No two refineries operate the same, and many variables contribute to the bottom line.  Even the same exact refinery operated by two different owners can drive different value to the P/L statement. 

I am not suggesting that these refineries are not profitable in today’s market environment.  However, these refineries will find it challenging to compete in dynamic market environments over time.  For petroleum refineries with a minimum capacity of 50 KBD crude throughput, I have selected the following sites:

• Western Refining El Paso
• Holly Frontier Artesia
• Valero Houston
• Phillips 66 Belle Chasse

The chart below has a quick comparison of major refining units.

By normalizing refinery configuration based on conversion capacity, I have depicted the 4

all have coking capacity lower than that  of PADD 3 peers, with most of the refineries having very limiting resid upgrading capacity.  Valero Houston does have some resid upgrading capability in a Solvent Deasphalting unit, but this type of configuration still comes with constraints.

to find a refinery that feels comfortable with its hydrotreating capacity.

listed, El Paso refinery sulfur capabilities are also sub-standard. 

The Valero sulfur capacity on a crude throughput normalized basis is high, but this is a bit misleading as that facility imports a significant amount of intermediates.

a refinery possesses hydrocracking or heavy hydrotreating capabilities.  Also higher gasoline yields are not always favored.

In addition to the high level indicators of refining configuration discussed above, let’s dive a little deeper into some of the other details that support my views on these mismatched refinery units.

Western Refining - El Paso

Cons

• Lack complexity - no hydrocracking, limited resid upgrading, and low crude vacuum capacity
  • Limited upgrading capacity historically pinned El Paso refining margins into a tight range
  • Crude slate limited to higher API grades due to limited VDU capacity
• Logistically Challenged  - Land-locked facility
  • Rely on pipelines, trucks, and rail for all feedstock and product movements

Pros

• Serve niche market since refinery is further away from PADD 3 refinery cluster
• Good access to Permian basin crude supply enable high margin capture when domestic crudes are discounted from world crudes

Navajo Artesia

Cons

• Lack complexity - no hydrocracking, limited resid upgrading, and low crude vacuum capacity
  • One of the lowest VDU to Crude capacity ratios of any PADD 3 refiner
  • High production of asphalt/F.O. with low resid upgrading capacity
  • High amount of hydrotreater capacity, but limited sulfur recovery capabilities
• Logistically Challenged  - Land-locked facility
  • Rely on pipelines, trucks, and rail for all feedstock and product movements

Pros

• Serve niche market since refinery is further away from PADD 3 refinery cluster
• Good access to Permian basin crude supply

Valero Houston

Cons

• Configurationally Challenged
  • 90,000 BPD crude capacity, but has 160,000 total feedstock input.  This results in a significant amount of gasoil imports to fill refinery utilization.
  • High sulfur handling capability, but low capacity of conventional hydrotreaters.   Suggests that a fair amount of refinery sulfur load comes from imported gasoil, and crude sulfur is limited.
  • Limited resid upgrading capacity with Solvent Deasphalting unit.  Results in higher FCC operating costs and lower Cat Cracker yields
  • Large FCC capacity relative to crude throughput limits distillate production capability.  When gasoline economics are poor, the refinery will struggle to economically fill the FCC.

Pros

• Very large hydrocracker capacity.  Enables higher distillate production from imported gasoils and takes advantage of cheap hydrogen costs to increase refinery volume expansion.

Phillips Belle Chasse

Cons

• Configuration Challenges
  • Large FCC capacity limits ability to produce distillates when market favors diesel over gasoline 
  • Limited sulfur handling capacity constraints ability to pursue challenged crude stocks
  • Small coking capacity relative to peer group
  • No hydrocracking capability
  • Lower than average distillate hydrotreating capacity

Pros

• Integration with Chemicals facility

By stripping out all of the complexity related to supply chain logistics and location advantages, I have distilled refinery operations down to the simple common denominator of configuration capability.  It is my belief that over time the most flexible refineries will always come out on top.

The refining business will always cycle with changing market drivers, and the ability to adapt operations will prove key.  Refiners that struck profit in the past will not always have profits in the future.  Assessing your refining capability relative to peers should remain a constant focus.