US farmer-owned cooperative CHS Inc., Inver Grove Heights, Minn., has completed its purchase of National Cooperative Refinery Association’s refinery and related operations at McPherson, Kan., to take full ownership of the assets (OGJ Online, Dec. 1, 2011).
Conclusion of the deal follows a 2011 agreement with then-minority owners Growmark Inc., Bloomington, Ill., and MFA Oil Co., Columbia, Mo., to buy additional interest in the McPherson refinery in four annual increments starting on Sept. 1, 2012, and culminating on Sept. 1, 2015, CHS said.
CHS’s current investments in infrastructure and pipelines at the 85,000-b/d refinery, now renamed the CHS Refinery at McPherson, are due to boost crude processing capacity at the Kansas plant to 100,000 b/d in 2016, the cooperative said.
CHS began the $330-million McPherson expansion, which was designed to be completed in phases during this year’s second half and early 2016, in 2013 (OGJ Online, Mar. 12, 2013).
The expansion project is under way alongside a separate project to construct a $555-million replacement coker at the refinery (OGJ, Dec. 3, 2012, p. 100).
The cooperative incurred $186.8 million in costs related to the coker project during fiscal-year 2014 and $121.3 million during the 9 months ended May 31, CHS said in its latest quarterly earnings report to investors.
Capital expenditures related to the refinery’s expansion amounted to $128.3 million for fiscal year 2014 and $105.1 million for the 9 months ended May 31.
Additional projects
The investment at McPherson comes as part of the cooperative’s broader strategy to boost overall efficiency and increase diesel production at its two refineries in order to meet fuel demands of its rural-American customer base.
Last year, CHS unveiled a plan to invest more than $400 million in projects to upgrade its 55,000-b/d Laurel, Mont., refinery (OGJ Online, Sept. 4, 2014).
The Laurel upgrade project, due to be completed in 2019, includes construction of a hydrogen plant as well as modifications to an existing crude unit, both of which are aimed at increasing crude throughputs and diesel production at the refinery.
The project also will involve modifications to an existing hydrocracker that, in addition to aiding increased diesel output, will equip the refinery to process a more flexible slate of crudes and reduce production interruptions at the site.
The company said it expects additional diesel production from Laurel will help its growing network of Cenex-branded marketers to capture continued growth opportunities resulting from robust diesel demand, particularly in the northern-tier states.
As CHS completes the nearly $2 billion in projects under way at the Montana and Kansas refineries, the cooperative’s total refining capacity will increase to about 157,000 b/d in 2016 and 166,000 b/d in 2019.
Through sole ownership of the McPherson refinery, along with additional investment to increase capacity at both the Laurel and McPherson plants, CHS essentially will be adding the equivalent of a third refinery to help satisfy the diesel supply needs of its owners and customers, according to Jim Loving, CHS senior vice-president for refining, pipelines, and terminals.
Contact Robert Brelsford at [email protected].
