Industryweek 13147 Oil Refinery 595 T

US Oil Industry Becomes Refiner to the World as Exports Boom

March 6, 2017
U.S. companies last year exported a record 3 million barrels a day of refined products, more than double the 1.3 million barrels a day shipped a decade ago.

When PBF Energy Inc. (IW 500/84) scooped up a refinery from Exxon Mobil Corp. on the Mississippi River in 2015, it wasted no time sprucing up the plant with an eye toward quickly resuming lucrative fuel exports.

Within three months, PBF was ready to load its first tanker for shipment abroad. By late last year, the New Jersey-based company was exporting 22,000 barrels a day of fuel, or 16% of that refinery’s output. Now, it wants to boost that to almost 25%.

PBF isn’t alone in this push. From major producers such as Chevron Corp. to specialized refiners including  Valero Energy Corp., the U.S. refining industry has shifted its game over the last five years, taking advantage of gaps left by struggling refiners in Latin America, Africa and Asia. Along the way, it’s transforming what had long been a largely domestic business into a new global venture.

"U.S. refiners are now the refiners for the world," said Ivan Sandrea, head of Sierra Oil & Gas, which is planning to build infrastructure to import U.S. fuels into Mexico.

U.S. companies last year exported a record 3 million barrels a day of refined products, more than double the 1.3 million barrels a day shipped a decade ago, according to data from the Energy Information Administration. Gasoline led the surge, with exports hitting an all-time high of almost 1 million barrels a day in December, up tenfold from a decade ago.

Redrawing the Energy Map

The export boom, together with surging domestic shale oil output, has redrawn the global energy map. The U.S. a decade ago reported annual net imports of crude and refined products of 12.4 million barrels a day. Last year, it received a net 4.8 million barrels a day, the lowest since 1985. In late 2016, the U.S. exported more crude and refined products to Latin America than it imported from the region -- a first.

The industry is embracing the new overseas fuel markets.

Take Exxon. When it updated investors on its strategy last week, it showed a chart of its integrated business. Over a map of Texas, photographs of oil pump-jacks, pipelines, refiners and, ultimately, tankers with arrows pointing toward Europe, South America and Asia displayed the importance of the export market.

Mexico is emblematic of the shifting landscape. The Latin American country relied on U.S. gasoline last year for nearly 50% of its total consumption as refineries operated by state-owned oil giant Petroleos Mexicanos (Pemex) malfunctioned. In December, Mexico imported a record high of 1.2 million barrels a day of U.S. fuels, particularly gasoline.

While Mexico is an example of the strong overseas demand for U.S. fuels, it also represents the danger American refiners face longer term. Mexican fuel demand isn’t booming, which means U.S. refiners are merely filling a gap left by domestic inefficiency.

If Mexico’s own refining plants make some recoveries, the U.S. business there could end as quickly as it started.

Domestic Struggles Fuel Demand

"You’ve got to be careful about what you describe as demand," said Thomas Olney, an analyst at Facts Global Energy, a consultancy. "In effect it’s just that domestic production has been struggling," he said.

The same holds true for countries from Brazil to Nigeria, where U.S. refiners are taking advantage of a lack of enough local refining capacity to meet domestic fuel needs. Ixchel Castro, a Latin American oil-market expert at consultant Wood Mackenzie Ltd., said U.S. gasoline exports to Mexico could drop by 15% in 2017 if Pemex re-start its refineries.

Still, American refiners can expect to keep their hold on most of the market for now. The U.S. Gulf Coast will always be the cheapest region to source fuels for Mexico, Venezuela, Brazil and Caribbean nations due to its proximity. And they stay in good position to serve West Africa too.

Threats abound in the eastern hemisphere. Middle Eastern and Asian refiners are also looking for export outlets to sell some of their surplus. Olney said Asian refiners could start shipping fuel into countries in the Pacific coast of Latin America, such as Chile, competing directly against U.S. refiners.

And there’s China, which also capped a record year for both diesel and gasoline exports in 2016. As Chinese exports flood Asia, U.S. refiners will find new competition in markets such as Japan, which in December imported a record 379,000 barrels a day of U.S. fuels.

U.S. refining executives are, so far, playing down the danger.

"We still feel bullish," Phillips 66 President Timothy Taylor told investors last month about the outlook for U.S. gasoline exports into Mexico and the rest of Latin America. The region’s refiners "continued to have issues, and that’s created an opportunity."

By Laura Blewitt and Javier Blas

Popular Sponsored Recommendations

Global Supply Chain Readiness Report: The Pandemic and Beyond

Sept. 23, 2022
Jabil and IndustryWeek look into how manufacturers are responding to supply chain woes.

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

How Organizations Connect and Engage with Frontline Workers

June 14, 2023
Nearly 80% of the 2.7 billion workers across manufacturing, construction, healthcare, transportation, agriculture, hospitality, and education are frontline. Learn best practices...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!