Exxon Mobil to Fire Up $2 Billion Texas Refinery Expansion
Exxon Mobil to Fire Up $2 Billion Texas Refinery Expansion

Exxon Mobil to Fire Up $2 Billion Texas Refinery Expansion

  • 16-Jan-2023 4:37 PM
  • Journalist: Harold Finch

Texas (United States): In the coming days, Exxon Mobil Corp. will be bringing its $2 billion expansion to fruition through an increase in gasoline and diesel production at its 369,000 barrels per day (bpd) Beaumont, Texas refinery. The completion of a 250,000 bpd crude distillation unit (CDU) will make the refinery the second largest in the United States and mark the first major expansion for U.S. oil processing in almost a decade - adding the volume equivalent of a mid-sized refinery.

These plans have been on the table since nine years ago and are now being put into motion as President Joe Biden has urged refiners to produce more fuels or face penalties. Although Exxon declined to discuss the exact date of initial startup, they did mention that it will be within the first quarter of this year.

According to spokeswoman Chevalier Gray, "Construction of the new crude unit is completed. We have initiated startup procedures and commissioning is underway", adding an extra 250,000 barrels per day of all new supply for refined products markets. Right now, U.S. stockpiles of diesel and gasoline are near five-year lows with motor fuel profit margins on the U.S. Gulf Coast currently at record levels - making this ambitious expansion project very timely indeed.

Refiners are experiencing significant profits from the industry's crack spread, amounting to approximately $35.40 per barrel. This measure takes into consideration the disparity between the cost of crude oil and the sale prices of gasoline and diesel. As margins become increasingly favorable, many refining operations have benefited from this reliable profit measure.

Right now, margins are sensational,” said Garfield Miller, president of refining investment banker Aegis Energy Advisers Corp. “These margins tell you that as far as the U.S. Gulf Coast is concerned, there is plenty of demand relative to supply.

After nearly a decade of consideration and planning, Exxon Mobil Corp. is set to complete the $2 billion Beaumont Light Atmospheric Distillation Expansion (BLADE) project - a new crude distillation unit (CDU) which will increase their refinery’s capacity by 68%. The CDU draws from the Permian shale field in West Texas and New Mexico, with Exxon officially investing $1.2 billion for the project according to the Texas Comptroller's office filing.

Though the total cost of BLADE clocks in at $2 billion, progress came slowly due to complications from COVID-19 as well as record low demand for motor fuel last year that resulted in a loss for the number one U.S. oil firm. When activated, the new equipment won't immediately generate large volumes of gasoline and diesel as Exxon plans to bring up the new CDU gradually while addressing any possible startup issues; ultimately serving as feedstock for other units in the refinery and providing all-new supplies for refined products markets.

Operators at the Beaumont refinery are in the process of purging air from the new CDU in anticipation of its first intake of crude, according to sources familiar with the matter. This will compensate for the 263,776 bpd Houston refinery set to be closed by Lyondell Basell Industries at the end of this year. Before the COVID-19 pandemic began, U.S. refineries gained a world scale refining facility every year through expansions and other tweaks, as noted by Aegis Energy Advisors' Miller.

However, since then six refineries have been forced to close and capacity has dropped from 18.98 million bpd to 17.9 million bpd - as reported by the U.S Energy Information Administration's June report. Exxon's Beaumont expansion marks a return to an era where refining capacity can be increased via modernized processing techniques and adding new equipment to preexisting plants, whilst several major oil companies are implementing similar models for their own refineries located in distant countries such as Kuwait, Mexico, Nigeria, and China; satisfying international demands on product cracks (or processing margins) to balance out global markets.

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