US adds refining capacity but future uncertain

22 August 2007 19:03  [Source: ICIS news]

WASHINGTON (ICIS news)--US refining capacity edged up 0.6% to 17.4m bbls/day in 2006, the National Petrochemical & Refiners Association (NPRA) said on Wednesday, but the trade group warned that US federal policies discourage further expansions.

 

The association said that as of 1 January this year - the most recent reporting period available - there were 149 operable refineries in the US.  That number has not changed since 2003 and is less than half the 324 refineries that were operational in the US in 1981.

 

NPRA executive vice president Charles Drevna said that despite the decline in the number of refineries, capacity has increased in the last decade due to expansions at remaining facilities.

 

“While it is true that a brand new refinery hasn’t been built [in the US] since 1976, we’ve actually, on the aggregate, built the equivalent of one new world-class refinery each year for the last 14 years,” Drevna said.

 

The association said that 2006 refining capacity of 17.4m bbls/day also represents an increase of nearly 4% over the last five years and nearly 13% over the last ten years.

 

However, according to the US Energy Department, domestic refining capacity was higher in 1981 when the 324 refineries then in operation produced 18.6m bbls/day.

 

Drevna said that while US refiners have continued to squeeze more capacity out of existing plants, additional expansions are in question because of federal policies.

 

“It is becoming more of a challenge to add capacity at existing sites because of more stringent environmental regulations and the complexity and uncertainty of permitting processes,” Drevna said.

 

“Another notable challenge is the conflicting messages we receive from policymakers,” he said, noting that Congress and the White House want more refining capacity but also are pushing policies to reduce US gasoline consumption by 20% within ten years.

 

“Refiners make their reinvestments today based on where they see demand headed,” Drevna said.  “If policymakers take actions that significantly decrease consumption, domestic refiners will naturally consider the wisdom of investing in new capacity or facilities only to have those investments stranded in a decade or less,” he said.

 

The Bush administration is promoting a major increase in US ethanol production and increases in US automotive engine efficiencies to cut domestic gasoline consumption by 20% by 2017 - the “20 in 10” programme.

 

The complete US refining capacity report is available from the NPRA Web site, and the Department of Energy table of US refining capacity from 1949 to 2006 can be accessed on the department’s Web site.

By: Joe Kamalick
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