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Motiva refinery managing fine in tight heavy crude market: Saudi Aramco

Highlights

Heavy crude prices rise on US' Venezuela sanctions

Motiva can easily switch crude diet, Judaimi says

US Gulf Coast coking margins take a hit

London — A tight market for heavy sour crude, exacerbated by US sanctions on Venezuela, has yet to negatively impact operations at Saudi Aramco's Port Arthur refinery on the Gulf Coast, the company's downstream chief told S&P Global Platts.

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"So far, we've never had an issue, even with the situation that's happening in Venezuela," Abdulaziz Al-Judaimi, Aramco senior vice president of downstream, said in an interview this week in the company's London office. "We don't anticipate any issues. Availability of crudes, it's a fungible commodity and you can move it from place to place."

The 630,000 b/d Port Arthur facility in Texas, operated by Aramco subsidiary Motiva, is the US' largest refinery.

The US imposed sanctions on Venezuela state-owned oil company PDVSA on January 28, including an immediate ban on US exports of diluent to Venezuela and a de facto ban on US imports of Venezuelan crude.

Motiva last imported Venezuelan crude in January 2018, when it took in 507,000 barrels, according to the latest data from the US Energy Information Administration. Its Venezuelan imports peaked at 2.9 million barrels in August 2015.

But even though it has not taken in Venezuelan crude in over a year, the heavy sour market in the US Gulf Coast has tightened considerably on the sanctions, which are expected to reduce Venezuelan output to as little as 500,000 b/d by year-end. Venezuela pumped 1.16 million b/d in January, according to the latest Platts OPEC production survey.

Many US Gulf Coast refineries have invested heavily in coking capacity to process heavy crudes from Venezuela, Mexico and other regional producers, while surging US crude output has mostly been in light shale oil.

Saudi Aramco itself has been cutting its heavy crude exports to the US under an OPEC production cut accord aimed at boosting oil prices.

Judaimi said the Port Arthur refinery is complex enough to run other crudes. About 20%-30% of its crude diet comes from Saudi crude.

"What we do in Motiva, we run our optimization model, and we define the availability of different crudes, between heavy [grades like] Maya and all the way to light crude from the US," he said. "You have multiple crude units, you can run multiple crude diets, you can adjust it the way it's needed for the right production."

He added that the Port Arthur refinery in 2018 had the highest gross margin in Aramco's entire downstream portfolio, hitting almost $13-$14/b.

"That's impressive," Judaimi said. "We were quite pleased with the performance of Port Arthur."

Competition among heavy and medium heavy sour grades on the Gulf Coast has driven prices sharply higher, and this has drastically shrunk refining margins at the very cokers meant to maximize value.

For example, USGC coking margins for Saudi Arabian crude grade Arab Medium have averaged just $1.45/b, down from nearly $9/b a year ago. Margins for the competition have not been much better. Mexican Maya coking margins averaged $3.34/b in February, down from almost $11/b a year ago.

In fact, cracking margins for light sweet crudes have outperformed these lackluster coking margins. USGC cracking margins for LLS and Bakken have averaged around $6-$7/b so far this month.

S&P Global Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

-- Herman Wang, herman.wang@spglobal.com

-- James Bambino, james.bambino@spglobal.com

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com