Texas, Midwest refiners thaw out their plants after polar vortex

New York — US refiners are restarting their plants after the recent deep freeze stretching from the Texas Gulf Coast north through the Midwest impacted refinery operations across a broad swath of the country.

The majority of the plants along Texas's refinery row are in the process of restarting, with most expected back online by mid-March, according to company statements and filings made with state regulatory agencies detailing emissions events, which go along with plant restarts.

While Texas refiners took main units down at the request of Governor Abbott to conserve scarce electricity so that people could heat their homes, some refiners – like ExxonMobil and Shell – even supplied energy to the grid from their cogeneration plants that normally would have powered their refineries.

S&P Global Platts estimates that about 5.4 million b/d of US Gulf Coast crude capacity was down for the week ended Feb. 26, out of the region's 9.96 million b/d. Almost all of the outages were in Texas, which has 5.1 million b/d of crude processing capacity at its coastal refineries and 742,000 b/d of inland refining capacity, according to US Energy Information Administration data.

The magnitude of the outage in the US' largest refining center caused refined product prices to jump. USGC CBOB reached $1.86/gal on Feb. 25, the highest since July 2019, when Hurricane Barry battered the region, according to Platts assessments.

USGC ULSD prices also gained, reaching $1.90/gal on Feb. 25, the highest since early 2020, when cold weather hit a pre-coronavirus world.

Despite the severe cold, some refiners saw a silver lining in the massive refinery outages.

"Recent industry downtime resulting from cold weather along the Gulf Coast should create improving inventories and margins for the Gulf Coast region," said Ezra Uzi Yemin, CEO of Delek US on Feb. 24.

Midwest suffers from power issues

However, the deep freeze and power supply instability was not limited to Texas refineries, where frozen wind turbines and frozen natural gas field pipes limited electricity supply, according to grid operator Electric Reliability Council of Texas.

Several other states reported grid problems. Oklahoma plants also took a hit from the cold weather – albeit not as drastically as in Texas -- with several refineries reporting mostly minor malfunctions as plummeting temperatures put a strain on local power infrastructure.

The local grid, the Southwest Power Pool, also said the freezing weather put a strain on local power supply. The SPP lifted its energy emergency alert on Feb. 18, two days after it went into effect.

HollyFrontier said work was underway at its Tulsa, Oklahoma, plant when the freeze hit and the cold weather "will just extend the down time," said Tim Go, HollyFrontier's chief operating officer, on Feb. 24.

Go said some of its Midcontinent plants, like the 162,000 b/d El Dorado, Kansas, plant "had some individual unit outages" but expected all the plants operating normally by the "end of this week."

"Some capacity will remain down in the following weeks as repairs continue. Overall, US refining capacity is estimated to be down by almost 7.6 million b/d for the week ending Feb. 26, declining to 6.4 million b/d, including an offset for runs pickup outside the vortex-affected region," S&P Global Platts Analytics wrote in a recent research note.

With the weather warming and utilities as well as some refinery operations partly restored, Platts Analytics expects downtime to decline to about 4.5 million b/d for the week ending March 5.

Prices jump higher

With so much refining capacity offline in Texas, and some minor impact at Midwest refineries, regional refined product prices jumped sharply in both Midwest markets to pre-coronavirus levels.

Group 3 sub octane was assessed at $1.94/gal, while Group 3 ULSD prices reached $2.03/gal as traders said barrels of ULSD were being trucked into Texas to meet demand there.

Chicago refined products also reached three-year highs with ULSD pegged at $1.95/gal on Feb. 25, while CBOB was assessed at $1.84/gal despite the reopening of the Explorer Pipeline, a major USGC-to-Illinois supply route on Feb. 19.

Some refiners took advantage of the outages to push forward planned work at their plants. Delek US moved up work planned later in the quarter at its 83,000 b/d El Dorado, Arkansas, plant after the recent storm disrupted that state's power grid.

PBF Energy also moved up work on the reformer and cut runs at its 172,000 b/d Toledo, Ohio, refinery as cold weather impacted operations, according to market sources.

But CVR Energy said first quarter throughput at its two Midwest plants -- the 74,500 b/d Wynnewood, Oklahoma, plant and the 132,000 b/d Coffeyville, Kansas, plant -- would range between 185,000 b/d and 190,000 b/d due to the polar vortex.

"We anticipate resuming normal operations at both facilities by the end of the month," said Tracy Jackson, CVR's chief financial officer on Feb. 23.