Lake Charles Refinery, LA, USA

The project concerns the efforts of the American International Petroleum Corporation (AIP) to start its refining operations at Lake Charles in Louisiana with a test run in the first quarter of 2000.

The American International Petroleum Corporation owns the Louisiana refinery through its subsidiary American International Refinery, Inc (AIRI). The subsidiary owns and operates the Lake Charles refinery. It claims that the Lake Charles plant has a potential capacity of 30,000 barrels/ day. The refinery also has a 720,000 barrel storage capacity. AIRI also owns and operates the St. Marks Refinery, near Tallahassee, FL, as a distribution terminal and storage centre. The crude oil brought to the refinery is refined into naphtha, kerosene, diesel oil and vacuum gas oil.

MARKET RATIONALE

The company sells its products to customers throughout the Gulf Coast and lower Mississippi River. It does not supply its own feedstock, but imports it from other companies. The test run is allowed by a recent agreement with the Sargeant group of companies which is committed to transporting crude oil to the Louisiana plant.

The refinery, which has an independently appraised replacement value of approximately $86 million, is situated on 87 acres of land adjacent to a river accessible from the Gulf of Mexico, facilitating transportation via barge. Receipt of crude oil feedstock is generally by barge, typically low-cost, low-gravity Mexican oil, although the Company may purchase oil, or asphalt feedstock, from other sources.

St. Marks, accessible by barge from the adjacent St. Marks River and Gulf of Mexico, has a 465,000 barrel storage capacity, and a 20,000 barrel per day capacity refinery which the Company is not currently operating. The Lake Charles refinery supplies the company's St. Marks refinery with bulk product via AIM. St. Marks allows the Company to significantly increase its retail customer base by penetrating into the large Florida, Georgia and Alabama markets.

The Louisiana plant is one of many relatively small refineries that can be found across the USA. Independent operators have to exploit fleeting opportunities. For instance, AIP has leased part of its Lake Charles operations to another company (Maretech) so that it can make asphalt.

THE LAKE CHARLES PROJECT

In the early part of 2000, AIP announced that its Lake Charles, LA, refinery had begun operations by successfully processing the initial run of crude oil at the rate of 12,000 barrels/day. The technical aspects of allowing the company to put its Lake Charles operations fully into operation were handled by its internal engineering department. The test was witnessed by the firm of Purvin & Gertz, International Energy Consultants. The following week, AIP marketed the refinery's products, including jet fuel, diesel fuel and naphtha. The company thought that the demand for these refined products was very strong in the USA.

The company is also currently increasing the storage capacity available at the Lake Charles refinery. This involves an increase of 60,000 barrels to 840,000 barrels.

FUTURE PLANS

The test run was merely a beginning for the Louisiana plant. It has pledged to increase processing to 300,000 barrels/month by November 2000, and to further enhance its output in the course of 2001. AIP is also interested in foreign investments, notably in the field of oil exploration in Kazakhstan, which may distract from further activity and investment in its domestic markets in the USA.