Patrick DeHaan is a senior analyst at gasbuddy.com.
The largest ever refinery expansion in U.S. history is nearing completion in Port Arthur, Texas. While it isn't technically a new site, it will be adding so much new capacity that the expansion is like adding the equivalent of a second refinery to the same area where the existing 275,000 barrels-per-day plant operates.
Motiva Enterprises, owners of the facility, planned and began work on this expansion half a decade ago, and final construction work will wrap up this year. After all is said and done, this facility will be the Big Mac, or perhaps Whopper, of the refining sector, boasting a capacity of 600,000 barrels per day. The new capacity will make the Motiva-owned facility the largest in the United States and one of the largest in the world.
After shutdowns or sales of multiple refineries on the East Coast, the additional refining capacity will be welcome news for motorists. However, with U.S. gasoline demand having already likely hit its peak in 2007, we may find that the finished expansion could result in even more finished gasoline and distillate leaving U.S. borders.
With West Texas Intermediate crude trading at a considerable discount, the opening of this additional capacity would not come at a better time for Motiva, even if gasoline demand has peaked in the United States. Aforementioned shutdowns on the East Coast and in Europe as well as intense demand from South America and China make this facility expansion profitable from the get go.
While this country hasn't technically added a new refinery in decades, large expansions, such as this Motiva expansion in Port Arthur, means refining capacity is increasing in some capacity. BP is also wrapping up modernization of its sprawling Whiting, Ind. facility to allow it to process more Canadian crude oil. Other such expansions have allowed refineries in the Rockies and Great Lakes to process more Canadian crude oil, which currently trades at a discount to lighter, sweet crude oils such as West Texas Intermediate and Brent crude.
So while we constantly are bombarded with the news media each time gasoline prices rise saying that a new refinery hasn't been added in decades, just remember that existing refineries have been upgrading virtually every year for a decade.