The Philadelphia refinery was scheduled to close in August. In April, Sunoco announced that it had entered into “exclusive discussions” with Carlyle about a possible joint venture.
The groups announced recently they had agreed to form Philadelphia Energy Solutions, a venture that will enable the facility to continue operating with the help of state taxpayer subsidies. The agreement will save all of the current refining jobs—850 workers—and create up to 200 more.
In a Carlyle Group press release, Carlyle Managing Director Rodney Cohen said, “Together we’ve re-imagined the Philadelphia refinery and its role as a critical energy hub in the Northeast. This joint venture will keep one of the region’s most important economic engines up and running. The refinery will be a reliable and critical supplier of fuels to the regional market through its new business structure and improved crude oil sourcing. In addition, the refinery’s exceptional location and infrastructure will enable the joint venture to create new business opportunities related to Marcellus Shale natural gas fields. We also look forward to continuing to work with all of the relevant stakeholders – government officials, the community, environmental officials and organized labor – as we work to stabilize, strengthen and expand the refinery.”
Cohen isn’t the only one pleased about the venture. Brian P. MacDonald, Sunoco’s chairman and chief executive officer was also happy to see the groups come together to save jobs and expand business opportunities.
“This partnership is a great example of what can happen when motivated people think creatively to solve pressing problems. The private sector, government and labor all played important roles in getting this done. This is the best possible outcome for everyone involved: existing jobs will be saved, new jobs will be created and new business opportunities will be given the chance to develop,” MacDonald said in a Carlyle Group press release.
The refinery’s closure threatened gas price spikes in some parts of the northeastern United States. Labor unions rallied to keep the facility open, and all levels of government got involved, from White House Economic Adviser Gene Sperling to Philadelphia Mayor Michael Nutter, to cut red tape and speed up approvals.
“Philadelphia Energy Solutions will create and maintain hundreds of skilled jobs for Philadelphians. It is an example of the private and public sectors working closely together to ensure this refinery, an important economic engine of the region, continues to operate. I would like to thank all of the partners who contributed to preserving these jobs,” Philadelphia Mayor Michael A. Nutter said in a Carlyle Group press release.
Union leaders were pleased with the agreement, and local members voted 98 percent in favor of ratifying a reworked contract with the joint venture.
Leo W. Gerard, international president, United Steelworkers, said, “Not only will good paying manufacturing jobs be saved, but new ones will be created as this vital facility is improved and expanded. This project demonstrates how all stakeholders benefit when private capital, industry, government, and labor work together for the collective benefit of society.”
A key thrust of the new venture will be to improve refining efficiency, reduce waste and emissions, and cut down on the reliance foreign oil.
Carlyle said it also wants to expand the use of Marcellus Shale natural gas as a lower-cost, lower-emission fuel for its refinery while exploring the possibilities of producing natural gas liquids or other natural gas byproducts.
Cohen said the company planned $200 million worth of capital improvements. Projects include:
- Upgrade the Catalytic Cracker: The joint venture will upgrade and refurbish the cracker, improving reliability and operating performance. The project will create more than 1,000 contracting jobs when the upgrade commences.
- Build High-Speed Train Unloading Facility at Refinery: Provide access to greater quantities of crude oil from North America (versus imported crude), particularly high-quality, low sulfur crude from the Bakken region in North Dakota.
- Build Mild Hydrocracker and Hydrogen Plant: By converting the existing middle distillate Hydrotreater into a Mild Hydrocracker and constructing a natural gas-based hydrogen plant, the refinery will produce a more environmentally friendly mix of refined products. The project will create several hundred construction jobs.
The joint venture is also exploring other significant capital projects, including the creation of new businesses based on the availability and abundant levels of natural gas from the Marcellus Shale.
Gov. Tom Corbett praised the partnership.
In a Carlyle Group press realase, Corbett said, ““Today’s announcement is testament to what can be accomplished when the public and private sectors work together toward a common goal; creating job opportunities for current and future generations. The Commonwealth’s support of this venture in conjunction with business, labor and all levels of government will preserve 850 direct jobs and thousands of jobs that rely on this refinery’s active operation in the Philadelphia region.”
Under terms of the agreement, Sunoco will contribute its refinery assets to the joint venture in exchange for a non-operating minority interest. Carlyle will have the majority interest and oversee day-to-day operations.