Mass. firm pushes $3.5 billion synthetic gas plant

A Massachusetts-based investment firm said Friday it’s partnering with an unnamed major utility to build a $3.5 billion refinery in Louisiana that will be capable of producing 300 billion cubic feet a year of synthetic natural gas.

That would be equal to 7 percent of the natural gas piped into the U.S. from Canada each year.

C Change Investments LLC of Cambridge, Mass., is investing in the joint venture, dubbed NC12 Inc. C Change and its investors would split ownership with the utility, who won’t be named until the project announcement comes in the first quarter of 2009.

When the announcement does come, it will name a Louisiana community as the project site, said Stephen Allen, a C Change spokesman.
The project is under the radar. Louisiana Economic Development officials had no immediate comment when asked about the project Friday.

Chett Chiasson, director of economic development at the Greater Lafourche Port Commission in Galliano, said he hasn’t heard any news about such a project.

Chiasson works with Port Fourchon, the energy hub that serves about 90 percent of all deepwater rigs and platforms in the Gulf of Mexico and is a major connection between offshore oil and gas and mainland pipelines.

In addition to producing synthetic natural gas — a cleaner form of gas created from coal and petroleum coke at extremely higher temperatures — the project would capture carbon dioxide and pipe it to offshore wells in the Gulf to improve extraction of oil and gas.

To the west, George Swift of the Southwest Louisiana Partnership for Economic Development said Lake Charles Cogeneration LLC, owned by New York-based Leucadia National Corp., will break ground in mid-2009 on a previously announced synthetic natural gas project.

The $1.6 billion facility at the Port of Lake Charles will produce an estimated 35 billion cubic feet a year, about 12 percent of the amount proposed by NC12 Inc.

“I’m not aware of anything else over here (planned in the gasification sector),” said Swift.

Both projects say they will gain customers because they can sell synthetic natural gas at comparable prices to natural gas, but they can do so without the volatility of commodity markets. A utility, for instance, could buy 10 years worth of gas at consistent prices without fearing unexpected price spikes.

Another major gasification project announced in June 2006 by Gov. Kathleen Blanco — a $5 billion coal gasification plant by LIG Fuel Inc., formerly Synfuel Inc. — never materialized in Ascension Parish.

The NC12 venture claims to have a game-changing catalytic technology that will convert coal along with petroleum coke from Louisiana refineries into synthetic natural gas at half the cost of other gasification technologies.

Among the company’s principals is John Preston, a senior lecturer at MIT’s Entrepreneurship Center. Preston and other investors bought patents for high-temperature liquid metal catalysts and the assets of Molten Metal Technologies in Fall River, Mass., according to NC12 materials.

It’s that technology that NC12 would employ in Louisiana. Allen said about 1.5 billion cubic feet of synthetic natural gas has been produced in Fall River and transported via pipeline, proving the company’s concept at that scale, he said.

At 2,700 degrees F, 32-foot high reactors with a 10-foot diameter house the gasification process. About 10 would be installed in a first phase in Louisiana and produce 50 billion cubic feet of synthetic natural gas per year, Allen said.

The full plant would take about four years to build, with the first phase opening in late 2010, he said.

During construction, temporary building jobs would average 200 but could peak much higher, with permanent employment at the gasification plant expected to be 100, Allen said. Salary levels haven’t been established yet.

Despite the current credit climate, Allen said NC12 can produce the project. The company said it has contracts in place with customers who would buy half of the output.

“We think even in today’s tight credit market that this project can be financed, because one of the keys is it’s modular,” Allen said. “The other key is … the (carbon dioxide) can be kept out of the environment and sold.”

Texas Syngas, now NC12, and Quantum Catalytics are waging a legal battle in Massachusetts, according to a September story in The Patriot Ledger newspaper of Quincy, Mass.

The paper reported that Texas Syngas and Quantum Catalytics sued Ze-gen Inc. in Boston federal court in August, claiming Ze-gen misappropriated trade secrets and patents from Quantum. The patents deal with the same kind of technology NC12 would employ in Louisiana.

Conoco to restart Alliance units after upset

NEW YORK, Nov 20 (Reuters) - ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) said it will restart on Thursday unnamed units at its 247,000 barrels-per-day Alliance refinery in Belle Chasse, Louisiana, after an "upset" a day earlier.

"We had a minor upset at our Alliance refinery yesterday, impacted units will be restarted today," Terry Hunt, a company spokeswoman, wrote in an email, without specifying the units that were affected. (Reporting by Haitham Haddadin)

Valero says plans significant '09 turnarounds

HOUSTON, Oct 28 (Reuters) - Top U.S. refiner Valero Energy Corp (VLO.N: Quote, Profile, Research, Stock Buzz) on Tuesday said it planned significant turnarounds in 2009, with projects planned at two of its Texas refineries.

The company also said it had scaled back capital spending in 2008 and 2009 by deferring projects until 2010 and 2011.

Valero said it would carry out a heavy oil cracker overhaul at its 340,000 barrel per day (bpd) Corpus Christi, Texas, refining complex in January. The company also plans a crude unit and coker turnaround at its 245,000 bpd Texas City, Texas, refinery in February.

"As it turns out, 2009 should be a more significant year for turnaround activity," said Chief Operating Officer Rich Marcogliese.

The company also plans coker drum replacement in June at its 250,000 bpd St. Charles, Louisiana refinery, he said.

Valero also plans an overhaul of its gasoline-producing catalytic cracking unit at the 210,000 bpd Delaware City refinery.

Valero has cancelled a delayed coker project at its 245,000 bpd Port Arthur, Texas, refinery, but the company may revive it at a later time, Marcogliese said.

The company is pushing planned cat cracker work at its 195,000 bpd Memphis, Tennessee, refinery from 2009 to 2011 and reseting a hydrocracker project at Port Arthur from 2010 to 2011.

About deferring the Port Arthur hydrocracker project, Chairman and Chief Executive Bill Klesse said a major expanison at the nearby Motiva Enterprises LLC 285,000 bpd refinery was tying down many of the local craft workers and the delay would help the company manage its cash flow.

"We also have an extremely large turnaround at Port Arthur next year," Klesse said.

The Port Arthur overhaul is scheduled for the end of 2009 and early 2010.

Oil company profits rise, but outlook is cautious

HOUSTON (AP) — Record crude prices this summer are translating into huge profits, as BP and Occidental Petroleum showed Tuesday, but some energy companies are bracing for tougher times, keeping a closer tab on cash and cutting spending.

Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27. But prices have since tumbled more than 50 percent, and the global economic malaise has raised questions about energy demand at least into 2009.

Despite a 71 percent jump in third-quarter profit, Occidental Petroleum said Tuesday it likely would not increase capital spending next year from its current $4.7 billion level. Refiner Valero Energy Corp., which also reported July-September results Tuesday, said it was scaling back spending by 33 percent this year and cutting its 2009 budget.

"You can expect us to maintain our balanced approach by investing in growth projects, paying off debt, buying back stock and increasing dividends, but clearly we intend to hold much more cash than in the past," said Valero chairman and chief executive Bill Klesse.

ConocoPhillips, the third-largest U.S. oil company, also has said it likely will keep capital spending at $15 billion next year.

It's vital that oil companies spend money on new exploration and production if they want to grow.

"The bigger you are, the less chance you're going to cut your capital spending," said Brian Youngberg, an analyst with financial services firm Edward Jones. "You generally have a stronger balance sheet and you tend to look through the ups and downs of commodity markets."

But demand for fuel is falling away amid a broad economic downturn.

The U.S. Department of Transportation last week reported the largest monthly decline in miles driven since World War II.

In the month after gas prices peaked at $4.11 per gallon, Americans drove 15 billion fewer miles in August 2008 than they did in August 2007 — the biggest single monthly decline since the data was first collected regularly in 1942.

Youngberg noted some smaller exploration and production companies are eliminating or delaying projects because they rely on credit markets for funding. That credit isn't available right now, he said.

That's not likely a worry for oil giant BP PLC, Europe's second-biggest oil producer behind Royal Dutch Shell PLC, which said Tuesday its third-quarter earnings rose to $8.05 billion from $4.41 billion a year earlier.

Revenue jumped 45 percent to $103.2 billion from $71.3 billion the previous year.

"The high oil price of the third quarter obviously helped our absolute result," said chief executive Tony Hayward.

Hayward said he was confident the company would continue to do well even though oil prices could dip further.

"I believe BP is well-positioned to cope with such volatility," Hayward said, noting the company had not committed as much money as its rivals to some higher-cost means of producing oil, such as mining tar sands.

"We think the current turmoil may in fact create opportunities for us," he added.

BP's U.S. shares rose $6.37, or 15.9 percent, to close at $46.52.

Los Angeles-based Occidental Petroleum said net income for the three months ended Sept. 30 rose to $2.27 billion, or $2.78 a share, versus $1.32 billion, or $1.58 per share, during the same period a year earlier.

Analysts polled by Thomson Reuters had been expecting earnings, on average, of $2.71 per share.

Revenue for the quarter rose to $7.06 billion from $4.84 billion in the year-earlier period.

Occidental said earnings from its oil and gas segment were $3.61 billion in the most-recent quarter, compared with $1.95 billion a year ago. Markedly higher commodity prices were partially offset by higher operating expenses.

Occidental shares rose $7.62, or 18.1 percent, to $49.70.

San Antonio-based Valero, the nation's largest independent oil refiner, said its third-quarter profit fell 9 percent from a year ago, but results were better than Wall Street expected.

Valero said net income was $1.15 billion, or 2.18 a share, compared with $1.27 billion, or 2.09 a share, a year ago. Valero had fewer outstanding shares in the most-recent quarter.

Excluding a gain from the July sale of a Louisiana refinery, income from continuing operations was $982 million, or $1.86 a share. Third-quarter revenue grew nearly 52 percent to $35.9 billion.

Analysts surveyed by Thomson Reuters expected earnings on average of $1.54 per share on revenue of $35.79 billion.

Margins — the difference between the cost of crude and other feedstocks and what the company makes on refined products — were extremely volatile in the quarter.

Gasoline margins were low in July, when crude prices hit record highs, but began to improve in August as oil prices began their downward spiral. Margins for distillate products, such as diesel and jet fuels, were robust throughout the quarter, Valero said.

Given the current economic downturn, Valero said it now expects capital spending to be around $3 billion this year, well below the $4.5 billion it had initially planned. For 2009, it expects capital spending to be about $3.5 billion, down $500 million from its previous guidance.

In a call with investors, company officials said the refiner planned to scrap plans for a new coker at its refinery in Port Arthur, Texas, and delay improvement projects at other sites.

"What we've got is a combination of a couple of deletions from our capital budget," said Rich Marcogliese, Valero's chief operating officer. "But primarily it represents a number of deferrals on discretionary investments."

Valero shares rose $1.70, or 11.3 percent, to $16.81.

Earnings season is in full swing for energy companies. Also reporting this week are Exxon Mobil on Thursday and Chevron Corp. on Friday.

Valero Energy Q3 income up

Valero Energy has reported that its income from continuing operations was $1.2 billion or $2.18 per share in the third quarter of 2008, compared to $848 million or $1.34 per share in the third quarter of 2007.

The income for the third quarter of 2008 includes the company's pre-tax gain of $305 million on the sale of its Krotz Springs refinery in Louisiana to a subsidiary of Alon USA Energy.

Excluding the pre-tax gain, the income for the third quarter of 2008 from continuing operations was $982 million or $1.86 per share. The operating income for the third quarter of 2008 was $1.8 billion, compared to $1.2 billion in the third quarter of 2007.

The income from continuing operations for the nine months ended September 30, 2008, was $2.1 billion or $4.02 per share, compared to $4 billion or $6.66 per share for the nine months ended September 30, 2007.

Bill Klesse, chairman of the board and CEO of Valero, said: "As a result of our good earnings, our financial position has continued to improve. At the end of the third quarter, our net debt-to-capitalization ratio was 15.8%, one of the lowest in company history."