HOUSTON REFINERY UPGRADE IS A FIRM DEAL
Lyondell Petrochemical Co., Houston, and Citgo Petroleum Co., Tulsa, have signed a final agreement calling for an $800 million upgrade of Lyondell's 265,000 b/d Houston refinery.
The accord results in creation of a new company, Lyondell-Citgo Refining Co. Ltd., jointly owned by affiliates of Lyondell and Citgo (OGJ, May 17, p. 23). The latter is an indirect, wholly owned unit of Venezuela's state owned Petroleos de Venezuela SA. Also involved in the agreement is a long term, firm supply of heavy Venezuelan crude. Volume is not disclosed.
Major parts of the upgrade include new coking, hydrotreating and sulfur recovery units, a new crude distillation unit, and modifications to the plant's largest crude distillation unit.
The project will increase the refinery's heavy crude oil processing capacity to 200,000 b/d of 17 gravity oil from 130,000 b/d of 22 gravity oil, sharply trimming feedstock costs.
After completion of the upgrade, the refinery's product slate will include a larger percentage of low sulfur diesel fuel and reformulated gasoline. Citgo will buy the refined product stream.
Construction is expected to begin in 1994 and require about 3 years to complete.
Citgo will pay for part of the upgrade and invest $100 million in base capital needs for the refinery until the project is complete. That will free Lyondell's cash flow for other uses.
The upgrade will be funded in three phases.
The first phase, lasting about 2 years, will be funded by Citgo. Phase Two is to be funded by venture borrowing. Phase Three is to be funded by a combination of venture borrowing and contributions from Citgo and Lyondell.
In exchange for its investment, Citgo will receive an interest in the new company expected to grow from about 5% at first to about 35% upon completion of the project,
Following the upgrade, Citgo has an option to increase its interest to 50%. Lyondell will retain the remaining interest.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.