U.S. Shale Plays Spark Planned Grassroot Refinery Projects
The term "new grassroot U.S. refinery" is almost an oxymoron. The U.S. hasn't seen a new major petroleum refinery in roughly 40 years. Refineries are expensive to build, and the U.S. already has a well-established refining system. Some of the refineries are downright venerable, having been established over a century ago, but it's still more cost-efficient to upgrade and expand those aging facilities than to build brand new ones.
There were 141 operable petroleum refineries in the U.S. as of January 1, 2016, according to the Energy Information Administration (EIA). The newest refinery with significant downstream unit capacity began operating in 1977 in Garyville, Louisiana. When Marathon Petroleum Corporation's (NYSE:MPC) (Findlay, Ohio) Garyville facility came online it had an atmospheric distillation unit capacity of 200,000 barrels per day (BBL/d). Its capacity has since been expanded to 539,000 BBL/d, making it the third-largest U.S. refinery.
But that doesn't mean there aren't plenty of new planned refinery projects of various sizes and stages of development, as entrepreneurs seek new markets for oil from shale plays like the Permian, Eagle Ford and Bakken. In all, Industrial Info is tracking nearly $8.9 billion in U.S. grassroot refinery project activity.
The latest entry in the new refinery construction category is MMEX Resources Corporation's (Austin, Texas) planned 50,000-BBL/d Fort Stockton Refinery in the West Texas Permian Basin. Located near the Sulfur Junction spur of the Texas Pacifico Railroad about 20 miles northeast of Fort Stockton, the facility would make use of the railway to export diesel, gasoline, and jet fuels; liquefied petroleum gas; and crude oil to western Mexico and South America.
"The Permian Basin is the largest continuous oil discovery in America and has experienced exponential gains in daily production volume recently. The existing facilities and pipeline networks are largely unequipped to handle this growth and are limiting where products can be transported," said MMEX Chief Executive Officer Jack Hanks in a March 7 press statement. "By building a state-of-the-art refinery along the region's existing railway infrastructure, we hope to bring a local and export market for crude oil and refined products, which will add substantial job and economic growth to West Texas."
Construction of the Pecos County refinery is slated to begin in early 2018, following the permitting process, and the facility is projected to begin operations in 2019. KP Engineering (Tyler, Texas) has signed on to engineer, design and construct the facility.
Also in Texas, Raven Petroleum Limited Liability Company (The Woodlands, Texas) is planning a 50,000-BBL/d refinery near the border city of Laredo in Duval County. The $500 million Freer Crude Oil Refinery would process Eagle Ford crude and ship diesel fuel, gasoline and other petroleum products to Mexico via the existing Kansas City Southern Railroad.
"By focusing on the niche market of exporting, Raven Petroleum is able to overcome the high cost and barriers to entry by avoiding directly competing with the 'big boys,' like ExxonMobil and Shell," according to the Raven website. Construction is expected to kick off in second-quarter 2018, with completion in fourth-quarter 2019. For more information, see Industrial Info's project report.
And in North Dakota, the first phase of Meridian Energy Group's (Belfield, North Dakota) 55,000-BBL/d Davis Refinery is planned to kick off construction in the third quarter of this year, with completion in summer 2018. Construction of a second phase would start in late 2018 and be completed summer 2019. In August, Meridian finalized a contract with Vepica USA Incorporated (Houston, Texas) to perform engineering work for the $900 million refinery, which would process oil from the Bakken Shale. It would move petroleum products via a Burlington Northern Santa Fe rail line that runs directly through the refinery.
For more information, please subscribe to the IIR blog.