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Researched by Industrial Info Resources (Sugar Land, Texas)--Industrial Info has identified $15.5 billion worth of petroleum refining project activity in the U.S. and Canada that is proposed to start construction this year through 2022. Refiners took a drubbing in 2020, as a result of the COVID-19-induced drop in demand, and the amount of project activity proposed at the beginning of any year usually drops significantly as the year progresses. Still, in-plant capital projects and unit additions have a good chance of moving forward, said Chris Paschall, Industrial Info's vice president for refining and crude research, during last week's 2021 North American Industrial Market Outlook event.
Click on the image at right for a breakdown of the planned spending by category.
Click here for the on-demand oil and gas outlook presentation.
A snapshot comparison of the present value of all projects across the entire U.S. and Canadian oil and gas industry and the value at this time in 2019 shows only a 10% difference, Paschall remarked. "We currently are tracking about $629 billion compared with the $699 billion at this time last year for the domestic markets," as many projects starts were delayed or cancelled, he said.
The downstream sector, including refineries, experienced a "significant pullback" in spending, with a number of refinery closures announced due to falling fuel demand. For related information, see November 5, 2020, article - Shell to Shut Down Refinery in Convent, Louisiana, Starting This Month, an Industrial Info Market Brief, September 11, 2020, article - Slim Pickings for U.S. Refinery Project Kickoffs in Fourth Quarter, October 30, 2020, article - PBF Energy to Idle Paulsboro Refining Units, Looks for More Cost Reductions and November 16, 2020, article - EIA: U.S. Refinery Runs Below Average Due to COVID-19, Reduced Demand.
The U.S. Energy Information Administration (EIA) estimates that global consumption of petroleum and liquid fuels averaged 92 million barrels per day (BBL/d) in 2020, which was down by 9 million BBL/d from 2019, Paschall said. The EIA expects global liquids fuels consumption to grow by 5.6 million BBL/d in 2021 and another 3 million BBL/d in 2022. "So, we are going to gain over the next two years what we lost in one year," he noted.
U.S. gasoline demand is 85% of what it was prior to the arrival of COVID-19, while diesel demand is at the 90% mark. The refining crack spread (the overall pricing difference between a barrel of crude oil and the petroleum products refined from it) for gasoline has recovered.
The U.S. Federal Highway Administration has estimated that travel on all U.S. roads and streets was 2.3 trillion miles in 2020, down 13.9% from 2019's numbers. Still, Americans are driving a "significant amount," Paschall said.
The diesel refining crack spread is continuing to recover. The diesel crack spread was compressed for much longer than gasoline because last year's plunge in airline travel resulted in a lot of jet fuel being pushed into the diesel blend, which in turn caused diesel inventories to rise.
Jet fuel demand continues to lag and is likely to take two to three years to recover, Paschall said. The U.S. Transportation Security Administration (TSA) reported that 878,000 travelers went through its airport turnstiles on January 18, compared with 2.2 million a year earlier.
Of the $15.5 billion worth of U.S. and Canadian refining projects proposed to kick off through 2022, $3.5 billion is earmarked for new grassroot facilities. Paschall said grassroot kickoffs are "going to be a difficult task, considering we are shutting down refining capacity in the U.S. right now."
The prospects are better for in-plant work and unit additions, he said. About $2.8 billion is allocated to the crude vacuum coking sector as refiners strive to reduce their feedstock costs by optimizing their facilities -- long accustomed to running heavy sour crude -- to handle sweet (and cheaper) domestic crude.
"But we also are starting to see some bottom-of-the-barrel projects, with heavy crude coming back on the market," Paschall said. Also known as residue upgrading, bottom-of-the-barrel processing includes separating, upgrading and converting the vacuum residue of crude oils.
Most of the planned diesel project spending is earmarked for renewable diesel, as refiners look to meet low-carbon goals. At its Wynnewood Refinery in Oklahoma, CVR Energy Incorporated (NYSE:CVI) (Sugar Land, Texas) plans to start construction soon on a renewable diesel conversion and unit addition. For more information see Industrial Info's project reports and September 1, 2020, article - NavigatIIR: U.S. Renewable Diesel Projects Grow in Popularity.
By market region, the U.S. Southwest, with its massive Gulf Coast refining capacity, is home to roughly half of the planned spending. The Southwest market region includes Texas, Louisiana, Oklahoma and Arkansas. Phillips 66 (NYSE:PSX) (Houston), which ranks as the largest potential spender through 2022, is planning a $500 million reformer unit addition at its Borger Refinery in the Texas Panhandle. The new reformer would replace the 20,000-BBL/d 19-2 semi-regen/cyclic reformer to increase yield. For more information, see Industrial Info's project report. For related information, see December 15, 2021, article - Phillips 66 Reduces Capital Spending for 2021.
"But we (also) are seeing some spending in Western Canadian markets," Paschall said. Among other projects, Husky Energy Incorporated (TSX:HSE) (Calgary, Alberta) continues to evaluate a asphalt plant expansion at its Lloydminster Refinery in Alberta. The capacity of the asphalt facility would be doubled to 60,000 BBL/d, using heavy oil to produce more than 30 types and grades of road asphalt. For more information, see Industrial Info's project report.
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.
Click here for the on-demand oil and gas outlook presentation.
A snapshot comparison of the present value of all projects across the entire U.S. and Canadian oil and gas industry and the value at this time in 2019 shows only a 10% difference, Paschall remarked. "We currently are tracking about $629 billion compared with the $699 billion at this time last year for the domestic markets," as many projects starts were delayed or cancelled, he said.
The downstream sector, including refineries, experienced a "significant pullback" in spending, with a number of refinery closures announced due to falling fuel demand. For related information, see November 5, 2020, article - Shell to Shut Down Refinery in Convent, Louisiana, Starting This Month, an Industrial Info Market Brief, September 11, 2020, article - Slim Pickings for U.S. Refinery Project Kickoffs in Fourth Quarter, October 30, 2020, article - PBF Energy to Idle Paulsboro Refining Units, Looks for More Cost Reductions and November 16, 2020, article - EIA: U.S. Refinery Runs Below Average Due to COVID-19, Reduced Demand.
The U.S. Energy Information Administration (EIA) estimates that global consumption of petroleum and liquid fuels averaged 92 million barrels per day (BBL/d) in 2020, which was down by 9 million BBL/d from 2019, Paschall said. The EIA expects global liquids fuels consumption to grow by 5.6 million BBL/d in 2021 and another 3 million BBL/d in 2022. "So, we are going to gain over the next two years what we lost in one year," he noted.
U.S. gasoline demand is 85% of what it was prior to the arrival of COVID-19, while diesel demand is at the 90% mark. The refining crack spread (the overall pricing difference between a barrel of crude oil and the petroleum products refined from it) for gasoline has recovered.
The U.S. Federal Highway Administration has estimated that travel on all U.S. roads and streets was 2.3 trillion miles in 2020, down 13.9% from 2019's numbers. Still, Americans are driving a "significant amount," Paschall said.
The diesel refining crack spread is continuing to recover. The diesel crack spread was compressed for much longer than gasoline because last year's plunge in airline travel resulted in a lot of jet fuel being pushed into the diesel blend, which in turn caused diesel inventories to rise.
Jet fuel demand continues to lag and is likely to take two to three years to recover, Paschall said. The U.S. Transportation Security Administration (TSA) reported that 878,000 travelers went through its airport turnstiles on January 18, compared with 2.2 million a year earlier.
Of the $15.5 billion worth of U.S. and Canadian refining projects proposed to kick off through 2022, $3.5 billion is earmarked for new grassroot facilities. Paschall said grassroot kickoffs are "going to be a difficult task, considering we are shutting down refining capacity in the U.S. right now."
The prospects are better for in-plant work and unit additions, he said. About $2.8 billion is allocated to the crude vacuum coking sector as refiners strive to reduce their feedstock costs by optimizing their facilities -- long accustomed to running heavy sour crude -- to handle sweet (and cheaper) domestic crude.
"But we also are starting to see some bottom-of-the-barrel projects, with heavy crude coming back on the market," Paschall said. Also known as residue upgrading, bottom-of-the-barrel processing includes separating, upgrading and converting the vacuum residue of crude oils.
Most of the planned diesel project spending is earmarked for renewable diesel, as refiners look to meet low-carbon goals. At its Wynnewood Refinery in Oklahoma, CVR Energy Incorporated (NYSE:CVI) (Sugar Land, Texas) plans to start construction soon on a renewable diesel conversion and unit addition. For more information see Industrial Info's project reports and September 1, 2020, article - NavigatIIR: U.S. Renewable Diesel Projects Grow in Popularity.
By market region, the U.S. Southwest, with its massive Gulf Coast refining capacity, is home to roughly half of the planned spending. The Southwest market region includes Texas, Louisiana, Oklahoma and Arkansas. Phillips 66 (NYSE:PSX) (Houston), which ranks as the largest potential spender through 2022, is planning a $500 million reformer unit addition at its Borger Refinery in the Texas Panhandle. The new reformer would replace the 20,000-BBL/d 19-2 semi-regen/cyclic reformer to increase yield. For more information, see Industrial Info's project report. For related information, see December 15, 2021, article - Phillips 66 Reduces Capital Spending for 2021.
"But we (also) are seeing some spending in Western Canadian markets," Paschall said. Among other projects, Husky Energy Incorporated (TSX:HSE) (Calgary, Alberta) continues to evaluate a asphalt plant expansion at its Lloydminster Refinery in Alberta. The capacity of the asphalt facility would be doubled to 60,000 BBL/d, using heavy oil to produce more than 30 types and grades of road asphalt. For more information, see Industrial Info's project report.
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.
