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Marathon Petroleum sells Speedway, looks to repurpose idled refinery

August 07/2020

MOSCOW (MRC) --  Marathon Petroleum sold its Speedway retail operations and is keeping offline two refineries shut earlier during the coronavirus pandemic, while increasing runs at its other refineries in the third quarter to meet rising demand following the easing of coronavirus-induced lockdowns, reported S&P Global with reference to CEO Mike Hennigan's statement on August 3.

Marathon Petroleum on August 2 agreed to sell its Speedway retail assets to 7-Eleven for USD21 billion in cash. The agreement includes a 15-year fuel supply agreement which calls for Marathon to supply 7-Eleven approximately 7.7 billion gallons/year or just over 500,000 b/d of transportation fuel.

Marathon also said it is indefinitely idling the two refineries it had shut down earlier when demand first crashed due to the pandemic--the 26,000 b/d El Paso, Texas, plant and the 161,000 b/d Martinez, California plant.

California was the first state to shut down, with Governor Gavin Newsome ordering all residents except essential workers -- to stay at home on March 19, causing gasoline demand to fall by about half and prices to plummet, reducing refinery cracks.

As a result, Los Angeles 88.5 CARBOB prices fell to an average of USD1.08/gal in the second quarter from USD1.68/gal in the first quarter, Platts price assessments show. So far, third quarter prices are averaging USD1.45/gal.

"By shutting Martinez, MPC [Marathon Petroleum Corporation] will not only be able to cut fixed costs but will also operate Los Angeles (363,000 b/d) refinery in a more profitable environment", said Credit-Suisse analyst Manav Gupta in a research note.

"Gallup is a small refinery with high fixed cost and was profitable when Midland diffs were wide. Shutting it lowers costs and MPC will see product markets tightening in El Paso where it already has refining capacity [131,000 b/d]," he added.

Marathon said it was unsuccessful in its attempt to sell the El Paso plant, but will keep logistics operating there despite the plant closure.

Marathon is evaluating re-purposing Martinez into a 48,000 b/d renewable diesel plant.

"We have the unique opportunity to take advantage of a strong set of logistics for the area and three significant processing units that are an ideal fit for making renewable diesel," said Hennigan.

Martinez has three high pressure, hydroprocessing units which, if retrofitted, could produce renewable diesel about equal to about one-third of the refinery's nameplate crude capacity, said Raymond Brooks, Marathon's head of refining.

"There are also existing hydrogen plants, power generation and extensive inbound and outbound logistics that are all needed to produce renewable diesel," he added.

"So our intention is to pivot to the production of higher value, low-carbon intensity diesel for California,' he said.

The plant currently produces about 54,000 b/d of ULSD. If Marathon decides to go ahead with the project, it is expected to be online in 2022 with initial production of 48,000 b/d of renewable diesel and "ramping up from there," he added.

Marathon Petroleum expects its total system third quarter refinery throughput to average 2.345 million b/d, up from the 2.276 million b/d in the second quarter as runs increase at its Midwest and US West Coast plants. Second quarter utilization was 71% across its 16-refinery system which has over 3 million b/d of refining capacity.

Marathon expects third quarter Midwestern throughput of 1.045 million b/d compared with the 957,000 b/d processed in the second quarter. US West Coast refinery runs are expected to average 435,000 b/d topping the second quarter's 419,000 b/d, despite a total turnaround planned for its 68,000 b/d Kenai, Alaska, refinery and hydrocracker work underway at its 363,000 b/d Los Angeles complex during the quarter.

On the US Gulf Coast, third quarter throughput is expected to be lower, averaging 920,000 b/d, compared with the 970,000 b/d in the second quarter, as third quarter catalyst changes are planned for Marathon's two largest refineries the 585,000 b/d Galveston Bay, Texas, plant and the 578,000 b/d Garyville, Louisiana plant.

As MRC reported earlier, US refiner Marathon Petroleum Corp is delaying all maintenance projects at its 102,000 barrel-per-day St. Paul Park, Minnesota, refinery for 2020 amid concerns related to the spread of the novel coronavirus. Several refiners have delayed planned maintenance at their plants this year due to concerns around the spread of the coronavirus among workers, or as part of capital and operational expense cuts.

Besides, Marathon Petroleum Corp idled its 166,000 barrel-per-day (bpd) refinery in Martinez, California beginning April 27 in response to the coronavirus pandemics hit to demand for refined products.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Marathon, Russia, USA.
Category:General News
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