US Gulf coast refiners could benefit from processing more Venezuelan crude in the near term if the capture of president Nicolas Maduro by US forces leads to more of that country's oil being redirected, Phillips 66 chief executive Mark Lashier said Tuesday.
Increasing production from Venezuela would likely take many years, but cargoes heading to China and other destinations could be directed toward the US and compete with Western Canadian Select (WCS) crude that is currently consumed in Gulf coast refineries, Lashier said at the Goldman Sachs Energy, CleanTech & Utilities Conference. An increase in Venezuelan crude imports into the US could also have an impact on price differentials in the midcontinent, Lashier said.
Phillips 66 owns and operates two large Gulf Coast refineries that can process about 200,000 b/d of Venezuelan oil if the crudes are available and the economics support it, the company's chief financial officer Kevin Mitchell said at the Goldman event. The refineries include the 265,000 b/d Sweeny refinery in Old Ocean, Texas, and the 264,000 b/d refinery in Lake Charles, Louisiana.
Phillips 66 is running about 500,000 b/d of heavy crude across its entire system and is a "heavy buyer" of western Canadian crude, Mitchell said.
Earlier today Canadian prime minister Mark Carney said that his country's crudes remain competitive, but that the prospect of more Venezuelan output could influence Canadian oil flows. This includes building another pipeline to bring Canadian production to Pacific markets to lessen dependence on US customers.
Currently, Phillips 66 purchases Venezuelan crude from Chevron "on occasion," Lashier said.
Chevron operates in Venezuela with state-owned PdV under a special waiver from US sanctions and imported about 120,000 b/d of crude from Venezuela to the US in December, according to data from Kpler ship tracking.
President Donald Trump said on 3 January that the US would temporarily run the Venezuelan government and seek to overhaul its oil sector, hours after he ordered a large-scale military assault that resulted in Nicolas Maduro's capture.
Trump said that US oil firms will be given the job of rebuilding the Latin American nation's long-neglected oil industry, a task that analysts said will prove difficult following decades of neglect, underinvestment and sanctions.
A meaningful turnaround will demand costly repairs to basic energy infrastructure covering everything from pipelines to power supplies, as well as access to the latest equipment and a skilled labor force that is ready to go. US producers will also need clarity around legal frameworks regarding contracts, as well as sharply higher oil prices to justify the massive investments needed.
Lashier said it will take years, if not decades, to realize Venezuela's full potential, but that "this is an opportunity for Venezuela to return back into the capitalist folds" and "to benefit their people" in the long term.
"It's a crime what has happened there, and we really do hope that it all plays out that way," he said.
