While the magnitude and longevity of planned work varies from year to year, refinery maintenance typically occurs during seasons that bookend peak refined products demand. Refinery maintenance schedules have rippling effects on the oil supply chain, as the seasonal decrease in crude demand often impacts inventory levels at supply hubs across North America. In 2017, for example, PADD 3 primary processing utilization dropped down to 88 percent during spring maintenance season, the lowest levels since 2014. This contributed to record-high inventories at the Cushing, OK, storage hub in April, according to Genscape's Cushing Crude Oil Storage report. Refiners across North America are currently gearing up for a busy spring turnaround season, and several major projects are currently underway.
Spring Maintenance Outlook
PADD 3 primary processing utilization dropped to 91 percent by week ending January 26, partially due to unplanned, cold-weather outages in the region. Spring 2018 primary processing rates in PADD 3 have already dipped below the four-year average, which bottomed out at 92 percent on average between 2014 and 2017, according to Genscape’s North American Refinery Intelligence Service. Utilization in PADD 3 rebounded to 96 percent for week ending February 2. However, at least another 972,000 bpd of crude distillation capacity is slated to undergo maintenance this season, according to Genscape's 2018 Refinery Turnaround Schedule, which provides a forward-looking glimpse at maintenance activities in North America for the calendar year. Subscribers to the North American Refinery Intelligence Service will soon have access to the monthly supplemental turnaround report, published on the second Thursday of the month, beginning on February 8, 2018.
According to the turnaround schedule, maintenance on light products processing units in PADD 3 is expected to be considerably lighter this year compared to last, when planned maintenance accounted for 36 percent of monitored capacity being offline for some part of Q1 2017, according to Genscape. Light products processing was further depressed by myriad unplanned outages, affecting around 10 percent of capacity in the region.
Refiners are expected to shut around 650,000 bpd of PADD 2 primary processing capacity this season, which accounts for 18 percent of crude and vacuum distillation capacity in the region. Should all maintenance activity coincide, utilization is on track to dip below the four-year average low of 91 percent during the spring months.
Fall Maintenance Season
Fall 2018 turnarounds in PADD 3 are expected to be lower in magnitude and duration compared to planned work this spring, according to Genscape’s turnaround schedule. However, more work is planned for this fall compared to 2017, with major turnarounds expected at several facilities, including Valero’s 245,000 bpd Texas City, TX, refinery, Flint Hills’ 295,000 bpd Corpus Christi, TX, refinery, and Placid’s 59,000 bpd Port Allen, TX, refinery. In fall 2017, around 5 percent of monitored light products capacity was offline for some part of the season due to planned maintenance, and less than 1 percent of primary processing was down for planned work. Refinery utilization did reach a record low of 68 percent in September 2017, with Hurricane Harvey causing widespread unplanned outages across the Gulf Coast.
Genscape’s historical data shows that refineries in the Mid-Continent typically undergo more aggressive turnarounds in the fall compared to spring. This fall, at least 10 refineries are slated to perform maintenance on primary processing equipment, which could affect 24 percent of refinery capacity in PADD 2, according to Genscape. In the previous four years, fall work contributed to an average low of 87 percent utilization in the region, and spring work contributed to an average low of 91 percent. While Gulf Coast refiners deferred maintenance to take advantage of healthy refining margins, primary processing outages in the Mid-Continent reached a record high of 29 percent capacity during the fall 2015 maintenance season, with routine work required on many units. These market dynamics led to a refined product supply glut and depressed product prices in early 2016, causing Mid-Continent refiners to consider economic run cuts that year.
Busy Turnaround Seasons the Result of Deferred and Routine Work
Genscape estimates that the work planned for 2018 could send primary processing utilization rates in the Gulf Coast and Mid-Continent below the four-year seasonal averages. Some of the increased maintenance in the Gulf Coast can be attributed to refiners deferring planned work from fall 2017 to spring 2018 in the wake of Hurricane Harvey. The hurricane not only diverted contract workers to repair damage from the storm, it also created profitable margins and incentivized refiners to run units rather than shut down in the weeks following the storm. Maintenance on the largest, 325,000 bpd CDU and other units at Motiva’s 600,000 bpd Port Arthur, TX, refinery was rescheduled for spring, along with projects at Phillips 66’s 247,000 bpd Sweeny, TX, refinery and Valero’s 210,000 bpd Corpus Christi West plant. Additionally, several refineries this year are due for major four and five-year routine turnarounds, such as Andeavor’s 122,000 bpd El Paso, TX refinery in the Gulf Coast and CHS’s 86,000 bpd McPherson, KS, refinery in the Mid-Continent. Genscape will continue to track the maintenance activity and provide insight into the impacts.
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