CVR Energy considers increasing Midwest distillate yield to 50%

CVR Energy is in the engineering phase of a project which could increase distillate yield at its two refineries located in the Midwest's Group Three region from the current 44% to 50%, CEO Dave Lamp said on third quarter results call.

"We're in the early phases of looking at this, but we're pretty confident there's at least 6,000 barrels available pick up over the top of what we do today," Lamp said Nov. 1.

"We typically yield about 44% on crude. We're trying to push that number towards 50%. And the molecules are there. It's just we need to debottleneck ... all three of our distillate hydrotreaters and put some hardware on some of our vacuum towers to recover this distillate."

CVR has 72,600 b/d of distillate hydrotreating capacity at its two refineries – with Coffeyville and Wynnewood having 47,000 b/d and 25,600 b/d of distillate hydrotreating capacity, respectively. Wynnewood has 40,300 b/d of vacuum distillation capacity.

Lamp said he was "pretty confident" about the project, and going forward it would depend on the cost. He expects it would take about six months to fully define the project.

He said the modifications to the diesel hydrotreaters as well as the vacuum towers required to complete the project would be done during turnarounds and take between two and three years. CVR has a planned turnaround at the 25,000 b/d Coffeyville coker in 2023.

"We still think distillate is short for a long, long time. [Distillate supply tightness is] just structurally going to be around for a long time," Lamp added, noting that impact of IMO 2020 and other factors which tightening the global supply of distillate. This includes the looming ban in Russian diesel set by the European Union for Feb. 5.

Operationally, CVR's Q3 crude throughput at its two refineries averaged 202,000 b/d, with 97% refinery utilization, including the 11 days of downtime at Coffeyville due to outages at its third-party air separation plant, CFO Dane Neumann said.

"Looking ahead to the fourth quarter of 2022, for our Petroleum segment, we estimate total throughput to be approximately 200,000-220,000 b/d," Neumann said.

CVR plans to increase volumes of Western Canadian Select at its Coffeyville refinery in Q4. In Q3, WCS accounted for only 6% of its crude throughput due in part to coker maintenance and narrow WCS-WTI spreads, which made it more economic for CVR to sell its WCS crude volumes.

However, so far in Q4, WCS ex Cushing is holding a $19.04/b discount to WTI ex Cushing, according to Platts assessment by S&P Global Commodity Insights. The Q3 WCS to WTI discount averaged $10.80/b.

"I think this quarter, we'll be maximizing the amount of WCS we run because ... the spreads did widen out," Lamp said.

So far in Q4, the Midwest WCS coking margin is averaging $63.46/b, while the Group 3 WTI cracking margin is averaging $42.54/b, according to margin data from S&P Global.

On the renewables front, CVR increased throughput at Wynnewood's renewable diesel unit to about 18 million gallons of vegetable oil feedstock in Q3. In Q4, throughput is expected to range between 14 million and 17 million gallons, slightly below Q3, due to downtime for a catalyst change.

Lamp said RD yields have been above 90% and the pretreatment unit under construction is expected in service in the third quarter of 2023, which is expected to increase RD margins by 50 cents/gal to $1/gal.