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Refiner Valero Restarts $3 Billion in Projects

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After more than a year’s halt prompted by the economic slowdown, Valero Energy Corp., the country’s largest independent oil refiner, is reviving refinery expansions in Port Arthur, Texas, and St. Charles, La., that will cost nearly $3 billion combined.

Photo: Courtesy of The Beaumont Enterprise/Dan Ryan
Concrete forms being built for components of a new hydrocracker unit at a Valero refinery in Port Arthur, Texas.
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The San Antonio-based company announced last month restarts of hydrocracker construction projects at the two facilities that will help it remove sulfur and produce more diesel. Valero stopped both projects in mid-2009, citing weak demand and poor refinery margins, says Bill Day, a company spokesman. The estimated $1.5-billion Texas project is expected to generate up to 1,500 new construction jobs and convert the facility into one of the nation’s largest refinery complexes. Work at the Louisiana site is valued at about $1.4 billion, Day adds. Valero will build a 50,000-barrel-per-day unit at each facility.

Valero spokeswoman Barbara Phillips confirms the restart of work at the Port Arthur site, about 90 miles east of Houston, in late August. The new hydrocracker unit will be built on 13 of the refinery’s 4,000 acres. Completion is expected by the end of 2012, although that is not a firm deadline, she contends. The St. Charles facility is set to be completed in the fourth quarter of 2013.

Analysts say Valero expects to pay for the projects using available cash. In July, the company reported a profit in its second-quarter 2010 results, after four consecutive quarters of loss.

“The rumor mill was saying the Valero project was dead,” says John Bernard, president and CEO of the Associated Builders and Contractors southeast Texas chapter in Nederland. “We were pleasantly surprised. It will help us continue for a few more years, especially with the Motiva project now peaking.”

Speaking of that “peaking” project, Bernard is referring to the massive $7-billion expansion of a refinery in Port Arthur owned by Houston-based Motiva Enterprises, a joint venture of Shell Oil and Saudi Aramco. Last February, the firm celebrated the topping out of what is expected to be the world’s largest refinery complex, estimated to have total crude through-put capacity of about 600,000 barrels per day. Bernard says another project at a nearby site owned by France-based oil company Total S.A. is also nearly complete.

According to Phillips, Valero will serve as its own site program manager and handle construction procurement for the Port Arthur project. “This is great news for our local contractors who missed out on some of the other mega-expansions,” says Bernard. Phillips could not confirm details of the construction scope and procurement schedule.

At the Valero site, foundation work is under way, and “much of the equipment needed for the project is already on-site,” says Phillips. Bernard is hopeful that enough local craft workers are trained adequately to fill openings, noting that impacts from the down economy and hurricane-related shutdowns have scattered the workforce. His ABC chapter, which he says is the only one in the country dedicated solely to serving the industrial sector, is boosting training for the local pipefitting, electrical and welding trades.

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