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.
www.gasification.org/Docs/2006_Papers/27LAND.pdf
As you can see..its PDF
search-Spent Liquor Gassification
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.
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.
Is something better’n nothing?
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
I don’t believe it is money well spent. Other sources provide greater return.
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.
When did anybody ever associate certainty with the oil industry?
LOL!
Never anybody with more than a few years in the oil industry...
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