2006 Louisiana Refining Spending Down Significantly Versus 2005

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Researched by Industrial Info Resources (Sugar Land, Texas). Coming on the heels of the tragic damage caused by Hurricane’s Katrina and Rita, the last thing the state of Louisiana needs is to have a significant industry, such as the Petroleum Refining Industry, cutting back on its capital and maintenance spending in 2006. Yet, that appears to be the case this year. Currently, the Refining industry has just under $500 million worth of capital and maintenance projects in the planning stages for the year; a significant decrease over 2005’s spending totals of just over $1 billion.

Surprisingly, this drop in spending has almost nothing to do with the damage caused by the multiple hurricane hits on the Gulf Coast. Only one refiner, Murphy Oil USA, Incorporated in Meraux, Louisiana, has yet to reopen its doors as a result of hurricane damage, and they are expecting to be back in operation in April. The balance of the refiners in the state were able to recover and make the necessary repairs to get units back online in almost record time. An act that allowed the entire country to breathe an almost visible sigh of relief.

According to Chris Paschall, Vice President Petroleum Refining at Industrial Info, the reasoning behind the decrease in spending is very similar to what is happening in Texas in 2006. “This round, new fuels initiatives mandated by the Environmental Protection Agency are coming to an end and across the board spending is reaching a cyclical low within the industry,” states Mr. Paschall. “The final fuel refiners need be compliant with is the ultra-low sulfur diesel and that has a mandated compliance date of June 1, 2006. So, all refiners are already well into the necessary changes to meet that deadline.”

Despite this lull in spending within the Refining industry in the state of Louisiana, gap measurement shows us that project fallout for the state is extremely low. In 2005, project fallout only reached a high of 2.29% in Louisiana and currently 2006 project fallout is hovering around the 4.5% mark, a number that may decrease as the year progresses.

Click on the image at right to view the Gap Measurement Comparison Chart

In 2006, Louisiana refiners are utilizing this lull in capital spending to do much needed maintenance work, doubly important, coming off of the rapid fixes put in place to keep operations going after the hurricanes of 2005. Of the significant projects on the books so far for 2006, seven of the top ten projects, in terms of total investment value, for 2006 are maintenance turnarounds ranging in cost from $15 million to $30 million each.

Some examples of the maintenance projects expected to begin this year are a proposed $30 million turnaround in Chalmette, Louisiana scheduled for late in 2006, as well as a trio of maintenance turnarounds that were scheduled to begin this month worth a total of $85 million ($30 million in Belle Chasse, Louisiana, $30 million in Convent, Louisiana, and $25 million in Westlake, Louisiana).

Click on the image at right to view a breakdown of 2006 planned spending by Parrish

Despite the downturn in spending in 2006, Louisiana refiners are still riding high. Increasing gas prices are allowing the refiners to take advantage of this lull and do the necessary planning for the coming years. After 2006, look for the industry to come right back out firing as the future is looking bright for the industry as a whole, not only within the state of Louisiana.

For detailed information on the projects mentioned in this news article contact Industrial Info's Member Center at 1-800-762-3361.

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Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.