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Energy/Agriculture

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Riding the Demand for Energy
$40 million investment pays off for new owner of Shreveport refinery

The Shreveport plant, a major supplier to Barksdale AFB, is Calumet’s largest refinery in Northwest Louisiana.

When Calumet Lubricants Co. acquired Pennzoil-Quaker State Co.’s Shreveport refinery in 2001, it was a specialty operation best known for motor oils. But Calumet thought the plant could do more. So it set out on a multimillion-dollar refurbishing that restored the refinery’s capability to process crude oil into unleaded gasoline, diesel fuel and jet fuel.

The reward: a major government contract supplying jet fuel to nearby Barksdale Air Force Base and an overall business revitalization as demand and prices for energy continue to rise.

“We reopened the fuel-processing units and put just under $40 million into the plant to reopen everything and modify some equipment to do what we wanted it to do,” says Jennifer Straumins, vice president of investor relations. As a result, the company added 20 employees and went from producing 9,000 barrels a day to 40,000 barrels a day of products.

Calumet finished the project in early 2005 and that summer won the contract to supply 50 million gallons of fuel to Barksdale, besting 21 other companies including one that had supplied the air base for about 15 years. The deal is valued at $75 million to $90 million, depending on the price of fuel.

HOMEWORK PAYS OFF

“They did their homework ahead of time to find out when the contract was coming up for bid and had their bid package ready,” says Kelly Ford, program director of the Northwest Louisiana Government Procurement Center, who helped Calumet secure the bid. That was the largest contract the center has helped with; typically, it facilitates between $70 million and $75 million worth of contracts per year.

In January 2006, Calumet Lubricants conducted an initial public stock offering and changed its name to Calumet Specialty Products Partners LP. And the changes won’t stop there.

“We’ve got several growth projects in the early stages at Shreveport,” Straumins says.

Of its three Northwest Louisiana refineries, the Shreveport plant is Calumet’s largest and most important. For Calumet, a major player in specialty petroleum products such as waxes, solvents and lubricating oils but a small one in fuel, the plant enhancements have paid off in bigger profits. Company revenue in 2004 was $540 million, with profits of $38.3 million. Revenue rose to about $1.3 billion in 2005 and to $1.64 billion in 2006; profits for those years were $140 million and $203 million, respectively.

“The majority of the increase was due to fuel products being produced out of Shreveport,” Straumins says.

Story by Jeannie A. Naujeck
Photo by Wes Aldridge

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