Lower crude costs contribute to North American refinery profitability

According to the US Energy Information Administration (EIA), first quarter 2014 financial results continued a three year trend of North American refineries showing considerably higher profitability than European refineries.

EIA suggests that lower North American crude oil prices compared with world prices have been a key factor in driving this outcome. Gulf Coast refiners have been experiencing increased earnings since 2013 because of lower crude costs after some of the infrastructure bottlenecks to crude oil flow were removed and prices of Light Louisiana Sweet (LLS) began to trade at a discount to Brent. In addition, relatively cheaper natural gas prices in North America continue to provide US and Canadian refineries with further energy feedstock price advantages compared with refineries in other parts of the world.

North American refiners’ earnings per barrel were more than US$ 6/bbl higher than their European competitors for the first three months of 2014, based of analysis of 26 energy companies with refinery operations that submit financial and operating information by segment to the US Securities and Exchange Commission (SEC).

In this analysis, the EIA compared 13 companies based in North America with 13 companies based in Europe. Ten of these refineries have nearly their entire throughput through Europe, ten others have nearly all their throughput through North America, and six have refineries throughout the world. Total earnings in the refining segment for each grouping was divided by its total refinery runs to estimate earnings per barrel processed.

The scale of refinery runs varied widely across companies. Earnings in the refinery segment ranged from a loss of approximately US$ 2 billion for one company to a profit of US$ 4.3 billion for another. Total refinery throughput averaged 25.6 million bpd in 2013, approximately 56% of total liquid fuels consumption by the countries of the Organisation for Economic Cooperation and Development (OECD).

Adapted from a press release by Emma McAleavey.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/05062014/north_american_refinery_profitability_660/