Phillips 66 has shut gasoline units at its 139,000 b/d Los Angeles, California, refining complex and is ramping up its import operation to help supply fuel to the state, the company's executive vice president of refining Richard Harbison said.
The company is in the process of shutting the Los Angeles facility and has already idled a number of units mostly "on the gasoline production side" including hydrotreaters and hydro processors, Harbison told Argus this week in an interview at the company's headquarters. The remaining units will be shut in a phased manner through the end of 2025.
The company is planning to stop processing crude in mid-October at the refinery as part of a shut down which was announced about a year ago.
Phillips 66 has "been slowly ramping up" its import model with fuel coming in from locations around the world, as well as from the US west coast including its own 105,000 b/d refinery in Ferndale, Washington, Harbison said.
"We continue to supply the market, and we've committed to do that and we're going to do it," he said.
The company is in the process of new permitting of an existing dock in the Los Angeles harbor area and has plans to develop another previously idled dock to increase its import capability, he said.
The import terminals will be operated by Philips 66 and connect by pipeline to the company's existing tank farm in Torrance, California, where fuel could then move to an existing Los Angeles terminal or to Kinder Morgan's pipeline system for delivery to California locations as well as Arizona or Nevada, Harbison said.
The import terminals are separate from the location of the Los Angeles refinery complex which includes facilities in Carson and Wilmington.
Remediation and decommissioning efforts are progressing at the refinery locations. Once the company has fully idled the complex and removed the hydrocarbons from it, it is planning to redevelop the locations with some plans in the early stages, Harbison said.
Harbison predicted California will eventually become an import fuel market such as the market in New York Harbor where local refineries supply a good part of the base demand for the local area, but the balance is all supplied by imports. "California is moving into that similar model," he said.
Harbison also predicted that other refineries around the world will start producing CARB gasoline to send to California as a natural market response to the new dynamics. CARB is a special fuel blend mandated by California that aims to reduce pollution and improve air quality.
"When California turns into a short market on gasoline, there will be incentive for refineries to tune to make CARB gasoline," he said.
Phillips 66 has produced CARB gasoline at its Ferndale refinery and could shift as much as 10-15pc of the refinery's output to CARB if needed, Harbison said.
The Phillips 66 Los Angeles closure and a planned shutdown of Valero's 145,000 b/d refinery in Benicia, California, by April 2026, have triggered major concerns about California's tight and often volatile products market, and the impact on neighboring states.
Phillips 66 expects environmental expenses of about $70mn in its refining segment in the third quarter related to future groundwater mitigation plans at the Los Angeles refining complex, along with an asset retirement charge of about $30mn in its midstream business related to transportation assets that will no longer be used because of the refinery closure.
The company is scheduled to report third quarter earnings on 29 October.
