Holly to buy, integrate Sinclair refinery in Tulsa

By OGJ editors
HOUSTON, Oct. 20 -- Holly Corp. has entered a definitive agreement to purchase Sinclair Oil Corp.’s 75,000-b/d refinery in Tulsa and will integrate the facility with its 85,000-b/d refinery 2 miles away.

Holly bought the other Tulsa refinery in June from Sunoco Inc. (OGJ, Apr. 20, 2009, Newsletter).

Operation of the refineries as a fully integrated complex will lower total crude capacity to about 125,000 b/d, according to Holly Chairman and Chief Executive Officer Matt Clifton, who said the reduction will cut investment requirements.

“We will save approximately $110 million of previously required regulatory capital costs versus our initial $150 million estimate,” Clifton said. “We also expect the integrated facility will reduce expected capital expenditures for forthcoming reduced benzene in gasoline requirements from approximately $30 million for the Holly facility alone to approximately $15 million for the integrated complex.”

Holly will pay $54.5 million in cash and $74 million in common stock for the refinery and about 2.3 million bbl of storage. It also will purchase the refinery’s inventory of about 500,000 bbl at market value at the time of closing.

Holly will agree at closing to provide as much as 50,000 b/d of gasoline and diesel fuel to Sinclair’s Midwest marketing network.

Holly Energy Partners, a midstream master limited partnership of which Holly Corp. owns 41%, will buy an additional 1.4 million of storage at Sinclair’s Tulsa refinery as well as various loading racks and related facilities.

Holly expects to enter into a long-term agreement with the partnership for storage, loading, and delivery services.

The refineries
The company said Sinclair has invested more than $300 million in the past 5 years to enable the Tulsa refinery to meet low-sulfur gasoline standards and to produce 100% ultralow-sulfur diesel. Holly expects to invest $16 million to finish emission-reduction projects in progress.

Integration will allow Holly to charge gas oil from its existing Tulsa refinery to the fluid catalytic cracking unit at the refinery it’s buying from Sinclair to produce gasoline and diesel. The company will use a desulfurizer at the Sinclair refinery for diesel from its existing refinery.

Holly expects about half the diesel from the combined facility to meet ultralow-sulfur standards. It plans to invest $10 million over the next 2 years to expand the Sinclair refinery’s desulfurization capacity in a project that will raise the complex’s yield of ultralow-sulfur diesel to 100%.

Holly also expects to invest $30 million to add sulfur recovery capacity and to expand the flare gas recovery system at its existing Tulsa refinery.

Clifton said crude capacity of the integrated refinery could be expanded “through relatively modest capital expenditures if future market conditions and economics warrant.”

According to Oil & Gas Journal’s 2008 Worldwide Refining Survey, capacity of the Sinclair refinery’s fluid catalytic cracking unit is 16,200 b/cd. Other capacities include 10,800 b/cd of catalytic reforming, 2,700 b/cd of sulfuric acid alkylation, and 5,400 b/cd of pentane-hexane isomerization.

The refinery Holly purchased from Sunoco has processing capacities of 8,500 b/cd of delayed coking, 17,500 of catalytic reforming, and 24,000 b/cd of catalytic hydrotreating. It also has 8,500 b/cd of lubes capacity.

Holly, Dallas, also operates a 100,000-b/sd refinery in Artesia, NM, and a 31,000-b/sd refinery in Woods Cross, Utah.

Sinclair operates two refineries in Wyoming, one near Rawlins with crude capacity listed in OGJ’s survey at 66,000 b/cd and the other at Casper, 22,500 b/cd.