Phillips 66 Turns to US Crude Grades at NJ Refinery; Upbeat on Refinery Upgrades: Exec
Phillips 66 will continue substituting Brent-based crudes with lower-cost domestic U.S. grades for its 289,100 b/d Bayway refinery in New Jersey, citing the Jones Act waiver allowing companies to reduce shipping costs amid the Middle East supply disruptions, Executive Vice President of Marketing and Commercial Brian Mandell said Wednesday.
In an earning conference call, senior executives of the U.S.-based integrated downstream energy company said they are also hopeful that capital improvement projects would increase production and decrease operating costs for its refineries.
Mandell said during the call that Phillips 66 has increased the use of discounted crudes like Canadian heavy grade, and the company has now become the world’s third-largest buyer of Venezuelan crude.
In addition, Phillips 66 can substitute lower-cost domestic grades for more expensive international grades for its U.S. refineries, then sell those more expensive international grades at a profit, he said.
“We have utilized our maritime charter fleet in conjunction with the Jones Act waiver to substitute foreign crudes with WTI-based crudes at our Bayway Refinery, and that helped mitigate the impact of Middle East conflict,” said Mandell. He expects Phillips 66 to continue moving U.S. crudes to Bayway.
The company also increased its systemwide distillate production by about 35,000 b/d in Q2, Mandell said.
The Bayway refinery in Linden, N.J., the largest coastal refinery in the U.S. Northeast, has traditionally consumed Brent-based crude grades.
The Trump administration’s waiver of the Jones Act allows foreign-flagged ships to operate within U.S. waters to lower shipping costs and improve crude and product supply for U.S. refineries.
Rich Harbison, Executive Vice President of Refining, said during the call that Phillips 66 has also deployed low-cost capital projects that tend to yield high returns. One active project is next year’s planned startup of low-sulfur gasoline production at its 245,000 b/d Humber refinery in the east coast of England.
The company’s acquisition of Lindsey oil refinery’s assets and planned integration into its Humber refinery earlier this year also allow the company to reach inner markets of the U.K. and London, he said.
Harbison also cited a two-phase project to increase jet fuel production at its 116,238 b/d Ferndale, Wash., refinery, which also manufactures CARB gasoline to supply the California market.
Harbison expects the first phase of that project to be completed by this year, with the second phase wrapping up next year — when the refinery’s jet fuel production capacity will rise by 12,000 b/d.
During Q2, Phillips 66 also completed turnarounds at its Humber and 370,900 b/d Wood River, Ill., refineries.
Phillips 66, which operates 11 refineries in the U.S. and Europe as well as midstream and marketing businesses, posted Q2 net income of $3.847 billion, up from 877 million in the year-ago quarter, driven by significantly stronger refinery operations on better crack spreads.
Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
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