US ethanol targets chill refining growth - EIA

14 November 2007 23:21  [Source: ICIS news]

US EIA chief Guy CarusoWASHINGTON (ICIS news)--Increasing federal mandates and subsidies for more US bio-ethanol production are having a chilling effect on traditional refiners’ plans to add gasoline capacity, the top US government energy analyst said on Wednesday.


Guy Caruso, chief administrator for the Energy Department’s Energy Information Administration (EIA), said that in an administration survey of US gasoline refiners, “we saw a definite reaction by major refiners to the uncertainty on where US public policy on ethanol is going”.


He said administration officials recently conducted an informal telephone poll of major US energy firms to measure their plans to add refining capacity and found they had reduced anticipated expansion work from 1.5m bbls/day to just under 1m bbls/day.


The White House has announced a policy goal of 35bn gal/year of domestic US biofuels production by 2017, and pending energy bills in the US Congress would mandate 36bn gal/year of ethanol output by 2022.


“We saw refinery expansion plans decline after the announcement of the 35bn gal/year ethanol mandate,” Caruso said. “In the informal telephone survey we did with major refiners we saw capacity expansion plans of some 1.5m bbls/day planned for 2011 drop to less than 1m bbls/day of additional capacity after the ethanol mandate announcements.”


Caruso noted that US domestic ethanol production of 35-36bn gal/year “would be equivalent to about 1m bbls/day of gasoline, so that’s some pretty big numbers”.


“It is hard to say that the refiners’ backing away from capacity expansions is all due to the ethanol mandates,” Caruso added, noting that refinery construction costs have risen and there is a lot of foreign refining capacity being added and planned, raising competition issues as well.


“But following the ethanol goal announcements, the rate of refinery expansion increases would appear to have slowed,” he said.


US refiners have previously warned that efforts by the White House and Congress to increase US production and consumption of biobased ethanol are undermining and discouraging planned gasoline refining expansions.


The Bush administration has not secured a congressional mandate for the White House goal of 35bn gal/year of biofuels by 2017, and Congress is still far from completing energy legislation to mandate a 36bn/2022 goal.


Asked if actual enactment of either of the federal ethanol mandates might further discourage traditional US refinery expansions, Caruso said he could not say.

By: Joe Kamalick
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