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US refiners invest sparingly in new capacity

  • Spanish Market: Oil products
  • 26/05/22

US refiners are executing a few capital projects that will expand domestic crude processing capacity before the end of 2023, but expensive forays into renewable fuel production will likely limit capacity expansions in future turnarounds.

Three of the largest refiners in the US are currently working on capital projects that could offer another 350,000 b/d of crude processing capacity to the US refining portfolio by the end of next year, partially offsetting the effect of recent closures around the industry.

The largest refinery expansion currently underway in the US is ExxonMobil's BLADE (Beaumont Light Atmospheric Distillation Expansion) project at its 369,000 b/d refinery in Beaumont, Texas. The project will add another 250,000 b/d crude distillation unit to the facility by next year in conjunction with the company's plan to increase oil production from Texas' Permian basin.

Valero is steering its own expansion project in Texas, with plans to start-up a 55,000 b/d delayed coker and sulfur recovery unit from the first half of next year at its 395,000 b/d Port Arthur refinery. The project will increase the facility's heavy-sour crude oil and residual processing capacity.

Marathon Petroleum continues work on the South Texas Asset Repositioning (STAR) project at its 593,000 b/d Galveston Bay refinery in Texas, which is integrating the Texas City refinery it purchased from BP in 2012 with another refinery in the same city the company already owns. The $1.5bn STAR project, first announced in 2015, is intended to add 40,000 b/d of new crude capacity and expand the facility's residual oil processing capabilities when complete next year.

These projects, all announced prior to 2019 and delayed repeatedly by Covid-19-related restrictions, have taken on new importance in view of stressed US refining capacity. US refiners have invested relatively lightly in capacity expansions during turnarounds in recent years, with a dimming long-term outlook for road fuel demand running headlong into the short-term demand shocks provided by the pandemic. Across 2020 and 2021 roughly 1.5mn b/d in US refining capacity was shuttered due to shattered demand, and it seemed likely to many industry watchers that less — and not more — refining capacity was needed in the short-term.

War changes the outlook

Recent events have reframed those assumptions. Impacts from the war in Ukraine have complicated trade in a number of commodities in recent months, and refined product stocks in the US and Europe have dwindled following sanctions on Russian energy. Refining margins have responded by reaching rarefied air — US Gulf coast refining margins in the four-week period ending 20 May averaged more than double year-ago levels, European gasoline margins in April reached a record-high $21.44/bl premium to Ice Brent and Asia-Pacific gasoline margins pushed past $30/bl for the first time earlier this month.

There is not much slack in the US refining system to answer the call offered by these prices. The Energy Information Administration estimates that US crude utilization will average 93pc in the second quarter before increasing to 94pc in the third quarter — a mark that would represent the highest rate in four years.

Recent events may signal that more crude processing is needed in the US and elsewhere, especially with US crude production expected to hit a record-high of close to 13mn b/d next year. But new refinery expansion projects are unlikely in the short-term, with companies already managing cost-intensive projects to set up renewable fuel infrastructure at a few facilities.

US petroleum refiners are currently involved in projects that promise to bring on roughly 208,000 b/d of renewable diesel (RD) processing capacity between this year and 2024. Valero, Marathon, Phillips 66, PBF Energy, and HF Sinclair have recently outlined around $5bn in such investments, with renewable fuel projects absorbing the bulk of a few companies' capex plans.

Phillips 66, which is without a partnerin its $850mn conversion of the San Francisco refinery in California, has earmarked around 45pc of all growth spending this year for its RD project as part of what it has called a "very constrained" capital approach. Marathon Petroleum has similarly earmarked around 50pc of its $1.3bn capital outlay for 2022 for converting the shuttered Martinez refinery near San Francisco into a 48,000 b/d RD plant by 2023.

In a possible sign of this trend's long-term staying power, service companies specializing in refinery turnarounds have heralded this shift toward RD production as a new bread-and-butter business line. Matrix Service, which does major maintenance projects for refiners, utilities and other industries, said late last year that refining sector investments are "moving toward carbon reduction and renewable fuels conversions" that will represent a significant portion of its business moving forward.

Delaying maintenance

Rather than investing in capacity expansions, refiners will walk the razor's edge by pushing back turnarounds to keep feedstocks — and cash — flowing this summer driving season. Phillips 66, which at the start of the year indicated that it would soon undertake turnarounds pushed off during the pandemic, said last month that it will now spend less money on maintenance this year than previously forecast as more turnarounds are delayed until next year.

This practice is not without its risks, as some refiners have suggested that utilization rates are unsustainable at current levels.

"Historically although we've been able to hit 93pc utilization generally you cannot sustain it for long periods of time," Valero chief executive Joe Gorder said on 26 April. "I think the markets will have to balance more on the demand side."


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07/04/25

Flooding on US rivers mires barge transit

Flooding on US rivers mires barge transit

Houston, 7 April (Argus) — Barge transit slowed across the Arkansas, Ohio and lower Mississippi rivers over the weekend because of flooding, which prompted the US Army Corps of Engineers (Corps) to close locks and issue transit restrictions along the waterways. The Corps advised all small craft to limit or halt transit on the McClellan-Kerr Arkansas River Navigation System (MCKARNS) in Arkansas because flows reached above 200,000 cubic feet per second (cfs), nearly three times the high-water flow. The heavy flow is expected to persist throughout the week, posing risks to those transiting the river system, said the Corps. Some barges have halted movement on the river, temporarily miring fertilizer resupply efforts in Arkansas and Oklahoma in the middle of the urea application season. The Corps forecasts high flows to continue into Friday, and the National Weather Service predicts several locations along the MCKARNS will maintain a moderate to minor flood stage into Friday as well. Both the Arthur V Ormond Lock and the Toad Suck Ferry Lock, upriver from Little Rock, Arkansas, shut on 6 April because of the high flows. Flows along the Little Rock Corps district reached 271,600cfs on 7 April. The Corps forecasts high flows to continue into Friday. Ohio and lower Mississippi rivers The Corps restricted barge transit between Cincinnati, Ohio, and Cairo, Illinois, on the Ohio River to mitigate barge transportation risks, with the Corps closing two locks on the Ohio River on 6 April and potentially four more in the coming days. Major barge carrier American Commercial Barge Line (ACBL) anticipates dock and fleeting operations will be suspended at certain locations along the Mississippi and Ohio rivers as a result of the flooding. NWS forecasters anticipate major flooding levels to persist through the following week. Barge carriers also expect a backlog of up to two weeks in the region. To alleviate flooding at Cairo, Illinois, where the Ohio and Mississippi Rivers meet, the Corps increased water releases at the Barkley Dam on the Cumberland River and the Kentucky Dam on the Tennessee River. The Markland Lock, downriver from Cincinnati, Ohio, and the Newburgh lock near Owensboro, Kentucky, closed on 6 April. The Corps expects the full closure to remain until each location reaches its crest of nearly 57ft, which could occur on 8 or 9 April, according to the National Weather Service (NWS). Around 50 vessels or more are waiting to transit each lock, according to the Lock Status Report published by the Corps on 7 April. The Corps also shut a chamber at both Cannelton and McAlpine locks. The John T Myers and Smithland locks may close on 7 April as well, the Corps said. The Olmsted Lock, the final lock before the Ohio and Mississippi rivers, will require a 3mph limit for any traffic passing through. The NWS expects roughly 10-15 inches of precipitation fell along the Ohio and Mississippi River valleys earlier this month, inducing severe flooding across the Ohio and Mississippi River valleys. A preliminary estimate from AccuWeather stated an estimated loss of $80-90bn in damages from the extreme flooding. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

USDA to release paused funds for higher biofuel blends


04/04/25
04/04/25

USDA to release paused funds for higher biofuel blends

New York, 4 April (Argus) — The US Department of Agriculture (USDA) said this week that the agency would release $537mn for 543 projects meant to expand infrastructure for higher biofuel blends, reviving many projects that were funded by former US president Joe Biden and then paused by the new administration. The grants will help support the installation of biofuel storage tanks and dispensers of higher ethanol blends, including E15 and E85, and higher biodiesel blends, including B20 and B99. They come from the Higher Blends Infrastructure Incentive Program, which started during US president Donald Trump's first term to help reduce the cost of installing biofuel infrastructure but was more recently expanded in scope with new funds from the Inflation Reduction Act. Project funding had been stalled after Trump pressed federal agencies to pause the disbursement of funds appropriated by that 2022 climate law. That directive affected projects due for funding under the higher blends program, including some approved in the final days of the Biden administration. Trump's efforts to freeze legislatively-approved funding is the subject of multiple court cases. USDA said that of the 543 projects approved for support, 188 projects — amounting to nearly $260mn of spending — were new commitments under the Trump administration. The largest of the new projects is a $14.3mn grant for QuikTrip to install E15 and B20 dispensers at 75 fueling stations across 13 states. More projects received funds in California than in any other state. USDA said releasing the funds — at the same time as various other government programs remain on hold — is part of its commitment to "aggressively exploring ways to unleash American energy and incentivize the production and use of homegrown US biofuels." Biofuel groups see potential for supportive policy under the Trump administration and lobbied US officials at a meeting this week for a steep increase in biomass-based diesel blend mandates. Ethanol lobbyists are privately optimistic too that the administration will soon start issuing emergency waivers to bypass typical summertime limits on nationwide E15 access. Support for biofuels is one way the Trump administration could reduce the toll on US farmers from an increasingly volatile trade war that threatens to cut off export markets for US corn and soy. USDA noted that the higher blends program, by allowing for more ethanol and biodiesel consumption, "protects American farmers from retaliatory trade practices." By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Tariffs and their impact larger than expected: Powell


04/04/25
04/04/25

Tariffs and their impact larger than expected: Powell

New York, 4 April (Argus) — Federal Reserve chairman Jerome Powell said today tariff increases unveiled by US president Donald Trump will be "significantly larger" than expected, as will the expected economic fallout. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth," Powell said today at the Society for Advancing Business Editing and Writing's annual conference in Arlington, Virginia. The central bank will continue to carefully monitor incoming data to assess the outlook and the balance of risks, he said. "We're well positioned to wait for greater clarity before considering any adjustments to our policy stance," Powell added. "It is too soon to say what will be the appropriate path for monetary policy." As of 1pm ET today, Fed funds futures markets are pricing in 29pc odds of a quarter point cut by the Federal Reserve at its next meeting in May and 99pc odds of at least a quarter point rate cut in June. Earlier in the day the June odds were at 100pc. The Fed chairman spoke after trillions of dollars in value were wiped off stock markets around the world and crude prices plummeted following Trump's rollout of across-the-board tariffs earlier in the week. Just before his appearance, Trump pressed Powell in a post on his social media platform to "STOP PLAYING POLITICS!" and cut interest rates without delay. A closely-watched government report showed the US added a greater-than-expected 228,000 jobs in March , showing hiring was picking up last month. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

UK considers import tariffs on US oil products


04/04/25
04/04/25

UK considers import tariffs on US oil products

London, 4 April (Argus) — The UK government has included refined oil products from the US in a list of goods that could be subject to retaliatory tariffs. The government said it was considering "potential tariff measures on US goods, should this be deemed necessary" in response to a 10pc US import tariff on UK goods and services — excluding energy — due to take effect on 5 April. The consultation will last until 1 May. Light oils, gasoils, jet fuel, fuel oils, lubricants and bitumen all feature in the list of products possibly subject to retaliatory tariffs. The UK could be particularly exposed to any tariff impact on US middle distillate imports in the event of retaliation. The UK sourced over a quarter of its 14.37mn t of 10ppm diesel and gasoil from the US last year, according to Vortexa, while 3pc of its 10.15mn t of jet and kerosine imports were sourced from the US. It is not clear what tariff rate the UK is targeting in its potential retaliation. For other oil products, any potential import tariff impact would become more muted as US refined product imports become less significant. The UK received just 6pc of its 1.92mn t total fuel oil imports from the US last year, while the UK was the fourth largest gasoline supplier to the US and received none of the product from its trade partner. European refined product values have collapsed as a result of the escalating trade war which saw China retaliate today against the US' latest tariff action. Eurobob non-oxy gasoline barge prices dropped by 4pc to $700.75/t on 3 April at a time when trading activity typically picks up ahead of the US summer driving season. Indicated non-oxy barge values were set to drop further in the trading session today. The EU is similarly preparing countermeasures against US import tariffs, which Washington set at 20pc from 9 April in addition to existing rates. Ice gasoil futures had dropped by 10pc since President Trump announced the new tariff regime on 2 April to $615.75/t by the close today. Ice gasoil futures are used as the pricing basis against which diesel, gasoil and jet fuel grades are assessed in the European middle distillates markets. European refined products market participants have pointed to a darker global economic outlook triggered by the US import tariffs as the driving force behind the drop-off in European product values. By George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

South Africa Natref to end bitumen production from Sep


04/04/25
04/04/25

South Africa Natref to end bitumen production from Sep

London, 4 April (Argus) — Bitumen production at Natref's 107,000 b/d Sasolburg refinery in South Africa will cease from September, ending all the country's output of the heavy oil product. Several South African bitumen market participants, including buyers from the refinery and suppliers of imported bitumen into the domestic and regional southern African markets, said officials from majority Natref shareholder Sasol had been informing customers of the planned move over the past week. Customers were told that final bitumen supply from stocks held at the refinery would be supplied to them into October, with all supplies ending thereafter. Market participants said the Natref plan is linked to a wider move of switching to sweeter crudes aimed at maximising output of light and middle distillates, which would also hit output of heavy products other than bitumen, notably high-sulphur fuel oil (HSFO). Officials at Sasol, which owns 63.3pc of Natref alongside UK energy firm Prax with 36.4pc, have so far not responded to Argus' requests for comment. South African market participant said the move had been under consideration for some time, even before Prax agreed to buy TotalEnergies' Natref stake in December 2023. South Africa turned from a major net exporter of bitumen, mainly to its southern African neighbours, to becoming increasingly dependent on imports after several of the country's refineries were either shut down or ended their bitumen production since 2020. South African cargo imports in bitumen tankers surged to nearly 200,000t in 2024, according to Vortexa data, mostly into Durban and some into Cape Town. Mediterranean supplies, mainly from Greece and Turkey, made up just over half of these, with Rubis and Continental supplying most. Mideast Gulf storage points, along with Bahraini state-owned Bapco's refinery and export terminal at Sitra, supplied around a third, while emerging exporter Pakistan shipped 8pc. According to a South African bitumen supplier, the Natref refinery's bitumen production fell last year to 45,000-50,000t — from an Argus estimate of 140,000t in 2023 — because of numerous plant halts and interruptions. The market effect of Natref ending its bitumen output will therefore be limited, with another leading South African participant saying truck flows from the inland refinery had become increasingly unreliable. The halt will nevertheless trigger more South African import requirements that are anyway likely to rise sharply in the coming years because of much-enhanced government infrastructure budgets. The Natref refinery was forced to stop all production for about two months following a fire in early January this year. French construction and bitumen supply firm Colas recently became the latest company to take a South African import asset position, agreeing a long-term deal with local firm FFS Refiners to operate four of five new bitumen tanks at an existing Durban facility once an FFS expansion there is completed, likely in the second half of this year. By Keyvan Hedvat and Fenella Rhodes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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