Here is news article on problems of Asphalt industry in getting supplies & high cost asphalt has risen as result of demand shortages and high oil prices. As backdrop G-W Wynnewood Refinery supplies about 60% of states asphalt, Valero Ardmore about 25% and Sinclair Tulsa another 15%.
Making the problem worse – A number of previous asphalt suppliers like Sinclair Tulsa will be adding or expanding coking operations across the U.S. at a time when demand for asphalt has began to increase for the first time in decades. Here are just a few of asphalt producers expanding cokers or adding cokers:
BP Toledo, BP Whiting, Chevron Pascagoula, Citgo Corpus Christi, Valero Corpus Christi, ExxonMobil Joliet, COP/WRN Woodriver, Frontier Chyenne, CHS Laurel, Hunt Tuscaloosa, Marathon Catlettsburg, Marathon Detroit, Marathon Garyville, Shell Martinez, Sinclair Tulsa, Sinclair Rawlings, and Petrobras Houston.
I may have missed a few and several of these only provide small volumes as option versus coker production which may continue but you can see it that they will have big impact.
Additionally nearly all the remaining large asphalt producers are refineries that have 75-100 MBD capacity and have fairly simple to cracking complexities that become targets for next round of refinery closures or consolidation. A Large majority of the +150 refineries (nearly half US refineries) that were closed in U.S. during 1980-1996 time frame were less 60MBD simple refineries. <Note for some reason Oil & Gas Journal delisted topping/asphalt refineries from their WW Refining survey in ~2002 but many are still running – need look at EIA U.S. refining survey to see them.>
The high cost of crude oil and low product yield (i.e. makes lot fuel oil / asphalt instead of more gasoline/diesel) continues to put economic pressure on these types of refineries. Even complex refineries like Valero & several others have taken downtimes due to bad economics from Fund investors speculating on crude & driving prices $135/Bbl versus comparative lower fuel prices.
The U.S. transportation infrastructure is in critical need of repair and updating (nearly 22% of all U.S. bridges need to be replaced and are in danger of failures as seen in upper Midwest past several years) and most State Department of Transportation budgets are fixed based on taxes and do not have ability to absorb prices increasing by mutiples (~ asphalt at $180/t in 2004-05, $240/t 2005-06, $320/t 2006-07 and according this 2008 $650/t!). It also comes at time when the NAFTA trade has shifted about 300% increase truck traffic versus previous import ship deliveries of products (and this is before Bush’s Canada-US-Mexico NA Highway), which adds not only traffic but has also accelerated the damage to our highway systems. The US domestic trucks represent ~20% traffic but usually cause about 80% of the damage to US highways & road systems.
The flow-back from eliminating surplus & even some base asphalt production at a time when demand is actually increasing will mean that resid’s alternate market prices will hurt coker & complex refinery margins as well ….. so this isn’t a one sided effect.
Regards
