HollyFrontier Corp., the operator of a crude-oil refinery in Woods Cross, said it plans to invest $225 million over the next two years to increase production by 45 percent at the Utah facility.
The Dallas-based company's announcement comes less than a month after Tesoro Corp. said it planned to invest $180 million to expand crude-oil processing at its nearby Salt Lake City refinery.
"Those investments suggest that both companies are anticipating the market for their products in Utah will be growing, as well as in markets [farther away] that they can supply over available pipelines," said Lee Peacock, president of the Utah Petroleum Association.
HollyFrontier said it anticipates the expansion, which will involve it moving processing equipment from an idled refinery in New Mexico and installing it at its Woods Cross plant, will be completed in late 2014. Capacity will rise from 31,000 to 45,000 barrels per day. The company did not supply information about how many jobs, if any, would be added to its workforce of about 140.
Mike Jennings, president of HollyFrontier, said the expansion will allow the company to eventually take advantage of its new 406-mile UNEV petroleum-products pipeline, which runs from Utah to Las Vegas.
"We will have the option to market additional products from this expansion to Cedar City and Las Vegas, as well as to our traditional customers in Salt Lake City and the Intermountain West," he said in a statement.
Tesoro's and HollyFrontier's plans center on bringing additional capacity online to refine black-wax and yellow-wax crude oil produced in the Uinta Basin in eastern Utah.
Black-wax crude comes out of the ground at a consistency similar to petroleum jelly. It is thick and viscous, and unlike so-called light, sweet crudes that are popular feedstocks for refining, black-wax crude usually isn't transported by pipeline.
Black-wax and other waxy crudes typically need to be trucked by insulated tankers and must arrive at their destinations within four to eight hours, or they will solidify. If that happens, the tanker's cargo must be warmed up before it can be pumped into the refinery.
HollyFrontier said that in conjunction with its Utah expansion it has signed a 10-year agreement with Newfield Exploration Co. to provide the Woods Cross refinery with 20,000 barrels per day of black-wax and yellow-wax crude produced from the oil exploration and production company's Uinta Basin properties.
Tesoro said last month it also had a similar supply agreement with Newfield.
"We've been working to expand our crude-oil production capacity in the Uinta Basin, so we're pretty excited about our new supply agreements," said Keith Schmidt, spokesman for The Woodlands, Texas-based Newfield Exploration.
Schmid described black-wax crude as "good oil" that nevertheless carries additional challenges. "Once there, though, it is a high-value, high-quality crude."
Under the supply agreement with Holly/Frontier, Newfield will be in charge of transporting the crude from its oil wells to the refinery, he said.
HollyFrontier, however, said its planned expansion and the supply agreement are dependent upon the company getting the necessary permits and regulatory approval. In December, Tesoro said it faced the same obstacles.