Posted in: Infrastructure,
by Gregg Laskoski on Jul 5, 2012 03:00 PM
Sunoco's 300,000 bpd refinery in Philadelphia, a facility that was targeted to be closed this month; which in turn would have hurt the regional economy and reduced east coast gasoline supply at the same time, is instead being reborn.
The Carlyle Group, a Washington based private equity firm, announced plans this week to operate the refinery with Sunoco as a joint venture called Philadelphia Energy Solutions.
To say that east coast motorists dodged a bullet would be a striking understatement. The region's population density can ill afford to lose refining capacity and it was on the brink. With Carlyle's investment, the complex now has a promising future as an "energy hub," says Philadelphia Inquirer reporter Andrew Maykuth.
The venture will save 850 jobs at the refinery, the largest fuel production plant in the northeast, and may employ hundreds more if expansion plans materialize. The plant's importance to the state economy is paramount because the refinery hires a constant stream of skilled contractors for maintenance projects and supports 10,000 jobs indirectly. The site was originally two refineries merged into one and it occupies more than two square miles of South Philadelphia.
Immediate upgrades at the refinery will require more than $200 million.
"It's a big win for the community, for workers, for energy security in the United States," said Brian P. MacDonald, CEO for Sunoco which retains a one-third non-operating interest in the venture. "It's a really interesting situation where you had private equity, unions, and key politicians on both sides of the aisle working together."
According to Maykuth, Carlyle will receive $25 million in state grants to support upgrades at the refinery, including construction of a terminal to allow high-speed unloading of railcars carrying crude from new oil-shale formations in North Dakota, Colorado, and Texas. Officials said they were also moving to include parts of the refinery in the 'Keystone Opportunity Zone' so it can receive tax benefits for new construction.
Access to lower cost crude is the key. When Sunoco decided to sell the plant it maintained that it could not be profitable paying exorbitant acquisition costs for crude oil with little access to lower cost crudes.
The refinery's new management said it intends to refurbish a residual catalytic cracker, a unit that turns heavy oil into diesel. The project will create more than 1,000 contracting jobs early next year. Additionally, they plan to refurbish other units that would optimize production of cleaner-burning ultra-low sulfur diesel fuel, for which there is significant demand.
The company is also exploring plans to build a co-generation plant to produce steam and electricity for the refinery and possibly new production units to manufacture derivatives of natural gas.
"The idea here is to build out that entire complex into a strong energy and chemical industrial site," said Philip Rinaldi, the man at the helm who also turned around a troubled refinery in Coffeyville, Kan. for another investment group.