U.S. Refining Turnaround Spend Slightly Higher This Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to the U.S. Energy Information Administration, U.S. refineries have been processing an average of more than 17 million barrels per day (BBL/d) of crude oil recently, setting a record high of 17.7 million barrels for the week ending May 26. The refinery runs have pushed up the levels of U.S. gasoline in storage, which is partially responsible for the recent downturn in crude prices. Are these run rates affecting refining spending activity? Industrial Info is tracking $5.45 billion in refining projects that are planned to kick off in the U.S. in 2017. This includes projects that have been completed, are under way, or are planned to kick off this year, and includes slightly more than $1 billion in maintenance projects. In 2016, Industrial Info tracked $875 million in U.S. refining maintenance projects. It appears that despite the recent increase in refinery runs, the U.S. is set for more refinery turnaround spending this year.

Not all of the refined product is staying on U.S. shores, providing an outlet for these increased runs. "We continue to export a record amount of gasoline and diesel to Mexico, Latin America and some of the European markets," said Chris Paschall, Industrial Info's vice president of research for the Petroleum Refining Industry, in a presentation in Valley Forge, Pennsylvania, last month.

"When we look at 2017 [maintenance] spend, it's a smidge higher than what we saw last year, even though the counts are going to be higher, of about 200 this year. ... With the margins as high they are, refiners try to capture that," Paschall said.

Most of the turnaround activity being tracked by Industrial Info is occurring at refineries in the Southwest and West Coast regions. Among the major maintenance projects being tracked is Phillips 66's (NYSE:PSX) (Houston, Texas) planned turnaround of the fluid catalytic cracking unit (FCCU) at its Ponca City Refinery in Oklahoma. The 35,000-barrel-per-day (BBL/d) Unit 5 will undergo maintenance in the fourth quarter of this year. For more information, see Industrial Info's project report.

Paschall said he was doubtful about the construction of grassroot refineries or other very high-dollar projects at U.S. refineries. "Expansions are more likely, as well as crude slate changes. That's what we've really seen over the last couple of years. The large multibillion-dollar expansion projects are at high risk of being delayed or cancelled as budgets have become more scrutinized due to the low-price commodity environment."

Contributing to spending are the U.S. Tier 3 gasoline regulations, which require sulfur content in gasoline produced at U.S. refineries to be no more than 10 parts per million (ppm) by 2020. BP plc (NYSE:BP) is under way with a naphtha hydrotreater unit addition at its Whiting Refinery in Indiana. The project entails constructing an 85,000-BBL/d naphtha hydrotreater to reduce sulfur content from 30 ppm to meet Tier 3 regulations. The project began in the first quarter of this year and is expected to take about two years to complete. For more information, see Industrial Info's project report.

On the whole, the U.S. Refining Industry is under way with a healthy amount of capital and maintenance spending this year. Increased refinery runs haven't slowed maintenance projects, as refiners continue to take advantage of high margins. While grassroot refineries will probably not be constructed in the U.S. in the near future, enough expansions and crude slate changes are under way to keep spending at healthy levels.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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 https://www.industrialinfo.com.