Gulf Coastin’ – Marathon’s Decision to Unload Inland Refiners Shows the Gulf Coast is the Place to be

Marathon Petroleum is selling a pair of inland refineries — the 105-Mb/d St. Paul Park refinery in Minnesota and the 72-Mb/d Mandan refinery in North Dakota (along with other assets) — to CVR Energy. The $4.2 billion deal, announced November 3, frees up Marathon to focus investment on its substantial Gulf Coast refining network while allowing CVR to nearly double its refining capacity. In today's RBN blog, we'll discuss how this transaction fits a broader trend of major refiners increasingly pointing their investment dollars toward the Gulf Coast, while inland refineries find new life with buyers who see synergistic value where the others don’t.

Before we dive into the details of the deal, let’s lay out what the recent developments make clear — refiners want to be on the Gulf Coast. We’ve covered this theme at length in our Future of Fuels report (last published in July), which forecasts PADD 3 refining capacity growing from 9.9 MMb/d in 2026 to 10.3 MMb/d in 2040, mostly from continued refinery expansion projects and regional debottlenecking. Valero’s plans to buy and restart the closed LyondellBasell Houston refinery (see Still Not Dead) will add to this forecast capacity growth. This contrasts with our long-term view for other regions in the U.S., where domestic demand declines and limited access to export markets lead to long-term capacity rationalization (see Mixed Signals). These expected declines are most severe on the West Coast because of regulatory challenges, higher crude costs, a faster rate of demand declines, and new supply coming in from other regions (see I Need More). Meanwhile, meaningful capacity reductions in the Midcontinent are not expected until after 2035. 

Let’s start with some background on the two refineries changing hands. St. Paul Park (green refinery icon at upper middle of Figure 1 below), built in 1939, is Minnesota’s oldest refinery, founded as Northwestern Refining Co. by the Erickson family. It has been through many owners in its 87-year-history. Ashland bought it in 1970; Marathon co-owned it through the Marathon Ashland joint venture and took full control in 2005; then sold it to Northern Tier in 2010; and got it back in 2018 through the Andeavor acquisition. (Northern Tier was acquired by Western Refining in 2016, which was, in turn, acquired by Tesoro in 2017; Tesoro changed its name to Andeavor upon completion of the Western Refining Acquisition.)