US independent refiner PBF Energy is optimistic that higher throughputs and cost advantages position it for a profitable 2022, even as it steers a major renewable diesel conversion co-located at its 190,000 b/d refinery in Chalmette, Louisiana.
PBF ran its refineries at a combined average throughput of 869,000 b/d in the fourth quarter, up from 677,000 b/d in the fourth quarter of 2020 and 843,000 b/d in the same period in 2019.
The company expects to run at a combined average throughput of 875,000-935,000 b/d in 2022, up from 834,000 b/d in 2021, 727,000 b/d in 2020 and 823,000 b/d in 2019. The company added the 157,000 b/d Martinez refinery to its portfolio in February 2020, just before the first wave of Covid-19 caused refiners to slow production.
"Demand is continuing to grow and return to pre-pandemic levels," PBF chief executive Tom Nimbley said. "The current backdrop for refining in 2022 and beyond, especially domestic refining, is looking favorable."
Europe hostage of own policies
PBF Energy is optimistic on the outlook for US refining in 2022 partly because of the operational cost advantage it holds over European peers.
The company estimates higher natural gas prices in Europe give it a $3-5/bl operating cost advantage over competitors in the region. Gas costs in Europe have recently trended around $25/mn Btu, compared to prices around $5/mn BTU in the US.
Higher natural gas prices mean higher costs for refiners using gas to power units. But it also increases costs to produce the hydrogen refiners use to desulfurize heavy sour crudes, giving US refiners more crude feedstock flexibility to switch to those grades, in the company's view.
"There is a significant and increasing cost of hydrogen production with these [natural gas] prices," chief executive Tom Nimbley said. "That would be an advantage for our system, the US system versus Europe or any other place that is faced with these costs."
These advantages are likely to continue given the goals of European energy policy, Nimbley said.
"This is an example of going into an energy transition with a set of goals but perhaps not a well thought-out strategy and execution plan," Nimbley said. "You shut down the nuclear plants, you shut down the coal plants, and you are now starting to shut down the fossil fuel plants to rely on solar and wind, and if that is not available, it becomes a problem."
Renewable shift
PBF Energy expects to begin producing renewable diesel at its Chalmette refinery in the first half of 2023, marking the company's deepest move yet into lower-carbon business lines.
PBF previously delayed plans to begin the 20,000 b/d renewable diesel project at Chalmette after announcing in April last year that it planned to convert an idled hydrocracker at the facility within six months.
The company spent $45mn on the project last year and will spend most of the remaining $550mn in project costs over the next six quarters. The facility will feature a pre-treament unit and will gain feedstock sourcing advantages from its "ideal" location at the intersection of the Mississippi River and the Gulf of Mexico, PBF said. Permitting from Louisiana is complete, which freed the company to begin construction in the fourth quarter of last year.
PBF plans to distribute its renewable diesel in Europe and Canada, as well as in California, where the company has two traditional refineries. The company will benefit from familiarity with the state's Low-Carbon Fuel Standard (LCFS) market, executives said.
"We are in the LCFS market every day," PBF president Matt Lucey said today. "We control our own proprietary distribution system as well in California, so we can distribute through assets that we control today."
PBF Energy post a profit of $189.1mn in the fourth quarter, compared to a $286mn loss in the fourth quarter of 2020 and a $69mn profit in the same period of 2019.
