Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, is
considering retiring one of two coking units at its only refinery in California
as the company seeks to run lighter crude at the plant.
The company has applied to county
regulators for a permit to shut the flexicoker at the 156,400-barrel-a-day
Martinez refinery northeast of San Francisco, a move that would shrink the
plant’s reliance on heavy oils and cut its greenhouse-gas emissions by 15
percent, Destin Singleton, a Shell spokeswoman, said May 16. The unit helps
convert the denser crude into more valuable products such as diesel and
gasoline.
Shell is considering the shutdown
as hydraulic fracturing and horizontal drilling unleash record volumes of light
oil from shale formations across the middle of the U.S. California’s refiners,
lacking pipeline access to the growing crude supplies, are bringing in the most
ever by rail as they work to counter shrinking production within the state and from
Alaska.
“The reality is that we are
looking at each individual refinery and making economic decisions as to what is
the most optimal feedstock,” John Abbott, downstream director for The
Hague-based Shell, said in an interview at Bloomberg’s headquarters in New York
May 16. “This is one of the most competitive assets on the West Coast of the U.S.
and in California.”
Industry refining margins on the
U.S. West Coast, a rough indicator of profitability, averaged $7.62 a barrel in
the first quarter, almost twice the $4.07-a-barrel coking margin on the Gulf
Coast, Shell said in a statement April 30.
Train Deliveries
The Martinez refinery doesn’t have
the equipment to unload oil from rail cars and has never received crude from
other terminals that take train deliveries, Singleton, based in Houston, said
by e-mail. The refinery will continue to receive oil by pipeline and vessel
using existing infrastructure once the coker is shut, she said.
Crude Mix
“Overall, heavy crudes are a big
part of our current mix,” Singleton said. “We’ll be processing the same crudes
we refine today, but the mix will be lighter — meaning significant reductions
in greenhouse gas emissions, less electricity use, and more efficient
operations.”
A delayed coker, which was
installed at the refinery in the 1990s, based on air regulatory filings, will
remain in service, she said.
Refiners from Tesoro Corp. (TSO:US) to Valero
Energy Corp. (VLO:US) are
working to bring more shale oil to their plants on the U.S. West Coast by rail.
Trains delivered 395,053 barrels of oil to California in March, a record volume
for that month, the most recent data available from the state Energy Commission
show.
Shell is seeking permits to build
a rail complex at its Anacortes refinery in Washington state that would allow
the plant to unload oil from as many as six trains a week, regulatory filings
show. The company has also said that it’s carrying upgraded crude to the West
Coast from its Scotford oil-sands upgrader in Canada.
Crude Imports
Martinez imported 903,000 barrels
of medium-to-heavy crude in February from Canada, the most recent data
available from the Energy Information Administration show. The complex already
processes some lighter crudes, like Bakken oil, along with heavier feedstock
from California’s Central Valley, Singleton said.
Contra Costa County regulators are
expected to prepare a report on the environmental impacts of the coker
retirement, and the public will have a chance to comment on the plan during
that process, she said.
Chevron Corp. (CVX:US)’s Richmond refinery, west of Martinez, is also applying to
local regulators for a project that would change its crude slate. The plan
would replace a hydrogen plant and increase capacity at the fluid catalytic
cracker’s hydrotreater and sulfur-recovery system to run higher-sulfur oils.
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