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Sharply higher cost estimate puts NexLube construction on hold

TAMPA — Construction of a new $120 million oil recycling plant at the Port of Tampa was suddenly halted last month because "the costs estimated for plant completion have increased to more than 100 (percent)," according to a company statement.

NexLube Tampa LLC also said in the Nov. 22 media release that it temporarily suspended construction to "evaluate its options due to the substantial increase in projected costs."

But that leads to the questions: How could the company's estimate be so wildly off? How could it learn, after 18 months of work, that the plant will cost twice as much? And that the final price tag to finish the facility could be more than $200 million?

"This happens basically with almost all industrial facilities," said David Bell, professor of chemical engineering at the University of Wyoming. "It happens all the time in the nuclear industry."

But he said that it is unusual for the company to have discovered the problem so long after construction began in 2012.

NexLube on Nov. 5 posted a photo of the construction site on its Twitter account, @NexLube. Much of the infrastructure — the 54,400-square-foot processing plant, the 9,200-square-foot office building and the tanker farm — has already been erected on 12.3 acres the company is leasing from the port at Pendola Point.

So what could have gone wrong? The company declined to comment Wednesday.

But Bell said a likely culprit could be the cost of the components needed for the hydrofinishing process chosen by NexLube. That process uses extreme heat and pressure — even more than other oil refineries — to transform used petroleum into new, purer lubricants.

"The really costly parts are it's a very high-pressure process," Bell said. "You have to have plumbing capable of withstanding high pressure, and the compressors are very costly pieces.

"There's rules to estimate the costs of those things, but they're very inaccurate."

NexLube signed a 20-year contract to lease the land from the Tampa Port Authority worth $10 million over its lifetime. The company was also awarded $630,000 in state incentives and granted a massive property tax break from Hillsborough County.

The company "believes the project continues to be viable," it said in its statement.

But what happens if the project is never finished? What if the company abandons the site and the Tampa Port Authority is left with tons of half-built concrete and steel sitting on public property?

"That's a hypothetical," said port spokesman Ed Miyagishima. "From all indications we're getting from the leadership at NexLube, the project is moving forward."

Jamal Thalji can be reached at (813) 226-3404, or @jthalji on Twitter.

Sharply higher cost estimate puts NexLube construction on hold 12/04/13 [Last modified: Wednesday, December 4, 2013 9:53pm]
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