Refining capacity at refineries in the United States is declining. Numerically, it is clear that there is a shift to decarbonization on a global scale, in addition to the decline in demand for gasoline and diesel due to the spread of the new coronavirus infection. I show the situation of refineries in the United States based on the materials of the Energy Information Administration (EIA). (The photo is an image. Quoted from Yahoo image)


According to a weekly report released by the EIA at the end of June this year, the refining capacity of US refineries decreased by 850,000 BCD (4.5%) to 18.13 million BCD (a record high of 18.98 million BCD in 2019). The EIA analyzed that the background of the decrease was that the demand for automobile fuel such as gasoline decreased due to the corona disaster, and the refiner stopped the operation of the refinery due to the decrease in selling price. EIA added that the shift to decarbonization, a global trend, has also spurred on.


As of January 1, this year, there are 129 US refineries that are out of service (idle). A year ago, there were 135 locations, so 6 locations will be deducted. The refineries that were shut down were three for Marathon Petroleum, one for Royal Dutch Shell and one for independent HolltFrontier. (The refinery operated by Philadelphia Energy Solutions was later closed, but was not counted because it was in operation as of January 1st).


On the other hand, three refineries were bought and sold between January 2020 and June 2021. In February last year, PBF Energy acquired the Martinez refinery in California (capacity: 156,000 BCD) from Shell. In June last year, Hilcorp North Slope acquired the Prudhoe Bay refinery (6,500 BCD) from BP, Alaska, in Alaska. Also, on January 1, 2021, Hartree Partners acquired the Channelview Condensate Splitter (35,000 BCD) from Targa resources.


According to EIA, crude oil refining in 2020 averaged 14.2 million BPD, the lowest in the last decade. In addition, the average utilization rate of refineries in 2020 was as low as 79%, the lowest level since 1985. On the other hand, US coal-fired production in 2020 was 535 million short tons (st), a decrease of 24% from 706 million st in 2019, the lowest since 1965. Global coal demand declined in 2020, impacted by a decline in supply for power generation in the United States.


Under these circumstances, oil major ExxonMobil is rushing to modernize its refineries. Exxon has made a final investment decision (FID) for an expansion and modernization project for the Baton Rouge refinery (capacity: 520,000 BPD) in Louisiana. The total project cost is expected to be 240 million dollars. Along with increasing the refining capacity, they plan to construct equipment to reduce the emission of volatile organic compounds (VOCs). Construction is expected to begin later this year.


There are also moves to convert equipment in the production of renewable fuels. PBF Energy has announced plans to modify its dormant hydrocracker to produce renewable diesel at the Chalmette refinery (capacity: 185,000 BPD) on the outskirts of New Orleans, Louisiana. The Louisiana state government says it will give tax breaks to Exxon and PBF projects to drive the project.


At the end of July, the Energy Information Administration (EIA) said that renewable diesel production capacity would increase from 600 million gallons / year (38,000 BPD) at the end of last year to 5.1 billion gallons / year (330,000 BPD) in 2024. Expected to increase. 


In addition to biorefinery, renewable diesel can be produced by mixing it with petroleum distillates at refinery refining facilities, so refinery facility remodeling plans are drawing attention.


Jiro Arihara

Global Commodity Watcher