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Refiners spend record on renewables credits; New petchems plants give ethane boost
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Refiners headed for record spend on renewable-fuel credits
Major refiners are on track to break their record annual spend on US renewable-fuel credits, according to Reuters.
In the first half of 2016, a group of 10 refinery owners including Valero Energy and Marathon Petroleum spent at least $1.1 billion buying Renewable Identification Numbers (RINs), the news agency found in a review of their filings. The record full-year spend by the same group was $1.3 billion in 2013.
The Renewable Fuel Standard (RFS) program requires refiners to blend a certain amount of renewable fuels, consisting mostly of corn-based ethanol, into the fuel they present to the market. The Environmental Protection Agency (EPA) set the renewable-fuel volume requirement at 16.93 billion gallons in 2015, 18.11 billion gallons in 2016, and is proposing to set it at 18.8 billion gallons – or roughly 10.44% of the entire fuel mix – in 2017.
Companies that fall short of the requirement can buy credits, or RINs, from those that are in compliance.
Valero spent $334 million on purchasing RINs in the first half of 2016, compared to $189 million for the corresponding period last year, the company confirmed in its latest financial report. John Locke, Vice President, Investor Relations, said in a follow-up call with analysts that full-year costs are expected to reach $750 million to $850 million.
Marathon spent $141 million to comply with its RFS obligations in the first half of 2016, up from $117 million in the first half of 2015. This year’s increase was due primarily to increased prices for biomass-based diesel RINs.
Valero filed a lawsuit against the EPA in February, claiming the renewable-fuel program favors some refineries over others. Chairman and CEO Joseph Gorder told analysts the system “misaligns the RIN obligation with the ability to comply by blending”, and said this had enabled speculators to drive up RIN prices and “facilitate opportunities for RIN fraud”.
The required volume of renewable and advanced renewable fuels is on the rise (Source: EPA)
Ethane consumption tipped to rise as petchem plants begin operations
Hydrocarbon gas liquids (HGL) consumption will remain flat in 2016, and then rise by 2.2% or 50,000 barrels per day in 2017 as increased ethane consumption more than offsets reduced consumption of other HGLs, according to the US Energy Information Administration (EIA).
US ethane consumption is forecast to increase by 60,000 b/d, or 5.6% in 2016, as expansion projects at ethylene-producing petrochemical plants increase feedstock demand for ethane, the EIA said. In 2017, ethane consumption is forecast to increase by an additional 80,000 b/d, or 7.5%, as five new petrochemical plants and a previously deactivated plant begin operations.
The EIA said it expects HGL production at natural-gas processing plants to increase by almost 300,000 b/d in both 2016 and 2017. It is predicting higher ethane recovery rates in 2016 and 2017, following planned increases in demand for petrochemical plant feedstock in the United States and abroad.
Planned terminal builds and expansions and a growing ship fleet allow more US ethane, propane, and butanes to reach international markets, with forecast net HGL exports averaging 1.1 million b/d in 2016 and 1.4 million b/d in 2017, it said.
ExxonMobil refinery hit by Louisiana floods, others spared damage
The storms and floods that hit Louisiana this week have forced ExxonMobil to curb operations at its 502,500 b/d-capacity Baton Rouge refinery.
Bloomberg, reported that four production units were shut and others were idled. Reuters reported separately that the 90,000 b/d crude oil distillation unit was shut. It quoted sources as saying that continued disruption of operations at the nearby Sorrento storage facility could force ExxonMobil to further cut production at the Baton Rouge refinery due to lack of storage for liquefied petroleum gas produced by the refinery.
Louisiana is home to about 18% of US refining capacity, according to data compiled by Bloomberg from EIA data. Other refineries and plants have reportedly been spared any disruptions from the severe weather conditions, which have claimed at least 11 lives and impacted more than 40,000 homes in Louisiana.
Methanol production continued as usual at the OCI Beaumont integrated ammonia and methanol facility, a spokesman for operator OCI Partners was quoted as saying by Platts. OCI shut down the ammonia plant to replace electrical devices damaged by thunder and lightning, OCI said in a filing with the Texas Commission on Environmental Quality.
Operations at Motiva Enterprises’ 227,000 b/d refinery in Convent, southern Louisiana were unaffected by the flooding, sources told Reuters. The company is investigating a fire that occurred in a hydrocracker at the same facility on August 11, four days before the storms began. No one was injured as a result of the incident, which did not impact any other units at the refinery.
Citgo Petroleum’s 427,000b/d Lake Charles refinery, Motiva’s 237,000 b/d Norco refinery, and Alon USA Energy’s 80,000 b/d Krotz Springs refinery are operating as usual, spokespeople and sources confirmed to Reuters.