WHITING | Traffic jams are all too common at 129th Street and Indianapolis Boulevard during a shift change at the BP Whiting Refinery.
And activity is expected to increase next year as the refinery moves to the next stage of its multibillion-dollar modernization project.
BP and union officials say they expect 10,000 or more contractors to be doing critical work next year on the project to increase the refinery's capability to process heavy Canadian crude oil.
All the heavy lifts of objects such as the coker are done, and the project is about 66 percent completed, BP spokesman Scott Dean said.
The startup of the refinery's largest crude distillation unit, the No. 12 pipestill, is scheduled for the fourth quarter of 2012. Two key systems, the coker and the gas oil hydrotreater, will start up in 2013. The new coker will capture more of an impurity from the refining process and turn it into a valuable byproduct, and the hydrotreater removes sulfur from fuel streams. BP said more than $1 billion would be spent on environmental upgrades at the refinery.
"The place will be a beehive of activity during the next couple years with all the welding, pipefitting and electrical work needed to hook all the units and modules together," Dean said.
The 122-year-old Whiting Refinery can process up to 405,000 barrels of crude oil per day. The refinery manufactures products such as gasoline, diesel fuel, petroleum coke, heating and industrial oils, solvents and asphalt. When the modernization project is complete, gasoline production is expected to increase 15 percent -- by 1.7 million gallons a day -- even though the amount of raw crude brought into the facility will remain near current levels.
When the project was announced in 2006, the company said the modernization project represented a $3.8 billion investment, which was deemed the largest private single investment by a company in the state's history. It also was slated to be completed this year.
Modernization project construction work started after BP received a permit from the Indiana Department of Environmental Management May 1, 2008.
Now the company says the Whiting effort is worth several billion dollars and slated for completion in 2013.
Company officials declined to comment on additional project costs or reasons behind the longer-than-anticipated timeline. With the scale and scope of the project, Houston-based oil industry consultant Andy Lipow said delays are common, although he couldn't speculate on the specific reasons.
'Heavy' crude part of plan
Lipow, president of Lipow Oil Associates LLC, said producing higher-sulfur and heavier crude oils is more feasible economically now, because of the available supply and the fact not every refiner is set up to process them.
He said BP also is interested in heavier crudes because the lighter, sweet crudes such as those from South America and the Middle East are becoming harder to get. The heavier crude products also can be brought into the refinery at a discount compared to the lighter products, Lipow said.
The No. 12 pipestill refines light, sweet crude oil but is being reconfigured to accept the heavier crudes as well. About 30 percent of the refinery's feedstock is heavy crude oil from Canada; after the modernization project if finished, the refinery will be able to operate with 90 percent of its feedstock from heavy crude Canadian oil, said BP spokesman Brad Etlin.
BP officials have said upgrades in Whiting help make the refinery competitive in the long-term, as it benefits from its proximity to Canada and the existing oil pipeline supply infrastructure.
BP Chief Executive Bob Dudley said in October the company's refining and marketing businesses are on track to deliver record earnings this year. Through the first three quarters of 2011, BP's replacement-cost profit, which includes changes in inventory values, was $15.9 billion. The company posted a 2010 net loss, which included an inventory writedown of $4.9 billion compared to a replacement-cost profit of $14 billion in 2009.