Gulf Coast refineries look seaward for sales

When operators of Alliance refinery began efforts to shed the Louisiana facility in December, it became the latest in a string of U.S. refineries put on the block.
In the midst of an economic slump, the nation was using less fuel and drivers were making fewer stops at the gas pump. But after just a few months of talking to potential buyers, Houston-based Phillips 66 pulled Alliance off the market.
“We fully intended to let that asset go,” CEO Greg Garland said in an interview. “Our view of Gulf Coast crude started changing.”
What changed was the United States' role in the global fuel market. After years of suffering from declining gasoline and diesel sales at home, Gulf Coast refiners are finding new value in selling more of their products to fuel-starved economies overseas.
As the United States has used technology to tap a bounty of once-inaccessible oil reserves below its surface, the price tag on some North American crudes has fallen below the global benchmark price. As a result, Alliance found new value in churning the low-cost crude that the U.S. supplies into the diesel that burgeoning South American countries want.
Phillips 66 plans to more than double its export volumes to 220,000 barrels per day by 2014. The company, which can process about 1.8 million barrels of crude per day in the United States, will spend $100 million to expand its access to tanks, pipes and dock space that help move fuel over borders.
San Antonio-based refiner Valero has been exporting about 18 percent of its diesel and 6 percent of its gasoline, and expects exports will become increasingly important in its business.
“We believe that demand for gasoline in this country has already peaked, in 2006 or 2007, and it will never again be that high,” said spokesman Bill Day. “To keep those refineries open, you have to find a place for that gasoline to go.”
The trend is helping revive the Gulf Coast industry. In June, Gulf Coast refineries ran at about 94 percent of their capacity, among the highest utilization rates since the summer of 2005, according to federal data.
“The refining business is still a very challenged business,” Garland said. But, he added, “what you are seeing is relatively high utilization rates in the U.S. refining industry today, even though demand has been down.”
The United States was a net exporter of petroleum products in 2011 for the first time since 1949, as certain fuel exports reached record levels and imports fell to historic lows.
The volume of fuel and other petroleum products exported from the United States has more than doubled since 2006. Nearly 3 million barrels were shipped across U.S. borders each day last year, compared to less than 1.3 million barrels five years earlier.
Americans still use about 16.6 million barrels of gasoline, diesel and other petroleum products each day, although that number has dropped more than 10 percent since 2006, according to the U.S. Energy Information Administration.
The Gulf Coast stands to gain the most from the United States' growing role as a fuel exporter. The region is a hub of sophisticated, world-class refineries, boasting port access and close proximity to the nation's biggest buyers, including Mexico and Brazil.
“The Gulf Coast is the Saudi Arabia of the refining world,” said Doug MacIntyre, senior oil market analyst for the U.S. Energy Information Administration.
“The U.S. has always had a strong refining sector, but in the past, that was for domestic consumption,” MacIntyre said. “Now there is another market, the foreign market, that refiners have access to.”
But whether the United States will continue to grow as a fuel exporter remains a debate.
The rise of U.S. fuel exports will be temporary, according to Terry Higgins, executive director of refining for Hart Energy, a research and publishing firm. As Brazil and other nations expand their refining capacity, U.S. exports will level off after a couple of years and then turn downward, he said.
“It has really been a dramatic change when you look at the amount of exports,” Higgins said. “I think there is a limit to that, though. Brazil has massive plans for refinery capacity. And Mexico will be bringing a large refinery on stream.”
Source: My San Antonio