Engineering News

Motiva Moves Forward with Port Arthur Expansion Despite Layoffs
January 14, 2009

Motiva Enterprises still plans to move forward with its expansion to make the refinery the largest in the country despite a number of layoffs implemented in the last few weeks, a company spokesperson said.

Motiva spokeswoman Verna Rutherford said some contractors recently cut jobs as a result of a cost review of the expansion project. The cost review is in progress to determine the most cost-effective way to move forward on the expansion, she said.

"We face a time in our business where demand for our products is down, and margins are also down," Rutherford said. "The changes being made at this time ensure tighter control of our costs on the project going forward."

Richard Ford, 54, was among the contract workers laid off. Friday was his last day on the job.

Ford was a small dirt-equipment operator, and said he was one of 83 people in his unit who lost jobs. The unit had 87 workers before the layoffs, Ford said.

"The thing that was shocking was we were told all along that we were doing such a good job," he said. "The boss gave us a big speech about a month ago when we began to hear rumors (about layoffs).

"He said, 'Don't listen to the rumors. There's still plenty work out here.'"

Ford worked on the expansion project through a contract with Houston-based Becon Construction -- one of many contractors working for Motiva.

Rutherford did not know the total number of contract workers who lost jobs because the contractors keep that information, but she said there still are more than 2,500 contract workers on the project.

The cuts affected night shift and overtime workers as well, Rutherford said.

The layoffs did not affect Motiva employees.

"The workforce will continue to be at the appropriate level for the construction activities that continue," she said.

Rutherford could not estimate a total number of contractors working on the project, because she said the number changes on a daily basis. But, she added, there are fewer contractors now than before the layoffs.

"Though it's unfortunate, we're still focused on having a large number of people out here working and construction is still going on," Rutherford said. "That's real positive."

Motiva should have final results of the cost review in the second quarter, and Rutherford said the company then will determine a completion date.

The project -- which now has a completion date of 2010 -- will expand capacity from 275,000 barrels per day to more than 600,000 barrels per day.

Bob Tippee, managing editor of the Oil and Gas Journal, said low gasoline demand across the country is having an adverse affect on refineries.

"Refiners are in the middle of a see-saw," Tippee said. "They live on the difference between crude oil prices and product prices. What happens in gas and diesel affects the production side, and what happens in crude affects them on the feed side."

When crude oil prices dropped in January, that sounded like good news for refiners, Tippee said. But prices dropped because demand dropped, and that caused product values to plummet, he said. That left refiners with a narrow margin to make a profit, he said.

Industry changes impacted Valero's expansion plans as well.

Spokesman Bill Day said the Port Arthur refinery's $1.6 billion expansion, which includes a 50,000-barrel-per-day hydrocracker unit, should be finished by 2011 -- one year later than originally planned.

Originally, the expansion cost $2.4 billion, but the updated plan dropped construction of a 45,000 barrel-per-day coker unit, Day said.

The plant's new completion date will coincide with a pipeline that will transport heavy oil to the plant from Canada, Day said.

Plans to complete other industrial projects still are in the works.

Golden Pass LNG spokeswoman Kathleen Jackson said the Golden Pass Liquefied Natural Gas project near Sabine Pass still is in the assessing damage after Hurricane Ike.

A completion date for the project -- originally set to be complete in mid-2009 -- should be more concrete once the assessment is finished, Jackson said.

Total Petrochemicals spokeswoman Pat Avery said plans for a 50,000 barrel-per-day coker still are on track to be complete in 2010.

Tippee said it's hard to predict when refineries will bounce back, but he doesn't expect the industry to recover soon.

Crude and product values may increase as the economy recovers, but since U.S. gasoline consumption is low, the in-crease will not produce enough of a spread for refiners to make a profit, Tippee said.

"How long do these conditions last?" he asked. "That depends on global economics, and right now, there's no light at the end of the tunnel."

Source: The Beaumont Enterprise, Texas

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