Update on U.S. Refinery Capacity: Good News For a Change

ExxonMobil has added capacity to refine West Texas Light Sweet Crude

New crude distillation unit under construction at ExxonMobil's refinery in Beaumont, Texas. REUTERS/Erwin Seba

In my Substack article in August 2022 about declining U.S. refining capacity, I included a quote from Chevron CEO Mike Wirth in a June 2022 interview: “My personal view is there will never be another refinery built in the United States.” (Bloomberg “U.S. may never build a new refinery even with surging gas prices, Chevron CEO says). He said that building a new refinery takes more than a decade to plan, permit and construct, which will not happen in this anti-fossil fuel environment.

He was right about new refineries, but ExxonMobil recently announced a significant expansion of their Beaumont refinery. It was not a secret that ExxonMobil was expanding its Beaumont refinery, but they stayed relatively quiet about the project. Who could blame them in the current anti-fossil fuel environment?

A Reuters news article on January 13, 2023, confirmed that the refinery expansion is completed, with the headline: “Exxon prepares to start up $2 bln Texas oil refinery expansion.” It continued, “ExxonMobil Corp in coming days will sharply boost gasoline and diesel production at its Beaumont, Texas, refinery, people familiar with the matter said, completing a $2 billion expansion first considered nine years ago.”

This expansion will add 250,000 barrels per day of refining capacity to the 369,000 barrels per day of existing capacity bringing the total refining capacity to 619,000 barrels per day. This makes the ExxonMobil Beaumont refinery the second largest U.S. refinery behind the Motiva Enterprises refinery in Port Arthur, Texas.

It is noteworthy that the additional crude distillation unit, or CDU, is designed for light-sweet crude oil that Exxon produces in the Permian basin in West Texas and New Mexico. The CDU, called BLADE, stands for Beaumont Light Atmospheric Distillation Expansion. Since much of the Gulf Coast refining capacity was built in the 1970s and was designed for the heavy-sour crude oil that was being imported from Saudi Arabia at the time, increasing the capacity to refine more domestic light-sweet crude oil, which is produced in the Permian Basin, is a big boost for U.S. energy security.

Unfortunately, the ExxonMobil refinery expansion will increase U.S. refining capacity only briefly because the 263,776 barrels per day Lyondell Basell Industries refinery in Houston is slated to close at the end of 2023. The company tried to sell the facility, but two sales fell through. The company said it will continue to seek potential transactions and/or alternatives for the roughly 700-acre site on the Houston Ship Channel but will discontinue operations at the end of 2023 even if it has not been sold. Hopefully, a buyer will emerge, but the fact that Lyondell has not been able to sell an operating refinery speaks volumes about the difficulties facing the U.S. refining industry.

With the many destabilizing policies being imposed on the U.S. oil and gas industry in the name of a disastrous forced energy transition, it is encouraging to see that the profit motive is still alive and well, with ExxonMobil willing to make a 2 billion dollar investment in U.S. energy security.

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