U.S. refineries are, of course, far less dependent on crude oil from the Middle East than they were before the Shale Revolution. But the cutoff in oil supplies from the Persian Gulf is forcing several U.S. refiners to look elsewhere for the mostly medium-sour crude they had been sourcing from the region.
<p>Independent refiner PBF Energy on June 11 announced its plan to acquire Shell Oil’s Martinez, CA, refinery for about $1 billion; the deal is expected to close by the end of 2019. The purchase will give PBF its sixth U.S.</p>
If East Coast refiners bought their crude at the wellhead in North Dakota during February 2016 they would have paid average prices of about $4.90/Bbl below U.S. Benchmark West Texas Intermediate (WTI) at Cushing, OK – which works out at about $26.25/Bbl (price estimates from Genscape). If they shipped that crude by rail to refineries in Philadelphia, PA on the East Coast they would have paid about $14/Bbl rail freight - meaning the delivered cost of crude would be $26.25 + $14 or $40.25/Bbl. Alternatively they could have simply imported Bakken equivalent light sweet crude priced close to international benchmark Brent for an average $34/Bbl – saving a minimum of $6.25/Bbl. Today we describe how these economics have had a detrimental impact on crude-by-rail (CBR) shipments to the East Coast.
This Wednesday (September 30, 2015) PBF Energy announced their acquisition of the 155 Mb/d ExxonMobil Torrance, CA refinery that has been out of commission since February 2015 and will not likely return to service until February 2016. This PBF purchase is their second refinery buy this year and their fifth since 2010. The sophisticated Torrance refinery has a lot of upside potential for PBF but may be constrained by California transport fuel regulations. Today we take a closer look at the deal.
