Houston Refining
Houston Refining, formerly known as Lyondell-Citgo Refining (or LCR), is a 270,200-barrel-per-day (42,960 m3/d) (July, 2007) refinery located on the Texas Gulf Coast in Houston, covering nearly 700 acres (2.8 km2) along the Houston Ship Channel.
The origins of Houston Refining date to 1918 when Harry Sinclair (Sinclair Oil) began building a battery still on the site. 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). Although Arco was primarily an oil company, the company realized the potential synergies between the Houston refinery and a chemicals complex it owned in nearby Channelview, Texas. To take advantage of this, Arco invested in a major expansion of the refinery that was completed in 1976 and that enabled it to process heavy sour crude to produce refined products and chemical plant feeds. At the same time, two world-scale ethylene crackers were built at the Channelview complex that were capable of processing naphtha and heavier liquids from the refinery.
By the early 1980s, however, the commodity chemicals business entered a prolonged period of oversupply, and the performance of Arco's Houston area assets began to decline. In addition, Arco's strategic planning group in Los Angeles, headed by Dr. Bob Gower, developed a long-range forecast calling for a decline in the price of crude oil. At the time Arco was in a bidding war with Chevron for Gulf Oil, but the crude oil price forecast made that acquisition look increasingly less favorable. Adding to the uncertainty was the value of Gulf's chemical assets.
Bob Gower's planning group was then tasked with the job of finding a way to either sell, spin off or shut down the Houston assets, which were losing on the order of $100 million per year by 1984. Instead Gower proposed a radical plan to combine the chemical plant and refinery into a single business unit that would take advantage of operational synergies and other opportunities to return to break-even performance. With nothing to lose, Arco approved Gower's plan and Lyondell Chemical became a wholly owned subsidiary of Arco on April 15, 1985, with Bob Gower as its president.
Arco itself also undertook a major restructuring in 1985, which included taking a $900 million write-off of the Houston area assets of what was now Lyondell Chemical. Even with the write-off Lyondell continued to lose money in 1985, albeit at a greatly reduced rate, and by early 1986 the company began to return to profitability. Aided in part by the writedown, profits for 1986 and 1987 averaged in the range of $120 million, and as the chemical cycle began an upswing in 1988 the company began seeing profits of $10–20 million per month.
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