New builds and sell-offs at heart of refinery activities

Paul Boughton

Sean Ottewell finds that a combination of major new investments and sell-offs is driving the worldwide refining market.

BP has announced that it expects to complete the sale of its Carson refinery and southwest US retail assets to Tesoro Corporation in the second quarter of 2013 now that the transaction has received US Federal Trade Commission (FTC) clearance.

Under the terms of the deal announced in August 2012, the assets include BP’s Carson, California refinery and related logistics and marketing assets in the region. Since that time, BP and Tesoro have been providing information to regulatory authorities to enable the parties to gain approval to complete the transaction for proceeds of approximately US$2.5 billion (€1.9 billion).

“With FTC clearance, we have taken a significant step closer to completion of this sale and to the strategic refocusing of our US fuels portfolio,” said Iain Conn, chief executive of BP’s global refining and marketing business. “I am very proud of the team’s work to achieve clearance of the sale and for consistently safe and high quality operations throughout the process. BP’s future US fuels business soon will be firmly rooted around three, highly sophisticated northern refineries, which are crude feedstock-advantaged, and tied to strong marketing businesses.”

BP has also announced the successful commissioning of a state-of-the-art diesel hydrotreater and hydrogen plant at its 234,000 bbl/d Cherry Point refinery located in Blaine, Washington.

“BP is committed to safe operations and providing consumers in the Northwest with cleaner fuels,” said Jeff Pitzer, BP’s northwest fuels value chain president. “This project has delivered on both counts.”

The multi-million dollar project included construction of the new diesel hydrotreater unit, with a production capacity of 25,000 bbl/d, a new hydrogen unit able to generate 44 million standard cubic feet of hydrogen per day and associated infrastructure.

"Not only was the project completed safely," Pitzer noted, "it positions Cherry Point for future opportunities as we continue to deliver on BP's strategy of operating feedstock-advantaged and technologically-advanced refineries tied to strong retail networks."

The new units enhance Cherry Point’s ability to meet regulations calling for lower sulphur diesel fuel. A diesel hydrotreater creates a chemical reaction that removes sulphur from diesel fuel by using hydrogen to help break the bond between sulphur and the fuel.

“These two units will significantly improve the plant’s efficiency and competitiveness,” said Stacey McDaniel, refinery manager. “The new units allow the refinery to make a full slate of ultralow sulphur diesel fuels and provide hydrogen to other refinery operations.”

BP says the latest technology for both hydrotreating and hydrogen production was used for the project.

“This recent investment resulted in more than 1000 skilled trades people working over the last two years to ensure a successful and safe completion of these significant new process units,” McDaniel added. “Our workforce and business partners did an outstanding job delivering this project.”

New investments and sell-offs

Phillips 66 is pursuing development of a 100,000 bbl/d natural gas liquids (NGL) fractionator to be located in Old Ocean, Texas, close to its Sweeny Refinery (Fig. 1). The project would create more than 25 full-time jobs and hundreds of temporary construction jobs. If approved, construction is expected to begin in the first half of 2014 with startup expected by the second half of 2015.

“This project would enable us to take advantage of strong existing midstream transportation and storage infrastructure along with demonstrated operations excellence,” said Phillips 66 chairman and ceo Greg Garland. “We see excellent market-facing opportunities to grow the natural gas liquids business, and the chance to supply purity NGLs and liquefied petroleum gas to the petrochemical industry and heating markets.”

Phillips 66 has a long history in the midstream business segment, including NGL gathering, long haul transportation, storage and fractionation.  The company owns fractionation capacity at the Gulf Coast Fractionators (GCF) and Enterprise fractionators in Mont Belvieu, Texas, as well as the Conway fractionator in Kansas. Phillips 66 is the operator of the GCF facility for the joint venture.

NGL feedstock for the Old Ocean fractionator project would be supplied by several nearby pipelines avoiding the Mont Belvieu congestion, and purified products produced by the fractionator would be marketed primarily to petrochemical customers in the region with access to Mont Belvieu.

The project is currently in the engineering design phase, and the company is in the process of filing for all applicable permits.

Meanwhile Shell Australia has put its Geelong refinery on the market. The proposed sale of the 120,000 bbl/d refinery is in line with the company’s global strategy to concentrate investment on large scale sites such as the company’s world-scale Pulau Bukom refinery in Singapore.

The announcement underpins Shell’s local strategy to grow its retail and bulk fuels business, along with terminals and pipelines.

Shell’s announcement recognises that other parties, with a different portfolio, may have an alternative strategy and want to enter or expand in the Australian refining market. The company is seeking a buyer who will show due care for employees, provide reliable supply for the company and its customers, and run the facility safely with respect for the environment and the Geelong community.

The company’s efforts are towards achieving a successful sale. There are other options available if a sale with agreeable terms and conditions cannot be reached - this could include converting the site to an import terminal.

Shell Australia’s downstream vice-president Andrew Smith acknowledged the process will create a period of uncertainty for employees. He added that Shell was committed to a timely sale process, providing support to employees during this period: “I understand this announcement will be difficult for refinery employees, but Shell will support them through this period of uncertainty.”

The company hopes to conclude the sales process by the end of 2014 and says that it remains committed to its business in the country.

Shell has operated in Australia for more than 110 years.  It supplies fuel to around 900 Shell branded service stations across the nation – along with aviation fuel, marine fuel, chemicals, bitumen and lubricants to a wide range of customers.

In other news, as part of the new vision of Pakistan State Oil (PSO) to make the leading public sector company an integrated energy company and with the determination to secure Pakistan’s energy supply chain, PSO has signed a memorandum of understanding (MoU) with the government of Khyber Pakhtunkhwa (GoKP) for the establishment of a state-of-the-art oil refinery in the province.

As per the MoU, PSO will set up a technologically advanced refinery with a capacity of 40,000bbl/d on about 400 acres of land in the district Kohat-Khyber Pakhtunkhwa. The project will be set-up through a public private partnership and will utilise crude oil from nearby indigenous supply sources for production of products conforming to Euro IV standards. The multi-million Dollar project is expected to be fully commissioned by 2016-17.

Common corrosion problem on Chevron refineriesA new metallurgical evaluation of crude unit pipe samples from the Chevron refineries in El Segundo, California, and Richmond, California, shows the same sulphidation corrosion process occurred in both, causing up to 60 per cent wall loss in a pipe sample from the El Segundo Refinery, according to a report issued by the US Chemical Safety Board (CSB) and the California Division of Occupational Safety and Health (Cal/OSHA).

The piping sample from the Chevron El Segundo Refinery, immediately west of Los Angeles, had lost up to 60 per cent of its wall thickness, from 0.322 inches to 0.12 inches in the thinnest part.

The Richmond Refinery experienced a major process fire on 6 August, 2012, after crude unit distillation tower piping failed catastrophically due to sulphidation corrosion and severe pipe thinning.

The new report was completed by Anamet, an independent materials engineering and laboratory testing company.  After the 6 August fire in Richmond, Chevron voluntarily inspected and upgraded corresponding sections of piping from El Segundo, which has a nearly identical crude unit. The tests compared sections of pipe from the #4-sidecuts in the two crude units. It was the #4-sidecut pipe in Richmond that released a massive quantity of combustible gas-oil and other hydrocarbons in August 2012. No release or incident occurred in El Segundo, and Chevron has since replaced the corroded piping with an upgraded metallurgy that is more resistant to sulphidation corrosion.

The report’s main conclusion is that sulphidation corrosion had affected the El Segundo samples to a similar extent as the Richmond samples had been affected. “The obvious difference between the two 4-sidecut lines was that Richmond suffered more extensive corrosion in one component that resulted in rupture,” note the authors.

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