Calumet Specialty Products Partners LP announced last week that it has broadened the scope of a previously announced expansion planned for its Shreveport, La., refinery. The company intends to increase base oil capacity there by approximately 6,000 barrels per day during the second half of next year.
In February, the Indianapolis-based company said that it planned a series of improvements that would have increased the refinerys throughput and added approximately 2,000 b/d to its base oil capacity. That project was scheduled to be completed by the second quarter of 2007.
Management now says it had in mind a second phase of the expansion and has merely accelerated its timetable.
We actually had two projects that we were looking at, Vice President of Investor Relations Jennifer Straumins said Monday. Initially, the second one was going to be completed early in the first quarter of 2008. But once we got some of the initial engineering back, we saw it made sense to do it all at the same time.
Shreveport is one of three refineries operated by Calumet, and one of two that make base oils. It currently has capacity to make 9,100 b/d, including 6,000 b/d of Group II and 3,000 b/d of Group I paraffinics.
Officials said the current expansion plan includes installation of several units and would increase overall crude capacity at the refinery by 16,000 b/d, to 57,000 b/d. Straumins said the project will be weighted toward base oil production. Engineering work is ongoing, but officials expect it will increase base oil capacity by approximately 70 percent – roughly 6,000 b/d.
Officials said they are not concerned about the possibility of the market becoming oversaturated, despite the fact that Motiva completed a 15,000 b/d expansion at its Port Arthur, Texas, plant in March. In addition, Petro-Canada says it will expand its Mississauga, Ontario, plant by 3,100 b/d in July.
[Calumets expansion] is like 2 or 3 percent of the overall marketplace, so were not doing huge damage, President and Chief Executive Officer Bill Grube said May 10 during a teleconference with investment analysts. This is going to be Group II quality, and there are Group I producers that are out there, so well be ahead of them from a quality standpoint. And were modeling this on some awful cheap prices for project projections.
Calumet said it will spend $60 million on the project in 2006 and another $50 million next year. Management expects the project to pay for itself within two or three years.
Officials added that the company may try to acquire business lines, having recently completed a public stock offering undertaken to refinance debt.
Were looking, but were not going to do stupid things from an acquisition standpoint, Grube said. Weve got at least half a dozen additional internal projects that are on our plate. … We dont feel pressured to do something, but if the right deal walks in, we will try to do it.