AM-14-53 Can U.S. Refiners Invest for Success?

Description:

Decades of investments in high conversion capacity has made the US the most complex refining market in the world. These investments have been centred largely on upgrading and hydrotreating units to process heavier and more sour crudes which have historically traded at a discount to light sweet crudes. However, recent developments in domestic tight oil have led to a paradigm shift in refinery capital investment decisions, as refiners are now choosing to invest in projects to add offloading facilities for crude by rail transportation, expand crude distillation capacity, and debottleneck light-ends processing units to access this growing surplus of domestic light sweet crudes. In this new world, as refiners contend with the evolving quality of their crude slates, the significance of complexity in determining refinery profitability is being put into question: Is it still profitable to invest in high conversion units? The companies that are investing in crude logistics offloading facilities, increasing crude distillation units, and debottlenecking of light-ends processing units are poised to take advantage of growing surplus of domestic light sweet crudes. This is expected to translate into improved bottom-line profitability for these companies. .