Par Pacific's purchase of ExxonMobil's Montana refinery may not affect asphalt volumes in the western US, but some buyers could face higher wholesale prices as a result of the deal.
ExxonMobil's 63,000 b/d refinery in Billings, Montana, currently competes with Par's 42,000 b/d refinery in Tacoma, Washington, for wholesale business. But following Par's $310mn purchase of the Billings facility, buyers in the region will lose some negotiating power now that more regional capacity is under one owner, particularly given the decline in asphalt production in the northwest in recent years.
Holly Frontier's 52,000 b/d facility in Cheyenne, Wyoming, exited the asphalt market after its renewable diesel conversion in August 2020. And Calumet reduced its presence in the market after beginning the conversion of one of two crude units at its 30,000 b/d refinery in Great Falls, Montana, in September of this year. This has made Calumet a much smaller participant in the wholesale market, with its local retail business absorbing most of its production.
Par is also eyeing potential renewable conversion opportunities at the Billings facility. Par identified the refinery's 6,000 b/d hydrocracker as "an excellent candidate for conversion" if a new Washington state low-carbon fuel standard provides sufficient demand, Par chief executive William Pate said on a call with analysts late last week.
The clean fuel standard, which the state expects to finalize in late November, would target a 20pc reduction in transportation carbon intensity levels in the state by 2034.
But the conversion of the Billings facility's hydrocracker may not affect asphalt production like the crude unit conversions at other refineries. Par could divert the vacuum gasoil (VGO) used as a feedstock for its hydrocracker to other uses across its logistical network, which would leave Billing's crude throughput unchanged.
Whether Par is considering other conversions at the Billings facility is unclear at this point.
Par currently operates refineries in Hawaii, Wyoming and Washington, and produces asphalt only at its Washington facility. The Billings purchase is expected to close in the second quarter of 2023.
