Released March 12, 2021 | SUGAR LAND
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(Editor's note: This article has been revised for clarity)
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Last month's Arctic blast of cold weather put oil refineries front and center as one part of the energy complex upended by frigid temperatures. However, unlike the power sector, which in Texas and some other states buckled under soaring demand and weather-forced outages, refineries were able to temporarily shut several million barrels per day of processing capacity without jolting gasoline or diesel markets. That's because consumer demand for transportation fuels has stayed weak, while inventories of gasoline and distillates remain at healthy levels.
Chris Paschall, Industrial Info's vice president of research for Oil & Gas and Petroleum Refining, has some good news for companies that supply equipment and services to refineries that undergo scheduled turnaround (TAR) projects.
"Refinery executives remain a bit conservative about their scheduled TAR spending plans, given that we have not yet entered the post-pandemic period," he said. "But as we move forward and markets stabilize, margins will recover and capital will be freed up, and we'll see an improving outlook for TARs in 2021 and 2022."
In a mid-January Industrial Info Outlook webcast, Paschall estimated total refinery project spending for the U.S. and Canada, including upgrades, expansions and other capital projects along with scheduled TARs, could reach $15.5 billion over 2021 and 2022. That number includes projects Industrial Info deems to have a "low" probability of taking place (roughly $4.1 billion), "medium" probability ($8.9 billion), and "high" probability ($2.6 billion).
"We really need to pay attention to projects with a 'medium' probability, which we believe have a 70%-80% chance of moving forward," Paschall said. "There are a lot of projects in that category that may move forward, but that will be dictated by how soon the economy opens up."
Measured by region, the Southwest is expected to garner the lion's share of scheduled total project spending over the two-year period, nearly $7.5 billion, followed by Western Canada ($2.3 billion), the West Coast ($1.7 billion) and the Rocky Mountains ($1.4 billion).
Click on the image at right to see a chart, by region, of expected spending for 2021-2022.
Paschall identified Phillips 66 (NYSE:PSX) (Houston, Texas), Valero Refining Company (NYSE:VLO) (San Antonio, Texas) and HollyFrontier Corporation (NYSE:HFC) (Dallas, Texas) as the largest projected spenders over the 2021-2022 period.
"The bottom has been hit, and we're starting to see increased spending," he said on a January 19 webcast organized by Industrial Info.
Several Texas refineries were particularly hard-hit by Winter Storm Uri; they are going through extended restarts now.
During the COVID-19 pandemic, many refineries made unplanned production cuts as state-imposed restrictions cut into demand for refined products. Some refineries have been operating at lower rates of production for over a year. However, the availability of three vaccines could mean the U.S. is turning a corner on the virus, though new strains have emerged. So far, slightly more than 60 million Americans have received at least their first vaccine against COVID-19.
Right now, refinery runs are slightly more than 80% of what they were prior to the pandemic, Paschall said, predicting it could be some time--a year, at least--before North America returns to its pre-pandemic demand levels.
As well, Paschall remarked, the refining business is going through dramatic change. Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) closed its Convent, Louisiana, refinery last year after failing to find a buyer. Several refineries are shifting their product slate to produce "green" diesel produced from biomass feedstocks. Globally, older refineries with narrower profit margins are being forced to consider closing as newer capacity comes online in Asia.
"It's a dynamic, global business, but it looks like refiners are starting to see light at the end of the tunnel," Paschall said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Last month's Arctic blast of cold weather put oil refineries front and center as one part of the energy complex upended by frigid temperatures. However, unlike the power sector, which in Texas and some other states buckled under soaring demand and weather-forced outages, refineries were able to temporarily shut several million barrels per day of processing capacity without jolting gasoline or diesel markets. That's because consumer demand for transportation fuels has stayed weak, while inventories of gasoline and distillates remain at healthy levels.
Chris Paschall, Industrial Info's vice president of research for Oil & Gas and Petroleum Refining, has some good news for companies that supply equipment and services to refineries that undergo scheduled turnaround (TAR) projects.
"Refinery executives remain a bit conservative about their scheduled TAR spending plans, given that we have not yet entered the post-pandemic period," he said. "But as we move forward and markets stabilize, margins will recover and capital will be freed up, and we'll see an improving outlook for TARs in 2021 and 2022."
In a mid-January Industrial Info Outlook webcast, Paschall estimated total refinery project spending for the U.S. and Canada, including upgrades, expansions and other capital projects along with scheduled TARs, could reach $15.5 billion over 2021 and 2022. That number includes projects Industrial Info deems to have a "low" probability of taking place (roughly $4.1 billion), "medium" probability ($8.9 billion), and "high" probability ($2.6 billion).
"We really need to pay attention to projects with a 'medium' probability, which we believe have a 70%-80% chance of moving forward," Paschall said. "There are a lot of projects in that category that may move forward, but that will be dictated by how soon the economy opens up."
Measured by region, the Southwest is expected to garner the lion's share of scheduled total project spending over the two-year period, nearly $7.5 billion, followed by Western Canada ($2.3 billion), the West Coast ($1.7 billion) and the Rocky Mountains ($1.4 billion).
Paschall identified Phillips 66 (NYSE:PSX) (Houston, Texas), Valero Refining Company (NYSE:VLO) (San Antonio, Texas) and HollyFrontier Corporation (NYSE:HFC) (Dallas, Texas) as the largest projected spenders over the 2021-2022 period.
"The bottom has been hit, and we're starting to see increased spending," he said on a January 19 webcast organized by Industrial Info.
Several Texas refineries were particularly hard-hit by Winter Storm Uri; they are going through extended restarts now.
During the COVID-19 pandemic, many refineries made unplanned production cuts as state-imposed restrictions cut into demand for refined products. Some refineries have been operating at lower rates of production for over a year. However, the availability of three vaccines could mean the U.S. is turning a corner on the virus, though new strains have emerged. So far, slightly more than 60 million Americans have received at least their first vaccine against COVID-19.
Right now, refinery runs are slightly more than 80% of what they were prior to the pandemic, Paschall said, predicting it could be some time--a year, at least--before North America returns to its pre-pandemic demand levels.
As well, Paschall remarked, the refining business is going through dramatic change. Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) closed its Convent, Louisiana, refinery last year after failing to find a buyer. Several refineries are shifting their product slate to produce "green" diesel produced from biomass feedstocks. Globally, older refineries with narrower profit margins are being forced to consider closing as newer capacity comes online in Asia.
"It's a dynamic, global business, but it looks like refiners are starting to see light at the end of the tunnel," Paschall said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
