U.S. refinery capacity remained in stasis during 2017-2018

The EIA reported on Monday that as of January 1, 2018, U.S. operable atmospheric crude distillation capacity totaled 18.6 million barrels per calendar day (b/cd), a slight decrease of 0.1% since the beginning of 2017 according to the administration’s annual Refinery Capacity Report.

Bakken-Only Light Oil Refinery to Break Ground in July

Source: EIA

But in North Dakota at least, some new refining capacity is about to be built and its feedstocks are going to be exclusive: North Dakota’s Bakken light oil.

New in North Dakota: Davis refinery has final permit in hand

Meridian Energy Group Inc. is just days away from breaking ground on a state-of-the-art crude oil refinery—the Davis refinery—on approximately 150 acres in Billings County near the Fryburg Rail Facility in Belfield, North Dakota.

Davis Refinery CGI Rendering
Source: Meridian Energy

Davis is on track to become one of the first greenfield fuels refinery in the U.S. in four decades. According to the EIA, the newest refinery before now with significant downstream unit capacity was Marathon’s facility in Garyville, Louisiana, which came online in 1977 with an initial atmospheric distillation unit capacity of 200,000 b/cd (barrels per calendar day). As of January 1, 2018 the Garyville refinery had a capacity of 556,000 b/cd.

The new Davis plant was designed to be capable of producing nearly zero-sulfur diesel and jet fuels, years ahead of EPA mandates, according to the company. The plant will operate on natural gas. The North Dakota Department of Health issued the Permit to Construct the 49,500 barrels per day (“bpd”) Davis Refinery to Meridian Energy Group on June 12. The new refinery could produce as much as 800mm gallons per year of refined products from to serve regional markets.

100% Bakken light oil feedstock

The majority of the U.S. Gulf Coast area refineries are configured to intake and process heavy oil, including that produced in Saudi Arabia, Venezuela and Canada. But the sole source of crude oil for the new Davis refinery will be local production of Bakken light crude. A company spokesperson told Oil & Gas 360® that the refinery had no plans at this time to take in any Canadian crude—heavy or light—for processing at Davis.

The refinery will be built to produce butane, propane, various grades of blended gasoline and gasoline blending stock, and various grades of ultra-low sulfur diesel fuel. “In addition, we will produce a small amount of atmospheric tank bottoms that actually meet the new 2020 IMO specs for low-sulfur marine fuel oil,” a company spokesperson said via email.

The Burlington Northern Santa Fe rail line runs directly through the refinery site, and initially all products will be transported by truck and rail to market distribution points. But pipelines aren’t ruled out.

“Now that the Davis air quality permit has been obtained, Meridian has been able to resume discussions with various firms that have pipeline assets that could be used for both crude gathering and for product distribution, and has also been able to resume discussions with firms that have an interest in partnering with Meridian to create Meridian’s own crude and product pipeline assets,” the spokesperson said.

Crude oil sourcing and product sales contracts are being finalized – a private institutional raise will be forthcoming

With permits in hand, Meridian has entered into an agreement with a local firm to begin site preparation and construction immediately.

Meridian has entered into preliminary agreements covering most of the necessary crude oil and nearly all of the products to be produced by the Davis refinery, and now that the PTC is in hand it is finalizing those commercial arrangements, the spokesperson said.

Meridian has been financing the project through its own internal capital to date, the spokesperson said. “Now that it has obtained the PTC, it will be possible to finalize the private institutional raise for the full project.”

Record U.S. refinery runs

the EIA reported Monday that record refinery runs have helped accommodate increases in U.S. crude oil production, which averaged 9.4 million barrels per day (b/d) in 2017, an increase of 4.0 million b/d from the level in 2009. Gross crude oil inputs to refineries averaged 16.6 million b/d in 2017 compared with 14.3 million b/d in 2009.

Bakken-Only Light Oil Refinery to Break Ground in July

Source: EIA

Over that period, operable refinery crude distillation capacity increased 945,000 b/cd, and utilization rose from 83% in 2009 to 91% in 2017, resulting in the 2.3 million b/d increase in gross crude oil inputs. Over the same period, U.S. crude oil imports decreased by 1.1 million b/d, and U.S. crude oil exports increased by 1.1 million b/d.

Bakken-Only Light Oil Refinery to Break Ground in July

Source: EIA

Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: Differences between gross inputs and the sum of production and net imports reflect inventory changes and unaccounted for crude oil.

The EIA counts a total of 135 operable petroleum refineries in the United States as of January 1, 2018, but if construction goes as scheduled for the Davis refinery, you can add one more when the plant construction is completed in 2020 and it is commissioned.

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