US refiners ready to compete: Motiva
US Gulf coast refiners remain the best positioned to compete in a flattening global fuels market that will price off of exports, Motiva chief executive Dan Romasko said.
Rising diesel export demand and upcoming regulatory changes requiring lower sulfur marine fuels will provide tailwinds for complex US refiners in coming years, Romasko said today at the Argus Americas Crude Summit in Houston.
The US’ recent entry as a net exporter of gasoline, combined with a flat or declining outlook for that chief US transportation fuel, will change pricing and pressure refiners worldwide. Pricing would grow much more susceptible to supply disruptions as fuel markets become more globally connected.
“I think it is going to be a bumpy world, and we would expect rationalization to occur,” Romasko said.
Motiva operates the largest US refinery, its 600,000 b/d facility in Port Arthur, Texas, and 26 terminals throughout the eastern US. Parent company Saudi Aramco completed a split of the Motiva joint venture from Shell last May.
Aramco last year said it would invest roughly $20bn over the next five years to grow the Motiva business, including potential petrochemical projects.
Fuel efficiency improvements and competing transportation technologies have begun chipping away at US gasoline demand, Romasko said. The flat to falling outlook has increased the importance of gasoline exports from competitive US refiners, as well as specialty products, such as base oils or asphalt, and petrochemicals.
Highly complex and competitive refining projects in Asia, the Middle East and Latin America will if constructed vie for an increasingly important global fuels market, shifting US products to export parity pricing, he said.
“This is not a disaster for the US, but it is a change, and it is a change in margin expectations going forward that will be bearish relative to what it had been in the past,” Romasko said.
Marine sulfur regulations offer promising demand and margins for complex US refiners. International Maritime Organization rules planned to take effect in January 2020 reducing the sulfur content of marine fuel will pressure refiners that make lower quality, higher sulfur fuels today and benefit complex facilities able to produce higher-quality fuels from tougher feedstocks.
Those improved margins could last two to five years as the shipping industry determines the most economic way to manage the regulations, Romasko said. The only sure thing would be an overreaction by refiners to the higher margins, he added.
“You could call it a windfall, but a benefit to the refining industry, during which we will figure out how to destroy it,” Romasko said.
The US must ease regulations restricting free markets, such as fuel blending mandates and Jones Act domestic shipping regulations, and preserve international trade access to ensure competitiveness, he said.
“Everything we do that violates free market principals, a bad outcome happens that we did not predict,” Romasko said.