Week of July 18, 2005
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Multibillion-dollar Refinery Expansions
to Lubricate Chinese Machine
by ADAM BRUNS, Site Selection Managing Editor
Oil companies Exxon Mobil, Saudi Aramco and Sinopec in early July signed on to a US$3.5-billion refinery expansion in China's Fujian province. A few days later, an Aramco official said the company was also looking at a greenfield refinery joint venture with Sinopec, this one in Qingdao, in the northern province of Shandong. Meanwhile, other reports had the two possibly collaborating on a $1.2-billion greenfield refinery complex in eastern China. And Exxon is looking at another project in Guangdong in the south.
Saudi Aramco has already announced its intention to build an integrated export refinery complex worth some $5 billion in its home country. In addition, with Japan's Sumitomo Chemical Co., it launched a 400,000-barrels-per-day (bpd) integrated refinery and petrochemical complex in Rabigh, Saudi Arabia, in May 2004. That project, like the new Fujian project, is expected to come online in late 2008. The company is also looking at a $6-billion integration of its Ras Tanura Refinery and Ju'aymah Industrial Area complexes. All on the heels of the December 2004 opening of the Qatif Producing Plants Project, now the world's largest crude output facility, which raised the Kingdom's production capacity by 650,000 bpd.
In fact, Aramco is also working with Sinopec on a Saudi natural gas project, in the nation's "Empty Quarter," the Rub' al-Khali desert.
Aramco's footing in Asia was already solid, with stakes in projects in South Korea, Japan and the Philippines. But China for Aramco as for other multinationals in other sectors is the motherlode.
"Given the tremendous economic growth of your nation, and the extensive petroleum reserves and production capabilities of ours," said Saudi Aramco President and CEO Abdallah S. Jum'ah at the groundbreaking, "the bonds that join us together are among the most important energy relationships on the planet."
A Comprehensive Project Package
Lafarge to Invest US$100
million in Aceh, Yanbu plants
by ADAM BRUNS, Site Selection Managing Editor
Whether it's hurricanes, tsunamis or other natural disasters, rebuilding takes rebuilding materials, and French building materials giant Lafarge SA is doing its part in Indonesia.
Lafarge announced in early July that it would construct a US$90-million cement plant in Aceh, North Sumatra, Indonesia, to replace its PT Semen Andalas Indonesia facility, destroyed by the tsunami of December 2004. Lafarge originally located the plant there in 1982. The new factory will have a capacity of 1.6 million tons when it comes online in mid-2007.
But the community development by Lafarge goes well beyond the factory. The company is simultaneously launching a program to rebuild 500 homes, a school, and a mosque in Lamkruet, a nearby village about a mile away from the industrial site that was almost entirely destroyed.
"We have long been present in Indonesia, and today, beyond from the emergency situation, we would like to support affected populations and help contribute to economic development in this country, which is very needy in terms of reconstruction," explained Bernard Kasriel, at the announcement on July 7.
That same day, the company also launched a floating terminal named "Glory" in the nearby port of Lhoknga, where Lafarge will be able to unload up to 1,600 tons of cement per day from its Malaysian subsidiary. That measure should help the company meet the high demand for materials in Banda Aceh until its rebuilt plant is back up and running.
Swedish and Swiss precision
instrument firms expand
(and retract) in U.S.
by ADAM BRUNS, Site Selection Managing Editor
In a 360-degree turnaround from its plans to exit Rhode Island for greener pastures in Connecticut, Hexagon Metrology North America has signed a lease agreement with the Quonset Development
In early 2005, an offer that in its 2003 incarnation included a site at the Quonset park fell through when it wasn't backed by an incentive offer from the Rhode Island General Assembly. As a result, and with $6 million in incentives and additional property tax breaks being offered by the State of Connecticut, Brown & Sharpe was going to relocate across the line to North Stonington, Conn.
Rhode Island Gov. Donald Carcieri in 2003 proposed that the state construct an $11.6-million, 116,000-sq.-ft. (10,776-sq.-m.) facility at the state-owned park. But the proposal, despite its approval by the state's economic development corporation, was shot down by the legislature during the summer of 2004, owing to concerns about the risk of the company walking away from the deal. Brown & Sharpe had been located in Rhode Island for more than 170 years, and had offered to pay annual debt on the facility for 15 years minimum.
A spring 2005 offer by Carcieri's office included $12 million of financing arranged through Sovereign Bank, as well as $4.8 million in incentives over and above that amount. But as of mid-March, the company was fully planning on transferring its 270 positions to North Stonington, and had already invested $2 million on 13 acres (5.3 hectares). The company was slated to receive a $4-million loan from the state, payable over 10 years at a 2.5-percent interest rate. An additional $2 million from the state's Urban Act program would have gone to the town for infrastructure improvements, and the town itself was ready to grant tax abatements.
"Connecticut presented to Hexagon a number of attractive incentives to assist us in the relocation process that made this clearly the best choice from among those we were considering, including our Rhode Island options," said Bill Gruber, president and CEO of Hexagon Metrology North America and Brown & Sharpe Inc. in February. In June, the tune was decidedly different:
"We are glad to have finally brought this process to a conclusion, and are pleased with the Quonset Point location," said Gruber. "Our primary motivation now is to move forward with construction and move into the new facility as quickly as possible. Our reason for relocating is the same as it's always been we need a facility that better suits the operational requirements of our business as it exists today. A new facility at Quonset Point will meet these needs with minimal disruption to our operations and staff.
"With regard to the Connecticut plans, Gruber continued, "we really appreciate all the effort that the people of North Stonington had made on our behalf, including all the departments and commissions involved, and in particular First Selectman Nicholas Mullane. In the end, however, Hexagon and the State of Connecticut were unable to agree upon the terms and conditions of the State's assistance agreement."
Taking Shelter in Quonset
Looking for More?
Work Proceeds on
$440-Million Alcoa Australia Project
by RON STARNER, Site Selection Director of Publications
PINJARRA, Australia One of the world's most successful and cost-efficient alumina refineries is undergoing a major facelift. In Pinjarra in Western Australia, Alcoa has embarked on a massive, $440-million project that represents one of the world's largest alumina plant expansions.
The project, first announced in July 2003, reached a milestone in April 2005 when Alcoa World Alumina Australia established a new office in Pinjarra as part of major changes designed to position the company for further growth in the region.
"Pinjarra is the most cost-effective refinery in the Alcoa system and produces 6.3 million metric tons of aluminum per year, or about 7 percent of the world's capacity," says Jim Winter, manager of corporate real estate for Pittsburgh-based Alcoa Inc. "Also, this plant is the most efficient in the world. The expansion project will increase our production in Western Australia by 600,000 metric tons per year."
The $440 million that Alcoa is spending is mostly an investment in new technology, but it is also adding new jobs to the town of Pinjarra, a largely agricultural community about 86 kilometers south of Perth and 19 kilometers inland from the coastal resort town of Mandurah.
The new Alcoa offices will house some 70 workers, most of whom are currently located at the firm's office in Booragoon. Alcoa director of finance and business services Tom Adams said that the decision to move some key positions closer to Alcoa's regional operation would improve service delivery and bring many business functions closer to company stakeholders.
"Importantly, the decision will also create major benefits for Pinjarra and the Peel region," Adams said. Those benefits include increased company expenditures in the local region;
"Ultimately, Alcoa must maintain competitiveness in a highly competitive global market, and this means being prepared to continually review our operations to ensure best practice in all areas of the business," said Adams. "This restructure is about securing our future in Western Australia and reaffirming our strong commitment to Pinjarra and the Peel."
Alcoa, the world's largest alumina producer, already directly employs more than 1,000 people at its Pinjarra refinery, plus hundreds of local contractors. The refinery upgrade will add up to 1,000 contractors on site during the project.
The expansion project is expected to be completed sometime in 2005.
Winter added that several factors were critical in the company's decision to expand the Pinjarra refinery. "The major factors were the efficiency and technology that was implemented there, as well as the labor, labor costs and utility costs," he noted. "Plus, the transportation costs were extremely beneficial, and this location gives Alcoa access to raw materials and key markets around the world."
Winter also credits the Australian government for making the project so attractive.
"Back in July of 2003, we began an engineering study to look at efficiency upgrades," says Winter. "We wanted to improve the environmental outcomes. We do studies such as this to make sure that it won't affect the environment negatively. We dealt with the local and state government and established a new benchmark for community engagement on projects such as this."
Winter even noted that the chairman of the Environmental Protection Agency of Western Australia described Alcoa's community engagement as a "best practice."
"We found the Australian authorities to be pro-business, and they helped us establish relationships with different stakeholders in the community," Winter notes.
When completed, the Pinjarra Efficiency Upgrade will increase export revenue by up to $160 million per year and increase the financial contributions Alcoa makes to local communities each year currently $1.1 billion.
"Improving our competitiveness will provide secure employment for more than 4,000 West Australians employed by Alcoa in regional communities and 15,000 indirectly employed throughout regional Western Australia," said Wayne Osborn, managing director of Alcoa. "The upgrade project will create a peak of 1,000 jobs during the construction phase."
Worldwide, Alcoa has 120,000 employees in 41 countries. Winter, who manages all global facilities for Alcoa, is a member of the Atlanta-based Industrial Asset Management Council.
For more on Alcoa's global facility build-out, don't miss Site Selection's exclusive interview with the president of Alcoa Russia, from our July 2005 issue.
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