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Previous to The IPO

Houston Refining, previously known as Lyondell-Citgo Refining (or LCR), is a 270,200-barrel-per-day (forty two,960 m3/d) (July, 2007) refinery positioned on the Texas Gulf Coast in Houston, protecting nearly seven-hundred acres (2.8 km2) along the Houston Ship Channel.

1 Historical past
2 Products 2.1 Capability

Historical past[edit]
The origins of Houston Refining date to 1918 when Harry Sinclair (Sinclair Oil) started building a battery nonetheless on the positioning. As the refinery grew, additional processing units were built to produce lubricants and aromatic chemicals, and with the addition of the fluid catalytic cracker in 1952 and the 736 coker in 1968 the refinery emerged as one of the earliest full-conversion refineries on the Texas Gulf Coast.

In 1969 Sinclair Oil was acquired by Atlantic Richfield (Arco). Though Arco was primarily an oil company, the company realized the potential synergies between the Houston refinery and a chemicals advanced it owned in close by Channelview, Texas. To make the most of this, Arco invested in a serious enlargement of the refinery that was accomplished in 1976 and that enabled it to process heavy bitter crude to provide refined products and chemical plant feeds. At the same time, two world-scale ethylene crackers had been constructed at the Channelview complex that have been capable of processing naphtha and heavier liquids from the refinery.

By the early 1980s, nonetheless, the commodity chemicals enterprise entered a prolonged interval of oversupply, and the performance of Arco’s Houston space assets began to decline. In addition, Arco’s strategic planning group in Los Angeles, headed by Dr. Bob Gower, developed a long-vary forecast calling for a decline in the value of crude oil. At the time Arco was in a bidding struggle with Chevron for Gulf Oil, but the crude oil price forecast made that acquisition look more and more less favorable. Including to the uncertainty was the worth of Gulf’s chemical assets.

Bob Gower’s planning group was then tasked with the job of finding a solution to both sell, spin off or shut down the Houston assets, which were shedding on the order of $one hundred million per 12 months by 1984. As an alternative Gower proposed a radical plan to mix the chemical plant and refinery right into a single enterprise unit that will natural gas symbol benefit from operational synergies and other alternatives to return to break-even performance. With nothing to lose, Arco accepted Gower’s plan and Lyondell Chemical grew to become a wholly owned subsidiary of Arco on April 15, 1985, with Bob Gower as its president.

Arco itself also undertook a significant restructuring in 1985, which included taking a $900 million write-off of the Houston space belongings of what was now Lyondell Chemical. Even with the write-off Lyondell continued to lose money in 1985, albeit at a enormously decreased fee, and by early 1986 the company started to return to profitability. Aided in part by the writedown, earnings for 1986 and 1987 averaged within the vary of $one hundred twenty million, and because the chemical cycle began an upswing in 1988 the corporate began seeing earnings of $10-20 million monthly.

Seizing a possibility to cash out at the highest of the cycle, in mid-1988 Arco decided to supply 50.1% of Lyondell Chemical to the general public by way of an initial public offering (IPO). To ensure that the offering was absolutely subscribed, Arco additionally promised that Lyondell would pay out all money circulate in excess of capital needs within the form of special dividends to the shareholders. Arco was initially able to sell roughly 53% of its stake when the IPO occurred in January 1989; however the price quickly fell below the IPO worth and Arco was forced to repurchase a few of the shares which resulted in giving Arco a 49.9% interest within the Houston refinery and the other Houston space belongings.

A part of Lyondell’s technique from the beginning was to function as a merchant refiner. This meant that even as a wholly owned subsidiary the corporate was not obligated to buy crude oil from the Arco dad or mum, nor was it required to promote product to Arco’s refined products marketing group. However, the lack of long-time period crude provide contracts meant that the corporate was topic to dramatic swings in the cost of uncooked materials and refined merchandise. Initially the company tried to handle this risk by a hedging technique based mostly on crude and refined product derivatives contracts, but when this proved to be unsuccessful company planners started to investigate the sale of the Houston refinery.

In early 1990 Lyondell started talks with several interested parties regarding the sale of the Houston refinery. These talks progressed all through the spring and summer season of 1990 with a number of potential consumers together with representatives of several mid-east oil corporations. However the Iraqi invasion of Kuwait in August 1990 and the subsequent uncertainty in the global petroleum markets damped interest within the natural gas symbol refinery and Lyondell was pressured to end discussions regarding its sale.

Prior to the IPO, Lyondell’s refinery evaluations staff had been engaged in a venture to negotiate an extended-term crude provide settlement (CSA) with a serious oil producer. This venture was shut down when Arco decided to take Lyondell public, but when the refinery sale mission ended curiosity in a long-term CSA was revived. Earlier discussions had indicated that in addition to locking in a guaranteed source of crude there was a possibility to expand the refinery’s heavy crude processing functionality.

Petroleos de Venezuela, S.A. (PDVSA) was one in every of the two producers who participated in the earlier examine. In a two-half transaction, Lyondell negotiated a 25-yr CSA with PDVSA to supply 240 MBD of heavy Venezuelan crude to the refinery, and PDVSA’s wholly owned U.S. subsidiary Citgo agreed to speculate in the refinery enlargement mission in alternate for partial ownership of the refinery. Initially estimated to cost $500 million, the refinery expansion challenge would ultimately high $1.2 billion and lead to some natural gas symbol acrimonious relationships between Lyondell and Citgo.

In 1993 CITGO entered right into a joint enterprise agreement with Lyondell Chemical to form the Lyondell-CITGO Refinery Firm in Houston; of which Lyondell owned 58.75 p.c and CITGO owned the remaining forty one.25 percent.

On Aug. Sixteen, 2006, Lyondell Chemical Firm bought CITGO’s share, and as a result, Houston Refining grew to become a wholly owned subsidiary of Lyondell.

The refinery has the power to remodel heavy, excessive-sulfur crude oil into fuels reminiscent of reformulated gasoline and low-sulfur diesel, as well as other products comparable to jet gasoline, heating oil, lubricants, petroleum coke and aromatics. It additionally has the ability to transform Mild Sweet Crude into Naphthenic Lube Oils, in addition to deal with White Oils in its Lube Oil Complex.

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