Oil refiners are continuing to roll out plans for expansions and upgrades even as prices for crude oil and products fall. On Sept. 20, BP America Inc. announced a $3-billion plan to increase its Whiting, Ind., refinery’s ability to process Canadian extra-heavy oil and in August, Motiva Enterprises named the engineering, procurement and construction contractor for the proposed expansion of its Port Arthur, Texas, refinery. But some project cancellations this year have highlighted the vulnerability of such plans to cost and other pressures.

Construction of BP’s Whiting refinery project is scheduled to begin next year and be completed in 2011. The project will not add to the facility’s 405,000-barrel-per-day capacity, but will increase its ability to process Canadian heavy crude oil by 260,000 bbl per day. Fluor Corp., Irving, Texas, is the lead engineering contractor, and will be the construction contractor as well, says Scott Dean, BP spokesman. BP’s board has approved the announced $3-billion cost but the project still must obtain regulatory approvals.

BP’s safety practices have been under intense public scrutiny since last year’s explosion at the company’s Texas City, Texas, refinery that killed 15 employees of Jacobs Engineering Group Inc., Fluor Corp. and General Electric Co. (ENR 4/4/05 p. 10). “We will continue to detail and align construction and refinery operations plans to ensure both are conducted safely,” said Mike Hoffman, BP group vice president for refining, in announcing the plans for Whiting. The plant will continue to operate during the reconfiguration, says Dean.

BP’s announcement is the latest in a slew of U.S. refinery expansion plans, many of which are geared toward adding cokers to process lower-priced heavy crude. In the Midwest, refiners like BP are eyeing an expected increase in heavy crude from Alberta’s oil sands.

On the Gulf Coast, Houston-based Motiva Enterprises LLC in August selected a joint venture of San Francisco-based Bechtel and Pasadena, Calif.-based Jacobs as EPC contractor for its proposed 325,000-bbl per day refinery expansion in Port Arthur. The schedule calls for detailed engineering to begin later this year with construction starting in 2007. Motiva, a joint venture of Saudi Refining Inc. and Shell Oil Co., both of Houston, has not announced the estimated cost, but one news source has pegged it at $4.5 billion.

“We knew a lot of this would go EPC in 2006-07,” says Troy Roder, president and CEO of Foster Wheeler USA Corp. The Clinton, N.J.-based technology supplier and contractor ramped up last year to take on the market. Roder foresees high demand continuing for the next three years at least.

But similar announcements have been altered or cancelled because of rising costs, labor shortages and delays in getting equipment. Another issue is the growing supply of ethanol, which could curb the need for more gasoline. Motiva’s expansion hinges in part on ethanol supply, according to Shell Oil President John Hofmeister. A decision by Americans to shift to more ethanol-powered vehicles or a significant increase in fuel economy standards could lower demand for refined products, making expansion unnecessary, he told reporters following a speech at an FBI-sponsored conference on critical infrastructure security in August.

The estimate for Marathon Oil Co.’s proposed 245,000-bbl per day expansion at its Garyville, La., refinery has grown from $2.2 billion in October 2005 to $3 billion because of cost escalations and scope changes. The company still is developing the project and will seek board approval late this year, says Gary Heminger, president of Marathon Ashland Petroleum. But Tesoro Corp., San Antonio, Texas, in July scrapped plans for a 25,000-bbl-per-day delayed coker at its Anacortes, Wash., refinery because of cost overruns. The refiner will proceed with a major refit of the older-design, high-maintenance coker at its Golden Eagle refinery in Martinez, Calif., now estimated at $415 million.

“Investment-grade [refiners] have enough cash to go ahead,” says Ben Tsocanos, associate director of Standard & Poor’s Ratings, which, like ENR, is a unit of the McGraw-Hill Cos. But some are choosing acquisition over construction. In August, Lyondell Chemical Co., Houston, bought out partner Citgo Petroleum Corp.’s 41.25% interest in their 268,000-bbl/day refinery at a price of close to $20 per bbl, says Tsocanos. Expansion costs run $10,000 to $15,000 per bbl, he says. “That’s the premium for having a refinery in today rather than having the construction lag,” he notes.