expensive. The industry will spend $800 billion to comply with each of the agency’s new cleaner fuels for diesel-powered vehicles and gasoline by 2005.

The growth in new refineries has slowed dramatically in the past 30 years, yet the nation’s fuel demands have continually increased, forcing refineries nationwide to meet the demand, merge or go out of business.

Reducing sulfur content
Flint Hills Resources plans to wrap up a nearly $150 million project to reduce its sulfur content in gasoline by May, company officials said.

Rich Tuttle, Flint Hills Resources spokesman, said its improved sulfur processing plant will supply cleaner gasoline to cities such as San Antonio and Austin that are struggling with air-quality issues.

The Environmental Protection Agency’s push to reduce gasoline sulfur content to 50 parts per million from its current 300 parts per million nationwide by 2005 has refineries gearing up to meet the standards, including local refineries, according to industry analysts.

Valero Energy Corp. became the nation’s second-largest refinery last year when it purchased Ultramar Diamond Shamrock and acquired Coastal Corp. Valero Corpus Christi refinery is building a $140 million gasoline desulfurization unit at its West Plant. The project is scheduled to be completed by March 2004. By 2006, the company plans to spend more than $1 billion on sulfur reduction, said Valero spokeswoman Joanna Weldman.

Weldman said capital investments will be difficult to make because of poor refining margins but construction on units to produce higher quality asphalt is scheduled at the East Plant.

In 2003, 25 percent of the corporation’s $1.1 billion budget will be spent on strategic capital investments, company officials said.

At Citgo, the company planned to spend $60 million for capital improvements and maintenance. However, the recent strike at Citgo’s Venezuelan parent company has delayed construction and environmental improvements, company officials said.

Citgo spokesman H.C. "Chuck" Cazalas said some contract jobs will be affected and the situation has forced the company to buy oil from alternative sources.

Increasing security
All of the local refineries have responded to advice from policing agencies to improve security.

Refineries nationwide have hammered out their own security procedures with help from the U.S. Department of Energy and the new Department of Homeland Security.

Locally, refineries are increasing security measures by working with Port of Corpus Christi officials and the U.S. Coast Guard.

Tuttle said that Flint Hills has increased security staffing and surveillance technology.

Some industry leaders hope Congress stays out of plant security.

"They are all moving ahead to assess their own security," Slaughter said. "We believe security is best left to voluntary efforts."

Contact Quincy C. Collins at 886-3792 or collinsq@caller.com