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Exxon to Complete $2B Refinery Expansion

Business

ExxonMobil sign on the oil tank | Image by JHVEPhoto/Shutterstock

ExxonMobil Corp. is set to complete a $2 billion expansion at its Beaumont refinery.

The expansion will sharply boost gasoline and diesel production, with an initial startup of 250,000 barrels per day (bpd) at the 369,000 bpd refinery. The addition will make its Beaumont refinery the second largest in the United States, according to Reuters.

It will be the first major expansion in U.S. oil processing in almost a decade, adding the equivalent of a mid-sized refinery, said Reuters.

“Construction of the new crude unit is completed. We have initiated startup procedures and commissioning is underway,” Exxon spokesperson Chevalier Gray told Reuters. “The unit will add 250,000 barrels per day of all new supply for the refined products market.”

Stockpiles of diesel and gasoline are nearing five-year lows in the U.S., creating near record-level profit margins for producing motors fuels in the U.S. Gulf Coast, said Reuters. Chevron and Exxon Mobil posted a combined $30 billion in earnings in the third quarter of last year.

“Right now, margins are sensational,” said Garfield Miller, president of refining investment banker Aegis Energy Advisers Corp. “These margins tell you that as far as the U.S. Gulf Coast is concerned, there is plenty of demand relative to supply.”

The new Crude Distillation Unit (CDU), called BLADE (Beaumont Light Atmospheric Distillation Expansion), was formally approved in 2019. BLADE is planned to process Exxon’s crude oil pumped from the Permian Shale Basin in West Texas and New Mexico, according to Reuters.

However, the new refinery will not immediately generate significant new volumes of gasoline and diesel, as the company plans to bring BLADE up slowly to manage any potential startup problems. BLADE will be Exxon’s third CDU at Beaumont and will increase the refinery’s capacity by 68%.

Analysts say the new CDU will make up the refining capacity lost at the end of the year when LyondellBasell Industries closed its 263,776 bpd Houston refinery.

“Up until COVID, the U.S. added the equivalent of a world-scale refining facility to existing capacity every year through expansions, de-bottlenecking, and tweaks,” Miller said.

Since the beginning of government lockdowns during the COVID-19 pandemic, six U.S. crude oil refineries closed, bringing U.S. capacity down from 18.98 million bpd to 17.9 million bpd, according to the U.S. Energy Information Administration report issued in June.

The new expansion marks a return to an era of refining capacity gains through processing tweaks and adding new equipment to existing plants, Reuters said.

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