Marathon Petroleum will idle two refineries indefinitely, transforming them into a terminal and a renewable diesel facility, the company said in an update.
"On July 31, we informed employees at our Martinez and Gallup refineries that we will indefinitely idle these facilities with no plans to restart normal operations," Marathon Petroleum said. "As part of these changes, Martinez will be converted to a terminal facility. We are also evaluating the strategic repositioning of Martinez to a renewable diesel facility, which aligns with California's Low Carbon Fuel Standards objectives and MPC's greenhouse gas reduction targets."
The Martinez refinery has a capacity of 166,000 barrels per day, and the Gallup facility has a capacity of 26,000 bpd. Both were idled in April amid the slump in fuel demand resulting from the national lockdowns in most of the world in response to the coronavirus pandemic.
Even with the transformations, the move will mean layoffs, as "Indefinite idling unfortunately means most jobs at these refineries will no longer be necessary, and we expect to begin a phased reduction of staffing levels in October," Marathon Petroleum said.
In a separate news report, Marathon Petroleum said it had struck a deal with 7-Eleven to sell its Speedway gas station chain for $21 billion. The company said it would pocket some $16.5 billion after the all-cash transaction, which it would use to strengthen its balance sheet and return capital to shareholders.
Refiners have been under a lot of pressure lately, with analysts warning there is too much refining capacity in the world given the latest trends in demand for fuels. Some of this capacity will need to close or transform as the outlook for demand remains pessimistic. Many refiners could go bankrupt unless they adjust to the new reality, Wood Mackenzie said in a recent report, noting that the more complex refineries would do better than the rest.
By Irina Slav for Oilprice.com
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