Texas Startup Aims for Success with Fourth Attempt to Construct First Major US Oil Refinery Since 1977, Reports Reuters

By Arathy Somasekhar and Erwin Seba

HOUSTON – Element Fuels Holdings, a startup based in the Dallas area, announced on Thursday its decision to renew efforts to construct a new oil refinery in South Texas, the first of its kind in nearly 50 years.

The project, intended for Brownsville, Texas, has been put forward by entrepreneur John Calce multiple times through his previous ventures, ARX Energy and JupiterMLP, with one attempt ultimately resulting in a bankruptcy filing. The initiative was initially managed by a holding company that also oversaw Centurion Terminals.

Element Fuels is seeking capital for the initial phase of the refinery, which aims to process approximately 50,000 to 55,000 barrels per day of naphtha feedstock into gasoline. Calce estimates that this phase will require around $1.2 billion in investment.

The company is currently in discussions with banks, private credit funds, and the U.S. Department of Energy to secure funding under the Inflation Reduction Act.

Calce acknowledged that previous attempts under JupiterMLP did not succeed "for a host of reasons." Nonetheless, Element Fuels has obtained a Texas state permit that authorizes the construction of the facility.

Once operational, the refinery will predominantly process U.S. shale oil sourced from West and South Texas, in contrast to most Gulf Coast refineries, which typically handle medium to heavy crude.

Calce expressed confidence in the U.S. shale oil market, noting that there is a significant demand for light crude and a short supply of refining capacity in the country.

The plan includes the establishment of an on-site power plant with a 165-megawatt capacity, utilizing hydrogen produced by the refinery. The company is currently negotiating with a credit counterparty for the refinery and has secured a long-term off-take contract for the power generated, although specifics remain undisclosed.

John Auers, managing director of refining consultancy Refined Fuels Analytics, highlighted that acquiring financing is one of the biggest challenges for new refining projects. He also pointed out that the lifespan of new refineries may be limited due to projected peak gasoline demand around 2030-2031, with heavier distillates like diesel and jet fuel peaking after 2040.

Should demand diminish, Element Fuels could pivot the refinery’s operations toward petrochemical production or direct exports to regions with lower adoption of electric vehicles, according to Calce.

The refinery’s design also incorporates flexibility to produce a variety of fuel grades.

(Note: This article has been officially corrected by Element Fuels to clarify that the capacity of the planned power plant is 165 megawatts, not 165 megawatts per day.)