Shell Idles Unit At Texas Refinery Due To Demand Crash

Shell is idling a unit at the Deer Park, Texas, refinery for several months due to low demand for fuels, sources familiar with the refinery’s operations told Reuters.

The 318,000-barrels-per-day refinery operates under a 50-50 joint venture set up in 1993 between Shell and Mexico’s state oil firm Pemex.   

The refinery is now idling the sulfur recovery unit (SRU) due to the depressed demand, while currently, the facility operates at around 75 percent of its capacity, according to Reuters’ sources.  

According to the latest EIA estimates, average refinery utilization at U.S. refineries stood at 77.5 percent in the week to July 3, with utilization rate slowly creeping up over the past few weeks from the 67.9 percent capacity utilization rate in the first week of May.

Typically, U.S. refinery utilization rates at this time of the year with the driving season are around 95 percent.

Apart from short-term plans for its refineries in the United States, Shell has a longer-term plan to sell several of its wholly owned sites as part of a new downstream strategy.

Earlier this week, a Shell spokesman told Reuters that the supermajor was considering selling its 240,000-bpd refinery in Convent, Louisiana, as part of a broader strategy to reshape its refining portfolio.

Shell is now implementing a new downstream strategy to reshape its refining business towards a smaller, smarter refining portfolio focused on further integration with Shell Trading hubs, Chemicals, and Marketing.

As part of this strategy, Shell sold earlier this year the Martinez Refinery in California to PBF Holding Company for US$1.2 billion.

Shell also announced in March that it started marketing the sale of the Mobile refinery in Alabama and the Puget Sound refinery near Anacortes in Washington as part of its new downstream strategy. At the time, however, Shell said that the U.S. Gulf Coast would remain a key manufacturing hub for the company, along with Rotterdam and Singapore.

By Charles Kennedy for Oilprice.com

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