Called on to produce more with the pandemic’s waning and a resurgence of worldwide demand, Texas oil refineries are running flat out and meeting the call, analysts say.
But various difficulties make building new refineries or expanding them a tall task.
Odessa oilman Kirk Edwards says it “has been impossible to get a new refinery built because of environmental regulations and lawsuits.
“Coming off COVID when gasoline usage was so far down that nobody did anything, there was very little capital investment,” Edwards said. “There needs to be an expansion of assets here in the U.S., but the Catch-22 is what guarantees do these refineries or future liquefied natural gas plants have from the government and Europe to spend that kind of money and make these expansions?
“The only thing they can do is expand in the areas of the country where the refineries are right now, which is usually the Gulf Coast.”
Texas’ refineries include Barton Refining’s Double Punch Refinery at Austin, ExxonMobil’s Baytown and Beaumont refineries, Delek US’s refineries at Big Spring and Tyler, Phillips 66’s facilities at Borger in the Panhandle and Sweeny, Flint Hills Resources’ and Citgo’s refineries at Corpus Christi, Valero’s at Corpus Christi, Houston, Port Arthur, Texas City and Sunray in the Panhandle, Shell Oil’s at Deer Park, Marathon Petroleum’s at El Paso, Three Rivers and Texas City, Leondell-Basell’s at Houston, Strator’s at Houston, Calumet Penreco’s at Houston, Blue Dolphin’s at Nixon, Chevron’s at Pasadena, TotalEnergies’ at Port Arthur, Arabian American Development’s at Silsbee and the biggest in the nation with 1,500 employees and a capacity of 607,000 barrels a day, Motiva Enterprises’ Port Arthur Refinery.
Companies were reluctant to respond to press inquiries, but a spokeswoman who asked not to be identified said the cost of building a new refinery would be prohibitive “versus the ability to recoup investments.
“Some older units were closed last year due to inefficiencies and the drumbeat to move toward electric vehicles,” she said.
Asked about the 25 deaths and 150 injuries from explosions, falls, fires, hydrogen sulfide leaks and crane collapses that have happened at Texas refineries since 2005, Texas Oil & Gas Association President Todd Staples said from Austin, “Safety and appropriate enforcement are utmost priorities of the Texas oil and natural gas industry.
“Stringent regulations are in place to maximize workplace safety and the industry’s investments in innovation and technology are aiding in this effort as well as protecting and improving air quality.”
American Fuel & Petroleum Manufacturers spokeswoman Erika Perryman said from Washington, D.C., that some refineries are expanding now “largely to accommodate processing increased volumes of United States-produced light sweet crude oil” and make not only gasoline but also jet fuel, heating oil, propane, butane, ultra low sulfur diesel fuel and kerosene, heavy fuel oil and asphalt. “These expansions will ensure that the U.S. continues to have sufficient refining capacity to meet our country’s energy needs and still export energy into the global market,” Perryman said.
She reported that national crude oil production is currently 11.8 million barrels a day, including 5.1 million b/d in the Permian Basin in March, while the record was 12.3 million b/d in 2019. “U.S. refining capacity is much bigger, 17.9 million b/d, so there is not any realistic concern that U.S. production will overwhelm refining capacity,” Perryman said.
“Expansions are meant to increase the share of our capacity designed for lighter crudes.”
The AFPM spokeswoman said 70 percent of American capacity is complex, meaning it’s designed for heavier, harder to refine oil not produced in the U.S. “Our complexity is a competitive advantage,” she said, noting that 150 different types of crude oil vary in quality, thickness and sulfur content.
“Our No. 1 refinery feedstock is U.S. crude oil and nearly 90 percent of what we refine is from the U.S., Canada and Mexico,” Perryman said. “What we are mindful of is that some regions, the East and West coasts in particular, have a tougher time accessing American-produced crude oil and refined products.
“That’s a symptom of losing regional refining capacity, not having sufficient pipeline infrastructure to efficiently and affordably move products and uncompetitive shipping policies that inflate the cost of U.S. crude and refined products compared to products travelling from overseas.”
She said the number of Texas refineries fell from 65 in 1982 to 27 in 2015 and then grew to 31 “because of the construction of condensate splitters related to figuring out a way around the crude export restrictions.
“Crude processed through a condensate splitter can be exported, but it is still a feedstock,” Perryman said. “Texas’ refining capacity declined from 5.1 million b/d to 3.8 in 1993, increased rather steadily to 5.856 in 2020 and then dropped a bit to 5.814 in 2021.”
