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US Refining Capacity to Creep Higher in 2023

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Refining capacity in the US is set to grow next year, but not nearly enough to offset the dramatic rationalization that started in the middle of 2019.

Chief among the projects adding downstream capacity in 2023 is Exxon Mobil’s expansion of its Beaumont, Texas facility, where the integrated major expects an incremental 250,000 barrels per day in throughput to come into service midyear. Valero Energy, meanwhile, is constructing a 55,000 b/d coker at its facility in Port Arthur, Texas.

In addition, the former Hovensa refinery in St. Croix in the US Virgin Islands is working toward a restart, a development that would add roughly 200,000 b/d in capacity. The timeline for the restoration of the refinery is uncertain, however, and previous attempts to restart have fallen apart.

However, the additional capacity due to come on line in the next year-plus is a drop in the bucket compared to recent losses. Starting in 2019 with the explosion of the Philadelphia Energy Solutions (PES) refinery, the US downstream has lost over 1 million b/d of throughput capacity to closures, accidents and conversions to produce renewable fuels.

Selected Refinery Closures and Conversions Since 2019
Refinery Losses
CompanyLocationCapacity Lost ('000 b/d)Reason/Future
PESPhiladelphia, PA330Fire
Phillips 66Alliance, LA256Flooding - converting to terminal
Phillips 66San Francisco, CA120Renewable diesel
Marathon PetroleumMartinez, CA161Renewable diesel
Marathon PetroleumGallup, NM26Closed
Marathon PetroleumDickinson, ND20Renewable diesel
HollyFrontier SinclairCheyenne, WY52Renewbale diesel
VertexMobile, AL75Renewable diesel
LyondellBasellHouston, TX268Closing in 2023
Total Lost 1,308 
Refinery Expansions
CompanyLocationCapacity Gained ('000 b/d)Type
ValeroPort Arthur, Texas55Coker
Exxon MobilBeaumont, Texas250Light crude unit
WIPSt Croix, USVI200Restart
Total Gained 505 

Seeking Quality

Neither Exxon nor Valero’s expansions come as a result of or in response to recent rationalizations or sky-high downstream margins. Rather, both have been on the docket for some time.

In addition, both are specifically targeted to handle particular grades of crude oil, and are not designed to increase capacity for a broad array of feedstock.

Exxon’s Beaumont expansion targets the light, sweet crude that proliferates in shale plays such as the Bakken, Eagle Ford, and Permian Basin.

In the wake of the shale revolution, Gulf Coast refiners — which typically process medium and heavy grades — faced a glut of light, sweet crude. After displacing look-alike imports, downstream players could not accommodate much more light, sweet.

Exxon was one of very few US refiners to invest heavily in processing capacity for incremental domestic crude. As volumes of light, sweet have grown, most of the incremental barrels have found a home abroad, a trend that is likely to continue.

Indeed, the additional capacity at Beaumont does not account for a single year’s growth in Permian supply, with firms such as Plains All American forecasting an increase in output of over 600,000 b/d by the end of this year.

Valero’s coker targets the opposite side of the crude quality spectrum and does not increase outright crude distillation capacity. The company says the project “should improve turnaround efficiency, reduce maintenance-related lost margin opportunity and increase heavy-sour crude oil and residual processing capacity and light products yield.”

The Gulf Coast continues to see growing volumes of heavy, sour Canadian crude as midstream connectivity improves, most recently via the reversal of the Capline.

Not Over

But even as new capacity comes into service, yet another refinery is slated for closure.

Independent LyondellBasell will close its 268,000 b/d Houston refinery by the end of 2023, which will completely offset the incremental capacity at Beaumont. And unless a buyer appears, it is likely that crude refining at the site will never return.

During the company's recent second-quarter earnings presentation to analysts and investors, LyondellBasell CEO Peter Vanacker floated the idea of converting the facility to recycle plastics, in keeping with the firm’s growing emphasis on chemicals.

Topics:
Refining, Independent Refiners, Regional Integrateds, Corporate Strategy , Oil Products, Oil Supply
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