Motiva’s giant Texas refinery battered by accidents after $10bn upgrade


The biggest oil refinery in the US is largely out of service after fires over the last two weeks damaged equipment at the Motiva Enterprises plant in Port Arthur, Texas.

The fires are the latest in a series of mechanical failures at the refinery, which doubled in size last year after a $10 billion expansion paid for by the two companies that own Motiva, Royal Dutch Shell and Saudi Aramco.

The 600,000-bpd plant has turned into an economic headache that analysts have said is costing the companies hundreds of millions of dollars in repairs and lost fuel sales.

After the fires, Motiva had to take offline its 325,000 bpd crude-distillation unit, the first step in fuel production, and various other units, according to Genscape, an energy information service that uses flyovers and infrared sensors to detect activity at refineries. Motiva declined to comment on mechanical problems.

Accidents started occurring almost immediately after the May 2012 opening ceremony in Port Arthur, where the chief executives of Shell and Saudi Aramco turned a ceremonial pipeline spigot. A week later, an accidental chemical release corroded the expanded refinery's new crude-distillation unit, forcing it to suspend operations for the next six months, the company said at the time.

In December, the same unit was shut down again for several weeks after a small fire broke out and leaks were found, according to regulatory filings and information provided by the company at the time. Another leak forced the company to repair key diesel-production equipment in June.

For Shell, the problems at the Port Arthur refinery have created "an economic disaster," said Oppenheimer & Co. analyst Fadel Gheit. "This thing started on the wrong foot and it continues to really limp."

The refinery's poor performance adds to Shell's series of setbacks in North America. The Anglo-Dutch oil giant was forced in the second quarter to write down $2 billion of US shale gas assets that hadn't been as profitable as the company hoped. In February, it canceled its plans to drill for oil in the Arctic this summer after special drilling rigs it planned to use for the project were damaged.

Shell spokeswoman Destin Singleton said Motiva continued to invest in the refinery but declined to comment on the specifics of mechanical problems there. The company declined to say how much gas, diesel and jet fuel the refinery is producing.

For Saudi Aramco, the expansion was meant as a way to help Saudi Arabia increase its exports to the US. But the refinery has imported only 1% more crude from that country over the last 12 months, or an average total of 200,000 bpd, according to an analysis of data from the US Energy Information Administration. Saudi Aramco didn't respond to requests for comment.

Although the refinery accounts for more than 3% of total US refining capacity, according to EIA figures, its extensive operational problems during the past 16 months have limited its impact on fuel markets, said Morningstar analyst Allen Good.

Wholesale gasoline prices in the US Gulf Coast market have risen 1% since the latest fire at the Port Arthur refinery, to $2.96/gal, according to Platts, an energy-price information service.

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