The expansion at the Motiva plant in Port Arthur was supposed to make it the largest refinery in the country, producing 600,000 barrels per day. But it held that distinction for mere days, until a chemical ate away at the insides of the new crude distillation unit.
So what happened?
Motiva, a joint venture of Royal Dutch Shell and Saudi Aramco, built the new plant specifically to handle Saudi crude, which contains more sulfur than many other types of oil. According to Erwin Saba of Reuters, who penned an impressive 2,100-word piece about the pricey accident at the plant, a chemical known as "caustic" leaked into the unit while it was idled to search for a leaky valve. When the unit was reheated with the caustic inside, the chemical began eating away at the inside of the pipes, a rare occurrence known as "accelerated chemical corrosion."
Just how much is the idled 325,000-barrel-per-day distillation unit, also known as a vacuum pipestill, going to cost the company?
Almost a billion dollars, according to Saba. The incident "has added an embarrassing and costly coda to a landmark $10 billion expansion," he wrote.
While the defective unit is fixed, the company will suffer $1.5 million a day in lost profit margin (that's $547.5 million a year). And the repair itself could run more than $300 million and take up to a year to complete.
After a five-year effort to double the plant's capacity, making it the largest in the country, they must now reassemble many of the same people and parts for a blitzkrieg fix that may exceed the original $300 million cost of the unit: corrosion experts are flying in from across the world; hundreds of workers are being hired; bespoke 30-inch stain less steel pipelines and 30-story cranes may need to be obtained quickly, according to sources involved in the repairs.
What is a caustic?
"Caustics are a base meant to negate the acid in cheaper heavy, sour crude," Saba wrote.
How much fuel can be made from 600,000 barrels a day?
Saba wrote that "every day, the plant consumes more crude than the five-state, Rocky Mountain region. It can make 6 million gallons of gasoline daily, enough to drive around the equator some 6,000 times, assuming 25 miles per gallon."
How will the impact of this idled unit be felt elsewhere?
On June 21, the Saudis announced they were halting shipments to Motiva's Port Arthur plant. "Shipments of crude will be stopped until the middle of July, the source said, after which a restart will be evaluated based on the status of the refinery," Reuters reported. "The supply halt follows the first public confirmation of the severity of the problems at the plant's new 325,000-barrels-per-day (bpd) crude distillation unit (CDU), commissioned just weeks ago."
And with the Saudis stopping the shipment of oil to the refinery, the demand for supertankers will plummet. According to Bloomberg, one of the ripple effects could be that "demand for the largest oil tankers may also weaken as Motiva keeps the Port Arthur crude unit closed."