Royal Dutch Shell and Saudi Aramco unveiled the $10 billion expansion of their joint-venture Motiva Enterprises Texas Gulf Coast refinery Thursday as it neared its top capacity, taking the crown as the largest in the US. - Saudi Aramco Chief Executive Khalid Al-Falih said the total cost of expanding the Motiva Enterprises Port Arthur, Texas, refinery to 600,000 barrels per day (bpd) was "in the range of" $10 billion, double its original estimate. The Port Arthur refinery is the largest investment Saudi Aramco, which is a 50-50 partner with Royal Dutch Shell Plc in Motiva, has made Saudi Arabia, Al-Falih told reporters Thursday. Motiva officially named the Port Arthur refinery expansion Thursday. The expansion, which made the Motiva Port Arthur refinery the largest in the United States, was originally budgeted at $5 billion, but had climbed to an estimated $7 billion in the fourth and fifth years of the project, according to Wall Street analysts citing information from Motiva and Shell. Motiva, Shell and Saudi Aramco have been tight-lipped with the media about the rising cost of the project. "It's not surprising costs have gone up from what you heard before," Al-Falih said. "By combining our upstream and downstream capabilities, integrated companies can drive innovation and match resource with demand," Shell CEO Peter Voser said at the ceremony marking the completion of a five-year, $10 billion expansion that doubles the capacity of the refinery. "Some of our competitors have simply walked away from the issue - spinning off their downstream operations into standalone companies. Shell won't do that," Voser said. In the past year, ConocoPhillips and Marathon Oil Corp. have become independent exploration and production companies and spun their refining and other downstream businesses into separate corporations. "This ambitious expansion creates this country's largest refinery and one of the most advanced anywhere," said Voser. With the completion of a new crude distillation unit (CDU) and associated units, the refinery's newly minted 600,000 bpd capacity eclipses Exxon Mobil Corp's 560,640 bpd Baytown, Texas, refinery, as the largest in the country. The refinery's pre-expansion capacity was 285,000 bpd. Motiva also aims to increase fuel exports to up to 100,000 barrels per day once pipeline infrastructure from the plant to its docks is completed, said Bob Pease, Motiva president and CEO. He didn't say how much the refinery currently exports. Last year the US became a net exporter for the first time since 1949, having shipped out 439,000 bpd more fuel than was imported. The Motiva project was launched in 2007, when US fuel demand was up and refinery capacity was seen as inadequate. That changed when the global financial crisis hit, slashing demand and prompting closures of several unprofitable refineries, particularly in the US Northeast. Motiva suspended work on the project for about a year in late 2008 to rein in costs, but did not intend to abandon it, said Khalid Al-Falih, president and chief executive of Saudi Aramco, the state-owned oil company of OPEC member Saudi Arabia. What had been estimated by analysts to be a $7 billion project was, in the end, a $10 billion project. "Rather than cut and run, we pressed ahead with our long-term commitment," he said. "We're confident in the return on investment, despite the cost, will be very healthy." Tom Purves, vice president of manufacturing of the expansion project, told Reuters on Thursday the plant was "closing in" on its 600,000 bpd capacity sooner than expected. He said it would reach that capacity in the current quarter rather than the third quarter this year as previously expected. "It's all in place," he said. The expansion gives Motiva the flexibility to run lower-cost heavy oil from South America, Latin America and potentially from Canada, if the delayed Keystone XL pipeline is built. Other Gulf Coast refiners like Marathon Petroleum Corp. have completed similar expansions, while excess refining capacity in the distressed East Coast market has shut down. Profit margins at Gulf Coast refineries have lagged those in the Midwest, which have benefited more from cheap supplies of heavy Canadian crude as well as cheaper inland US crude output. Several Gulf Coast refiners with plants able to process that kind of heavy crude - like Marathon and Valero Energy Corp. - are vocal proponents of Keystone and its ability to bring more Canadian crude to the Gulf market.
