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New laws leave oil refiners uncertain
Houston Chronicle ^ | Jan. 6, 2008, 11:58PM | BRETT CLANTON

Posted on 01/07/2008 7:39:40 AM PST by thackney

Oil refiners may reconsider plans for some refinery expansion projects in 2008 in response to new energy legislation that could reduce gasoline use in coming years, industry groups and refiners say.

While expansion projects already under way won't be affected, those in the early planning stages could be delayed or canceled, they said — continuing a pullback that began last year amid rising costs for refinery additions and uncertainty over future gasoline demand.

Within 10 years, U.S. refiners could be producing less gasoline than they are today as a result of the new energy legislation, which calls for stricter auto gas mileage standards and more ethanol output, said the National Petrochemical and Refiners Association, a trade group in Washington.

If that's the case, "it doesn't really make sense for refiners to spend billions of dollars expanding to meet a demand that's not going to be there," said Bill Day, spokesman for San Antonio-based Valero Energy Corp., the nation's largest refiner.

But industry critics say refiners are using new energy policies as an excuse to keep refining capacity tight and their profits high. They claim refinery additions will still be needed to feed growth in gasoline and demand, as well as bridge a shortage in refining capacity today that is being filled by gasoline imports.

"Even as the legislation is implemented, we will have a shortfall of refining capacity for the entire lifetime of those specific energy goals," said Mark Cooper, director of research at the Consumer Federation of America in Washington.

While a new U.S. refinery hasn't been built in three decades, U.S. refiners have been expanding facilities in recent years to keep pace with fuel demands and to take advantage of one of the most profitable periods in the industry's history.

Early last year, refiners were so confident their winning streak would continue that they told the Energy Department they planned to add 1.6 million barrels per day of new refining capacity, an increase of about 10 percent and enough to produce an additional 37 million gallons of gasoline every day.

New capacity

The nation's 140 refineries have about 17.5 million barrels per day of capacity.

But by the summer, with material and labor costs skyrocketing and threats emerging on the policy front, several refiners canceled projects. Now the Energy Department estimates new projects planned by 2012 will add about 1 million barrels per day of new capacity.

The drop, while significant, brought expansion plans closer to their level of the last decade — an average annual capacity expansion rate of about 200,000 barrels per day, said Cindy Schild, manager of refining issues at the American Petroleum Institute, an industry trade group.

But the uncertain demand picture for gasoline, resulting from the new energy laws, may well push more projects off the table, said Tim Donohue, vice president at management consulting firm Booz Allen Hamilton's Houston office.

"I think there will be further declines," he said.

Signed by President Bush in December, the Energy Independence and Security Act of 2007 requires fuel economy standards for cars and light trucks to increase to an average 35 miles per gallon by 2020, an increase of 40 percent. It also boosts a mandate for renewable fuel production, mostly ethanol, to 9 billion gallons by 2009 and to 36 billion gallons by 2022. Current production of ethanol is about 5 billion gallons. The increased ethanol supplies will be blended with gasoline to extend the nation's fuel supply.

Taken together, the two measures are projected to reduce gasoline consumption 20 percent by 2017, consistent with a target President Bush set in his 2007 State of the Union speech.

Even if they hit their mark, however, there is still a business case to be made for adding refinery capacity, Donohue said. Fuel demands likely will continue to outstrip U.S. refiners' ability to meet them, even after the new energy laws are enacted, he said.

There are also doubts new ethanol targets can be achieved given the limitations of corn-based ethanol and still unproven technologies for making ethanol from non-food crops and agricultural waste, he said.

$7 billion project

Several major refiners recently have indicated they will move forward with expansion projects despite headwinds facing the sector.

Last month, Motiva, a joint venture between Royal Dutch Shell and Saudi Arabia's state-owned oil company, broke ground on a $7 billion project to double the size of its Port Arthur refinery to 600,00 barrels per day, making it the largest in the nation. The project should be finished by 2010.

Others, however, remain in flux.

Last year, Valero postponed a 22,000-barrel-a-day expansion of its refinery in Texas City, and is still in the "talking stage" of a possible addition at a Port Arthur facility, Day said.

Charles Drevna, president of the National Petrochemical and Refiners Association, said he would not be surprised if more companies took a "long hard look" at refinery expansion projects in light of the changing regulatory landscape.

"There's only so much capital to go around on these types of things," he said.


TOPICS: News/Current Events
KEYWORDS: energy; oil; refining
While a new U.S. refinery hasn't been built in three decades, U.S. refiners have been expanding facilities in recent years to keep pace with fuel demands...
1 posted on 01/07/2008 7:39:42 AM PST by thackney
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To: thackney

www.gasification.org/Docs/2006_Papers/27LAND.pdf

As you can see..its PDF

search-Spent Liquor Gassification


2 posted on 01/07/2008 7:44:57 AM PST by crz
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Comment #3 Removed by Moderator

To: thackney

These developments point to much higher fuel prices in 5 to 10 years. In addition, we will be importing more gasoline due to lack of domestic refining capacity. Instead of making us more energy independent, the recent energy bill will make us much more dependent with substantially higher fuel prices. The rats are sure to pile on this situation. The rats want to increase taxes on the domestic oil industry. These higher taxes will lead to even less investment in oil and refinery development.


4 posted on 01/07/2008 8:30:30 AM PST by businessprofessor
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To: crz
In the conclusions of that paper it states:

More than 600 TWh/ 2200PJ of black liquor energy is used within the pulp mills world wide. This can be converted to:
-30 milj tons gasoline equiv. (World)

If milj tons means million metric tons, then:

30 milj tons = 268 million barrels

268 million barrels equals less than 1% of the worlds petroleum production.

So if the entire worlds paper production was used this way it would provide less than 1% of the petroleum need.

5 posted on 01/07/2008 8:35:32 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
expanding facilities in recent years to keep pace with fuel demands...

BS. They've done a piss poor job at everything except lining their pockets. So now no new refinery because it might cause the price to drop if they have too much capacity? This is a national security issue.

The more I read of this kind of junk, the more I believe it's time to dump oil and start over with something else.
6 posted on 01/07/2008 8:37:55 AM PST by mysterio
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To: thackney

Is something better’n nothing?


7 posted on 01/07/2008 8:43:38 AM PST by crz
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To: mysterio
expanding facilities in recent years to keep pace with fuel demands...

BS

Take a look at the growth of gasoline consumption and gasoline production in the US.

In Dec 2007 the US supplied 97% of the gasoline consumed.
In Dec 2002 the US supplied 98% of the gasoline consumed.

In July 2007 the US supplied 96% of the gasoline consumed.
In July 2002 the US supplied 95% of the gasoline consumed.

U.S. Weekly Finished Motor Gasoline Product Supplied
http://tonto.eia.doe.gov/dnav/pet/hist/wgfupus24.htm

U.S. Weekly Finished Motor Gasoline Product
http://tonto.eia.doe.gov/dnav/pet/hist/wgfrpus24.htm

8 posted on 01/07/2008 8:58:34 AM PST by thackney (life is fragile, handle with prayer)
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To: crz

I don’t believe it is money well spent. Other sources provide greater return.


9 posted on 01/07/2008 8:59:25 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Good that you believe it that way. Of course then, you are an oil man arent you?

BTW. there is a plant that is to be Built at NewPage paper corps mill at Escanaba Mi. It will be online in a couple years.


10 posted on 01/07/2008 9:02:39 AM PST by crz
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To: thackney
Hyperion Oil is proposing to build a new refinery in southeast South Dakota near the town of Elk Point. Needless to say the Sierra Club and other outside wackos are joining with local Luddites to stop this project.
11 posted on 01/07/2008 11:29:57 AM PST by The Great RJ ("Mir we bleiwen wat mir sin" or "We want to remain what we are." ..Luxembourg motto)
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To: The Great RJ
I wish them luck. Arizona Clean Fuels has been trying for about a decade to build their refinery.
12 posted on 01/07/2008 11:37:41 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

When did anybody ever associate certainty with the oil industry?


13 posted on 01/07/2008 11:47:50 AM PST by RightWhale (Dean Koonz is good, but my favorite authors are Dun and Bradstreet)
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To: RightWhale

LOL!

Never anybody with more than a few years in the oil industry...


14 posted on 01/07/2008 11:49:18 AM PST by thackney (life is fragile, handle with prayer)
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