Marathon Petroleum-Andeavor Merger to Combine $5 Billion in Refining Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) earlier this week announced that it would purchase rival refiner Andeavor (NYSE:ANDV) (San Antonio, Texas) for $23.3 billion. If the deal goes through, it will make Marathon the largest U.S. refiner by capacity, surpassing Valero Energy Corporation (NYSE:VLO) (San Antonio), according to Bloomberg. The deal is expected to close in the second half of this year. Industrial Info is tracking more than $5 billion in active Marathon and Andeavor projects.

Click on the image at right for a look at active Marathon and Andeavor projects by U.S. market region.

Among Marathon's top projects is the $1.5 billion South Texas Asset Repositioning (STAR) project, which includes several sub-projects at the company's refineries in Galveston Bay and Texas City in Texas. Fluor Corporation (NYSE:FLR) (Irving, Texas) is providing engineering for the project. Most of the project activity is planned to kick early next year, taking about three years to complete. Among the projects included in the STAR program is the expansion of the crude units at the Galveston Bay refinery. The project will increase the capacity of the existing 437,000-barrel-per-day (BBL/d) crude complex by 40,000 BBL/d to improve both gasoline and distillate yields. For more information, see Industrial Info's project report.

Also on the books at the Galveston Bay refinery is the expansion of the residual hydrocracker. The project entails increasing the existing 64,000-BBL/d hydrocracker by 20,000 BBL/d, reducing sulfur content and increasing the residual oil processing capabilities. For more information, see Industrial Info's project report. To support the expansion of these units, Marathon is also updating its offsite utilities to the tune of $500 million. For more information, see Industrial Info's project report.

Among the projects at the Texas City refinery is the construction of a diesel hydrotreater. The planned 65,000-BBL/d hydrotreater will produce 100% ultra-low-sulfur diesel. The project has an estimated total investment value (TIV) of $200 million. For more information, see Industrial Info's project report.

While Marathon spun off most of its midstream assets in the form MPLX (NYSE:MPLX) (Findlay), Andeavor has retained its position in the pipeline sector. Andeavor recently announced a joint venture pipeline project with Phillips 66 Partners (NYSE:PSXP) (Houston, Texas) and Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta) for the Gray Oak crude oil pipeline, which will run from the Permian Basin to Corpus Christi, Texas, benefitting Marathon's Gulf Coast refinery locations. For more information, see Industrial Info's project report and April 26, 2018, article - Phillips 66 Partners to Begin Construction of Permian-to-Corpus Christi Crude Oil Pipeline.

Among Andeavor's planned refining projects is the Anacortes Clean Products Upgrade at the company's refinery in Anacortes, Washington. Included in these projects is the addition of a 15,000-BBL/d mixed xylene unit to produce petrochemical feedstock. The $300 million project is expected to kick off next year and be completed in 2020. Also included is the addition of a naphtha isomerization unit. The 10,000-BBL/d unit will convert low-octane paraffins to high-octane paraffins and reduce sulfur in gasoline production. Construction began last year and is expected to be completed this quarter. Fluor is performing engineering on the project. For more information, see Industrial Info's project reports on the mixed xylene unit and naphtha isomerization unit.

Andeavor also has projects to comply with the government's Tier 3 gasoline requirements, which require the sulfur content of gasoline to be reduced from 30 parts per million (ppm) to 10 ppm. At the company's refinery in Mandan, North Dakota, Andeavor plans to construct a 15,000-BBL/d gasoline hydrotreater to meet these requirements. Construction is planned to kick off this quarter and be completed in the third quarter of next year. The project has an estimated TIV of $190 million. For more information, see Industrial Info's project report.

At Andeavor's refinery in Salt Lake City, Utah, the company is planning a revamp of its gasoline hydrotreater to comply with Tier 3 requirements. Construction is planned to kick off in the third quarter of this year, taking about 14 months to complete. The project has an estimated TIV of $100 million. For more information, see Industrial Info's project report.

On Monday, Marathon reported first-quarter 2018 net income of $37 million, compared with $30 million in first-quarter 2017.

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