Reuters: Saudi, Shell mull Texas refinery expansion: “With gasoline prices surging and refineries straining to meet demand, Saudi Arabia and oil giant Shell are mulling a plan to expand their joint venture refinery in Port Arthur, Texas…”: Posted Thursday 15 Sept 2005

HOUSTON, Sept 14 (Reuters) - With gasoline prices surging and refineries straining to meet demand, Saudi Arabia and oil giant Shell are mulling a plan to expand their joint venture refinery in Port Arthur, Texas, state environmental regulators said on Wednesday.

"They have actually been in and talked to us about the requirements for a permit for Port Arthur," said Terry Clawson, a spokesman for state regulatory body Texas Commission for Environmental Quality.

Energy newsletter Oil Daily reported earlier Wednesday that the joint venture company, Motiva Enterprises, planned to more than double the Port Arthur refinery's capacity to 600,000 bpd at a cost of $3.2 billion.

Such an expansion would make the refinery the largest in the United States.

Amid mounting concern about tight refining capacity in the world's biggest energy consumer, Motiva representatives met with TCEQ officials in July to discuss what would be required in the permitting if they wanted to expand the refinery at Port Arthur. But they have not yet filed for permits, he said.

Motiva spokesman Stan Mays said, "We are evaluating several long-term projects along the Gulf Coast. That's all we're really doing right now."

Motiva Enterprises LLC is a refining and marketing company owned equally by Royal Dutch Shell (RDSa.L: Quote, Profile, Research)(RDSb.L: Quote, Profile, Research) and state oil firm Saudi Aramco.

Saudi Aramco in Riyadh declined comment and Shell in London had no immediate comment on the plans.

The world is chronically short of refining capacity, especially the upgrading capacity required to process high density, high-sulphur crude into transport fuels.

New facilities will include a coker and desulphurisation unit, making it capable of handling the medium and heavy sour crudes Saudi Arabia can produce in abundance, the Oil Daily report said.

Most of the output would be gasoline, diesel, heating oil and jet fuel.

World refining capacity expands mostly by "creep," the piecemeal upgrading of existing refineries, at a pace of 1-2 percent a year. U.S. officials have talked of reversing a policy discouraging new refinery construction.  

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