"The polar vortex raging across Texas is causing chaos for the largest US refiners, as the state’s vast oil refining sector is forced into record unplanned shutdowns as installations fail to cope with extreme weather conditions.
We expect the region's unplanned outages to surge above an average of 1.5 million bpd in February 2021, as 4.2 million bpd of refining capacity is affected this week.
Despite the magnitude of the unplanned outages, the net effect on refinery crude intake is expected to be more moderate as significant spare refinery capacity is available in the US Gulf Coast to pick up the slack.
Unplanned outages at refineries across Texas and Louisiana will result in average February 2021 US refinery input dropping to 13.9 million bpd, an 800 000 bpd decrease.
Overall, the average demand dent isn’t far away from our average forecast for total US oil production shut-ins of 900 000 bpd for February 2021, leading to a finally near net-zero effect from the freezing temperatures.
The Covid-19 induced demand drop has caused refiners to maintain low capacity utilisation rates and pushed many others to delay turnarounds during this spring maintenance season, which will result in the lowest planned maintenance outages seen in the last five years.
We find that as refiners ramp up runs towards the summer to meet the expected increase in end-user demand, the delayed planned maintenance could increase unplanned outages as the heightened stress from higher run rates could cause machine breakdowns.
If combined with another external shock, such as a repetition from last year’s hurricane season, it could result in very tight product markets for the second half of 2021.
From Monday this week, we have tracked 4.2 million bpd of refinery capacity temporarily shut due to the weather conditions, including the 640 000 bpd Motiva Enterprises facility and the 600 000 bpd Marathon Petroleum Galveston Bay refinery, some of the largest refining facilities in the US.
About 2.5 million bpd of capacity was shut in between Houston and Louisiana and another 540 000 bpd in the Corpus Christi area was affected. This represents a significant portion of the region's total capacity of 8.7 million bpd.
We find that as a consequence of the refinery outages, fuel markets will tighten, which combined with increased demand for heating fuels is triggering a spike in prices across the suite of refined products from gasoline to propane.
We see a significant risk of this year’s unplanned outages being significantly high as the decision to delay scheduled maintenance for over two years for many refiners could lead to units breaking down and requiring unplanned shutdowns for repairs or replacements.
If the summer 2021 hurricane season is just as active as last year, such extra external shocks could significantly tighten US product balances in the latter half of 2021."
Read the article online at: https://www.hydrocarbonengineering.com/refining/19022021/rystad-energy-comments-on-texas-refinery-outages/
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