Shell, Saudi JV to Invest $7B on Texas Refinery

Shell Oil Co. announced its Motiva Enterprises joint venture with Saudi Arabia will invest $7 billion on a 325,000 barrel-per-day (b/d) expansion at Motiva's refinery in Port Arthur, Texas. The refinery's capacity will increase to 600,000 b/d by 2010, to become the largest in the U.S. and one of the largest worldwide. In a statement, Shell said, "The 325,000 b/d expansion at Port Arthur is equivalent to building the first new refinery in the U.S. in more than 30 years." A London-based Citigroup analyst said the expansion will cost $21,000 per b/d capacity, "consistent with recent industry estimates for refinery replacement costs." The estimated cost of the expansion has more than doubled in about the past year and half, due to the "upgrading of equipment to make higher-quality fuels from lower-quality crudes," according to a UBS analyst. A Bechtel/Jacobs JV has been contracted to manage the expansion project. Shares of Shell were down slightly in late morning trading in London. Shell's ADRs gained 1.7% to $84.20 on Thursday.

Sources: Press release, Bloomberg, MarketWatch
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