US independent refiner Phillips 66 plans to diversify its crude slate at two midcontinent refineries once it closes on a deal to buy out its joint venture (JV) partner Cenovus Energy and takes full ownership of the facilities.
Cenovus under the JV had a keen interest in processing heavy crude at the 345,000 b/d Wood River refinery in Roxana, Illinois, and the 149,000 b/d facility in Borger, Texas. The buyout, which is expected to close in the fourth quarter, allows Phillips 66 to "open up that aperture" and optimize different crudes, including lighter grades, the company's executive vice president of refining Richard Harbison told Argus this week in an interview at the company's headquarters.
Harbison said the transaction also provides commercial flexibility on the products side. Phillips 66, which operated the JV's refineries, was obligated to produce certain products at certain prices, Harbison said. Now the refineries are "opened up to the market", Harbison said.
Phillips 66 can get feedback directly from its commercial and marketing organizations on which products to produce based on which are valued the highest in the market, he said.
Phillips 66 last month announced the $1.4bn deal to buy Cenovus' 50pc interest in the JV, WRB Refining. The Wood River refinery produces transportation fuels as well as petrochemical feedstocks, asphalt and fuel-grade petroleum coke. The Borger refinery produces transportation fuels, fuel-grade petroleum coke, NGLs and solvents.
Phillips 66 has also added crude flexibility at its 265,000 b/d Sweeny refinery in Old Ocean, Texas. The company made some relatively small modifications to the overhead systems and to the gas processing capability of the facility that allowed it to expand the processing capacity of light crude from about 20,000 b/d to 60,000 b/d, Harbison said.
This allows Phillips 66 to process more Permian crude which is readily available and connected by pipeline to the refinery, so it has lowered the crude cost for the facility as well, he said.
For Ontario-based Cenovus, the deal to sell its share of the JV comes during an intense competition with Strathcona Resources to buy fellow Canadian oil sands producer MEG Energy.
Cenovus on 8 October increased its offer to buy MEG in an effort to deter shareholders from accepting a competing bid from Strathcona.
Cenovus is now offering C$29.80 ($21.36) for each MEG share, up by C$2.35/share from its initial 21 August offer. This values MEG at about C$8.6bn, including assumption of MEG's debt. MEG shareholders will consider the revised bid on 22 October.
