Refiners see solid California results through 2016
OREANDA-NEWS. November 09, 2015. California refiners are preparing for more normal market conditions next year after tight summer supplies exposed which companies were steady and which were struggling.
Planned and unplanned shutdowns led by a now nine-month outage at ExxonMobil's 155,000 b/d refinery in Torrance, California, will keep products prices aloft through the end of the year. Carbob, used exclusively inside California and made by relatively few refineries, hit a two-year high in July with more than a \\$1/USG premium to Nymex RBOB.
But the industry expects lower retail prices to drive demand and strong margins next year.
"That will certainly keep that market tighter than what we've seen in the past several years, so we're fairly optimistic on our west coast operations next year," Valero senior vice president of operations Gary Simmons said in a call on earnings.
No refiner benefited from having stable third quarter California operations more than Valero. The company reported a \\$342mn profit — ten times the same regional profit last year and the second highest in five years — on average throughputs of 275,000 b/d, or roughly 89pc of its capacity in the state.
Tesoro, the state's largest refiner by capacity, saw a 60pc increase in California refining margins despite lower throughputs and a turnaround at its Los Angeles refining complex. Tesoro more than doubled its quarterly profits.
An ongoing outage on Plains All American Pipeline's Line 901, supplying crude to a part of Phillips 66's 120,000 b/d San Francisco refining complex, has cut rates at that refinery since June and reduced west coast results for the company. ExxonMobil did not break out California for the quarter, but its downstream facilities outside the US outperformed its US refineries during the quarter.
Gasoline in the fourth quarter so far averaged more than double the five-year average in the Los Angeles market and roughly in line with the average in San Francisco, as refiners cut expected throughputs for maintenance.
Valero does not comment on turnaround plans, but cut California throughputs by as much as 11pc compared to the same quarter last year. Market sources expected a full plant turnaround at its Los Angeles-area Wilmington refinery to continue into December.
Tesoro this week had maintenance underway at its Los Angeles and northern California Golden Eagle refineries. The company had planned to wrap-up a turnaround at Los Angeles at the end of October.
Chevron, which does not comment on refinery operations, has maintenance underway at its 250,000 b/d refinery in Richmond. And Phillips 66 continues to wait for Plains All American to restore their crude supply, a task expected at the end of the year.
The maintenance work puts California refiners on pace for full rates next quarter. ExxonMobil declines to comment on Torrance restart plans, but PBF Energy, which is working to buy the plant next year, says Torrance plans to restart the downed fluid catalytic cracking (FCC) unit in February, roughly a full year after an explosion knocked it offline.
Refiners will count on a recovering California economy and continued driver response to cheaper year-over-year prices to drive gasoline demand in the state next year. Even amid the 2015 refinery profits, retail prices averaged 64? lower though the first 10 months of the year than the same period last year, according to the Energy Information Administration (EIA). Gasoline sales in the state have improved consistently by an average 4pc between November 2014 and August, the most recent period with EIA data.
"The fundamental drivers of the business, specifically in California but the west coast in general, as we look at it, has continued to just be favorable to what drives our business," Tesoro chief executive Greg Goff said.