Jan-2025

Exploiting ‘old’ refinery assets (NARTC 2025)

Although North America, as a major transit route, is well positioned for building refineries, no new facilities have been built since 1977.

Rene Gonzalez
Editor, PTQ

Article Summary

It is no secret that government policy supersedes market forces and other advantages such as large crude resources, engineering expertise, and an efficient supply chain and service infrastructure. Instead, refineries are closing in the US and Europe. However, there appear to be opportunities for repurposing assets.

In 2025, two significant US refineries are expected to close. The LyondellBasell Houston Refinery, with a capacity of 263,776 bpd, is scheduled to shut down in the first quarter. Additionally, Phillips 66’s Los Angeles refinery, which processes 139,000 bpd, is planned to close by the end of 2025. These closures will result in a combined loss of more than 400,000 bpd in refining capacity, possibly providing higher margins opportunities for the remaining high-complexity facilities.

Environmental, social, and governance (ESG) practices, CO₂ footprint mandates, renewable identification numbers (RINs), and other regulatory and policy factors continue to temper a refining organisation’s marketability. However, the US Energy Information Administration (EIA) projects 2025 US gasoline consumption will remain at the same level as 2024, estimated at 9 million bpd. Refiners will likely benefit from robust Gulf Coast margins due to feedstock accessibility (such as West Texas Intermediate [WTI], low-sulphur shale crudes) and strong export opportunities to Latin America and Europe, predicating the need for extending the life of gasoline-producing units such as the catalytic reformer and FCC unit.

According to the US EIA, US fossil fuel production rose over the last four years, from 76 quads in 2020 to a record high of 86 quads in 2023, more than ten times the amount of total renewable energy production. Less than expected EV demand is partially why modest refinery investments will continue. Depending on which expert you favour, margins could range from $7-15 per barrel for complex refineries, based on the crude and product mix. US distillate consumption is also expected to grow by 4% in 2025 due to an increase in industrial, mining, and manufacturing activities.

In any case, water and higher hydrogen demand to meet clean fuels specifications is less expensive than in other regions. For example, hydrogen is five times more expensive in China than in the US. Against this backdrop, the more carbon-intensive and less efficient facilities may reconsider closing and instead reconfigure themselves as biorefineries for the production of sustainable aviation fuel (SAF), renewable diesel, and similar products.

These ‘old’ facilities can leverage existing utilities, including desulphurisation capacity, boiler house, flare, and other offsites (such as tank storage, product blending, loading and receiving, and water effluent treatment). Having this infrastructure in place is necessary when investing in supporting hydroprocessing assets that can catalytically process a wide range of waste fats, oils, and greases into refinery products.

Margins opportunities for the more complex refiners ensure continued investment in complexity and capacity. These investments are reflected by recent data showing that the total FCC cracking propylene capacity across US refineries is estimated to range between 6.5 and 7.5 million metric tons annually. This capacity has benefited from refiners’ ability to optimise assets, such as FCC units for olefins production, using advanced catalysts and operating conditions tailored for future gasoline blends and higher yields of petrochemical feedstock like propylene.

Legislation such as the proposed Next Generation Fuels Act aims to establish a minimum research octane number (RON) of 98 for future gasoline blends, supporting advanced internal combustion engine (ICE) technologies while reducing carbon emissions through ethanol blending. These higher-octane fuels would enable more efficient engine performance and could become standard as automakers increasingly align engine design with these advancements, starting as early as the model year 2026. Meanwhile, rising cobalt costs will not make EVs cheaper anytime soon. EVs may fill the role as the ‘second car’, but ICE-powered vehicles will keep refiners competitive.

This short article originally appeared in the 2025 NARTC Newspaper, which you can VIEW HERE