US independent refiner Marathon Petroleum plans to shut down the petroleum coke calciner at its 363,500 b/d Los Angeles refinery complex by July, sources said.
The calciner produces 350,000 t/yr of calcined petroleum coke, which is used to produce anodes for aluminium smelting.
The decision, and its relatively short timeline, is related to the costs of environmental compliance, according to sources. The regulator for the Los Angeles area, the South Coast Air Quality Management District (SCAQMD), is set to enforce stricter restrictions on emissions that would have required the refiner to make costly equipment upgrades to the facility, likely units referred to as "scrubbers".
The SCAQMD has a longstanding cap-and-trade program for emissions that sets annual targets for emission reductions of nitrogen oxide (NOX) and sulphur oxides (SOX) for each industrial facility in the Los Angeles region. Emitting less than the target level allows the company to sell credits.
But the SCAQMD is sunsetting that cap-and-trade program in favor of a command-and-control system setting specific emissions limits for different types of industrial and refining equipment, and new rules passed last November placed constraints on NOX emissions from fluid catalytic cracking units and calciners at refineries in the region.
Local regulators estimated in November that refiners in the Los Angeles area would have to spend $179mn to $1bn on upgrading equipment in order to meet the new limits. The rules also apply to Valero's 135,000 b/d Wilmington refinery, Chevron's 269,000 b/d El Segundo refinery, Phillips 66's 139,000 b/d Carson-Wilmington refinery and PBF Energy's 155,000 b/d Torrance refinery.
The Marathon calciner's closure promises to further tighten calcined petroleum coke dynamics on the west coast. Rival Phillips 66 plans to shut the calciner at the Rodeo portion of its 120,000 b/d San Francisco refining complex from next year, as part of that facility's conversion toward renewable diesel production. The plan also includes the closure of crude upgrading units at its connected Santa Maria refinery in Arroyo Grande, California. The Rodeo calciner is expected to shut down by the first half of next year, one source said.
Phillips 66 San Francisco is regulated by the Bay Area Air Quality Management District and not subject to the same NOX emissions rules as Marathon's Los Angeles refinery complex.
While Phillips 66's conversion will eliminate all petroleum coke production, Marathon will continue to market green petroleum coke from the Carson refinery. Green coke prices are at record highs, with the US Gulf 3pc sulphur, 300-400ppm vanadium monthly midpoint hitting $350/t on a dry metric basis in April. This was nearly half of the $767.50/t price for finished calcined coke on a US Gulf basis. The last time green coke prices made up such a high percentage of calcined coke prices was in April 2018.
The combination of high raw material prices, stricter emissions standards, carbon credit costs, and restrictions on storage and handling are causing a number of integrated refiners to reconsider the economics of calcining petroleum coke.
The Marathon calcined coke is marketed by BP, which originally owned the facility before selling it in 2013 to US independent Tesoro, which Marathon later acquired.
Marathon does not provide comment on its operations. BP did not respond to a request for comment.