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Petroleum Refining: Unpacking the North American refinery landscape

Hillary Stevenson
Hillary Stevenson
Senior Director of Energy Market Intelligence at IIR Energy
James Mitchell
James Mitchell
Commodity Thought Leader, Refinitiv

In this first of a series of blogs produced in collaboration with IIR Energy – a leading supply-side global market intelligence player servicing the commodity trading community – we unpack the complex and dynamic North American refinery landscape.

  1. The petroleum refining industry is currently characterised by a number of challenges and opportunities.
  2. Some common pain points around capacity and the impact of potential capacity changes can best be solved by ensuring access to reliable, complete and up-to-the-minute industry data.
  3. The next 12 months are likely to see some in-plant capital projects, refinery restarts or even grassroots development begin to augment capacity.

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Can the industry balance challenge and opportunity?

The global petroleum refining industry is currently balancing two fundamental market needs.

Firstly, the industry is striving to deliver sufficient refined products for a post-pandemic world characterized by growing global demand. This presents an immediate challenge for industry players, as they must navigate a dynamic crude supply landscape, impacted by sanctions, price caps, changing supply volumes, and more.

At the same time, this challenge presents an opportunity for forward-thinking entities to locate refined product supply closer to both crude feedstock sources and end-user demand by adding refineries in places with crude supply and growing populations.

Secondly, industry stakeholders must continue to develop and optimise energy transition projects, both from an emission and fuel demand point of view. The most pressing challenge within this undertaking is sourcing and securing renewable fuel feedstocks, such as soybeans, sugar cane, tallow, used cooking oil (UCO) and more. Secondary challenges also exist in terms of feedstock costs and greenhouse gas (GHG) emissions reduction costs.

Again these challenges present opportunities. In this instance, a host of regulatory incentives for renewable fuels production, carbon capture and GHG reduction efforts – such as the US Renewable Fuel Standard (RFS) – exist.

Refinitiv oil research: Our industry-leading data, research, analysis and modelling provide clarity in rapidly evolving oil trading markets.

Tackling common pain points

Against this backdrop, industry stakeholders are facing some common pain points:

Understanding potential capacity: Industry players are operating against a dynamic backdrop, where fully understanding the outlook for North American refinery capacity is far from straightforward. Potential capacity is impacted by several factors, including grassroots developments, in-plant additions and possible closures.

Assessing the impact of capacity changes: In addition, market players must ensure that they fully understand how different scenarios relating to refinery capacity changes could impact crude and fuel markets.

A number of specialist solutions and best practice responses can be employed to help solve these challenges and maximise the opportunities that exist, but the essential requirement is access to reliable, accurate and comprehensive data.

The right information can empower industry stakeholders to make better, more informed decisions – and for this reason, Refinitiv and IIR Energy have collaborated to create a cohesive, one-stop-shop solution that leverages both IIR Energy’s in-depth operational knowledge and Refinitiv’s market-leading data.

IIR’s PetroCast Live – which can be accessed on the Refinitiv platform – offers real-time information on global refining operations and delivers a holistic single view that can accurately inform predictions relating to the price of crude and refined products.

Covering planned and unplanned turnarounds, new capacity events, capital projects, reductions, curtailments and more, PetroCast Live leverages robust research and ensures that continually updated forecasts are available.

IIR Energy provides real-time, supply-side global market intelligence for the commodity-trading community.

North American refinery capacity: a snapshot of the next 12 months

Looking ahead, what are the likely developments within the North American refining industry over the coming 12 months?

IIR Energy’s Senior Director of Energy Market Intelligence, Hillary Stevenson, sees potential for a grassroots refinery final investment decision (FID), explaining that IIR Energy is tracking five grassroots projects at the moment.

Jim Mitchell, Head of Americas Oil Analysts, Refinitiv, contends that of the five projects on IIR’s watchlist, Red Leaf Duchesne in Utah – which will consume local waxy crude production – is arguably the most viable. That said, he points out that Meridian Davis in North Dakota and MMEX Fort Stockton in Texas may be best placed to take advantage of the regulatory incentives already outlined.

Stevenson goes on to say, however, that the market is more likely to see some in-plant capital projects, which could potentially add 112,500 bpd of capacity over the next several years. This so-called refinery creep is in part driven by the simple fact that it is generally easier to grow capacity by expanding existing footprints rather than opening new refineries.

In addition, IIR Energy is tracking a selection of refinery restarts, which could add back capacity of up to approximately 497,000 bpd.

Given the many variables that impact the North American refinery landscape and the highly dynamic nature of this industry, there is a fundamental need for market players to equip themselves with equally dynamic, trusted data that can power better decisions against a complex global backdrop.

Those that do so will be best placed to minimise risk, solve the challenges that currently define this space and maximise the opportunities on offer within the sector.

In subsequent blogs within this series, we will unpack other anticipated projects and developments across the globe, as well as their potential impact on international crude and fuel markets.

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Can the industry balance challenge and opportunity?

The global petroleum refining industry is currently balancing two fundamental market needs.