US Expenditure on Refining Capacity Additions to Reach $4 Billion by 2020

LONDON (July 22, 2014) – The U.S. is forecast to spend approximately $4 billion on refining capacity expansion projects between 2014 and 2020, enabling the country to process its increasing volumes of unconventional resource production, says research and consulting firm GlobalData. The company’s report* states that the U.S. will add 315 thousand barrels per day (mbd) of new distillation capacity by 2020, which will account for a 3 percent share of the world’s total capacity increases. Between 2014 and 2020, the country will witness its largest annual refining capacity increase in 2015, when it will add 142 mbd from several projects, including the startup of a condensate splitter in the Gulf Coast. Unlike other countries with mega-refining projects, the forecast increase in U.S. capacity results from relatively small refining projects, consisting primarily of hydroskimming and condensate splitter projects, configured to accommodate rising light sweet oil shale production. Carmine Rositano, GlobalData’s managing analyst covering downstream oil & gas, said, “The Dickinson, Mondak, Thunder Butte and Trenton projects are all located near to the Bakken field in North Dakota. These small, 20-mbd facilities are now economically viable, refining Bakken crude that is priced at a discount to benchmarked crude prices and selling products into the local markets. “Since processing discounted U.S. crude oil and selling products into the marketplace has proved profitable, other small refineries that had been shut down can now reopen in areas where oil shale production is on the rise.” GlobalData states that $1 billion will be spent on projects aimed at changing feedstock and crude oil supplies processed at several U.S. refineries. These projects will allow specific grades of crude oil to be processed, therefore maximizing refining optionality and profitability. Rositano continued: “Valero is expected to invest over $700 million to increase its refineries’ processing capabilities of light sweet crude oil produced from the Eagle Ford shale. This expenditure will include $340 million at Corpus Christi and $390 million at the company’s Houston Refinery. “Meanwhile, Husky Oil will invest approximately $270 million to upgrade its 160 mbd Lima refinery, so that it can process approximately 40 mbd of Western heavy Canadian crude oil. This will displace an equal volume of light sweet crude oil down to the Gulf Coast area,” the analyst concluded. *Global Refining Capital Expenditures Forecast to 2020 GlobalData is a global research and consulting firm offering advanced analytics to help clients make better, more informed decisions every day.