Phillips 66's plans for a late 2025 shutdown of its 139,000 b/d refinery in Los Angeles, California, will likely lead to more trans-Pacific refined products tanker shipments into the US west coast while having a more muted effect on crude tankers.
Phillips 66 said it would likely shut the refinery in the fourth quarter of 2025, citing the high regulatory costs of operating in California. While it is unclear what will become of the facility, Phillips 66 said it still plans to supply the region with road fuels in the future.
The closure will reduce California's refining capacity by 8.6pc to about 1.48mn b/d and removes about 14pc of refining capacity in the Los Angeles area.
Tankers hauled about 160,000 b/d of refined products to California in January-October, with about 95,000 b/d going to Los Angeles, according to data from analytics firm Vortexa. About 27pc of the deliveries to Los Angeles came from refiners on the US Gulf coast and elsewhere on the US west coast on Jones Act-compliant vessels, which must be US-built, US-flagged and US-crewed.
But the relatively small Jones Act fleet is already fully utilized, with no additional ships on order, shipbroker Poten said. This means replacement supplies of refined products will need to come from farther afield, likely Asia-Pacific.
South Korea is Los Angeles' biggest source of waterborne refined products so far this year, shipping about 33,000 b/d in January-October, Vortexa data show, followed by other US sources (25,000 b/d), China (9,000 b/d), India (9,000 b/d) and Canada (8,500 b/d). Taiwan, Singapore and Japan also have supplied marginal cargoes to Los Angeles this year.
An increase of California-bound shipments from these countries would create additional demand for voyages lasting a range of 19-35 days, boosting ton-mile demand and tanker employment in the Pacific basin. Medium range (MR) and long range 1 (LR1) refined product tankers would benefit the most from these increased trade flows, with MRs accounting for 67pc of the current market share and LR1s 33pc, according to Vortexa data.
Tanker demand for exports from the US west coast is unlikely to be affected. Phillips 66 Los Angeles exported just 2,000-4,000 b/d of products in January-October, data from Kpler and Vortexa show.
Limited impact on crude tankers
Because Phillips 66's Los Angeles refinery was designed to process domestic California crude, the impact on the regional crude tanker market likely will be much more limited — and offset by increased tanker demand on Canada's Pacific coast.
With available domestic — albeit declining — California crude production, the 139,000 b/d refinery imported 64,000 b/d of crude in January-August 2024, mostly from short-haul sources in the Americas, the latest data from the US Energy Information Administration (EIA) show. The trade was dominated by 1mn bl Suezmaxes and 500,000-700,000 bl Aframaxes.
The refinery imported 15.52mn bl of crude in January-August 2024, according to the EIA. Canada was the largest international supplier (4.84mn bl) in that span, boosted by the Trans Mountain Expansion (TMX) pipeline start-up in May, followed by Guyana (3.48mn bl) via the Trans-Panama Pipeline, Mexico (2.98mn bl), Brazil (2.92mn bl) and Ecuador (1.3mn bl).
Because of the refinery's use of domestic crude supplies, the complex's imports are equivalent to just two Suezmax shipments or three Aframax shipments per month. For the regional tanker market, that is more than offset by the burgeoning TMX flows on Canada's Pacific coast, which in October loaded a record 24 Aframaxes, destined to refineries in China and the US west coast.
