US crude exports would hurt refining margins: BP

OREANDA-NEWS. April 24, 2015. Broader US crude exports would eliminate domestic refiners' advantage versus their global peers, BP's chief executive of downstream Tufan Erginbilgic said today.

US refiners have benefited from lower feedstock costs that are their main advantage against new, complex refining centers in Asia and the Middle East, Erginbilgic said at the IHS CeraWeek energy conference in Houston. Prices forced lower by the combination of high production and limited market access in part drove BP's reorganization of North American refining to facilities closer to US and Canadian crude production, rather than on the coasts.

BP supports free trade and an end to the decades-long ban on exports of US crude, he said.

But crude prices have been the principal competitive advantage for US refiners, he said. If restrictions were lifted, BP would view US refiners the same as struggling global peers. Opportunities created by increased crude supplies, whether from high levels of production or by refining rates cut by maintenance, would flatten.

"If export restrictions are lifted, US refining will be under more intense competition than today," Erginbilgic said.

The company would view US refineries the same as overall global refining, which BP has long viewed as needing cuts to capacity.

BP sold its California and Texas refining businesses to concentrate its US refining operations in Washington, Ohio and Indiana. BP's 222,7000 b/d refinery in Cherry Point, Washington, actively exports into a growing global market for products, while midcontinent refineries rely principally on crude price advantages.

But BP's 410,000 b/d refinery in Whiting, Indiana, and 157,000 b/d joint venture refinery in Toledo, Ohio, could eventually also access global products markets, Erginbilgic said.

"Our strategy was to create, really differentiate our position on the feedstock and to get advantage there," Erginbilgic said. "Over time, there are going to be product pipelines getting out that supply as well."

Midcontinent pipeline operators have already explored ways to grant refiners in the region access to new markets. Pipeline reversals and construction have connected refiners to the edges of the US Gulf coast, in Texas and Arkansas, and into Pennsylvania.