US refiner Phillips 66 said Wednesday it plans to increase its product export capacity by 50,000 b/d to 370,000 b/d by the end of this year and to raise the volume of less expensive North American crude it processes at its US refineries.
Announcing its earnings for first-quarter 2013, which more than doubled to $1.4 billion, Phillips partly credited the increased use of "advantaged crudes" in its refineries, which pushed profit margins to $13.94/b in the first quarter.
"Several rail, terminal and pipeline service agreements, as well as direct investments in transportation and refining assets, will enable the company to deliver more advantaged crudes to its US refineries," the company said.
Phillips is moving this cheaper crude from the Midcontinent and Canada to its refineries on both coasts using rail and barge. It recently took delivery of 400 railcars out of the 2,000 ordered to move primarily Bakken to the East and West coasts.
Phillips expects regional crack spreads in the second quarter to strengthen on rising seasonal demand, even though the lower crude price has helped keep them in the black, but sees crude market volatility as a factor in their level.
"I think our fundamental view is that the fundamentals haven't changed, that we still see the discounts with inland crudes. We still see the Canadian discounts," Phillips 66 CEO Greg Garland said.
"We do believe, though, that they will remain volatile and that we wouldn't be surprised to see those come back out a bit from where they have been in the last month. May not be as high as what we saw or as much volatility as last year," he said.
Over the next 12 months, the company expects to process an additional 150,000 b/d of low-cost North American crude oil, it said.
Phillips 66 also said it exported 150,000 b/d of refined products in the first quarter, a "significant increase" from the same period of 2012.
It said it completed projects at its Ferndale, San Francisco and Alliance refineries, which expanded refined product export capability by 35,000 b/d.
In total, Phillips 66 has the capacity to export 320,000 b/d from its domestic refineries, it said.
"Through further investment at [our] facilities on the Gulf and West coasts, export capability is expected to increase to 370,000 b/d by the end of 2013," it said.
Phillips 66 said that in the first quarter 68% of the company's US crude slate was "advantaged" compared with 60% in the same period last year.
In the first quarter of 2013, Phillips 66 processed 563,000 b/d of heavy crude oil, including 190,000 b/d of Canadian heavy crude.
The company ran 311,000 b/d of WTI-based crudes, including light Canadian crude.
Additionally, Phillips 66 processed 221,000 b/d of Eagle Ford, Bakken and Mississippian Lime crudes, a 120,000 b/d increase over first-quarter 2012.
Its worldwide refining utilization was 90% in the first quarter, reflecting turnaround activity in the Gulf Coast and Central Corridor regions, as well as planned work at its joint venture Wood River, Illinois, refinery and both planned unplanned downtime caused by a power outage at Sweeny, which closed the plant for over 40 days.
Phillips expects second quarter operating global utilization rate in the high 90s%.
NGL FRACTIONATOR
Phillips 66 also said it was pursuing the development of a 100,000 b/d capacity NGL fractionator at Old Ocean, Texas, the site of its 247,000 b/d Sweeny refinery.
If approved, construction is expected to begin in the first half of 2014, with startup anticipated in the second half of 2015.
"Our plans for a new NGL fractionator on the Gulf Coast reinforce our commitment to the American energy landscape and highlight our unique opportunities across the downstream value chain," Garland said.
