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Louisiana Rain, Part 3 - Evolving Crude Availability for Southeast Louisiana Refiners

Increasing U.S. shale oil production has benefitted many U.S. refineries, but along the Gulf Coast, the primary beneficiaries have been in Texas. As production increased in the Permian and Eagle Ford plays, new pipelines were built to supply refinery centers in Corpus Christi, Houston, and Beaumont/Port Arthur. In contrast, the availability of shale crude by pipeline to refineries in Southeast Louisiana has lagged. However, new pipeline capacity to the crude hub in St. James, LA, is about to change the dynamic in a major way. Today, we continue our series on St. James by discussing the Bayou State’s refinery infrastructure and how new pipelines could impact refinery crude slates.

This is Part 3 of our series. In Part 1, we talked about how, with the onset of the Shale Revolution, growth in Alberta oil sands production in the 2010s, and the lifting of the U.S. crude export ban in December 2015, the St. James crude hub has been in a state of flux — and the changes have only just begun. Most importantly, the hub’s long-standing role as a recipient and distributor of imported crude and Gulf of Mexico production to the Midwest has been fading, and St. James — located 60 miles upriver from New Orleans — is increasingly valued for its ability to receive and stage U.S. shale oil, Gulf of Mexico production, and Canadian oil-sands crude for delivery to area refineries and export docks. In Part 2, we looked at what St. James currently offers in terms of crude storage (about 38 MMbbl) and pipeline connectivity (inbound and outbound), as well as what expansion plans are afoot to reflect the hub’s changing function.

Today, we shift our attention to refineries in the greater St. James area, and how plans to add new pipeline capacity into the region may provide new crude-supply opportunities to these refineries. The refineries of Southeast Louisiana (SELA) comprise approximately 2.6 MMb/d of capacity, which equates to about 30% of the total refinery capacity along the Gulf Coast. Geographically, the SELA refineries (see Figure 1 map) span from Delek US’s Krotz Springs facility on the Atchafalaya River to Phillips 66’s Alliance refinery in Belle Chasse, downriver from New Orleans. Capacity-wise, they range from 78 Mb/d (Delek Krotz Springs) to 566 Mb/d at Marathon Petroleum Co.’s (MPC) refinery at Garyville. (See capacity table in Figure 1; refinery sizes are based on the capacity of their crude distillation units, or CDUs.)

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