Tesoro alone in west coast petchem interest

Argus    Houston   1 Aug 2014

US refining peers show little interest in following Tesoro’s lead on a proposed west coast petrochemical project.

Tesoro is considering a $400mn project to increase mixed xylene (MX) extraction by 15,000 b/d at its 120,000 b/d refinery in Anacortes, Washington. The relatively minor upgrade would provide MX to be sold into the Asia market, where Tesoro estimates demand will grow by 5-7pc annually.

Because MX production uses refinery-produced reformate, which is otherwise used for gasoline production, the shift could also ease what refiners consider an oversupplied US west coast gasoline market. Tesoro plans to supply the MX project with reformate from Anacortes and delivered by water from its 168,000 b/d Golden Eagle refinery in Martinez, California.

But Phillips 66 and Valero, two west coast independent refiners who have also showed interest in expanding their chemicals businesses, did not plan to follow suit.

“I don’t think we’re looking at any chemicals investments on the west coast,” Phillips 66 chief executive Greg Garland said. “We don’t have any big investments on tap on the west coast.”

The US west coast and especially California present a tough investment case for independent refiners, let alone their shareholders.

Both Phillips 66 and Valero operate most of their refining on that coast in California, where state and local regulators can significantly slow a project. Phillips 66 and Valero have both struggled for more than a year to move logistics projects forward. Chevron has worked for nearly a decade to upgrade its 250,000 b/d refinery in Richmond, and will not under the best conditions complete the project before 2017.

“It would be tough to get permits, at the end of the day,” said Lane Riggs, Valero vice president of refining operations.

Valero only has California assets, while Phillips 66 operates a 100,000 b/d refinery in Ferndale, Washington. Even Washington has proven difficult for recent permits.

Tesoro acknowledged “strong headwinds” on its 360,000 b/d joint venture rail terminal with Savage in Vancouver, Washington. The refiner will need to seek construction permits from the state for the MX project.

About Martinez Environmental Group

We are a community health and environmental group located in Martinez, CA.
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