Almost 2.5 mm barrels per day of US refining capacity to close

The U.S. fall refinery maintenance season is shaping up to be the busiest since before the Covid-19 pandemic forced plants to cut rates and delay all but emergency work.

According to data from Energy Aspects LTD, almost 2.5 million barrels per day of refining capacity will be taken offline for maintenance from September to December. This is 11% more than the same period last year.

Looking ahead, some predict that the first quarter of 2024 will be the busiest maintenance season on record, loaded with deferred work and regularly scheduled changes to crude oil units, fluid catalytic crackers for gasoline manufacture, cokers and others . This could start a race to lock down available contractors.

This fall’s busy schedule is partly the result of repairs to units affected by unplanned leaks, multiple fires, and the general stress of running hard during an unseasonably hot summer. Refiners also have to work with a backlog of runs after delaying maintenance to save money during the pandemic and later to chase strong margins as the economy improved.

“In 2023, we’re seeing a lot of unplanned disruptions,” said Austin Lin, principal oil and refining markets analyst at Wood Mackenzie. “There has been a continued tendency to postpone and minimize maintenance wherever possible.”

Now, as refining margins fall from their peaks, plants may begin to go down for repairs. The crack spread on 3-2-1 futures fell to around $23 a barrel on Monday, down from more than $43 on August 11. While diesel margins remain relatively strong, gasoline margins collapse as summer ends.

Routine maintenance, such as changing catalysts and cleaning boilers, should be done regularly. Full makeovers that traditionally occur every 4-6 years can only be put off for so long without risking chronic disruptions that can shut down units for weeks at a time.

“The day of reckoning has come,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Now they have to do the maintenance.”

As of Friday, an average of 526,000 barrels per day of U.S. processing capacity was expected to be offline for scheduled work in September, 1.48 million barrels in October, 452,000 barrels in November and nothing in December, according to Energy Aspects. Data only includes confirmed maintenance. Actual amounts are likely to increase if more work is added or if unplanned outages occur due to unit disruptions, power failures or storms.

Shell’s Norco refinery north of New Orleans pushed a turnaround of its single crude unit to late September from a late March start because product margins were robust, a person familiar with the matter said. the operations Exxon Baytown and Motiva Port Arthur in Texas also began maintenance on large crude units last week.

The pandemic taught refiners many hard lessons about the unpredictability of the market, with the US losing about 1.2 million barrels of capacity to outright shutdowns between 2019 and 2022. Another 300,000 barrels were lost due to upgrades to add capacity that never happened, said Robert Auers. , manager of Refined Fuels Analytics, a division of RBN Energy.

An unknown every fall is whether a major tropical storm will cause more capacity on the US Gulf Coast during the Atlantic hurricane season. The last year the Gulf’s production areas were spared a tropical storm strike, which can wipe out large amounts of production for days at a time, was 2014.

–With assistance from Chunzi Xu, Lucia Kassai and Brian K. Sullivan.