'Sonhoe' project still on track

Teesside, UK - Plans to establish a £2-billion crude oil processing plant in the Tees Valley remain. The plant is to process heavy crude oil - producing millions of barrels of diesel and naphtha - and would represent one of the largest single investments in the process industry in the UK in the last 20 years.

As announced in late 2007 by Sonhoe Development Co. - a London-based company specialising in the development of hydrocarbon processing and infrastructure facilities - the facility would process 200,000 barrels a day of heavy crude oil into high quality, low sulphur diesel, petrochemical feedstock naphtha and kerosene for use in the UK, or for export. The development timescale through to completion was originally put at five to seven years.

According to Stan Higgins, boss of Nepic (North East Process Industry Cluster), the project is still very much alive with a lot happening behind the scenes. It is, he noted, top of Nepic’s agenda and by far the largest of 54 significant process engineering investments planned for the region (see News Analysis, p9).

Despite its massive scale, the Sonhoe project has disappeared off the publicity radar over recent months. The companys’s once informative website, for example, is now ’under construction’.

Higgins linked the lack of publicity, in part, to some likely changes in the structure of the ownership behind the project, though he declined to give further details, citing commercial confidentiality. “It looks like the ownership of the project is changing slightly,” Higgins did comment - also suggesting that the Sonhoe name might disappear from what he is now calling ’the heavy oil upgrader project’.

The project also requires agreements across the complex petrochemicals supply chain with partners such as SABIC UK Petrochemicals, which is currently establishing world-scale polyolefin production facilities on Teesside.

According to Higgins, supply chain issues have been “reasonably secure” since quite early on in the project. Rather, he said, the main delay has been complications over parcels of land and associated issues. Sonhoe has identified brownfield sites in and around the Wilton International site to locate the main processing units, storage and logistics facilities, plus the creation of new marine facilities on the river Tees.

“If we were doing this [in China] we wouldn’t have these problems, but in this country you have to deal with the owners of the land,” the Nepic boss pointed out. “Both the owners of the project and the support agencies, such as One North East, Nepic and Tees Valley Regeneration, have been helping with these issues,” he added.

“Some of the reasons why this project has been taking such a long time are that it is such a huge project involving parcels of land. My understanding now is that most of the pieces are being progressed. We hope that in the next two or three months there will be further developments, such as planning permissions and some basic design work.”

Clearly, another factor concerns the large sums of money needed, even to get to the front-end design stage of the project. As Higgins pointed out, this is a completely private sector project and raising money has not been the easiest thing to do in the current economic climate. But, he added, everyone is working hard to make the project go and remain quietly confident about its prospects.

Higgins’ views reinforce earlier comments by Neil Kenley, strategic investment and marketing director for Tees Valley Regeneration: “Despite the global economic downturn the fundamentals of the project still stack up. Millions of barrels of heavy crude are being extracted from oil wells across the globe and millions of barrels of heavy crude remain in the ground.”

Kenley continued: “There is a world-wide demand for diesel which continues to increase on an annual basis. There is an estimated 50 million tonne per annum shortage of diesel forecasted for Europe by 2015; this Tees Valley facility would make up about 7-10% of that deficit.”